REG - Gore Street Energy - Final Results
15/07/2024 07:00
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RNS Number : 2708W Gore Street Energy Storage Fund PLC 15 July 2024
15 July 2024
Gore Street Energy Storage Fund plc
(the "Company" or "GSF")
Audited Full-Year Results
Strong revenue generation, increasing operational capacity and robust balance
sheet
Gore Street Energy Storage Fund plc, the internationally diversified energy
storage fund, is pleased to announce its Audited Full-year results for the
year ended 31 March 2024.
Financial highlights for the year ended 31 March 2024:
· NAV as of 31 March 2024 was £541 million, bringing NAV total return
since IPO to 48.4%.
· NAV per share as of 31 March 2024 was 107.0p (31 March 2023: 115.6p).
· The portfolio generated £41.4 million in revenue during the fiscal
year (31 March 2023: £39.3 million).
· The portfolio generated an operational EBITDA of £28.4 million. (31
March 2023: £27.8 million).
· As of 31 March 2024, the Company had £60.7 million in cash or cash
equivalents, as well as £58.6 million in debt headroom on its existing
facilities, sufficient to cover all contractual obligations and continue to
build out the Company's portfolio to over 750 MW.
· The Company maintained a low level of gearing, equal to 6.5% 1
(#_ftn1) of GAV as at 31 March 2024. During FY24/25, the Company expects to
draw down on its available debt lines to support the buildout of the Company's
near-term portfolio and expects net debt to reach c.15 % of GAV once fully
drawn.
· Dividends announced for the period of 7.5 pence per share. Dividend
yield of 11.6% 2 (#_ftn2) (31 March 2023: 6.9%).
· The Company achieved an operational dividend cover of 0.78x and a
fund-level dividend cover of 0.56x.
· The weighted average discount rate increased to 10.2% (31 March 2023:
10.1%).
Operational highlights:
· Energised capacity increased by 45% to 421.4 MW (31 March 2023: 291.6
MW) following the successful energisation of Stony and Ferrymuir. As of the
date of publication, both assets are revenue generating.
· Average operational capacity over the year increased by 7% to 311.5
MW (31 March 2023: 291.6 MW).
· Total revenue generation increased by 5.5% to £41.4 million (31
March 2023: £39.3 million).
· Average revenue of £133,000 per MW/yr (31 March 2023: £135,000 per
MW/yr), highlighting the benefits of the diversification strategy.
· The Company increased its asset base on the Irish Grid to 385 MW (31
March 2023: 310 MW), of which 130 MW is operational, following the acquisition
of a 51% stake in a 75 MW pre-construction energy storage asset (Project
Mucklagh) located in the Republic of Ireland.
Capital Raising:
· The Company issued shares at the prevailing NAV at the time to
strategic partners Nidec and Low Carbon for a total consideration value of
c.£27 million.
ESG & Sustainability
· During the reporting period, the operational portfolio avoided 15,178
tCO(2)e and stored 26,232 MWh of renewable electricity.
· The FY 2023/24 ESG and Sustainability Report will be published and
available on the Company's website in early September 2024.
Outlook
· Of the 332 MW of assets in construction due to become energised over
the next seven months, 275 MW / 475 MWh is eligible to benefit from an
investment tax credit (ITC) of between 30-40% of qualifying capital
expenditure through the Inflation Reduction Act, which was passed in late
2022.
· The Investment Manager expects the Company to benefit from a cash
inflow in the range of $60 million to $80 million.
· This includes the 200 MW Big Rock asset, which, when completed, will
play a material role in supporting the CAISO grid (California)-the Company's
fifth market to date-to integrate rising levels of renewable generation.
Updated Dividend Policy:
The Company will target a dividend for the financial year ending 31 March 2025
of 7.0 pence per ordinary share, which is consistent with investors'
expectations based on the current NAV. This will be subject to cash generation
from the underlying portfolio, reflecting prevailing market conditions and
performance, financial position and outlook, and the fiscal environment in
which the Company operates. From the 2024/25 financial year, the profile and
quantum of dividend distributions will be more closely aligned with
operational and other cashflows.
See the Chair's Statement and the Investment Manager's report for further
details.
Pat Cox, Chair of the Company, commented:
"Despite challenging market conditions, the Company has achieved significant
growth by raising new funds and expanding our diversified energy storage
portfolio to approximately 1.25 GW across five markets.
"The Company met its dividend target, taking total NAV returns since IPO to
48.4%, and with £60.7 million in cash and £58.6 million in debt headroom, we
are well-positioned to support the construction of the priority assets over
the coming months. With 332 MW of new capacity expected to be added to the
energised portfolio, which reached 421.4 MW in the reporting period, by the
end of the current financial year in the US and elsewhere, the Company is
poised to take another significant step forward in scale.
"I remain fully confident that this diversified approach will continue to
deliver strong and sustainable returns to investors while contributing to the
decarbonisation needed across the global energy system."
Results Presentation Today
There will be a presentation for sell-side analysts at 9.30 a.m. today, 15
July 2024. Please contact Buchanan for details
on gorestreet@buchanancomms.co.uk (mailto:gorestreet@buchanancomms.co.uk)
A presentation for investors will also be held today, 15 July 2024, on the
Investor Meets Company Platform at 11:00 a.m.
Investors can sign up to Investor Meet Company for free and add to meet GORE
STREET ENERGY STORAGE FUND PLC via:
https://www.investormeetcompany.com/gore-street-energy-storage-fund-plc/register-investor
(https://www.investormeetcompany.com/gore-street-energy-storage-fund-plc/register-investor)
Annual Report:
The Company's annual report and accounts for the year ended 31 March 2024 are
also being published in hard copy format and an electronic copy will shortly
be available to download from the Company's webpages
https://www.gsenergystoragefund.com/ (https://www.gsenergystoragefund.com/) .
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/2708W_1-2024-7-12.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2708W_1-2024-7-12.pdf)
The Company will be submitting its Annual Report and Accounts to the National
Storage Mechanism, which will shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Gore Street Energy Storage Fund plc Annual report for the year ended 31 March
2024
Key Metrics
For the year ending 31 March 2024
NAV PER SHARE
107.0p
(2023: 115.6p)
OPERATIONAL EBITDA
£28.4m
(2023: £27.8m)
DIVIDEND YIELD
11.6%
(2023: 6.9%)
NAV TOTAL RETURN
for the year ended 31 March 2024
-1.2%
(2023: 12.6%)
OPERATIONAL CAPACITY
371.5 MW**
(2023: 291.6 MW)
DIVIDENDS PAID DURING THE YEAR
7.5p
(2023: 7.0p)
KEY METRICS As at 31 March 2024 As at 31 March 2023
Net Asset Value (NAV) £540.7m £556.3m
Number of issued ordinary shares 505.1m 481.4m
NAV per share 107.0p 115.6p
NAV Total Return for the year* -1.2% 12.6%
NAV Total Return since IPO* 48.4% 52.4%
Share price 64.5p 100.8p
Market capitalisation £325.8m £485.3m
Share price Total Return for the year* -30.0% -5.1%
Share price Total Return since IPO* -10.2% 30.9%
Discount to NAV* -39.7% -12.8%
Portfolio's total capacity 1.25 GW 1.17 GW
Portfolio's operational capacity 371.5 MW 291.6 MW
Average operational capacity 311.5 MW 291.6 MW
Total portfolio revenue £41.4m £39.3m
Average revenue per MW/yr £132,905 £134,774
Operational EBITDA £28.4m £27.8m
Total Fund EBITDA £20.2m £16.8m
Dividends per ordinary share paid during the year 7.5p 7.0p
Operational dividend cover for the year 0.78x 0.90x
Total Fund dividend cover for the year 0.56x 0.54x
Dividend Yield* 11.6% 6.9%
Gross Asset Value (GAV)* £578.1m £556.3m
Gearing* 6.5% 0.0%
Ongoing Charges Figure* 1.42% 1.37%
* Some of the financial measures above are classified as
Alternative Performance Measures, as defined by the European Securities and
Markets Authority and are indicated with an asterisk (*). Definitions of these
performance measures, and other terms used in this report, are given on page
101 of the 2024 annual report together with supporting calculations where
appropriate.
** The 49.9 MW Ferrymuir asset was energised during the reporting
period, taking total energised capacity to 421.4 MW at year end.
Chair's Statement
On behalf of the Board of the Gore Street Energy Storage Fund plc, I am
pleased to present the Company's Annual Results for the year ended 31 March
2024.
Overview and Performance
Despite challenging conditions in the Great Britain (GB) energy storage and
listed markets, the 2023/24 reporting period saw the Company successfully
raise new capital, increase its energy storage capacity, and extend its
uniquely diversified portfolio to c. 1.25 GW across five uncorrelated markets,
all while maintaining its dividend and a prudent level of debt. Total revenue
grew to £41.4 million through strong consolidated asset performance,
notwithstanding volatile market conditions in GB and a normalisation of power
prices in Germany.
The Company met its target dividend for the year, equal to 7.5 pence per
share, taking NAV total return including dividends since IPO to 48.4%.
During the reporting year, the Company energised the 79.9 MW Stony and 49.9 MW
Ferrymuir projects in GB, both of which are now fully operational and
generating revenue, while the energisation of the 57 MW Enderby project is
scheduled to follow shortly post-period. With an energised portfolio of 421.4
MW during the period, the Company is poised to take one of its biggest steps
forward in scale with a further 332 MW of capacity expected in the coming
months. This includes the 200 MW Big Rock (CA, USA) and 75 MW Dogfish (TX,
USA) projects, taking the energised portfolio to c.753.4 MW by the end of the
current financial year.
This internationally diversified growth is the result of a strategy adopted in
2019 when we first invested in assets outside of GB as it became clear to the
Investment Manager and the Company that reliance on revenues from a single
grid would expose shareholders to higher volatility than a diversified
portfolio. This vision has been vindicated during and after the reporting
period, with sole GB investment strategies suffering from low grid services
revenues due to overcapacity and the failure of a robust GB wholesale trading
market to develop as expected by many.
Our fleet of operational projects across Ireland, Germany and the US provides
a buffer against GB headwinds as they are not only uncorrelated with the GB
market but offer different revenue streams for different durations. The Irish
and Texas grids continued to provide particularly strong revenues over the
reporting period, driven by fundamentals that support energy storage. Wind
generation in Ireland grew, providing lucrative market opportunities for
battery energy storage systems as grid operators rewarded fast-acting flexible
assets. Texas continued to face challenges from periods of extreme weather
that increased the grid's need for reserve services and provided attractive
trading opportunities. The Company is well-placed to capitalise on these
opportunities as they emerge across multiple markets.
We remain in a strong financial position as a result of good liquidity
management by the Investment Manager. As at 31 March 2024, the Company had
£60.7 million in cash or cash equivalents and £58.6 million in undrawn debt
facilities. This ensures the construction of priority assets is fully
supported and can continue at pace. We also raised new capital during the
period through our long-term strategic battery partner, Nidec, and used our
shares to acquire additional interests in operating assets from our strategic
development partner, Low Carbon. In the case of Low Carbon, the Company
increased its asset base to 385 MW in the lucrative Irish market with minimal
cash consideration, agreed at 2019 prices, demonstrating our ability to grow
even at a time when capital markets are effectively closed to investment
trusts.
Macroeconomic Environment
The macroeconomic environment continued to impact the investment landscape
throughout 2023/24, with high inflation and central bank interest rates
constraining performance across the sector.
In monitoring the share price volatility experienced across the sector over
the financial year, we maintain the view that the discount to Net Asset Value
at which the share price has traded materially undervalues the Company and its
portfolio. The results reveal the strength of our activities across multiple
uncorrelated markets, and we expect to continue to deliver value for
shareholders as more capacity is brought online.
Following price hikes in 2022, capex costs fell as supply chain issues related
to the pandemic subsided and lower demand from the electric vehicle market
resulted in greater availability of materials. This lowers the capital costs
of assets currently being built and, as revenue opportunities emerge to
justify additional expenditure, permits the potential augmentation of existing
sites.
The Company maintains its focus on delivering market-leading revenue from a
varied range of sources, using assets built at the best value per MWh fully
installed, and continues to ensure capex costs are monitored by the Investment
Manager when assessing capacity additions to our sites.
Strategy and Operational Performance
Maintaining high availability of the assets within the portfolio remains a
priority for the Company and its Investment Manager. By exceeding 93%
availability across the financial year, the assets were able to capitalise on
the most lucrative opportunities possible while ensuring planned maintenance
could be carried out to safeguard future operations.
Our strategy over the period focused on the fundamentals of renewable energy
penetration and its associated volatility, which creates demand for ancillary
services. In Ireland the ongoing DS3 programme (Delivering a Secure
Sustainable Electricity System), which facilitates the integration of wind
power and other non-synchronous renewable energy sources, delivered
substantial revenue.
Solar deployment drove revenues in Texas, particularly over the summer when
electricity demand soared during periods of high temperatures. The added
impact of increasingly steep grid load ramps caused by declining solar output
in the evenings resulted in an increased need for reserve services from fast
responding, secure sources like energy storage.
The portfolio also delivered a broader range of activities in markets where
ancillary services fell in value, such as Germany. The volatility of the
previous reporting period subsided as gas supplies became less restricted and
grid service prices normalised. The Company adopted a more wholesale
trading-focused strategy in Germany, supported by an increasingly
sophisticated data-driven approach, to ensure its asset could access
additional revenue streams.
Overall wholesale trading increased as a proportion of revenues across all
markets to 7% compared to the previous financial year's 3% as the Company
continued to diversify its revenue stack to deliver sustainable returns to
shareholders. These actions, taken as part of the Company's diversified
approach, were essential in managing the impact of market saturation and
limited wholesale market volatility in GB.
We are pleased that the outperformance of our international portfolio compared
to the GB assets allowed the Company to achieve higher absolute revenues than
in the previous reporting period despite declines in GB revenue. The Company
is hopeful that GB market conditions will improve, with some signals towards
the end of the financial year and post-period suggesting a recovery across
some revenue streams. We remain well positioned to maintain strong performance
from our international portfolio in addition to any improved revenue
generation from GB assets.
NAV Performance
Despite best-in-class operational performance across the portfolio and
pro-active management delivering strong returns, external factors, including
central banking monetary policy to manage inflation and discount rates across
the sector, contributed to a NAV decrease across the financial year from
115.6p per share as of 31 March 2023 to 107.0p per share.
We expect to see improving market conditions as inflation continues to subside
and rates come down. The Company remains confident in its ability to continue
to deliver long-term value to shareholders as we deploy additional operational
capacity by the end of the fiscal year. This will have a positive effect on
revenue generation and dividend coverage.
Discount Management
The Board continues to retain the ability to repurchase shares at a price
lower than NAV in the interests of discount management. The Company remains
fully committed to the build-out of the portfolio with support from
shareholders, with the additional debt added during the period dedicated to
these construction efforts. Healthy returns are expected to continue from
across the portfolio as more capacity is added, including in the CAISO market
in California, and discount rates will continue to be unwound as we progress
from construction to operations.
We, therefore, maintain the position that the repurchase of shares is not the
right course of action for the Company at the current time, although the Board
will continue to monitor the performance of the share price and will act to
employ appropriate discount control mechanisms as needed.
Debt
The Company increased its £15 million revolving debt facility with Santander
to £50 million, including an accordion option to increase beyond £50 million
to up to 30% of Gross Asset Value. We also added debt finance secured at the
project level for the first time, with $60 million from First Citizens Bank
tied to the deployment of the 200 MW/400 MWh Big Rock asset in California, the
Company's largest to date. We have long heralded the promise of long-term
secured revenue from the Resource Adequacy (RA) mechanism in CAISO and the
backing provided by this loan vindicates this position as we look ahead to
energising the asset by the end of 2024.
Capital Allocation
The Company continues to focus on the correct allocation of capital to ensure
long-term, sustainable returns are achieved in the interests of shareholders.
This includes prioritising the construction of specific assets to deliver
optimal value through their scale, revenue opportunities and geographical
spread. We expect to deploy the majority of available cash and lines of
credit, both project and fund-level facilities, by the end of the 2024/25
financial year to fund the buildout of 57 MW in GB through the Enderby project
and 275 MW across the US projects Big Rock and Dogfish.
The Company has comfortable headroom to meet its current contractual
obligations and we will continue to act prudently regarding leverage in what
remains a high interest rate environment. We are also encouraging the
Investment Manager to continue exploring options to recycle capital from the
portfolio and will keep the market informed of any relevant progress.
Dividends
The Board has approved a fourth interim dividend of 1.5 pence per share,
bringing the total dividend announced for the period ended 31 March 2024 to
7.5 pence per share in line with the Company's Dividend Policy (the
ex-dividend date being 27 June 2024, with the record date of 28 June 2024).
The dividend will be paid on or around 15 July 2024.
Dividend Policy
We remain committed to regular capital allocation reviews and comprehensive
analytical assessments, while remaining receptive to shareholder feedback, to
ensure the Company continues to be managed effectively for investors.
Following this year's review, the Board has decided to adjust the Company's
dividend policy to better align it with the construction schedule of the
portfolio.
It is the Directors' intention to continue to pay, in the absence of
unforeseen circumstances, a dividend of 7.0 pence per ordinary share for the
financial year subject to market conditions and performance, financial
position and outlook, and fiscal environment. This is consistent with
investors' expectations based on the current NAV but, from the 2024/25
financial year, the profile and quantum of dividend distributions will be more
closely aligned with operational and other cashflows rather than NAV.
Moving from roughly equal payments across all quarters, the Board has
determined to target a dividend of 1.0 pence per Ordinary Share for each of
the first three quarters of the financial year. It is intended the amount of
the final quarterly dividend (announced in June and paid in July) will make up
the balance of the annual dividend target subject to cash flows at the time.
As with the current dividend policy, all dividends remain at the discretion of
the Board.
This is a prudent adjustment to the dividend policy reflecting the maturing
nature of the Company's portfolio, with a transformative year for increasing
operational and revenue-generating capacity.
Sustainability
The Company is rooted in sustainability and continues to increase disclosures
across a range of ESG metrics measuring the impact of its own operations.
Publication of our second ESG & Sustainability report in September 2023
covering the FY 2022/23 reporting period took account of investments in
California and Texas, with the latter exposing the Company to a grid system
with higher levels of fossil-fuel generation. As these markets increase their
renewables deployment, the crucial role of the Company's battery storage
assets in enabling decarbonisation will increase while supporting stable grid
operations during increasingly frequent periods of extreme weather.
The ESG & Sustainability Report covering FY2023/24, due to be published in
early September, will consolidate the Company's latest Sustainable Finance
Disclosure Regulations (SFDR) and Task Force on Climate-Related Financial
Disclosures (TCFD) disclosures. An assessment of the Company's Principal
Adverse Impacts (PAI) under SFDR is included in the appendix of this report.
The Company remains committed to increasing transparency in the market for
green investment products. As part of this, we will report on progress towards
integration of the Principles for Responsible Investment (PRI) for the first
time in 2024. We are proud of our track record of transparency across all
metrics and will continue to deliver leading levels of disclosure to the
market.
Board Composition and Succession Planning
As reported last year, the remuneration and nomination committee continue to
plan director succession to ensure the four directors appointed at IPO in 2018
retire in an orderly manner. Work on future appointments is advancing, and
details are included in the committee's report.
AGM
The AGM will be held at the offices of Stephenson Harwood, 1 Finsbury Circus,
London EC2M 7SH on Wednesday 18 September 2024 at 10.00 am. Further details
are included in the Notice of AGM on page 88. I look forward to welcoming
shareholders attending in person.
If you are not able to attend in person, or prefer to vote by proxy, but have
questions for the Board, please contact the Company Secretary at
cosec@gorestreetcap.com (mailto:cosec@gorestreetcap.com) .
Outlook
The new capacity due online in the coming months, including the 200 MW asset
in California, represents a step-change for the Company as we extend our
operational and geographical diversification even further.
Despite recent issues for our sector, I remain fully confident that this
diversified approach will continue to deliver strong overall returns while
contributing to the decarbonisation needed across the global energy system.
Investment Manager's Report
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
"I'm proud to report the Company continued to achieve growth while
demonstrating leadership and resilience during an extremely turbulent period.
The international portfolio continued to deliver consistent average revenue of
£15.1 per MW/hr through best-in-class operational performance and capital
management. The Company achieved an operational dividend cover of 0.78x for
the year from an average operational fleet of 311 MW. With the energised
capacity reaching 421 MW and 332 MW more to follow in the coming seven months,
all while maintaining a prudent approach to leverage, the Company is
well-positioned to increase dividend cover and continue delivering value for
shareholders by generating robust and stable cash flow from its well
diversified asset base."
Operational Highlights:
· The portfolio generated £41.4 million of revenue during
the fiscal year. This amounted to £28.4 million in operational EBITDA.
- The Company achieved an average revenue per MW/hr of £15.1,
highlighting the stable revenue profile of the Company.
- With its international portfolio, the Company averaged £19.6
per MW/hr over the period, 2.2x the GB portfolio, inclusive of liquidated
damages.
- The Company achieved an operational dividend cover of 0.78x and
a fund-level dividend cover of 0.56x.
- Energised capacity increased by 45% to 421.4 MW, following the
successful energisation of Stony (79.9 MW) and Ferrymuir (49.9 MW). As of the
date of publication, both assets are revenue generating.
- Of the 332 MW of assets in construction due to come online over
the next 7 months, 275 MW / 475 MWh is eligible to benefit from an investment
tax credit of between 30-40% of qualifying capital expenditure through the
Inflation Reduction Act, which was passed in late 2022. The Investment Manager
expects the Company to benefit from a cash inflow in the range of $60 million
to $80 million.
· The Company continued to show good liquidity management.
As of 31 March 2024, the Company had £60.7 million in cash or cash
equivalents, as well as £58.6 million in debt headroom on its existing debt
facilities, sufficient to cover all contractual obligations and build out the
Company's portfolio to over 750 MW.
- As of 31 March 2024, the Company's gearing was 6.5% of GAV.
· The Company increased its asset base on the Irish Grid to
385 MW, of which 130 MW is operational, following the acquisition of a 51%
stake in a 75 MW pre-construction energy storage project (Project Mucklagh)
located in the Republic of Ireland.
· The Company's assets continued to support the energy
transition by providing services needed to integrate more renewable energy
sources into the grid. During the reporting period, the operational portfolio
avoided 15,178 tCO(2)e and stored 26,232 MWh of renewable electricity.
Net Asset Value:
· NAV as at 31 March 2024 was £541 million, bringing NAV
total return since IPO to 48.4%
· NAV per ordinary share of 107.0 pence per share
· The main drivers of NAV during the period where updated
macro assumptions, reflecting the current environment in which the Company was
operating in, as well as pro-active management, resulting in continued strong
cash generation and a material increase in energised capacity.
Table 1: Movement in NAV since March 2023
Movement in NAV Changes in
since March 2023
NAV (PPS)
NAV March 2023 115.6
Offering Proceeds -
Dividends -7.4
Revenue Curves -7.0
Inflation -1.5
Discount Rates -2.8
Net Portfolio Returns 10.1
NAV March 2024 107.0
The Investment Manager's Report provides readers with an explanation of the
backdrop in each of the markets the Company operates in. It details the
revenues generated, how the assets performed, and the specific drivers of the
portfolio's NAV. It also includes a Q&A with the Investment Manager's CIO
and CFO, Sumi Arima, where he talks about the Company's strategy and his
thoughts on the markets in which the Company operates. The Investment
Manager's CEO, Dr Alex O' Cinneide, then gives his views on the Company's
performance, and outlook of the future.
A glossary of industry terms can be found on page 104 of the 2024 annual
report.
Portfolio
1.25 GW
Total portfolio (GW)
1.62 GWh
Total portfolio (GWh)+
421.4 MW
Energised
826.8 MW
Pre-construction and construction phase projects
Portfolio in GB & Northern Ireland (GBP)
Asset name Capacity Ownership
1 Boulby 6.0 MW | 6.0 MWh 99.9%
2 Cenin 4.0 MW | 4.8 MWh 49.0%
3 POTL 9.0 MW | 4.5 MWh 100.0%
4 Lower Road 10.0 MW | 5.0 MWh 100.0%
5 Mullavilly 50.0 MW | 21.3 MWh 51.0%
6 Drumkee 50.0 MW | 21.3 MWh 51.0%
7 Hulley 20.0 MW | 20.0 MWh 100.0%
8 Lascar 20.0 MW | 20.0 MWh 100.0%
9 Larport 19.5 MW | 19.5 MWh 100.0%
10 Ancala 11.2 MW | 11.2 MWh 100.0%
11 Breach 10.0 MW | 10.0 MWh 100.0%
12 Stony 79.9 MW | 79.9 MWh 100.0%
13 Ferrymuir 49.9 MW | 49.9 MWh 100.0%
14 Enderby Energisation | Sep 2024 100.0%
15 Middleton Grid Availability | 2026 100.0%
Republic of Ireland & Germany (EUR)
Asset name Capacity Ownership
16 Cremzow 22.0 MW | 29.0 MWh 90.0%
17 Porterstown 30.0 MW | 30.0 MWh 100.0%
17.1 Porterstown Expansion Energisation | TBC 100.0%
18 Kilmannock Grid Availability | 2026 100.0%
18.1 Kilmannock Expansion Grid Availability | 2027 100.0%
19 Mucklagh Grid Availability | 2028 51.0%
North America (USD)
Asset name Capacity Ownership
20 Snyder 9.95 MW | 19.9 MWh 100.0%
21 Westover 9.95 MW | 19.9 MWh 100.0%
22 Sweetwater 9.95 MW | 19.9 MWh 100.0%
23 Big Rock Energisation | Dec 2024 100.0%
24 Dogfish Energisation | Feb 2025 100.0%
25 Wichita Falls Grid Availability | 2025 100.0%
26 Mesquite Grid Availability | 2025 100.0%
27 Mineral Wells Grid Availability | 2025 100.0%
28 Cedar Hill Grid Availability | 2025 100.0%
* MWh included for operational sites
+ Based on expected system duration and may be subject to change
Revenue Generation and Portfolio Performance
Renewable energy generation has continued to grow across the markets in which
the Company operates, enabled by increased flexible capacity on each grid
system. Battery energy storage systems (BESS) deliver value in these
jurisdictions by providing frequency services, load shifting, grid balancing,
energy arbitrage, and by ensuring reliability of supply during periods of
stress caused by extreme temperatures and varying wind conditions.
During the fiscal year, the fundamentals driving revenues in Ireland and Texas
were even stronger than the previous year. Integration of rising levels of
wind generation continued to drive the Irish grid's flexibility needs and
revenues for BESS, which has become a crucial technology within the ancillary
services market. Electricity demand in Texas, meanwhile, continued its upward
trend, increasing the system's need for fast-acting reserves. The continued
deployment of solar in Texas has also driven the "Energy Reliability Council
of Texas" (ERCOT) grid operator to introduce services capable of responding to
grid load ramps, which have become an increasingly significant challenge
during the evening ramp-down of solar generation.
German ancillary services experienced a drop in value as gas supplies were
less constrained than in the previous financial year. Wholesale trading,
meanwhile, offered significant opportunity throughout the year, as both supply
and demand sought to rebalance positions in the continuous trading markets.
This created high liquidity for traders, resulting in more lucrative
opportunities for BESS operators. Germany also permitted and facilitated
easier access for energy storage to new revenue streams such as aFRR, for
which the German asset is now prequalified, FCR prices saw a rise post period
in Germany, which can be credited to high solar penetration suppressing
mid-day energy prices, increasing the opportunity cost for traditional thermal
generation to run to deliver FCR services.
The GB market was subject to one of the most challenging years to date for
BESS as large amounts of energy storage capacity continued to be added to the
grid and National Grid introduced changes to the ancillary services
procurement methodology, causing ancillary services revenues to fall as a
result of increased competition. Trading markets did not provide relief to
tight ancillary services markets over the winter, driven by lower gas prices
than in previous years and milder temperatures. Changes to market operation
through introduction of the Enduring Auction Capability (EAC) for dynamic
markets and the Open Balancing Platform in the Balancing Mechanism (BM) did
not provide the increased opportunity the market had anticipated.
The difference in dynamics driving these markets highlights the benefits of
the Company's globally diversified portfolio. The portfolio generated a 5.5%
uplift in revenues compared to the previous financial year. This global
approach has made the portfolio less susceptible to revenue variances over
time caused by cyclic downturns in individual markets.
During the fiscal year, the portfolio increased the number of services offered
to the market compared to the previous year (aFRR in Germany, ECRS in Texas,
Balancing Reserve in GB). The assets were also more actively trading than in
previous years, with 7% of revenues coming from trading, versus 3% in the
previous financial year.
The Investment Manager has continuously sought to maximise the performance of
the portfolio in each market. Targeted decision-making, such as changing Route
to Market providers "RTMs" in multiple geographies, allowed the portfolio to
benefit from uplifts in performance. Continuous monitoring of the markets,
asset performance, and service delivery also enabled the Investment Manager to
identify points of improvement to the portfolio's overall performance, which
continues to show a robust and healthy level of revenue generation independent
of individual market conditions. The announced addition of new services (Quick
& Slow Reserve in GB, Dispatchable Reliability Reserve Service (DRRS) in
ERCOT, Capacity Market in Germany), coupled with market changes (REMA in GB,
Future Arrangements for System Services and Day Ahead System Service Auction
in Ireland), are expected to produce new opportunities for BESS.
Great Britain
Table 2: Overview of the GB Market
TSO National Grid
GB Portfolio 189.6 MW / 180.9 MWh
Market Share 5%(1)
Revenue during the period (m) £10.1(2)
Revenue per MW/yr £77,300/MW
Revenue per MWh/yr £82,900/MWh
1 3,884 MW buildout at 31st March 2024, from MODO GB Asset Database
2 The figure includes c.£3.0m of Liquidated Damages
The GB market experienced a significant decrease in generated revenues from
the previous financial year. Market indices indicate a 69% fall in overall
market performance between FY23/24 and FY22/23, on a per MW basis, primarily
driven by increased competition in ancillary services markets and suppressed
volatility in the traded markets throughout the year.
GB added 1.4 GW of new BESS on the grid during FY23/24, the highest increase
seen to date, while average EFA block ancillary service procurement levels
increased by only 1 GW compared to the previous financial year. This uneven
increase led to saturation of ancillary services markets, especially Dynamic
Containment/Moderation/Regulation (DC/M/R). A further contributor to market
decline was the phase-out of dynamic FFR into November 2023, reducing the
number of markets accessible to BESS. Average DC prices through the year
reduced by 71% in comparison to the previous financial year.
In November 2023, National Grid ESO also introduced EAC, which allowed bidding
between multiple dynamic services simultaneously and negative price bidding.
The platform contributed to a further reduction in dynamic services pricing,
with DC/M/R seeing a weighted average drop in prices of 32% in November 2023
versus October 2023.
Simultaneously, regular trading opportunities did not materialise for BESS as
energy prices decreased compared to the previous financial year. Trading in
wholesale markets, therefore, did not provide a significant upside to
ancillary services participation, further contributing to market saturation as
assets did not have a consistent alternative revenue source.
Balancing Mechanism (BM) skip rates of batteries were widely criticised by
BESS operators who grew increasingly frustrated by the apparent preference of
the system operator to utilise thermal generators to provide system action
rather than BESS, which were reportedly more cost-effective. The introduction
of National Grid's new platform to administer the BM (Open Balancing Platform
or OBP) in December 2023 sought to rectify this by automating part of the BM
process, allowing the grid to take more decisions and dispatch from a wider
asset base. Since the introduction of the OBP, BESS have seen some increase in
BM participation, however, this has not had a material impact on the overall
revenues of batteries while increasing competition in the marketplace between
smaller assets.
Further changes came to the market in March 2024 as Balancing Reserve (BR) was
introduced for BM-registered sites to act as a payment for sites that are to
be made available in the BM. BR did not significantly impact BESS revenue at
the close of the financial year, though operational information is currently
limited.
The annual Capacity Market (CM) auctions cleared at a high price, driven by
increasing requirements set by The Department for Energy Security and Net Zero
(DESNZ) and limited existing capacity. The Company secured a combined 251.5 MW
of non-derated Capacity Market contracts across both the T-4 CM auction, which
cleared at a price of £65/kW/year, and the T-1 CM auction, which cleared at
£35.79/kW/year. These agreements will provide an additional c.£1.7 million
in two delivery years, alongside existing CM commitments. All GB assets,
therefore, continue to have ongoing CM contracts.
At the beginning of the reporting period, BESS buildout reached its highest
rate on the grid to date. However, Q4 saw the lowest build-out of capacity
since Q2 of FY22/23. This points towards the cyclical nature of the GB market
as capacity build-out starts to slow down as a result of lower revenues. As
grid volatility and ancillary services procurement increases in line with the
deployment of further wind and solar across the grid, the trend of lower BESS
buildout should allow increased opportunities in the future for current market
participants.
Ireland
Table 3: Overview of the Irish Market
TSO EirGrid & SONI
Irish Portfolio 130.0 MW / 72.6 MWh
Market Share 15%(3)
Revenue during the period (m) £ 23.6
Revenue per MW/yr £181,600
Revenue per MWh/yr £325,200
3 849 MW of BESS capacity in both ROI and NI, based on Aurora
Ireland Flexible Energy Market Report May 2024
The Delivering a Secure Sustainable Electricity System (DS3) initiative holds
a pivotal role within the combined Irish energy system by facilitating the
integration of non-synchronous renewable energy sources, primarily wind power.
At the heart of DS3's functionality lies the System Non-Synchronous
Penetration (SNSP) scalar, a real-time metric that gauges the level of
intermittent renewable generation and net interconnector flows within the
single electricity market of Northern Ireland (NI) and the Republic of Ireland
(ROI), defined as a percentage of electricity demand on the system. DS3 rates
increase as SNSP increases, meaning that batteries delivering DS3 services see
increasing remuneration per hour for their response at times when the system
needs it the most.
Throughout the reporting period, as the buildout of renewable generation
continued across the Irish market, the system encountered a substantial
increase in both absolute levels and volatility of wind power generation,
exhibiting an average SNSP increase of 27% compared to the previous year. This
resulted in a notable c.40% year-on-year surge in DS3 revenue. In addition,
the high availability maintained by assets throughout the year contributed to
a consistent monetary performance by the Irish assets.
Wholesale trading, or energy arbitrage, continued to play an important role as
opportunities were capitalised on during periods of high demand and low wind
generation, resulting in a spike in Day-Ahead or Intra-Day pricing. The
Investment Manager's dynamic approach executed by the Company's RTM partner
allowed for the reallocation of higher volumes into this wholesale revenue
strategy rather than solely relying on DS3. This enabled additional access to
revenues, especially for Porterstown in ROI that has a fixed price capped
contract.
The Company successfully secured lucrative CM contracts at £100/kW/year for
Mullavilly and Drumkee in the T-4 27/28 auction and £128/kW/year for
Porterstown in the T-1 24/25 auction, adding to the existing CM contracts in
place during the fiscal year. The diversification of revenue from multiple
sources surpassed forecast projections, resulting in a significant performance
increase of 41% for NI and 23% for ROI compared to the previous reporting
period.
Wind volatility is expected to continue to shape Ireland's dynamic electricity
market structure, with BESS positioned at the forefront of maintaining grid
security and stability to support the increase in SNSP to up to 95% by 2030
from up to 75% today and aid in achieving Ireland's 2050 net-zero goals.
Germany
Table 4: Overview of the German Market
TSO 50 Hertz, Amperion, Tennet, Transnet BW
German Portfolio 22.0 MW / 29.0 MWh
Market Share 2%(4)
Revenue during the period (m) £1.8
Revenue per MW/yr £80,000
Revenue per MWh/yr £60,700
4 As at 31 March 2024, German had 1,353 MW of grid scale BESS
capacity operational
Both the German and broader European energy markets saw decreases in energy
prices during the reporting period that impacted the revenues available to
BESS. Gas and electricity wholesale markets prices experienced reductions of
69% and 62%, respectively, compared to the previous FY as a result of milder
temperatures during the winter, increased availability of gas storage, and a
steady influx of liquefied natural gas (LNG) from global sources as Germany
diversified its supplies away from Russia. EU regulation aimed at ensuring gas
stores are replenished led Germany to import an increasing volume of gas from
the United States and Qatar. The normalised gas prices served to reduce energy
price volatility, contributing to a 50% decrease in Frequency Containment
Reserve (FCR) prices compared to the previous reporting period.
The Company's Cremzow asset strategically diversified its participation beyond
a sole focus on FCR in anticipation of these market challenges. The Investment
Manager's engagement of a new RTM provider offering algorithmic trading
methods led to enhanced flexibility and revenue potential through
high-frequency trading, which mitigated the risks associated with an
FCR-centric strategy. Cremzow was also successfully prequalified for both
sub-services of automatic Frequency Restoration Reserve (aFRR) - energy and
capacity - following the PICASSO reform, which enabled participants to deliver
balancing energy for 15 minutes instead of the previous requirement of at
least four hours. This combined approach, leveraging additional services and
algorithmic trading, allowed the equivalent capacity from the Company's German
asset to surpass the revenue achievable from a strategy focused solely on FCR
by 43% across the reporting period.
Despite the increase in LNG supply and the milder temperatures leading to
price dips, the structural deficit in European natural gas persists due to the
shortfall from lost Russian imports. European energy prices remain vulnerable
to supply disruptions or spikes in demand, especially during winter, hot
summers, or periods of high renewable energy penetration on the system
increasing the need for flexibility. In these situations, BESS assets like
Cremzow play a pivotal role in providing flexibility services to stabilise the
grid and meet fluctuating energy demands.
Post-period the Company has begun accessing a broader spectrum of revenue
streams with the commencement of aFRR capacity in May 2024.This strategic
positioning underscores the significance of enhancing market resilience
despite the challenges posed by market dynamics.
This increased market access also positions the Company to capitalise on
upcoming opportunities as Germany grows its energy storage ambitions. In
December 2023, the Federal Ministry for Economic Affairs and Climate
Protection (BMWK) published an electricity storage strategy designed to remove
barriers for the asset class to support Germany's renewable energy targets for
2035. This was followed by the announcement of a CM mechanism, set to launch
in 2028, similar to those used in other markets to secure long-term contracted
revenue.
Texas
Table 5: Overview of the Texas Market
TSO ERCOT
Texas Portfolio 29.85 MW / 59.7 MWh
Market Share 1%(5)
Revenue during the period (m) £ 6.0
Revenue per MW/yr £200,400
Revenue per MWh/yr £100,200
5 3,243 MW stand-alone BESS buildout at 31st March 2024, from MODO
ERCOT Asset Database
Assets connected to the ERCOT market in Texas saw overall increases in revenue
over the reporting period in comparison to the previous fiscal year, driven
primarily by volatility over Q2. Temperatures continue to be a key driver of
prices in Texas, with overall demand on the grid increasing year-on-year. Peak
summer demand for 2023 was 5 GW higher than the equivalent peak in 2022,
contributing to low available headroom on the grid and driving reserve prices
and scarcity pricing.
In June 2023, the grid operator introduced the ERCOT Contingency Reserve
Service (ECRS), an additional reserve service accessible to BESS. The more
constraining and demanding requirements of ECRS participation in comparison to
Responsive Reserve Service (RRS) lead to ECRS carrying a significant premium
throughout the summer, with the average price of ECRS turning out 77% higher
than RRS in FYQ2. The operational Texan sites made 72% of their overall
revenue in this quarter, as the summer proved once more to be the most
lucrative period of the year, driven by high temperatures. The Investment
Manager's decision to change RTM in the months prior to unlock access to more
markets proved beneficial, allowing the assets to capture the peak ECRS
pricing in August.
As load decreased into Autumn, and with the start of the permitted ERCOT
maintenance windows, renewable energy generation as a factor of total demand
increased. This invariably led to high price volatility throughout the ERCOT
system. In West Texas, where the operational portfolio sites are located, high
levels of wind provided lucrative trading opportunities as the assets
participated increasingly in trading.
Texas did not see significant disturbance from winter storms compared to
previous years (winter storms Uri and Elliott). The FY22/23 storms led to
considerable increases in both energy and ancillary services prices, as they
reduced the amount of operational capacity on the grid and impaired
infrastructure. In January 2024, winter storm Heather brought freezing
temperatures to Texas for multiple days, however, the impact on grid
infrastructure was limited. Reserves prices saw an increase over January, with
an average ECRS price across three days of $170/MW/hr, raising the month's
average to $18.8/MW/hr. The remainder of Q4 was mild, leading to low
opportunity in ancillary services and reduced opportunity in wholesale
trading, although milder conditions led to more trading as a percentage of
revenue, with 20% coming from trading in Q4 compared to 11% in Q3.
Overall, the Texan portfolio outperformed the previous year by 57%. RRS saw a
22% increase in average price compared to the previous year, however, the
distribution of RRS pricing through the year was comparatively more skewed
towards higher prices. Less frequent but more exceptionally high-priced days
pushed the overall average upwards at the expense of mid- and low-priced days.
This further illustrates the value in capturing periods of peak pricing, as
well as designing alternative strategies on days of lower prices.
California
Table 6: Overview of the Californian Market
TSO CAISO
Current Phase In Construction
Target Energisation December 2024
California's grid has continued to accommodate BESS, with a further 6.8 GW
planned for deployment in the 2024 calendar year(6). This increase aligns with
the additional renewable energy on the grid, as a further 4.8 GW of solar
energy capacity is planned to interconnect in 2024. Such increases in
renewable generation, especially from solar, have continued to drive the load
shape towards a "duck-curve". High renewable penetration on the grid has
increasingly led to suppressed energy pricing during peak solar generation
hours. This trend is expected to yield frequent negative pricing during
"shoulder months", where the load is at its lowest, increasing availability of
spreads available to BESS for trading.
6 S&P Global - Outlook 2024: CAISO battery boom continues with
over 6 GW planned in 2024
At the end of the previous financial year, CAISO and the CPUC approved the
implementation of the mid-term reliability programme. As a result of this
decision, the relative scarcity of projects available to deliver Resource
Adequacy (RA) contracts has led to an increase in RA contract values. As an
eligible participant, batteries that are not currently committed to an RA
agreement have been able to capitalise on this opportunity.
These long-term contracts are expected to account for a significant proportion
of revenue (up to c.40%), presenting a valuable opportunity for eligible
battery projects, including the Company's 200 MW/400 MWh Big Rock asset.
Overall portfolio performance
The portfolio generated £41.4m in revenues, an increase of 5.5% compared to
the previous year (2023 Financial Year £39.3m), with weighted annualised
revenue of c. £130,000/MW (£15.12/MW/hr). This was achieved through
geographical diversification and the Company's unique ability to generate
revenues even when some markets were hindered by seasonal variation or
saturation.
Table 7: Summary of Portfolio Performance
£(000's) % within grid
GB 189.6 MW / 180.9 MWh
Ancillary Services 3,226 32%
Capacity Market 2,007 20%
Wholesale Trading 1,032 10%
Other(7) 3,795 38%
Total(8) 10,059 100%
Ireland 130 MW / 72.6 MWh
Ancillary Services 22,474 96%
Capacity Market 734 3%
Wholesale Trading 318 1%
Other 82 0%
Total 23,608 100%
Germany 22 MW / 29 MWh
Ancillary Services 953 54%
Wholesale Trading 807 46%
Other - 0%
Total(9) 1,760 100%
Texas 29.85 MW / 59.7 MWh
Ancillary Services 5,128 86%
Wholesale Trading 633 10%
Other 223 4%
Total 5,983 100%
Portfolio Total 41,411
Market Revenue £(000's)/ £/MW/hr £(000's)/ £/MWh/hr
£(000's)
MW/yr
MWh/yr
GB £10,059 £77 £8.80 £83 £9.44
Ireland £23,608 £182 £20.67 £325 £37.02
Germany £1,760 £80 £9.11 £61 £6.91
Texas £5,983 £200 £22.82 £100 £11.41
Weighted Average £41,411 £133 £15.12 £147 £16.69
Total Revenue £(000's) Jun-end 2023 Sep-end 2023 Dec-end 2023 Mar-end 2024
GB £1,859 £1,775 £1,647 £4,777
Ireland £3,931 £5,797 £7,145 £6,736
Germany £340 £509 £530 £381
Texas £798 £4,325 £338 £522
Total Revenue £6,928 £12,406 £9,660 £12,416
Operational Capacity 291.6 MW 291.6 MW 371.5 MW 371.5 MW
7 Includes REPs, ABSVD, NIV, and Liquidated Damages.
8 The Company holds a 49% ownership interest in Cenin (4.0 MW) and
retains 49% of the generated revenue.
9 The Company holds a 90% ownership interest in Cremzow (22 MW) and
retains 90% of the generated revenue, while Enertrag maintains a minority
stake in the asset.
Asset Performance
The portfolio performed well with average availability incorporating all
commercial operations downtime, including planned preventive maintenance,
exceeding 93% across the reporting period.
Great Britain:
The GB fleet performed well during the period, with the fleet's average
availability broadly in line with the consolidated portfolio average.
Larport's availability was impacted due to a substation transformer failure,
which was resolved in January without ongoing concern.
Ireland:
Project performance in Ireland remains a highlight for the portfolio, with
over 99% availability over FY 24/25 (a small uplift on FY 22/23). All Irish
projects responded to the requirements of DS3 services without issue. As in
FY22/23, all DS3 events were responded to correctly and the projects continue
to generate revenue in these services without penalties.
Germany:
The Cremzow project comprises two phases, a 20 MW phase and a pilot 2 MW
phase. The 20 MW phase performed well during the period and met expectations,
however, the 2 MW phase had lower availability as it uses older technology.
The Investment Manager is currently exploring options to enhance the
availability of the 2 MW phase in the long term.
US - Texas:
The three operational projects (Snyder, Sweetwater and Westover) performed
well in the first half of the reporting period, which was critical for project
revenues as summarised in the revenue performance section of this report.
Downtime was mostly driven by inverter failures, although communications
network connection failures drove some outages. These issues have been
addressed by installing redundancy measures such as satellite backup. The
Investment Manager has been working closely with the inverter manufacturer and
O&M provider to identify measures to upgrade inverters at each site (some
firmware updates and upgrades are now completed, with more upgrades due in May
2024). Preventative maintenance is being coordinated to maximise each
project's capability for stable performance ahead of the summer season and
peak pricing.
Asset Management Developments
This was another busy year for both the industry and the portfolio.
Trials were completed with battery analytics providers and a suitable supplier
was identified for supporting the wider portfolio. Insurers valued the
material risk reduction of this approach, and the Investment Manager received
and accepted quotes for improved premium terms for multiple sites in GB.
Shortly after the reporting period, this approach extended to a global
portfolio policy utilising the same monitoring and diagnosis software: it is
believed this will be the first global policy of its kind for a portfolio of
battery storage systems, highlighting the Investment Manager's approach to
thought leadership whilst leading by example. Additional projects (since
Cremzow) are also being retrofitted with electrolyte vapour detection (an
additional mitigation through hardware to avoid thermal runaway occurring),
evidencing the Investment Manager's commitment to best practices in safety for
the fleet.
The Investment Manager continued to identify and enact operational performance
efficiencies. In GB, reduced prices were negotiated across the majority of
O&M contracts and most asset management contracts were terminated in
favour of in‑house management enabled by the growing technical
capabilities and experience of the Investment Manager. In Ireland, project
warranties were reviewed and material cost savings were identified (effective
Q1 FY24/25). The Investment Manager will deliver asset management activities
for all three operational Irish projects moving forward. Engagement with RTMs
in both Germany and Texas remains strong and will facilitate improved
coordination and scheduling of downtime to best support revenue optimisation
in these markets.
Data-driven asset management will be a focus of FY24/25. Partners have been
identified (with contractual negotiations underway) for the entire portfolio
to support data collection, battery analytics, automated operational insight
and live alerting. Many benefits are expected from this approach, such as
increasing availability by quicker awareness of project faults and better
decision-making for RTMs and commercial optimisation teams.
Project Progress Overview
Stony (79.9 MW - Great Britain) - Operational
Construction at Stony was successfully completed in July 2023, and the site
was subsequently energised in September 2023. The commissioning process went
smoothly, and the asset began providing service in December 2023. Operational
notifications have been received from the distribution network operator, and
the asset is now active across ancillary services, trading and Capacity
Market.
Ferrymuir (49.9 MW - Great Britain) - Operational
Works at Ferrymuir were disrupted by the insolvency of the contestable works
contractor, Smith Brothers Contracting. The Investment Manager secured
critical long lead time equipment and arranged the appointment of a
replacement independent connection contractor. Working with the utility
operator, Scottish Power, the completion of the contestable works was
negotiated, and the site was energised in February 2024. Revenue generation
from the asset began in July 2024. As site take-over was scheduled to occur
at the end of May 2024, but the milestone was not achieved, the Company is
pursuing its contractual remedies to compensate for lost revenues due to those
delays.
Enderby (57 MW - Great Britain)
Pre-commencement planning conditions were fully discharged, and the
contractors mobilised to site in late Spring 2023. Rapid progress was made on
the completion of the civil engineering and drainage works at the BESS site
and all of the infrastructure is now installed. The batteries, power
conversion system (PCS) and substation are delivered, installed and ready for
energisation. Connection to the grid has been prevented by delay to National
Grid's protection system on account of rectification of security
vulnerabilities. National Grid have completed their works and energisation is
to commence in August.
Dogfish (75 MW - Texas)
At Dogfish, the transformer, switchgear and ancillary high-voltage equipment
were procured in September ahead of the close of the EPC to minimise the
impact of long lead manufacture and delivery on project schedule. The EPC was
signed with Nidec in December and design and procurement are well advanced.
Physical works of a significant nature have been completed at the site to
safe-harbour 2023/24 energy community designation for the investment tax
credit 10% enhancement. Works are on track for energisation in February 2025.
This is later than previously reported owing to selection of Nidec as the EPC
delivery partner after the opportunity for supplier financing arose.
Negotiation of the finance agreements together with re-opening EPC
negotiations took time but offered lower risk and better alignment with the
Manager's capital allocation strategy.
Big Rock (200 MW - California)
Completion of pre-commencement development obligations was completed through
the summer of 2023, and ministerial permits were issued by the County ahead of
mobilisation. All major procurement is complete for Big Rock and works are
progressing well on site. The BESS EPC contractor has completed the access
roads, grading and drainage works. All of the foundation piles are installed,
and the BESS enclosures have begun to be delivered to the site. The substation
and overhead line construction are progressing on schedule while transformer
manufacture is complete, and delivery is planned for June. Line outage and
switchyard energisation are being scheduled with the local utility for
September - system conditions allowing - with commissioning on the BESS to
follow. The BESS is on track to be energised in December 2024.
DEVELOPMENT AND PRE-CONSTRUCTION
The construction schedule for Porterstown II has been revised to accommodate
several important factors. Notably, there was a significant 14% reduction in
battery prices(10) between 2022 and 2023 onwards, with this trend extending
into 2024. The Investment Manager has, therefore, made an adjustment to the
construction schedule to capitalise on the declining prices and policy and
liquidity considerations in order to maximise returns. This strategy is
consistent with the Investment Manager's history of minimising capex through
various means, such as strategic financing, exploiting pricing and policy
trends. The Investment Manager is also cognisant of the current interest rate
environment and signals from the BOE, and its use of debt in the current
environment. Therefore, this adjustment to the construction schedule is viewed
as a proactive step that is expected to result in a higher asset IRR and a
good example of active management. The Investment Manager will update the
market in the near term on construction dates.
10 Source: Bloomberg
The Investment Manager has completed applications for new planning consents
for Kilmannock I and II to take advantage of the latest technology
configurations and the nature of the site topography. The consent for
Kilmannock I and for Mucklagh, the new addition to the portfolio as of March
2024, has been received. Pre-commencement planning conditions for Kilmannock I
are being discharged with an archaeological investigation most recently
completed in April 2024 without any finds.
At Middleton, similar archaeology works for a pre-commencement condition are
planned, and work is underway on construction environmental management plans,
drainage design and system design.
Long lead procurement for the main grid transformers for Kilmannock and
Middleton is underway. Projects are in good readiness to proceed to
construction pending final capital allocation.
Battery prices have continued to fall through 2023 and 2024, reinforcing the
Investment Manager's decision not to overbuild assets, ensuring optimal
capacity to serve the market opportunities present and configuring projects
for future modification. Rapid growth of battery manufacturing has outpaced
demand, which is leading to significant downward pricing pressure on battery
makers. Looking ahead to 2025, US manufacturers benefiting from IRA subsidies
are expected to further intensify competition, potentially driving prices
further down. For projects currently in procurement, the Investment Manager
has secured price reductions of between 8% to 34% from Q3 2023 to Q2 2024, for
combined battery module and container offers.
Table 8: Sites in construction
Construction Capacity Target Energisation
Stony 79.9 MW Energised
Ferrymuir 49.9 MW Energised
Enderby 57.0 MW Sep-24
Big Rock 200.0 MW Dec-24
Dogfish 75.0 MW Feb-25
Table 9: This table lists the expected availability of grid connections where
contracts accepted and signed for pre-construction assets. Completion of
development, procurement and ultimately construction will be scheduled to
align with connection availability while optimising capital deployment.
Other Portfolio Grid Availability
PBSL2 TBC(11)
Mineral wells 2025
Mesquite 2025
Cedar hill 2025
Wichita falls 2025
KBSL 1 2026
Middleton 2026
KBSL2 2027
Mucklagh 2028
11 Energisation target to be determined based on capex pricing and
market opportunity. The Investment Manager expects to provide details in the
Company's next Interim Report
Q&A with Sumi Arima
Sumi Arima
CIO and CFO of Gore Street Capital, the Investment Manager
Q: What were the key milestones reached in the 2024 fiscal year?
Unlike the previous reporting period, which was defined by a series of
acquisitions that took the Company into three new international markets,
FY23/24 was a milestone year in itself as the strength of the diversified
strategy was illustrated. We have always believed that, as a responsible
investor dedicated to delivering sustainable value to shareholders,
diversification was the correct choice to lower risk and access as wide a
range of revenue streams as possible. The consolidated portfolio over the
reporting period has demonstrated why this choice was the right one by
consistently delivering average revenue of £15.1 per MW/hr, or c.£133,000
per MW/year.
We have been able to report this average figure throughout the year as strong
performance in markets like Ireland and Texas offset the decline we've seen in
GB and the normalisation of revenues in Germany following the previous
reporting period's unprecedented market conditions. This was particularly
evident in FY Q2 driven by high volatility in the ERCOT market and our
prequalification to deliver the new ECRS service. Reaching approximately
£150/MW/hr for the month of August was a particular highlight as the
Company's highest monthly revenue per MW ever achieved from a single market.
More important is that this story continued throughout the year, highlighting
the uniquely stable revenue profile the Company has achieved through its
diversification strategy.
We also saw the confidence that this approach has inspired across the market,
with contracts negotiated with strategic partners to secure growth, in part,
on the basis of share issues. This allowed the Company to grow its portfolio
in the lucrative Irish market with a minimal cash consideration, aligning
interests between the Company and key stakeholders and demonstrating the value
of our track record of success.
Work is already well underway to continue to build on this record, with the
Company's biggest projects to date moving ahead at pace. Energisation of the
79.9 MW Stony asset in September was a key milestone, becoming the largest
energised project to date within the portfolio, while progress at the
prioritised US sites is positioning the Company to once again capitalise on
its international presence through access to new revenue streams.
We have been able to overcome the complexities of entry into California, one
of the most regulated markets in the world, to progress the 200 MW Big Rock
asset towards its targeted energisation date in December. The scale of this
project compared to the Company's first 6 MW asset in GB is a true reflection
of its ambition, and the results we've seen this reporting period show how
important it has been to overcome the challenges associated with entering new
markets over the last six years to create a diversified and successful
portfolio.
Q: Did revenues emerge as expected over the reporting period?
We underwrite our assets to declining revenues on the assumption that, as a
first mover across multiple geographies, new market players would emerge and
build out capacity to compete with the Company's portfolio once the business
case is proven and capital costs reduce. The GB market is the best example of
this, having undergone cycles in which demand for grid balancing services
exceeds supply, bringing new entrants into the market chasing high
profitability. This inevitably leads to oversupply of capacity and a reduction
in available revenues, causing new capacity additions to subside.
What did surprise us over the reporting period is how much capacity continued
to be built out in GB by peers with a single market strategy. The fundamental
driver of increased system volatility that stems, in part, from higher
penetration of renewables on the grid was not at the level required to support
so much energy storage capacity coming online, which is why the GB market has
experienced such suppressed revenues over the reporting period. This situation
also effectively reinforces the decision to follow a diversified strategy, as
the Company has been able to access a wide range of revenues across an
international portfolio.
Seasonal variations between regions continued to play a role in the revenues
that emerged over the reporting period although in a slightly less pronounced
way. In Ireland, for example, higher wind generation in the summer as well as
winter months resulted in consistently stronger performance throughout the
year as the Company's assets helped to ensure stable integration of
renewables.
We anticipated higher overall revenues from ERCOT as a result of our
transition to a more sophisticated revenue strategy, which we knew would
provide access to a wider range of revenue streams. The Investment Manager is
in regular contact with our partners in Texas as well as the grid operator to
understand what volatility is expected on a quarterly basis. This meant we
were prepared for the scale of opportunity achieved over the summer.
As well as cushioning market decline in GB, the expected strong performance in
Ireland and Texas also helped to reduce the impact of revenue reductions in
Germany. This fall stemmed from a reduction in power prices compared to the
2022/23 period, which contained extreme gas market volatility as the EU raced
to reduce its reliance on Russian gas supplies. With gas setting marginal
prices for the power market, revenues available to the Company's Germany asset
were higher at that time compared to what we expected to see once the market
resettled. With EU efforts firmly in effect over the latest reporting period,
power prices returned to more normalised levels as predicted, causing a sharp
fall in revenues compared to the previous year's extreme prices. Our strategy
for the year accounted for this predicted decline as we adopted a more
data-driven, trading focused approach to broaden our activities beyond just
ancillary services.
Q: How has the decline of GB revenues affected the Company's consolidated
revenue performance?
The downturn in GB has been drastic, with a combination of saturation in
ancillary services and reduced volatility in the wholesale market reducing the
value that can be extracted from this single market. The decisions taken by
the Company since establishing the energy storage asset class six years ago-to
allocate capital across multiple, uncorrelated markets-have meant that the
impact on the consolidated portfolio's performance has been minor. We also
appreciated the support of shareholders back in the 2022 General Meeting,
where shareholders supported an amendment to allow the Company greater
flexibility to invest outside of the UK and Ireland, reducing the minimum
allocation to UK from 60% to 40% which further supported our diversification
strategy. The Company has, in fact, increased its overall revenue on an
absolute basis compared to the previous financial year due to the uptick we've
seen in other geographies, highlighting the uniquely stable revenue profile of
its diversification strategy.
The average revenue of £8.80 per MW/hr we've seen in GB, including liquidated
damages, compares to £19.6 per MW/ hr from the non-GB portfolio. With almost
no correlation between GB revenue and non-GB revenue, the entire operational
portfolio has been able to maintain consistent performance and reduce revenue
volatility over half, as illustrated in figure 6 on page 22 of the 2024
annual report, compared to what would be achieved by a GB-only strategy. The
confidence this provides for investors in the Company's ability to deliver
consistent returns is a result of the diversification strategy enacted by the
Investment Manager and how capital has been allocated across five
international markets to date. We are, therefore, committed to further
reducing the Company's exposure to GB as a proportion of capacity on a MWh
basis to provide greater value for investors.
Markets like Ireland and Texas could experience similar cyclical declines as
more capacity comes online and their markets become more saturated. The
difference, however, is that these markets are adding renewables at a faster
rate than we are seeing in GB, driving the fundamental economic case for
energy storage. We will also be adding capacity in new markets with the
scheduled energisation of the 200 MW Big Rock asset in California by the end
of 2024, providing access to long-term contracted revenue from the high-value
Resource Adequacy market. As with participation in other uncorrelated markets,
this will contribute to revenue stability at a consolidated portfolio level.
We are already seeing the current weaknesses of the GB market discourage new
market entrants and capacity additions, potentially kickstarting the next
cycle of recovery. Energy storage is a long-term asset experiencing volatility
year by year but, as more renewables are added and the flexibility needs of
grid operators increase, the crucial role of the asset class remains strong.
Q: What is the Company's view on GB market recovery?
As the Company has a dedicated focus on delivering sustainable returns through
its diversified approach, monitoring profitability over the long term rather
than reacting to short-term trends is a key role fulfilled by the Investment
Manager to ensure this is achieved.
As one of the first active players in the GB market, we have seen high revenue
years followed by overbuild and a subsequent reduction in available revenue
from frequency services. This is the situation we find ourselves in today,
with GB's c.4 GW of battery energy storage offering more capacity to the
ancillary services market than currently required. Wholesale trading revenue,
although increasing, still does not offer high enough returns on a consistent
basis to make up this shortfall and so value is more difficult to extract.
In the past this has led to under-build of new projects until profitability
returns to previously seen levels and we are already seeing signs of that
cycle continuing, with low-capacity additions to the GB fleet in FY Q4. We
have remained prudent in our build strategy throughout these cycles, designing
assets to suit available revenue streams while minimising capex-on a MW and
MWh installed basis-with the optionality to retrofit with additional duration
when market opportunities warrant the additional capital expenditure.
While the timeline for recovery remains unclear, we are seeing National Grid
ESO continue to develop new products and capabilities to better utilise the
unique capabilities of battery energy storage systems. Higher revenue
generation could, therefore, be on the horizon in GB but the timing of this
recovery is a complex question. It is largely dependent on the pace of
renewable deployment, the grid operator's frequency service procurement needs,
the global gas market, and the weather over the coming winter period. Any one
of these factors could result in a switch to high revenue generation for the
Company's GB portfolio, but it is impossible to forecast the exact timing.
This illustrates the underlying value of the Company's diversified operational
portfolio as it is able to deliver returns for investors throughout these
market cycles from across four uncorrelated markets to date, with CAISO in
California soon to follow.
Q: Would you ever consider a tolling agreement to offset revenue risk in the
future?
We regularly test the market for tolling agreements and are yet to be
convinced they offer an attractive alternative or addition to our diversified
approach to revenues. The recently and widely reported large tolling agreement
in GB appears to fall in line with the price levels we've seen when testing
the tolling market and, while it may serve to improve confidence among
lenders, locking in an agreement at a low point in the market has considerable
disadvantages. Any upside from market recovery is eliminated for the tolling
agreement period which, for investors, means they are forced to settle for a
certain but potentially low return.
Remaining merchant allows the Company to retain any potential upsides across a
portfolio that is already derisked by its geographical spread across five
uncorrelated markets. More importantly, we have the control over each asset to
optimise the Company's revenue strategy to ensure these upsides are accessible
while ensuring they maintain best-in-class operational performance.
Tolls often come with increased cycle rates, which can degrade the battery,
while putting in place stringent availability requirements and penalties if
they dip below that level. As an active manager with an in-house commercial
and asset management team working in unison to maintain availability while
engaging in a wide range of optimal revenue streams, we would not rush to give
up that control.
Q: Why did the Company increase its capacity in Ireland?
The strategic decision to increase capacity in the Republic of Ireland was
driven by the consistently lucrative nature of this market for the Company
since its initial international expansion in 2019. The Irish market has
exhibited strong fundamentals and continues to represent an attractive
investment opportunity aligning with our objectives.
Through these transactions, the Company acquired the remaining 49% stake in
two existing operational Irish assets - the combined 90 MW Porterstown project
and 120 MW Kilmannock construction asset - through the issuance of new
ordinary shares to our strategic partner Low Carbon. This long-term
relationship, which was established when the Company first diversified into
the Irish market, also allowed us to exercise the option to secure a 51%
interest in Project Mucklagh, a 75 MW pre-construction asset with targeted
energisation in 2028, for a development fee agreed back in 2019. This was an
attractive cash consideration on a £/MW basis compared to the prices we see
now following rapid development of the Irish market, making the legal option
agreed by the Company five years ago extremely cost efficient for today.
These acquisitions represent innovative and efficient capital deployment
solidifying the Company's commitment to portfolio diversification across
geographic markets while strengthening a strategic partnership by bringing Low
Carbon onto the Company's share register. This will ensure all parties are
fully aligned during buildout of the assets to ensure they are delivered at
pace to join the Irish market, which will remain critical within the Company's
diversified portfolio.
The Company's ability to expand its network of long-term partners enhances its
access to a pipeline of development opportunities across target geographies.
As evidenced by the Company's continued execution in Ireland, active
management of the portfolio through strategic acquisitions and partnerships
will remain a key driver of long-term growth and shareholder value
generation..
Q: How did the Company overcome the difficulties faced in securing capital
during a difficult time for raising new funds?
The rapid increase in interest rates since late 2022 has significantly
impacted the investment trust sector, particularly renewable energy investment
trusts. These trusts have historically often traded at a premium to their NAV,
reflecting investor demand and confidence in the sector's growth prospects,
however, as interest rates have surged, the yield offered by these trusts
became less attractive over the period relative to the risk-free rates
available on government bonds.
This has led to a sell-off in the sector, depressing share prices and causing
trusts to trade at discounts to their NAV levels. The discount levels have
become quite pronounced for even some of the largest renewable energy
investment trusts. This creates challenges from a capital raising standpoint
as trusts are prohibited from issuing new shares below NAV, restricting their
ability to fund new projects and acquisitions.
The challenge for the Company has been to continue to pursue a growth strategy
in this environment but the Investment Manager has been able to adopt
alternative complex structures in which contracts can be negotiated with
strategic partners to include payment, at least in part, through share
issuance at NAV. During the reporting period, this allowed us to raise gross
proceeds of £15.8 million from our long-term strategic partner Nidec and grow
the Company's portfolio in the lucrative Irish market by c. 24% with a minimal
cash consideration through well-structured negotiations with Low Carbon.
This approach reduces the immediate cash burden on the Company while aligning
our objectives with partners who have demonstrated confidence in our strategy
and ability to deliver strong returns over the long term. These achievements
underscore the Company's ability to navigate the headwinds of the current high
interest rate environment and maintain a growth trajectory through innovative
problem-solving and strong industry relationships.
While discounts persist, capital raising and funding new projects will remain
a key challenge for renewable energy infrastructure investment trusts to
navigate, however, we have demonstrated our ability to overcome this challenge
and continue to deliver growth and value to shareholders.
Q: Has the Company's use of leverage evolved in the period as project-level
finance or alternative financing structures are employed?
While still a young asset class, utility-scale energy storage has evolved
rapidly in the six years since the Company first listed on the London Stock
Exchange. Unlike conventional renewables, which offer long-term contracted
revenues to provide certainty to lenders, energy storage remains largely based
on a merchant revenue stack, reflecting the uniquely complex and varying
capabilities of the technology. This has historically been met with reduced
appetite from lenders to provide leverage to investments on attractive terms.
As the market has matured and the Company's track record of success has become
well-established, lenders are more comfortable than ever with our approach.
We remain committed to ensuring resilience on the balance sheet by retaining
the Aggregate Group Debt below 30% of GAV and had reached just 6.5% of GAV at
the end of the financial year. We expect this to rise to c.15% after drawing
down on available debt lines to support the buildout of the Company's
near-term portfolio while maintaining a low level of gearing but retaining
headroom to increase borrowing should it be necessary. We have shown this
period that the Company is able to capitalise on its track record to secure
additional debt from key partners like Santander and First Citizens Bank at
the portfolio and project level.
During the period we successfully increased the Company's revolving credit
facility from £15 million to £50 million to support the construction of its
projects in construction. The Company also secured $60m in debt finance at the
asset level for the first time to support the 200 MW Big Rock project. The
loan from First Citizens Bank reflects the value this project offers to the
portfolio through the addition of long-term contracted revenues for up to
c.40% of the revenue stack over the project's lifetime. Once fully drawn, the
$60 million facility amounts to a conservative level of gearing equal to
25-30% of the gross asset value of the project.
These agreements demonstrate the Company's ability to raise capital, both
equity and debt, in the current climate as part of a strategy to demonstrate
and implement appropriate and balanced liquidity management. They also show
lenders have become increasingly comfortable with the Company's approach,
delivered by the Investment Manager.
Q: How have capex prices changed over the reporting period and what
opportunities arise from these changes?
Our strategy has always been to build assets to the requirements of revenue
streams available in the market at the time of operation. We are unique in
operating assets across four different markets all with different system
durations, but with a strategic view on future capacity additions should capex
costs align with revenue opportunities.
Many operators in GB, for example, have committed themselves to deployment of
two-hour systems at a considerable cost on the assumption that trading
opportunities would emerge as the dominant revenue stream to warrant such
investment. We have instead deployed capital efficiently to focus on
shorter-duration systems, primarily to deliver frequency response and
ancillary services but designed with the ability to augment their duration.
This approach has allowed us to maintain disciplined control over capital
costs and retain the potential to take advantage of changes in capex prices
when they prove most advantageous for the Company and its shareholders.
We have seen capex costs fall dramatically in the last two years driven by
economies of scale and technology advancements in manufacturing, alongside a
change in demand from the electric vehicle market. Today we are able to
purchase equipment at a considerable discount compared to the costs incurred
by two-hour projects built in recent years, which remain unrepresentative of
the value available on the market.
We will continue to review options to augment our systems with additional
duration in this context of lower capex prices, but will maintain our prudent
approach to capital allocation in response to available revenue opportunities.
We will, of course, remain vigilant about potential headwinds, such as supply
chain disruptions, geopolitical tensions, and fluctuations in raw material
prices as we continue to build out our portfolio. We are, however,
well-positioned to navigate the dynamic energy storage landscape and deliver
sustainable returns for our stakeholders.
Q: What is your key focus for the next financial year?
As we look ahead to the next reporting period and beyond, we remain committed
to driving sustainable growth and maximising returns for our investors. This
begins with prioritising the build out of 332 MW of new capacity over the next
seven months. This includes our landmark 200 MW Big Rock project, which will
fully establish our presence in the CAISO market in California. Bringing these
assets online will be crucial for expanding our operational footprint and
revenue generation capabilities, improving dividend cover and creating further
value for shareholders as projects are derisked as they move to operational
stage.
The prioritised portfolio represents the optimal allocation of capital across
the five markets in which the Company has assets, and we will continue to
monitor how best to utilise the Company's existing resources. This will
include evaluating opportunities to recycle capital into the most attractive
jurisdictions through potential asset sales and redeployment of proceeds into
higher-returning geographies and revenue opportunities. Our focus remains on
maximising profitability and maintaining our leading position in revenue per
MW and per MWh.
Raising capital through other means will also be a priority. We have shown
over the reporting period this is possible through alternative structures and
are keen to continue leveraging the Company's track record and the Investment
Manager's extensive network to secure new finance.
The fundamental drivers supporting energy storage remain robust, driven by
climate policies and energy security needs worldwide. We are well-positioned
to capitalise on these conditions and deliver sustainable growth to investors.
NAV Overview and Drivers
Table 10: NAV Bridge
£m Pence per share
NAV March 2023 556 115.6
Offering Proceeds 27 0.0
Dividends (36) (7.4)
Revenue Curves (35) (7.0)
Inflation (7) (1.5)
Discount Rates (13) (2.8)
Net Portfolio Returns 49 10.1
NAV March 2024 541 107.0
Table 11: Reconciliation of Reported NAV
2024 2023
Operational Portfolio 201,662,000 166,252,000
Construction Portfolio 290,887,000 269,037,000
Fair Value of Portfolio 492,549,000 435,288,000
Group Cash 65,168,000 136,809, 000
Other Net Assets/(Liabilities) (17,021,000) (15,832,000)
NAV 540,697,000 556,265,000
Aggregate Group Debt 37,345,000 -
GAV 578,042,000 556,265,000
The Company's independent valuer, BDO, conducted an independent valuation as
of 31 March 2024, which included a review of key assumptions. The findings
from BDO's valuation aligned with the Company's year-end valuations and the
key assumptions adopted which were used to determine the final NAV.
Successful active management during the period resulted in strong cash
generation which along with a significant increase in energised capacity
resulted in a 10.1 pence per share increase in NAV. Key macro assumptions,
including inflation, revenue curves and discount rates reflecting the
prevailing environment in which the Company operated, led to a decrease of
11.3 pence per share during the period. The Company also paid dividends,
resulting in a 7.4 pence per share reduction in NAV. Below, the Investment
Manager provides an overview of each of the key NAV drivers during the period:
1. Offering Proceeds
The Company issued 23,700,000 new Ordinary Shares to strategic partners Nidec
and Low Carbon. The shares were issued at the prevailing Net Asset Value on
the date of issuance. In December 2023, 14,000,000 shares were issued to
Nidec, followed by an additional issuance of 9,700,000 shares to Low Carbon in
January, both at the prevailing NAV.
2. Dividends (-7.4 pence):
The Company met its dividend target during the reported period, equal to 7.5p
per share. Due to the issuance of additional shares partway through the
reporting period, the per-share dividend included in the above NAV bridge,
amounted to 7.4p.
3. Revenue Curves (-7.0 pence):
The Company maintained its approach to revenue curves, taking the mid-case
scenario from third-party research houses for the purpose of asset valuation.
Where available, the Investment Manager took a blended average mid-case
scenario from multiple research houses to gain a more balanced view of future
revenue generation. The Investment Manager considers this method to provide a
fair reflection of the underlying value of the portfolio.
Throughout the year, key markets, notably Great Britain, experienced a decline
in the revenue forecasts driven by recent weakness in revenue being factored
in by research houses. Despite improved outlook in some markets, the net
effect compared to the previous reporting period was a decrease of 7.0 pence
in NAV.
Material contracts secured during the period include: one-year T-4 Capacity
Market contracts for Port of Tilbury, Lascar, Hulley, Larport and the Ancala
assets and one-year T-1 Capacity Market contracts for Port of Tilbury, Stony,
Ferrymuir and Enderby in GB; Capacity Market contracts for Porterstown in the
Republic of Ireland (October 2023 to September 2024) and the Northern Irish
assets (October 2027 to September 2028). In Germany, the forecasts were
adjusted to reflect the hybrid revenue strategy (ancillary services &
trading) implemented during the period, resulting in a slight increase in the
assets valuation. In California, even though merchant ancillary services
forecasts have seen a decrease in the period primarily due to changes in CAISO
rules causing further state-of-charge management-related costs to batteries,
the current market environment for long term fixed price resource adequacy
contracts is favourable and is expected to be accretive to NAV once a contract
has been secured. The curves were also updated for the Texan assets, with
slight increases and decreases in future assumptions, dependent on the node of
each asset - the overall effect for the Texan fleet was net neutral.
The revenue curves used in valuing the Company's assets as of 31 March 2024
are provided in Figure 9 on page 26 of the 2024 annual report.
4. Inflation (-1.5 pence):
As presented below, inflation assumptions applied across grids for 2024 and
2025+ reflect the inflationary macro environment observed globally. These are
in line with those presented in the Company's Interim Report for the period
ended 30 September 2023.
Table 12: CPI Assumptions
CPI Assumptions GB Ireland US Germany
2024 2.75% 2.75% 2.75% 2.75%
2025+ 2.50% 2.50% 2.50% 2.50%
5. Discount Rates (-2.8 pence):
To combat the persistent inflationary environment, central banks across
different geographies raised interest rates, increasing yields for long-term
government bonds. To align with the higher return environment, the Investment
Manager increased the discount by 25 bps across all assets. The impact of
de-risking through construction progress on discount rates for relevant assets
are discussed separately below in the Net Portfolio Returns section.
The Company's discount rate matrix is provided below:
Table 13: Discount Rate Matrix
Discount Rate Matrix(13) Pre-construction phase Construction phase Energised
phase
Contracted Income 10.75-11.00% 9.75-10.50% 7.25-9.25%
Uncontracted Income 10.75-11.00% 9.75-10.50% 8.75-9.25%
MW 494.8 332.0 421.4
13 Porterstown uses blended discount rates across
energised (Phase I) and pre-construction (Phase II) phases. MW capacity
numbers for pre- construction phase includes assets held at book value.
6. Net Portfolio Returns (+10.1 pence):
Net Portfolio returns refers to cash generation, COD delays, opex savings,
site upgrades, de-risking of sites and DCF changes and rollover:
· Cash Generation (6.3 pence): Cash generation was the
primary driver within portfolio returns.
· COD delays (-2.1 pence): Delays in assets meeting their
COD dates resulted in a reduction in NAV by 2.1 pence. This was driven by
slower than expected energisation timelines given grid bottlenecks across the
global fleet. Detailed dates for the energisation of assets can be found in
the Project Progress Overview section above.
· Operating Expenses (1.8 pence): The Company amended the
operating expense assumptions to reflect modified O&M, asset management,
and insurance costs. Through the work done by the Investment Manager's
in-house team, the premiums for RTM costs associated with the Texan, Stony and
Cenin assets were reduced, further boosting the business case for storage
assets.
· Site Upgrades (2.1 pence): The Investment Manager expects
to retrofit select GB assets, which include Stony, Ferrymuir, and Enderby,
with one hour of additional duration, resulting in all three sites becoming
2-hour duration assets. The Investment Manager intends to align the
retrofitting timeline to take advantage of decreasing lithium-ion prices and
an expected shift in the GB market, which is expected to favour a more
trading-centric strategy. The upgrades are designed to capture additional
revenues from the balancing market and energy arbitrage, supporting future
augmentation. The Investment Manager expects to retrofit assets over the next
three years. The Investment Manager will continue to monitor multiple
variables and remains dynamic in its approach to ensure best value.
· De-risking of Construction Assets (2.8 pence): The assets
that have seen discount rate premium reductions include Big Rock, Dogfish in
the US, Stony, Enderby, and Ferrymuir in GB, which align with construction
progress.
- The US assets executed BOP and EPC contracts during the period
and are now progressing in their construction works.
- As reported throughout the period, Stony and Ferrymuir both
achieved energisation. The Investment Manager also secured all major
equipment, including batteries and inverters for the Enderby project, which
were delivered to site and are currently being installed.
Due to the portfolio wide discount rate hikes of 0.25% outlined above, the
weighted average discount rate of the Company's portfolio as of March-end 2024
increased slightly to 10.2% (FY23: 10.1%) despite the natural unwinding of the
discount rate as a material amount of assets progressed through stages of
construction.
· Fund, Offering and Subsidiary Holding Companies Operating
Expenses (-1.9 pence)
· Other DCF adjustments and rollover (1.1 pence): This
includes items such as updated battery cell costs for repowering capex, DCF
valuation of assets previously at book value and rollover which aggregated
resulted in a relatively minor negative impact on NAV.
· A fair value breakdown of the Company's assets is
provided by grid and asset stage below:
Table 14: Fair Value (FV) breakdown by Grid and Asset Stage
FV Breakdown by Grid (in £m)(14) Construction and pre-construction Energised
Great Britain 73.5 124.0
Ireland 16.2 79.6(15)
Germany n/a 14.3
Texas 38.1 15.2
California 128.6 n/a
14 Excludes pre-construction assets at book value.
15 Includes expansion project along with phase 1, which were previously
valued separately.
Capital Allocation:
The Company regularly reviews its capital allocation policy and considers a
range of options to optimise long-term sustainable returns to shareholders. As
previously disclosed, the Company remains focused on constructing its
near-term portfolio. Throughout the year, the Company is expected to deploy
the majority of its available cash and draw down on its available lines of
credit, both the project and fund-level facilities. By the end of the next
fiscal year, the Company is expected to run a conservative net debt position
of c.15% of Gross Asset Value(16) (equivalent to around £99 million once
fully drawn to support the completion of the near-term portfolio buildout).
The Investment Manager remains cognisant of the high-interest rate
environment. The Investment Manager has been and will continue to be prudent
in its use of leverage and managing associated refinancing risks - the Company
has comfortable headroom under loan-to-value and debt service coverage
covenants. The Investment Manager also notes the Company's contractual
obligations and will not enter into contracts, on its behalf, without the
necessary capital to fulfil them. Additionally, the Investment Manager
continues to explore capital recycling options and will keep the market
informed of relevant progress.
16 Based on March-end 2024 NAV.
Dividends
The Company reviews the dividend policy annually to ensure its continued
suitability. Following this year's review, the Board has decided to adjust the
Company's dividend policy to better align it with the construction schedule of
the portfolio. The Company will target a 7.0p dividend for the 2024/25
financial year, consistent with investors' expectations based on the current
NAV. Any payment exceeding this amount will be tied to cash generation from
the underlying portfolio.
The target dividend payments will also be weighted to the fourth quarter (one
pence paid per quarter for the first three quarters and a four pence dividend
for the final quarter), as the Investment Manager anticipates that the ITC
payment will be received. This policy adjustment reflects the maturing nature
of the Company and sets it well to continue to provide long-term value for
shareholders.
Investment Tax Credits
Under the Inflation Reduction Act (IRA) implemented on 16 August 2022,
standalone utility-energy storage projects are eligible to access Investment
Tax Credits (ITC). The IRA enables taxpayers to reclaim a percentage of the
cost of renewable energy systems through 'transferring' the tax benefits (ITC)
to eligible third parties with current taxable profits to monetise them closer
to when they are earned at the placed-in-service date. The Company's ERCOT
(Dogfish) and CAISO (Big Rock) construction assets qualify to monetise these
tax credits received under the IRA through transferring them. The Big Rock
asset qualifies to receive an ITC of 30% of eligible capex, while the Dogfish
asset is expected to benefit from a 30% tax credit along with an additional
10% adder, resulting in a total expected ITC benefit of 40% for the Dogfish
asset. With a combined capacity of 275 MW/475 MWh, the financial benefit
under the IRA is accretive to the Company in the form of tax-exempt income
upon transfer. The Projects will be eligible for the ITC upon placed in
service date (when the project begins regular operation), following which the
Investment Manager will proceed to monetise the tax credit through its sale to
a tax-paying entity, a process that is already in progress. The Investment
Manager anticipates a total ITC benefit in the range of $60 million to $80
million.
Key sensitivities
The following sensitivities have been applied to the valuations to measure the
impact of major macroeconomic factors, with the most material factors being
inflation and discount rates. Please refer to Figure 10 on page 29 of the 2024
annual report.
a. Inflation rate: +/- 1.0%
b. FX volatility: +/- 3.0%
c. Discount rate: +/- 1.0%
d. EPC costs +/- 10.0%
NAV Scenarios
Various scenarios have been considered to assess the impact on portfolio
valuations. Please refer to Figure 11 on page 29 of the 2024 annual report.
a. Revenue Scenarios: NAV based on third-party high & low cases
reflecting the impact of different possibilities relating to renewables
buildout, increase in energy demand and other factors such as regulations. The
application of high case revenues result in a £112m increase while the low
case revenues result in a decrease of £121m in NAV.
b. Valuation of construction portfolio using operational discount
rates reflects the upside available to the NAV from the progression of
non-operational assets moving forward to their respective CODs. This results
in a £76m increase in NAV.
Message from Alex O' Cinneide
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
I'm proud to report the Company continued to achieve growth while
demonstrating leadership and resilience during an extremely turbulent period.
The international portfolio continued to deliver consistent average revenue of
£15.1 per MW/hr through best-in-class operational performance and capital
management. The Company achieved an operational dividend cover of 0.78x for
the year from an average operational fleet of 311 MW. With energised capacity
reaching 421.4 MW, and 332 MW more to follow in the coming seven months, all
while maintaining a prudent approach to leverage, the Company is
well-positioned to increase dividend cover and continue delivering value for
shareholders by generating robust and stable cash flow from its
well-diversified fleet of assets.
Market conditions in Great Britain have demonstrated why the strategy of
diversification is vital to success in our sector. Continued buildout of
energy storage capacity in GB has led to saturation in the ancillary service
market while limited wholesale volatility has meant alternative revenues are
not available to fill the gap. The Company's resilience within this context
through its diversified portfolio has showcased this reporting period as one
of the most illustrative in the Company's history. The value in GSF's
international reach, continues to set it apart from competitors.
The consolidated portfolio generated average revenue of £15.1 per MW/ hr
consistently across the period, demonstrating the stable revenue profile of an
operational portfolio spread across four uncorrelated markets. This has
allowed the Company's overall revenues to outpace peers by c.3x as its
international portfolio overcomes the constraints of singular exposure to the
GB market, which offers similar revenue generation across all asset owners.
This consistent outperformance is a testament to the Company's prudent
approach to capital allocation across multiple jurisdictions and operational
excellence over our six-year history. The expertise built up in-house at the
Investment Manager over this period has been a key contributor to this success
and will only grow further as we develop new capabilities to further monetise
the Company's assets.
Investment decisions made back in 2019 to enter the Irish market and in 2022
to take on operational assets in Texas have paid off over this period. Early
pre-qualification of the Company's assets to deliver ERCOT's ECRS service over
the summer resulted in approximately £150/MW/hr in August, marking the
highest monthly revenue per MW ever achieved by the Company in a single grid.
This was followed by record-high revenue from the Company's Northern Irish
assets during FY Q3.
As each season passed, revenue opportunities across the portfolio shifted and
balanced into the consistent revenue profile we were able to achieve in this
reporting period, underscoring the advantages of activity across diverse,
uncorrelated grids within an energy storage portfolio.
I am pleased to report that this portfolio continues to grow around the world
as we pursue our diversified strategy. Over the period the Company's energised
capacity grew to 421.4 MW with the addition of its biggest project to date -
the 79.9 MW Stony asset, which became commercially operational in FY 2024 -
and subsequently the 49.9 MW Ferrymuir project, which overcame delays caused
by resourcing issues at the network operator and the insolvency of a main
sub-contractor. Progressing these projects was a key focus over the reporting
period to move the Company's construction assets towards revenue generation.
Together they represent a significant boost in energised capacity achieved by
year-end, marking a considerable increase in the scale of built assets in the
Company's portfolio.
The Company was also able to add new capacity and projects to the wider
portfolio and take overall capacity to 1.248 GW (FY23: 1.17 GW) while securing
new finance through innovative agreements with strategic partners. With
capital markets largely closed to the infrastructure investment trust
community over the period, I am proud of the Investment Manager's ability to
raise funds on behalf of the Company from its strategic partners to continue
its growth and delivery of sustainable returns for investors.
The acquisition of the remaining 49% in two of the Company's existing Irish
projects through share issuance was completed alongside the addition of the 75
MW Mucklagh project, which was achieved thanks to a legal option to purchase
agreed in 2019 at a lower cash consideration than would have been agreed
today. These transactions demonstrate our ability to execute new deals
successfully and drive returns for shareholders through a diversified asset
base.
We have also strengthened relationships with long-term partners and secured
project-level finance for the first time for our 200 MW California project,
Big Rock. These new achievements ensure the Company continues to deliver on
its strategy of achieving a varied and market-leading stream of income, built
on the best value per MWh installed with high system availability and
resilience, and leading optimisation of revenue opportunities, around the
world.
The ongoing deployment of renewables globally continues to be a fundamental
driver of the business case for energy storage, and policy in key markets is
rapidly catching up to that fact. The recommendations made by the European
Commission in March 2023, which placed energy storage at the heart of a clean
and stable future European grid system, are to be adopted following a vote by
the European Parliament in April. These measures are paving the way for Member
States to shift their flexibility focus towards energy storage and other
non-fossil sources as more renewables are deployed, and will build on the
improving market conditions of individual countries. Germany, for example, has
announced plans for a market-based, technology-neutral capacity mechanism to
be established in 2028, which could offer similar long-term, contracted
revenue to energy storage as seen in various other markets. We will continue
to monitor these emerging opportunities across various countries to determine
how best to allocate capital in the future.
While different measures are being introduced at a Union-wide and Member State
level, we are hopeful this legislative push to clean flexibility will create
as positive an environment for energy storage as in the US under the Inflation
Reduction Act. Over $270bn(17) of new investments in clean energy projects and
manufacturing was announced within the first year of the legislation being
passed and 33.8(18) GW of new US utility-scale solar, wind and energy storage
capacity was added over 2023.
17 Source: American Clean Power
18 Source: American Clean Power
With 44 GW(19) of new utility-scale solar and wind capacity expected across
the USA in 2024, much of it to be deployed in Texas and California, the
Company is primed to deliver crucial grid services and capitalise on any new
opportunities- as we did over the reporting period - to ensure the ERCOT and
CAISO grids are able to integrate this new clean power.
19 Source: US Energy Information Administration
Our focus will, therefore, remain on building out the Company's construction
portfolio while maintaining capital discipline to reduce exposure to GB and
maximise returns from the international portfolio.
We continue to invest in Gore Street Capital's in-house resources to fulfil
the needs of the Company across construction, asset management, and
commercialisation services, as well as supporting activities in
administration, ESG, legal and investment. This will ensure we continue to
play a material role in the success of the Company and position it to deliver
long-term value to shareholders.
Delivery against Strategy
Despite what has undoubtedly been a challenging period for the entire sector,
the Investment Manager is pleased to report significant progress towards
achieving the Company's objectives and delivering long-term sustainable
growth. Key achievements over the past year include:
Financial Performance:
The Company demonstrated a steady revenue profile during the period, one of
the key benefits of the Company's unique allocation strategy, especially as a
dividend-paying stock that has continued to meet its dividend targets. The
Company achieved an Operational EBITDA of £28.4m, which translates into an
operational dividend cover of 0.78x for the year. This positive trend reflects
the Company's focus on delivering long-term sustainable growth while
maintaining strong financial performance.
Strategic Expansion:
The Company was able to increase its presence in the Irish market, one which
has been amongst the most consistently profitable markets for BESS. The
Investment Manager utilised sophisticated transaction structures for its Irish
acquisitions during the year which included a 51% stake of Project Mucklagh,
as well as the remaining 49% stake in projects Kilmannock and Porterstown. The
transaction structures included joint ventures, acquiring a majority stake in
an asset as opposed to 100% through exercising an option put in place back in
2019, enabling transactions at extremely attractive price points, as well as
the majority of the combined consideration being settled via issuance of
shares in the Company.
Capital Raising:
The Company was pleased to be amongst a very small group of trusts that
successfully issued shares during the period. Both issuances were made at the
prevailing NAV to strategic investors: Nidec and Low Carbon.
Financial Management:
The Company secured an initial $60m loan financing from First Citizens Bank at
a competitive cost and secured at the asset level. This capital structure is
part of the manager's overall liquidity management. The Company has maintained
a strong balance sheet and made appropriate use of debt. The Company also
upsized its RCF facility with Santander from £15m to £50m.
Strong revenue profile:
The advantages of the Company's diversification strategy were made clear
during the year through the portfolio's strong and consistent revenue profile.
The Company generated an industry-leading average revenue of £15.1 per MW/hr
during the year (£133,000 MW/yr), far in excess of listed peers on both an
average and consolidated basis.
Operational Success:
Despite the volatility in the market, the Company continued to deliver
operationally. Strong technical management resulted in a high level of asset
availability, achieving a weighted average of over 93% throughout the year,
including scheduled downtime. Multiple construction milestones were also
achieved, increasing the Company's energised capacity to 421.4 MW by the end
of the period.
ESG:
The Company remains committed to sustainability and responsible business
practices. The Company publishes an annual ESG & Sustainability Report,
which provides an overview of the ESG strategy, key initiatives, and the
portfolio's environmental and social performance during the year. The FY
2023/24 Report will be published and available on the Company's website in
early September 2024.
Outlook
While the energy storage market remains in a nascent stage across various
markets, its crucial role in supporting stable grid operations in a rapidly
decarbonising world is being more widely recognised as deployment experiences
rapid growth globally. The US Inflation Reduction Act continues to propel
deployment of new renewable generation assets, while the European Parliament
has voted to adopt a series of measures designed to promote low carbon
flexibility from energy storage. This will build on the efforts of individual
Member States like Germany, where the Company already has an asset that stands
to benefit from measures proposed by the country's first electricity storage
strategy and an announced Capacity Market, expected to launch in 2028. As an
early mover in several geographies, the Company is established in leading
energy storage markets and, therefore, remains well-positioned to capitalise
on wider adoption of the technology to maximise shareholder value.
While the start of a new Parliament in the UK may provide uncertainty, as with
every fresh election outcome, the increased climate ambition of the new
government provides a welcome boost for renewable infrastructure trusts. We
hope to see the investment environment improve as the government pushes
towards its accelerated clean power ambitions for 2030, which will provide
greater opportunities for energy storage to deliver crucial services to the
grid.
The Company's primary focus over the next seven months remains fixed on the
buildout of new capacity at the best value per MW/MWh fully installed across
the remaining near-term portfolio of 332 MW currently under construction. This
includes the 200 MW Big Rock asset which, when completed, will play a material
role in supporting the CAISO grid-the Company's fifth market to date-to
integrate rising levels of renewable generation. The Investment Manager aims
to maximise profitability by ensuring that capital allocation is done
optimally, whether by geography or by duration/capex. The Company is
well-positioned to remain a market leader in terms of revenue generation on
both a MW and MWh basis, given its unique exposure across multiple
uncorrelated revenue streams in different markets.
The Company's diversification, which is set to increase, is expected to
provide long-term value as exposure to GB decreases as a percentage of
operational MWh throughout the remainder of 2024. In addition, the Investment
Manager intends to make portfolio construction decisions that create value by
raising and deploying capital efficiently. Both construction assets in the US,
for example, offer a potential combined benefit of $60 million to $80 million
to the Company through the sale of ITCs for which they are eligible, and we
are exploring opportunities to deliver this value to shareholders. We are also
including considering the sale of assets to recycle capital and redeploy into
other geographies that offer more attractive returns. The Company is uniquely
positioned to execute this activity as the only player with a presence across
five markets.
The fundamental drivers of energy storage remain strong, driven by climate
action and energy security policies and legislation worldwide. The difference
in strategies employed by asset owners has led to materially different
outcomes, marking a turning point for the industry. In the GB market,
participants are largely price takers, generating similar revenue across asset
owners. However, 2023 has shown that capital allocation strategies, whether
geographical or based on duration, have significantly impacted financial
outcomes. This trend is likely to continue throughout 2024 and beyond and the
Company is set to take advantage, with a solid diversification strategy and a
unique exposure across multiple revenue streams in uncorrelated markets. With
support from the Investment Manager's team, located in GB, Ireland and the US,
the Company will continue to play an important role in the decarbonisation of
energy systems globally.
Risk Management and Internal Control
The Board is responsible for the Company's system of risk management and
internal control and for reviewing its effectiveness. The Board has adopted a
detailed matrix of principal risks affecting the Company's business as an
investment trust and has established associated policies and processes
designed to manage and, where possible, mitigate those risks, which are
monitored by the audit committee on an ongoing basis. This system assists the
Board in determining the nature and extent of the risks it is willing to take
in achieving the Company's strategic objectives. Both the principal risks and
the monitoring system are subject to robust review at least annually. The last
review took place in July 2024.
Although the Board believes that it has a robust framework of internal
controls in place this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk.
Actions taken by the Board and, where appropriate, its committees, to manage
and mitigate the Company's principal risks and uncertainties are set out in
the table below.
*The "Change" column on the right highlights at a glance the Board's
assessment of any increases or decreases in risk during the year after
mitigation and management. The arrows show the risks as increased or
decreased.
EMERGING RISKS AND UNCERTAINTIES
During the year, the Board also discussed and monitored risks that could
potentially impact the Company's ability to meet its strategic objectives.
Political risk which includes regulatory, fiscal and legal changes impacting
strategy, and potential changes to national and cross-border energy policy,
was assessed to be a matter to keep under consideration.
The Board has determined they are not currently sufficiently material for the
Company to be categorised as independent principal risks. The Board receives
updates from the Manager, Company Secretary and other service providers on
other potential risks that could affect the Company. The Board also considered
the uncertainties caused by the conflict in Ukraine and Gaza, an uncertain
economic outlook and volatile energy prices although they are not factors
which explicitly impacted the Company's performance.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk Description Mitigation and Management Change*
Changes to Market Design The Company's assets generate revenue by delivering balancing services to The Company has assets in five grids to mitigate the impact of one grid's ó
power grid operators in the United Kingdom, Ireland, Germany, Texas and changes.
California. There is a risk in any of those markets that unanticipated changes
to the design of the grid, of power system services or any change in the In addition, the Manager aims to stack revenue contracts to vary the types of
specifications and requirements for service delivery (including network income streams received from each system operator and within each market to
charges or changes to market rules) could negatively impact cash flow or mitigate against revenue risk.
constrain revenue projections for assets within the region in which a change
occurs and thereby reduce the net asset value of the affected assets.
Inflation The Company's profit projections are based in part on its budget for capital The Company ensures that it generates revenues in the markets in which it ó
and operating expenditure incurred in the construction, operation, and incurs operating costs from a diverse mix of short, medium and long-term
maintenance of its portfolio of battery storage assets. These include, amongst contracts that are subject to fixed or floating contract prices. As revenues
other things, the cost of battery cells, inverters, the cost of power required are pegged to operating expenditure, the Company shall aim to neutralise
to charge the batteries and the labour costs for operations. inflationary increases (e.g., cost of power to charge the batteries) by
rebalancing its revenue services (e.g., changing the timing or bases for
There is a risk that unanticipated inflation will increase capital expenditure charging batteries to either reduce costs or increase revenues) as appropriate
and operating costs materially beyond budget, without a commensurate impact on to maintain its investment forecast. The long-term Capacity Market contracts
revenues, with the consequence of reducing profitability below the investment of up to 15 years are index linked.
forecast and/or rendering projects less economic or uneconomic.
There is also a risk that continued or severe inflation could positively
and/or negatively change the grid power market design (see Changes to Market
Design above).
The Company has little exposure to debt financing but has access to debt
facilities. There is a risk that increases in the inflationary index rates
could render the interest rates applicable to these debt facilities less
economic or uneconomic.
Exposure to Lithium-Ion Batteries, Battery Manufacturers and technology The portfolio currently consists only of lithium-ion batteries. The Group's The Company remains technology agnostic and continues to evaluate other ó
changes battery energy storage systems are designed by a variety of EPC providers, but economically viable energy storage opportunities to reduce its exposure to
the underlying lithium-ion batteries are manufactured primarily by BYD, CATL lithium-ion and further diversify its portfolio mix. The Company is mindful of
and LG Chem. While the Company considers lithium-ion battery technology to be the ESG risks associated with the production and recycling of batteries.
the most efficient and most competitive form of storage in today's market,
there is a risk that other technologies may enter the market with the ability The Company is not under an exclusivity agreement with any individual battery
to provide similar or more efficient services to power markets at comparable manufacturer and will manage its supply framework agreements in a manner that
or lower costs, reducing the portfolio's market share of revenues in the allows it to take advantage of any improvements or amendments to new storage
medium or long term. There is also a risk that batteries might be unavailable technologies as they become commercially viable, as well as mitigating any
due to delays caused by supply chain issues. potential supply chain issues.
Service Provider The Company has no employees and has delegated certain functions to several Service providers are appointed subject to due diligence processes and with ó
service providers, principally the Manager, Administrator, depositary and clearly documented contractual arrangements detailing service expectations.
registrar. Failure of controls, and poor performance of any service provider,
could lead to disruption, reputational damage or loss. Regular reports are provided by key service providers and the quality of their
services is monitored. The Directors also receive presentations from the
Manager, depositary and custodian, and the registrar on an annual basis.
Review of annual audited internal controls reports from key service providers,
including confirmation of business continuity arrangements and IT controls,
and follow up of remedial actions as required.
Valuation of Unquoted Assets The Company invests predominantly in unquoted assets whose fair value involves The Investment Manager routinely works with market experts to assess the ó
the exercise of judgement by the Investment Manager. There is a risk that the reasonableness of key data used in the asset valuation process (such as
Investment Manager's valuation of the portfolio may be deemed by other third revenue and inflation forecasts) and to reassess its valuations on a quarterly
parties to have been overstated or understated. basis. In addition, to ensure the objective reasonableness of the Company's
NAV materiality threshold and the discount rates applied, a majority of the
components of the portfolio valuation, (based on a NAV materiality threshold)
are reviewed by an independent third party, prior to publication of the
half-year and year-end reports.
Delays in Grid Energisation or Commissioning The Company relies on EPC contractors for energy storage system construction, The Company works closely with EPC contractors to ensure timely performance of ó
and on the relevant transmission systems and distribution systems' owners services and imposes liquidated damage payments under the EPC contracts for
(TSO) for timely energisation and connection of that battery storage asset to certain delays in delivery.
the transmission and distribution networks appropriately.
The Company seeks commitments from TSOs to a target energisation date as a
There is a risk that either the EPC contractor or relevant TSO could delay the condition to project acquisition and provides maximum visibility on project
target commercialisation date of an asset under construction and negatively development to TSOs to encourage collaboration towards that target
impact projected revenues. energisation date.
The Manager factors in delays by adjusting the valuation on an ongoing basis.
Currency Exposure The Company is the principal lender of funds to Group assets (via intercompany The Company acts as guarantor under currency hedge arrangements entered into ó
loan arrangements) for their investments in projects, including projects by impacted subsidiaries to mitigate its exposure to Euros and US Dollars. The
outside of the UK. This means that the Company may indirectly invest in Company will also guarantee future hedging arrangements as appropriate to seek
projects generating revenue and expenditure denominated in a currency other to manage its exposure to foreign currency risks.
than Sterling, including in US Dollars and Euros. There is a risk that the
value of such projects and the revenues projected to be received from them
will be diminished as a result of fluctuations in currency exchange rates. The
diminishing in value could impact a subsidiary's ability to pay back the
Company under the intercompany loan arrangements.
Cyber-Attack and Loss of Data The Company is exposed (through the server, software, and communications Among other measures, the Company ensures its contractors and service á
systems of its primary service providers and suppliers) to the risk of providers incorporate firewalls and virtual private networks for any equipment
cyber-attacks that may result in the loss of data, violation of privacy and capable of remote access or control. Cybersecurity measures are incorporated
resulting reputational damage. for both external and internal ('local') access to equipment, preventing
exposure to ransomware attacks or unsolicited access for any purpose. The
Company engages experts to assess the adequacy of its cybersecurity measures
and has implemented a requirement for annual testing to confirm and certify
such adequacy for representative samples for the entire fleet.
Physical and transitional climate-related risks The Company's assets are located in several different countries, some of which The Manager's due diligence and site design processes factor in climate á
experience extreme weather, which could have a physical impact on the assets change-related risks when selecting sites and assets and designing systems to
and as a result affect shareholder returns. operate within a range of temperatures.
Climate change may also affect the development of technologies, markets and The Manager reports to the Board on developments in these areas regularly,
regulations. including recommendations for the Company to acclimate to technological,
market or regulatory change, including any driven by climate change.
RISK ASSESSMENT AND INTERNAL CONTROLS REVIEW BY THE BOARD
Risk assessment includes consideration of the scope and quality of the systems
of internal control operating within key service providers, and ensures
regular communication of the results of monitoring by such providers to the
audit committee, including the incidence of significant control failings or
weaknesses that have been identified at any time and the extent to which they
have resulted in unforeseen outcomes or contingencies that may have a material
impact on the Company's performance or condition.
No significant control failings or weaknesses were identified from the audit
committee's ongoing risk assessment which has been in place throughout the
financial year and up to the date of this report. The Board is satisfied that
it has undertaken a detailed review of the risks facing the Company.
A full analysis of the financial risks facing the Company is set out in note
18 to the Financial Statements on pages 80 to 82 of the 2024 annual report.
GOING CONCERN
As at 31 March 2024, the Company had net current assets of £59 million and
had cash balances of £60.7 million (excluding cash balances within investee
companies), which are sufficient to meet current obligations as they fall due.
The major cash outflows of the Company are the payment of dividends, costs
relating to the acquisition of new assets and further investments in existing
portfolio Companies, all of which are discretionary. The Company is a
guarantor to GSES 1 Limited's revolving credit facility with Santander. During
the year this facility was increased from £15m to £50m, with an extended
term of four years to 2027. The Company also secured $60m in debt finance at
the asset level for the first time to support the 200 MW Big Rock project.
The Aggregate Group Debt as at 31 March 2024 was at 6.5% of GAV with £58.6
million in debt headroom available. There is no debt held at the Company
level.
The completed going concern analysis considers liquidity at the start of the
period and cash flow forecasts at both the Company level and project level.
These forecasts take into consideration expected operating expenditure of the
Company, expected cash generation by the project companies available for
distribution to the Company, additional funding from the Company to project
companies under construction, and continued discretionary dividend payments to
Shareholders at the target annual rate. Financial assumptions also include
expected inflows and outflows in relation to external debt held of the Company
or its subsidiaries. The Directors have reviewed Company forecasts and
projections which cover a period of 18 months from 31 March 2024, and as part
of the going concern assessment have modelled downside scenarios considering
potential changes in investment and trading performance, which show that the
Company has sufficient financial resources.
The Directors consider the following scenarios:
· A base case scenario considering expected Company
operating expenditure and dividends, and cash inflows and outflows relating to
subsidiary companies under the current planned strategy to focus on build-out
of existing construction projects. This factors in expectations of available
external debt.
· Although a simultaneous reduction in project companies'
revenue across the five grids they operate is not considered likely, a
plausible average reduction in base case revenue has been considered as a
downside scenario. This would result in a reduction in cash flow available for
distribution from subsidiaries to the Company.
This analysis shows that, under both the base case and downside scenarios, the
Company is expected to have sufficient financial resources available to meet
current obligations and commitments as they fall due for at least 12 months
until 30 September 2025. The Directors acknowledge their responsibilities in
relation to the financial statements for the year ended 31 March 2024 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 30 September 2025.
LONG TERM VIABILITY
In reviewing the Company's viability, the Directors have assessed the
prospects of the Company over a period of five years to 31 March 2029. After
assessing the risks, which include emerging risks like climate change and
reviewing the Company's liquidity position, together with the forecasts of
performance under various scenarios, the Directors have a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities over the period of five years. In making this statement, the
Directors have reviewed cash forecasts over this period, taking into
consideration base case expectations and potential downside scenarios. The
Directors have also considered the current unlevered nature of the Company and
its subsidiaries and its capacity and ability to raise further debt up to 30%
of Gross Asset Value per internal policy. The diversified nature of the
portfolio, across five different grids, has been taken into account when
assessing concentration of any prolonged downturns to the portfolio. In
addition, mitigating actions under severe downside scenarios have been
considered, such as the discretionary nature of dividends and ability to delay
uncontracted capital expenditure on build out of construction phase projects
in the portfolio. This assessment has not considered the potential for further
fundraising through equity markets.
Statement of Comprehensive Income
For the Year Ended 31 March 2024
Year Ended 31 March 2024 Year Ended 31 March 2023
Revenue Capital Total Revenue Capital Total
Notes (£) (£) (£) (£) (£) (£)
Net (loss)/gain on investments at fair value through profit and loss 7 - (30,041,779) (30,041,779) - 60,826,822 60,826,822
Investment income 8 32,298,791 - 32,298,791 12,466,909 - 12,466,909
Other income 10,355 - 10,355 - - -
Total income 32,309,146 (30,041,779) 2,267,367 12,466,909 60,826,822 73,293,731
Administrative and other expenses 9 (7,925,906) - (7,925,906) (9,881,436) - (9,881,436)
(Loss)/profit before tax 24,383,240 (30,041,779) (5,658,539) 2,585,473 60,826,822 63,412,295
Taxation 10 - - - - - -
(Loss)/profit after tax and (loss)/profit for the year 24,383,240 (30,041,779) (5,658,539) 2,585,473 60,826,822 63,412,295
Total comprehensive (loss)/income for the year 24,383,240 (30,041,779) (5,658,539) 2,585,473 60,826,822 63,412,295
(Loss)/profit per share (basic and diluted) - pence per share 11 5.02 (6.19) (1.10) 0.55 12.76 13.31
All Revenue and Capital items in the above statement are derived from
continuing operations.
The Total column of this statement represents the Company's Income Statement
prepared in accordance with UK adopted IAS. The (loss)/profit after tax and
(loss)/profit for the year 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.
Statement of Financial Position
As at 31 March 2024
Company Number 11160422
Notes 31 March 2024 31 March 2023
(£) (£)
Non - Current Assets
Investments at fair value through profit or loss 12 481,659,515 434,762,146
481,659,515 434,762,146
Current assets
Cash and cash equivalents 13 60,667,572 123,705,727
Trade and other receivables 14 519,853 843,825
61,187,425 124,549,552
Total assets 542,846,940 559,311,698
Current liabilities
Trade and other payables 15 2,150,447 3,046,853
2,150,447 3,046,853
Total net assets 540,696,493 556,264,845
Shareholders equity
Share capital 20 5,050,995 4,813,995
Share premium 20 331,302,899 315,686,634
Special reserve 20 - 349,856
Merger reserve 20 10,621,884 -
Capital reduction reserve 20 75,089,894 111,125,000
Capital reserve 20 95,542,635 125,584,414
Revenue reserve 20 23,088,186 (1,295,054)
Total shareholders equity 540,696,493 556,264,845
Net asset value per share 19 1.07 1.16
Statement of Changes in Equity
For the Year Ended 31 March 2024
Share capital Share premium reserve (£) Special reserve (£) Merger reserve (£) Capital reduction reserve (£) Capital reserve (£) Revenue reserve (£) Total shareholders'equity (£)
(£)
As at 1 April 2023 4,813,995 315,686,634 349,856 - 111,125,000 125,584,414 (1,295,054) 556,264,845
Loss for the year - - - - - (30,041,779) 24,383,240 (5,658,539)
Total comprehensive
loss for the year - - - - - (30,041,779) 24,383,240 (5,658,539)
Transactions with owners
Ordinary Shares issued at a premium during the year 237,000 15,666,000 - 10,670,000 - - - 26,573,000
Share issue costs - (49,735) - (48,116) - - - (97,851)
Movement in special reserve - - (349,856) - 349,856 - - -
Dividends paid - - - - (36,384,962) - - (36,384,962)
As at 31 March 2024 5,050,995 331,302,899 - 10,621,884 75,089,894 95,542,635 23,088,186 540,696,493
Capital reduction reserve and revenue reserves are available to the Company
for distributions to Shareholders as determined by the Directors.
For the Year Ended 31 March 2023
Share capital Share Special reserve Capital reduction reserve Capital Revenue reserve Total shareholders equity
premium
reserve (£)
(£)
reserve (£) (£) (£) (£)
(£)
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 for the year - - - - 60,826,822 2,585,473 63,412,295
Total comprehensive profit for the year - - - - 60,826,822 2,585,473 63,412,295
Transactions with owners
Ordinary Shares issued at a
premium during the year 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,852) - - - - (2,657,852)
Transfer to capital reduction reserve - (100,000,000) - 100,000,000 - - -
Movement in special reserve - 163,200 (163,200) - - -
Dividends paid - - - (30,970,692) - - (30,970,692)
As at 31 March 2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
Capital reduction reserve and revenue reserves are available to the Company
for distributions to Shareholders as determined by the Directors.
Statement of Cash Flows
For the Year Ended 31 March 2024
Notes Year Ended Year Ended
31 March
31 March
2024 (£)
2023 (£)
Cash flows generated from operating activities
(Loss)/profit for the year (5,658,539) 63,412,295
Net loss/(profit) on investments at fair value through profit and loss 30,041,779 (60,826,822)
Decrease/(increase) in trade and other receivables 323,973 (797,348)
(Decrease)/increase in trade and other payables (896,407) 671,610
Net cash generated from operating activities 23,810,806 2,459,735
Cash flows used in investing activities
Funding of investments (69,850,873) (225,765,788)
Loan principal repayment from investment 3,678,725 32,592,883
Net cash used in investing activities (66,172,148) (193,172,905)
Cash flows used in financing activities
Proceeds from issue of Ordinary Shares at a premium 15,806,000 150,000,000
Share issue costs (97,851) (2,657,852)
Dividends paid (36,384,962) (30,970,691)
Net cash (outflow)/inflow from financing activities (20,676,813) 116,371,457
Net decrease in cash and cash equivalents for the year (63,038,155) (74,341,713)
Cash and cash equivalents at the beginning of the year 123,705,727 198,047,440
Cash and cash equivalents at the end of the year 60,667,572 123,705,727
During the year, interest received by the Company from investments totalled
£29,155,404 (2023: £8,835,389) and interest received from bank deposits
totalled £3,143,387 (2023: £3,631,520).
Total repayments from subsidiaries during the year amounted to £32,834,129
(2023: £41,428,272).
Notes to the Financial Statements
For the Year Ended 31 March 2024
1. General information
Gore Street Energy Storage Fund plc (the "Company"), a public limited company
limited by shares was incorporated and registered in England and Wales on 19
January 2018 with registered number 11160422. The registered office of the
Company is 16-17 Little Portland Street, First Floor, 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 currently
located in the UK, the Republic of Ireland, North America and Germany.
2. Basis of preparation
STATEMENT OF COMPLIANCE
The annual financial statements have been prepared in accordance with UK
adopted international accounting standards. The Company has also adopted the
Statement of Recommended Practice issued by the Association of Investment
Companies which provides guidance on the presentation of supplementary
information.
The financial statements have been prepared on a historical cost basis except
for financial assets and liabilities at fair value through the profit or loss.
The Company is an investment entity in accordance with IFRS 10 which holds all
its subsidiaries at fair value and therefore prepares unconsolidated accounts
only.
FUNCTIONAL AND PRESENTATION CURRENCY
The currency of the primary economic environment in which the Company operates
(the functional currency) is Pound Sterling ("GBP or £") which is also the
presentation currency.
GOING CONCERN
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. After making
enquiries and bearing in mind the nature of the Company's business and assets,
the Directors consider the Company to have adequate resources to continue in
operational existence over the period to 30 September 2025, being at least 12
months from the date of approval of the financial statements. As such, they
have adopted the going concern basis in preparing the annual report and
financial statements.
The going-concern analysis takes into account expected increases to Investment
Adviser's fee in line with the Company's NAV and expected increases in
operating costs, as well as continued discretionary dividend payments to
shareholders at the annual target rate. Consideration has been given to the
current macro-economic environment and volatility in the markets. Based on the
analysis performed, the Company will continue to be operational and will have
excess cash after payment of its liabilities for at least the next 12 months
to 30 September 2025.
As at 31 March 2024, the Company had net current assets of £59 million and
had cash balances of £60.7 million (excluding cash balances within investee
companies), which are sufficient to meet current obligations as they fall due.
The major cash outflows of the Company are the payment of dividends, costs
relating to the acquisition of new assets and further investments in existing
portfolio Companies, all of which are discretionary. The Company had no
contingencies and significant capital commitments as at the 31 March 2024. The
Company is a guarantor to GSES1 Limited's revolving credit facility with
Santander. During the year this facility was upsized from £15 million to £50
million, with an extended term of four years to 2027. The Company had no
outstanding debt as at 31 March 2024.
The Directors acknowledge their responsibilities in relation to the financial
statements for the year ended 31 March 2024 and have prepared the financial
statement on a going concern basis. The Company expects to meet its
obligations as and when they fall due for at least the next twelve months to
30 September 2025.
The board has considered the impact of climate change on the investments
included in Company's financial statements and has assessed that it does not
materially impact the estimates and assumptions used in determining the fair
value of the investments.
OPERATING SEGMENTS
Under IFRS 8, particular classes of entities are required to disclose
information about any of their individual operating segments. A vast majority
of the Company's portfolio is held through the Company's direct subsidiary,
GSES 1 Limited, except for two new direct investments which do not meet any of
the quantitative thresholds to require separate disclosure under IFRS 8.
Therefore, the Directors are of the opinion that there is only one segment and
therefore no operating segment information is given.
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 year 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. As such, the Directors are required to make a judgement as to
whether the Company continues to meet the definition of an investment entity.
To determine this, 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 17.
4. New and revised standards and interpretations
NEW AND REVISED STANDARDS AND INTERPRETATIONS
The accounting policies used in the preparation of the financial statements
have been consistently applied during the year ended 31 March 2024.
In February 2021, the International Accounting Standards Board issued further
amendments to IAS8: Accounting Policies, Changes in Accounting Estimates and
Errors. Those amendments clarify the distinction between changes in accounting
estimates, changes in accounting policies and correction of errors. They
further clarify how entities use measurement techniques and inputs to develop
accounting estimates. These amendments are effective for periods beginning on
or after 1 January 2023 and having reviewed the amendments, the Board is of
the opinion that these amendments do not have a material impact on the
Company's financial statements.
In May 2021, the IASB issued amendments to IAS 12: Income Taxes regarding
deferred tax relating to Assets and Liabilities arising from a Single
Transaction. The amendments introduce an exception to the 'initial recognition
exemption' for an entity, whereby deferred tax previously did not need to be
recognised when, in a transaction that is not a business combination, an
entity purchased an asset that would not be deductible for tax purposes (even
though there is a difference between the asset's carrying amount and its tax
base). These amendments are effective for periods beginning on or after 1
January 2023 and having reviewed the amendments, the Board is of the opinion
that these amendments do not have a material impact on the Company's financial
statements.
In February 2021, the IASB issued amendments to IAS 1: Presentation of
Financial Statements and IFRS Practice Statement 2 requiring that an entity
discloses its material accounting policies, instead of its significant
accounting policies. Further amendments explain how an entity can identify a
material accounting policy with examples of when an accounting policy is
likely to be material and also the application of the 'four-step materiality
process' described in IFRS Practice Statement 2. These amendments are
effective for periods beginning on or after 1 January 2023 and having reviewed
the amendments, the Board is of the opinion that these amendments do not have
a material impact on the Company's financial statements.
There have been no other new standards, amendments to current standards, or
new interpretations which the directors feel have a material impact on these
financial statements.
NEW AND REVISED IFRS IN ISSUE BUT NOT YET EFFECTIVE
In January 2020, the International Accounting Standards Board issued
amendments to IAS 1: Presentation of Financial Statements to clarify how an
entity classifies debt and other financial liabilities as current or
non-current. The amendments specify that covenants to be complied with after
the reporting date do not affect the classification of debt as current or
non-current at the reporting date. Instead, the amendments require a company
to disclose information about these covenants in the notes to the financial
statements. The amendments are effective for annual reporting periods
beginning on or after 1 January 2024 and having reviewed the amendments, the
Board is of the opinion that these amendments will not have a material impact
on the Company's financial statements.
5. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below:
INVESTMENT INCOME
Interest income is recognised on an accrual basis in the Revenue account of
the Statement of Comprehensive Income.
Investment income arising from the portfolio assets is recognised on an
accruals basis in totality, with amounts received in cash recognised in
investment income and the unrealised portion disclosed in net gain on
investments at fair value through profit and loss.
EXPENSES
Expenses are accounted for on an accrual basis and charged to the Statement of
Comprehensive Income. Share issue costs are allocated to equity. Expenses are
charged through the Revenue account except those which are capital in nature,
these include those which are incidental to the acquisition, disposal or
enhancement of an investment, which are accounted for through the Capital
account.
NET GAIN OR LOSS ON INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
Gains or losses arising from changes in the fair value of investments are
recognised in the Capital account of the Statement of Comprehensive Income in
the period in which they arise. The value of the investments may be increased
or reduced by the assessed fair value movement.
TAXATION
The Company is approved as an Investment Trust Company ("ITC") under sections
1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 Statutory
Instrument 2011/29999 for accounting periods commencing on or after 25 May
2018. The approval is subject to the Company continuing to meet the
eligibility conditions of the Corporations Tax Act 2010 and the Statutory
Instrument 2011/29999. The Company intends to ensure that it complies with the
ITC regulations on an ongoing basis and regularly monitors the conditions
required to maintain ITC status.
From 1 April 2023 the main UK corporation tax rate increased from 19% to 25%.
Current Tax and movements in deferred tax asset and liability are recognised
in the Statement of Comprehensive Income except to the extent that they relate
to the items recognised as direct movements in equity, in which case they are
similarly recognised as a direct movement in equity. Current tax is the
expected tax payable on any taxable income for the period, using tax rates
enacted or substantively enacted at the end of the relevant period. Any
closing deferred tax balances have been calculated at 25% as this is the rate
expected to apply in future periods.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date where
transactions or events that result in an obligation to pay more tax or a right
to pay less tax in the future have occurred. Timing differences are
differences between the Company's taxable profits and its results as stated in
the financial statements. Deferred taxation assets are recognised where, in
the opinion of the Directors, it is more likely than not that these amounts
will be realised in future periods, at the tax rate expected to be applicable
at realisation.
INVESTMENT IN SUBSIDIARIES
Subsidiaries are entities controlled by the Company. Control exists when the
Company is exposed, or has rights, to variable returns from its involvement
with the subsidiary entity and has the ability to affect those returns through
its power over the subsidiary entity. In accordance with the exception under
IFRS 10 Consolidated financial statements, the Company is an investment entity
and therefore only consolidates subsidiaries if they provide investment
management services and are not themselves investment entities. All
subsidiaries are investment entities and held at fair value in accordance with
IFRS 9 and therefore not consolidated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and call deposits held with
the bank with original maturities of three months or less.
Restricted cash comprises cash held as collateral for future contractual
payment obligations and deferred payments payable from indirect subsidiaries
to third parties of the Company in relation to the Big Rock project.
All cash is recognised at fair value and subsequently stated at amortised cost
less loss allowance, which is calculated using the provision matrix of the
expected credit loss model (refer to note 13 for further information).
TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised initially at fair value and
subsequently stated at amortised cost less loss allowance which is calculated
using the provision matrix of the expected credit loss model.
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value and
subsequently stated at amortised cost.
DIVIDENDS
Dividends are recognised, as a reduction in equity in the financial
statements. Interim equity dividends are recognised when legally payable.
Final equity dividends will be recognised when approved by the Shareholders.
EQUITY
Equity instruments issued by the Company are recorded at the amount of the
proceeds received, net of directly attributable issue costs. Costs not
directly attributable to the issue are immediately expensed in the Statement
of Comprehensive Income.
FINANCIAL INSTRUMENTS
In accordance with IFRS 9, the Company classifies its financial assets and
financial liabilities at initial recognition into the categories of amortised
cost or fair value through profit or loss.
FINANCIAL ASSETS
The Company classifies its financial assets at amortised cost or fair value
through profit or loss on the basis of both:
• the entity's business model for managing the financial
assets
• the contractual cash flow characteristics of the financial
asset
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held within a
business model whose objective is to hold financial assets in order to collect
contractual cash flows and its contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding. The Company includes in this category short-term
non-financing receivables including cash and cash equivalents, restricted
cash, and trade and other receivables.
Financial asset measured at fair value through profit or loss (FVPL)
A financial asset is measured at fair value through profit or loss if:
a) its contractual terms do not give rise to cash flows on specified
dates that are solely payments of principal and interest (SPPI) on the
principal amount outstanding; or
b) it is not held within a business model whose objective is either
to collect contractual cash flows, or to both collect contractual cash flows
and sell; or
c) it is classified as held for trading (derivative contracts in an
asset position); or
d) It is classified as an equity instrument.
The Company includes in this category equity instruments and loans to
investments.
FINANCIAL LIABILITIES
Financial liabilities measured at fair value through profit or loss (FVPL)
A financial liability is measured at FVPL if it meets the definition of held
for trading of which the Company had none.
Financial liabilities measured at amortised cost
This category includes all financial liabilities, including short-term
payables.
RECOGNITION AND DERECOGNITION
Financial assets and liabilities are recognised on trade date, when the
Company becomes party to the contractual provisions of the instrument. A
financial asset is derecognised where the rights to receive cash flows from
the asset have expired, or the Company has transferred its rights to receive
cash flows from the asset. The Company derecognises a financial liability when
the obligation under the liability is discharged, cancelled or expired.
IMPAIRMENT OF FINANCIAL ASSETS
The Company holds trade receivables with no financing component and which have
maturities of less than 12 months at amortised cost and, as such, has chosen
to apply the simplified approach for expected credit losses (ECL) under IFRS 9
to all its trade receivables. Therefore the Company does not track changes in
credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date.
The Company's approach to ECLs reflects a probability-weighted outcome, the
time value of money and reasonable and supportable information that is
available without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic conditions.
The Company uses the provision matrix as a practical expedient to measuring
ECLs on trade receivables, based on days past due for groupings of receivables
with similar loss patterns. Receivables are grouped based on their nature. The
provision matrix is based on historical observed loss rates over the expected
life of the receivables and is adjusted for forward looking estimates.
FAIR VALUE MEASUREMENT AND HIERARCHY
Fair value is the price that would be received on the sale of an asset, or
paid to transfer a liability, in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on
the presumption that the transaction takes place either in the principal
market for the asset or liability, or in the absence of a principal market, in
the most advantageous market. It is based on the assumptions that market
participants would use when pricing the asset or liability, assuming they act
in their economic best interest.
The fair value hierarchy to be applied under IFRS 13 is as follows:
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are carried at fair value, and which will be
recorded in the financial information on a recurring basis, the Company will
determine whether transfers have occurred between levels in the hierarchy by
reassessing categorisation at the end of each reporting period.
6. Fees and expenses
ACCOUNTING, SECRETARIAL AND DIRECTORS
During the year, expenses incurred with Gore Street Services Limited (formerly
Gore Street Operational Management Limited) ("GSS") for secretarial services
amounted to £nil with £nil being outstanding and payable at the year end.
Apex Group Fiduciary Services (UK) Limited ("Apex") had been appointed as
administrator. Through an Administration agreement, Apex is entitled to an
annual fee of £50,000 for the provision of accounting and administration
services based on a Company Net Asset Value of up to £30 million. An ad
valorem fee based on total assets of the Company which exceed £30 million
will be applied as follows:
• 0.05% on a net asset value of £30 million to £75 million
• 0.025% on a net asset value of £75 million to £150 million
• 0.02% on a net asset value thereafter.
During the year, expenses incurred with Apex for accounting and administrative
services amounted to £159,714 (2023: £144,233), with £39,414 being
outstanding and payable at the year end (2023: £41,829).
AIFM
The AIFM, Gore Street Capital Limited (the "AIFM"), was entitled to receive
from the Company, in respect of its services provided under the AIFM
agreement, a fee of £75,000 per annum for the term of the AIFM agreement.
During the year, AIFM fees amounted to £75,104 (2023: £74,793), there were
no outstanding fees payable at the year end.
At the year end, an amount of £18,750 paid in the year to Gore Street Capital
Limited in respect of these fees, is being disclosed in prepayments as it
relates to the period 1 April 2024 to 30 June 2024.
INVESTMENT ADVISORY
The fees relating to the Investment Advisor are disclosed within note 22
Transactions with related parties
7. Net gain on investments at fair value through profit and loss
31 March 31 March
2024 2023
(£) (£)
Net (loss)/gain on investments at fair value through profit and loss (30,041,779) 60,826,822
(30,041,779) 60,826,822
8. Investment Income
31 March 31 March
2024 2023
(£) (£)
Bank interest income 3,143,387 3,631,520
Loan interest income received from subsidiaries 29,155,404 8,835,389
32,298,791 12,466,909
The bank and loan interest income is calculated using the effective interest
rate method.
9. Administrative and other expenses
31 March 31 March
2024 2023
(£) (£)
Accounting and Company Secretarial fees 171,930 191,504
Auditor's remuneration (see below) 273,000 303,500
Bank interest and charges 9,515 7,813
Directors' remuneration and expenses 306,556 242,313
Directors & Officers insurance 19,272 39,336
Foreign exchange loss 14 34
Investment advisory fees 5,542,596 4,914,324
Legal and professional fees 1,110,554 1,218,993
AIFM fees 75,104 74,793
Marketing fees 56,295 94,630
Performance fees - 2,457,164
Sundry expenses 361,070 337,032
7,925,906 9,881,436
During the year, the Company received the following services from its auditor,
Ernst & Young LLP.
31 March 31 March
2024 2023
(£) (£)
Audit services
Statutory audit: Annual accounts - current year 254,500 285,900
Non-audit services
Other assurance services - Interim accounts 18,500 17,600
Total audit and non-audit services 273,000 303,500
The statutory auditor is remunerated £170,790 (2023: £171,350), in relation
to audits of the subsidiaries. This amount is not included in the above.
10. Taxation
The Company is recognised as an Investment Trust Company ("ITC") for
accounting periods beginning on or after 25 May 2018 and is taxed at the main
rate of 25%. ITCs are exempt from UK corporation tax on their capital gains.
Additionally, ITCs may designate all or part of dividends distributions to
shareholders as an interest distribution, which is tax deductible, to the
extent that it has "qualifying interest income" for the accounting period.
Therefore, there is no corporate tax charge for the year (2023: £nil).
31 March 31 March
2024 2023
(£) (£)
(a) Tax charge in profit and loss account
UK Corporation tax - -
(b) Reconciliation of the tax charge for the year
(Loss)/profit before tax (5,658,539) 63,412,295
Tax at UK standard rate of 25% (2023: 19%) (1,414,635) 12,048,336
Effects of:
Unrealised loss/(gain) on fair value investments 7,510,445 (11,557,096)
Expenses not deductible for tax purposes 42,325 12,064
Income not taxable (2,589) -
Tax deductible interest distributions (7,219,157) (1,371,989)
Deferred tax not recognised 1,083,611 868,685
Tax charge for the year - -
The Company has an unrecognised deferred tax asset of £2,917,202 (2023:
£1,833,591) based on the excess unutilised operating expenses of £11,668,809
(2023: £7,334,364) at the prospective UK corporation tax rate of 25%
(2023:25%). The Company may claim deductions on future distributions or parts
thereof designated as interest distributions. Therefore, a deferred tax asset
has not been recognised in respect of these operating expenses and will be
recoverable only to the extent that the Company has sufficient future taxable
profits.
11. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing the profit or loss
for the period attributable to ordinary equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the period. As
there are no dilutive instruments outstanding, basic, and diluted earnings per
share are identical.
31 March 31 March
2024 2023
Net (loss)/gain attributable to ordinary shareholders (£ 5,658,539) £ 63,412,295
Weighted average number of Ordinary Shares for the year 485,524,888 476,542,691
(Loss)/profit per share - Basic and diluted (pence) (1.17) 13.31
12. Investments
31 March 31 March
2024 2023
Place of business Percentage ownership (£) (£)
GSES1 Limited ("GSES1") England & Wales 100% 470,570,558 434,762,146
Porterstown Battery Storage Limited ("Porterstown") Republic of Ireland 49% 6,765,120 -
Kilmannock Battery Storage Limited ("Kilmannock") Republic of Ireland 49% 4,323,837 -
31 March 31 March
2024 2023
Reconciliation (£) (£)
Opening balance 434,762,146 180,762,419
Loans advanced during the year 69,850,873 225,765,788
Loan repayments during the year (3,678,725) (32,592,883)
Loan interest received (29,155,404) (8,835,389)
Loan interest accrued from GSES1 Limited 29,971,133 8,714,157
Purchase of investments in Porterstown and Kilmannock 10,767,000 -
Total fair value movement on equity investment (30,857,508) 60,948,054
481,659,515 434,762,146
The Company meets the definition of an investment entity. Therefore, it does
not consolidate its subsidiaries or equity method account for associates but,
rather, recognises them as investments at fair value through profit or loss.
The Company is not contractually obligated to provide financial support to the
subsidiaries and associate, except as guarantor to the debt facility entered
into by its direct subsidiary GSES1 Limited, and there are no restrictions in
place in passing monies up the structure.
The investment in GSES1 is financed through equity and a loan facility
available to GSES1. The facility may be drawn upon, to any amount agreed by
the Company as lender, and is available for a period of 20 years from 28 June
2018. The rest of the investment in GSES1 is funded through equity. The amount
drawn on the facility at 31 March 2024 was £375,354,326 (2023:
£309,182,178). The loan is interest bearing and attracts interest at 8.5% per
annum effective from 1 April 2023. Up until that date, the interest charge was
5% per annum. Investments in the indirect subsidiaries are also structured
through loan and equity investments and the ultimate investments are in energy
storage facilities.
The increase in interest rate is viewed as a substantial modification to the
terms of the loan facility and as a result is derecognised and re-recognised
from the effective date. As the loan principal and accrued interest form part
of the Company's investments at fair value through profit or loss, the effect
of this change of interest rate is captured within the revaluation and
remeasurement of the total investment at period end. As a result there is no
accounting impact of the modification on the Statement of Financial Position
or Statement of Comprehensive Income.
Realisation of increases in fair value in the indirect subsidiaries will be
passed up the structure as repayments of loan interest and principal. The
Company holds a 100% investment in GSES1 and a 49% stake in Porterstown and
Kilmannock. GSES1 in turn holds investments in various holding companies and
operating assets as detailed 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
Ferrymuir Energy Storage Limited GSF Albion England & Wales 100% Ferrymuir
Kiwi Power ES B Limited GSF Albion England & Wales 49% Cenin
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((2)) GSF IRE (51%) / Company direct holding (49%) Republic of Ireland 100% Porterstown
Kilmannock Battery Storage Limited((2)) GSF IRE (51%) / Company direct holding (49%) Republic of Ireland 100% Kilmannock
GSF England Limited ("GSF England") GSES1 England & Wales 100%
GS10 Energy Storage Limited (formerly 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
OSSPV Limited GSF England England & Wales 100% Lower Road, Port of Tilbury
Stony Energy Storage Limited GSF England England & Wales 100% Stony
Enderby Battery Storage Limited GSF England England & Wales 100% Enderby
Middleton Energy Storage Limited GSF England England & Wales 100% Middleton
GSF Atlantic Limited GSES1 England & Wales 100%
GSF Americas Inc. GSF Atlantic Delaware 100%
GSF Cremzow GmbH & Co KG GSF Atlantic Germany 90% Cremzow LP
GSF Cremzow Verwaltungs GmbH GSF Atlantic Germany 90% Cremzow GP
Snyder ESS Assets, LLC GSF Americas Delaware 100% Snyder
Sweetwater ESS Assets, LLC GSF Americas Delaware 100% Sweetwater
Westover ESS Assets, LLC GSF Americas Delaware 100% Westover
Cedar Hill ESS Assets, LLC GSF Americas Delaware 100% Cedar Hill
Mineral Wells ESS Assets, LLC GSF Americas Delaware 100% Mineral Wells
Wichita Falls ESS Assets, LLC GSF Americas Delaware 100% Wichita Falls
Mesquite ESS Assets, LLC GSF Americas Delaware 100% Mesquite
Dogfish ESS Assets, LLC GSF Americas Delaware 100% Dogfish
Big Rock ESS Assets, LLC GSF Americas Delaware 100% Big Rock
Mucklagh Battery Storage Facility Limited((1)) GSF IRE Republic of Ireland 51% Mucklagh
(1) The acquisition of Mucklagh Battery Storage Facility Limited
was completed on 14 March 2024.
(2) On 25 March 2024, the Company directly acquired the remaining
49% of both Porterstown Battery Storage Limited and Kilmannock Battery Storage
Limited through an issuance of shares in the Company on 26 March 2024 (see
note 20). This acquisition, along with the existing 51% stake of Porterstown
and Kilmannock held by GSF IRE Limited, takes total ownership for the Company
and its subsidiaries to 100%. Post year end, this 49% stake was transferred
down to GSF IRE Limited by way of an intercompany loan through GSES 1 Limited.
13. Cash and cash equivalents
31 March 31 March
2024 2023
(£) (£)
Cash at bank 55,306,092 99,199,093
Restricted cash 5,361,480 24,506,634
60,667,572 123,705,727
Restricted cash comprises cash held as collateral for future contractual
payment obligations and deferred payments payable from indirect subsidiaries
of the Company to third party suppliers in relation to the Big Rock project.
Collateral will be released to the Company upon settlement of the contractual
payments, to be made in accordance with the applicable contracts. The final
payment to the supplier under the contractual agreement was made in April 2024
and subsequently the remaining £5,361,480 plus interest earned post year end
was released from the collateral account in June 2024.
14. Trade and other receivables
31 March 31 March
2024 2023
(£) (£)
VAT recoverable 185,712 213,360
Prepaid Director's and Officer's insurance 2,111 4,085
Other Prepayments 118,218 36,746
Other Debtors - 280,560
Bank interest receivable 213,812 309,074
519,853 843,825
15. Trade and other payables
31 March 31 March
2024 2023
(£) (£)
Administration fees 39,414 73,509
Audit fees 276,500 283,100
Directors remuneration 9,824 8,222
Professional fees 1,823,031 2,554,634
Other creditors 1,678 127,388
2,150,447 3,046,853
16. Categories of financial instruments
31 March 31 March
2024 2023
(£) (£)
Financial assets
Financial assets at amortised cost
Cash and cash equivalents 60,667,572 123,705,727
Trade and other receivables 519,853 843,825
Fair value through profit and loss
Investment 481,659,515 434,762,146
Total financial assets 542,846,940 559,311,698
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 2,150,447 3,046,853
Total financial liabilities 2,150,447 3,046,853
At the balance sheet date, all financial assets and liabilities were measured
at amortised cost except for the investment in equity and loans to
subsidiaries which are measured at fair value.
17. Fair Value measurement
VALUATION APPROACH AND METHODOLOGY
There are three traditional valuation approaches that are generally accepted
and typically used to establish the value of a business; the income approach,
the market approach, and the net assets (or cost based) approach. Within these
three approaches, several methods are generally accepted and typically used to
estimate the value of a business.
The Company has chosen to utilise the income approach, which indicates value
based on the sum of the economic income that an asset, or group of assets, is
anticipated to produce in the future. Therefore, the income approach is
typically applied to an asset that is expected to generate future economic
income, such as a business that is considered a going concern. Free cash flow
to total invested capital is typically the appropriate measure of economic
income. The income approach is the Discounted Cash Flow ("DCF") approach and
the method discounts free cash flows using an estimated discount rate
(Weighted Average Cost of Capital ("WACC")).
VALUATION PROCESS
The Company's portfolio of lithium-ion energy storage investments has a total
capacity of 1.25 GW (2023: 1.17 GW). As at 31 March 2024, 371.5 MW of the
Company's total portfolio was operational (2023: 291.6 MW) and 873.5 MW
pre-operational (2023: 881.6 MW) (the "Investments").
The Investments comprise projects, based in the UK, the Republic of Ireland,
mainland Europe and 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 valuation. The Investment
Manager prepares financial models utilising revenue forecasts from external
parties to determine the fair value of the Company's investments and the
Company engages external, independent, and qualified valuers to verify the
valuations.
As at 31 March 2024, the fair value of the portfolio of investments has been
determined by the Investment Manager and reviewed by BDO UK LLP.
The below table summarises the significant unobservable inputs to the
valuation of investments.
Significant Inputs Fair Value
31 March 31 March
Valuation 2024 2023
Investment Portfolio technique Description (Range) (£) (£)
Great Britain DCF Discount Rate 7.25% - 11% 197,453,898 180,714,570
(excluding Northern Ireland) Revenue / MW / hr £7 - £12
Northern Ireland DCF Discount Rate 8% - 9.25% 44,381,239 55,049,170
Revenue / MW / hr €9 - €27
Republic of Ireland DCF Discount Rate 8.25% - 11% 54,445,455 28,515,507
Revenue / MW / hr €8 - €13
Other OECD DCF Discount Rate 9.25% - 10.75% 196,268,784 171,008,958
Revenue / MW / hr €9 - €12 /
$8 - $29
Holding Companies NAV (10,889,861) (526,059)
Total Investments 481,659,515 434,762,146
The fair value of the holding companies represents the net assets together
with any cash held within those companies in order to settle any operational
costs.
• Sensitivity Analysis
The below table reflects the range of sensitivities in respect of the fair
value movements of the Company's investments and via GSES1.
Significant Inputs Estimated effect on Fair Value
31 March 31 March
Valuation 2024 2023
Investment Portfolio technique Description Sensitivity (£) (£)
Great Britain (excluding Northern Ireland) DCF Revenue +10% 40,018,900 39,163,849
-10% (40,636,523) (39,402,771)
Discount rate +1% (29,165,634) (25,103,594)
-1% 34,203,482 29,658,404
Northern Ireland DCF Revenue +10% 4,773,587 5,360,179
-10% (4,776,693) (5,357,401)
Discount rate +1% (2,657,793) (3,239,801)
-1% 3,066,071 3,741,944
Exchange rate +3% (1,222,696) (896,254)
-3% 1,298,082 952,017
Republic of Ireland DCF Revenue +10% 7,892,427 5,631,626
-10% (9,622,279) (6,434,752)
Discount rate +1% (8,951,937) (5,936,555)
-1% 10,423,597 6,914,698
Exchange rate +3% (1,202,234) (101,466)
-3% 1,276,599 107,516
Other OECD DCF Revenue +10% 29,656,856 24,849,092
-10% (30,077,236) (25,153,598)
Discount rate +1% (16,265,625) (14,401,398)
-1% 18,675,891 16,472,024
Exchange rate +3% (5,675,505) (4,689,659)
-3% 6,026,567 4,981,974
High case (+10%) and low case (-10%) revenue information used to determine
sensitivities are provided by third party pricing sources.
• Valuation of financial instruments
The investments at fair value through profit or loss are Level 3 in the fair
value hierarchy. No transfers between levels took place during the year. The
fair value of other financial instruments held during the year approximates
their carrying amount.
18. Financial risk management
The Company is exposed to certain risks through the ordinary course of
business and the Company's financial risk management objective is to minimise
the effect of these risks. The management of risks is performed by the
Directors of the Company and the exposure to each financial risk is considered
potentially material to the Company, how it arises and the policy for managing
it is summarised below:
• Capital risk management
The capital structure of the Company at year end consists of equity
attributable to equity holders of the Company, comprising issued capital,
reserves and accumulated gains. The Board continues to monitor the balance of
the overall capital structure so as to maintain investor and market
confidence. The Company is not subject to any external capital requirements.
• Counterparty risk
The Company is exposed to third party credit risk in several instances,
including the possibility that counterparties with which the Company and its
subsidiaries, together the Group, contract with, may default or fail to
perform their obligations in the manner anticipated by the Group. Such
counterparties may include (but are not limited to) manufacturers who have
provided warranties in relation to the supply of any equipment or plant, EPC
contractors who have constructed the Company's projects, who may then be
engaged to operate assets held by the Company, property owners or tenants who
are leasing ground space and/or grid connection to the Company for the
location of the assets, contractual counterparties who acquire services from
the Company underpinning revenue generated by each project or the energy
suppliers, or demand aggregators, insurance companies who may provide coverage
against various risks applicable to the Company's assets (including the risk
of terrorism or natural disasters affecting the assets) and other third
parties who may owe sums to the Company. In the event that such credit risk
crystallises, in one or more instances, and the Company is, for example,
unable to recover sums owed to it, make claims in relation to any contractual
agreements or performance of obligations (e.g. warranty claims) or require the
Company to seek alternative counterparties, this may materially adversely
impact the investment returns.
Further the projects in which the Company may invest will not always benefit
from a turnkey contract with a single contractor and so will be reliant on the
performance of several suppliers. Therefore, the key risks during battery
installation in connection with such projects are the counterparty risk of the
suppliers and successful project integration. The Company accounts for its
exposure to counterparty risk through the fair value of its investments by
using appropriate discount rates which adequately reflects its risk exposure.
The Company regularly assesses the creditworthiness of its counterparties and
enters into counterparty arrangements which are financially sound and ensures,
where necessary, the sourcing of alternative arrangements in the event of
changes in the creditworthiness of its present counterparties.
• Concentration risk
The Company's investment policy is limited to investment in energy storage
infrastructure in the UK, Republic of Ireland, North America, Western Europe,
Australia, Japan, and South Korea. The value of investments outside of the UK
is not intended to exceed 60% of Gross Asset Value of the Company. As at 31
March 2024, investments outside of the UK were at 42% (2023: 36%) of the Gross
Asset Value. Significant concentration of investments in any one sector and
location may result in greater volatility in the value of the Group's
investments and consequently the Net Asset Value and may materially and
adversely affect the performance of the Group and returns to Shareholders.
The Company currently has investments located across 5 different grids in the
UK, Republic of Ireland, North America (ERCOT and CAISO), and Germany. This
diversification reduces exposure to any single grid. The investment policy
also limits the exposure to any single asset within the portfolio to 25% of
the Gross Asset Value of the Company.
• Credit risk
The Company regularly assesses its credit exposure and considers the
creditworthiness of its customers and counterparties. Cash and bank deposits
are held with Barclays plc, Santander UK plc and JPMorgan Chase and Co., all
reputable financial institutions with Moody's credit ratings of Baa1, A1 and
A1 respectively.
• Liquidity risk
The objective of liquidity management is to ensure that all commitments which
are required to be funded can be met out of readily available and secure
sources of funding. The Company may, where the Board deems it appropriate, use
short-term leverage to acquire assets but with the intention that such
leverage be repaid with funds raised through a new issue of equity or cash
flow from the Company's portfolio. Such leverage will not exceed 30 per cent.
at the time of borrowing of Gross Asset Value without Shareholder approval.
The Company intends to prudently introduce a conservative amount of debt
throughout the portfolio. The Company's only financial liabilities as at 31
March 2024 are trade and other payables. The Company has sufficient cash
reserves to cover these in the short-medium term. The Company's cash flow
forecasts are monitored regularly to ensure the Company is able to meet its
obligations when they fall due. The Company's investments are level 3 and thus
illiquid and this is taken into assessment of liquidity analysis.
The following table reflects the maturity analysis of financial assets and
liabilities.
31 March 2024 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
Financial assets
Cash at bank 55,306,092 - - - 55,306,092
Restricted cash 5,361,480 - - - 5,361,480
Trade and other receivables 519,853 - - - 519,853
Fair value through profit and loss
Investments - - - 481,659,515 481,659,515
Total financial assets 61,187,425 - - 481,659,515 542,846,940
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 2,150,447 - - - 2,150,447
Total financial liabilities 2,150,447 - - - 2,150,447
31 March 2023 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
Financial assets
Cash at bank 99,199,093 - - - 99,199,093
Restricted cash 19,610,119 4,896,515 - - 24,506,634
Trade and other receivables 843,825 - - - 843,825
Fair value through profit and loss
Investments - - - 434,762,146 434,762,146
Total financial assets 119,653,037 4,896,515 - 434,762,146 559,311,698
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 3,046,853 - - - 3,046,853
Total financial liabilities 3,046,853 - - - 3,046,853
Investments include both equity and debt instruments. As the equity
instruments have no contractual maturity date, they have been included with
the >5-year category. Additionally, the debt instruments have an original
maturity of 20 years.
• Market risk
Market risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. Market risk
reflects currency risk, interest rate risk and other price risks. The
objective is to minimise market risk through managing and controlling these
risks to acceptable parameters, while optimising returns. The Company uses
financial instruments in the ordinary course of business, and also incurs
financial liabilities, in order to manage market risks.
i) Currency risk
The majority of investments, together with the majority of all transactions
during the current period were denominated in Pounds Sterling.
The Company, via GSES 1 and its direct subsidiaries (and also directly for 49%
of Porterstown and Kilmannock), holds three investments (Kilmannock,
Porterstown and Mucklagh) in the Republic of Ireland, an investment in Germany
(Cremzow), and several investments in North America, creating an exposure to
currency risk. These investments have been translated into Pounds Sterling at
year end and represent 50% (2023: 46%) of the Company's fair valued investment
portfolio. The Company regularly monitors its exposure to foreign currency and
executes appropriate hedging arrangements in the form of forward contracts
with reputable financial institutions to reduce this risk. These derivatives
are held by the Company's subsidiaries.
ii) Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
Company is exposed to interest rate risk on its cash balances held with
counterparties, bank deposits, advances to counterparties and through loans to
related parties. Loans to related parties carry a fixed rate of interest for
an initial period of 20 years. The Company may be exposed to changes in
variable market rates of interest and this could impact the discount rate used
in the investment valuations and therefore the valuation of the projects as
well as the fair value of the loan receivables. Refer to Note 17 for the
sensitivity of valuations to changes in the discount rate. The Company
currently has no external debt. The Company continuously monitors its exposure
to interest rate risk and where necessary will assess and execute hedging
arrangements to mitigate interest rate risk.
iii) Price risk
Price risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. If the market
prices of the investments were to increase by 10%, there will be a resulting
increase in net assets attributable to ordinary shareholders for the period of
£48,165,952 (2023: £43,476,217). Similarly, a decrease in the value of the
investment would result in an equal but opposite movement in the net assets
attributable to ordinary shareholders. The Company relies on the market
knowledge of the experienced Investment Advisor, the valuation expertise of
the third-party valuer BDO and the use of third-party market forecast
information to provide comfort with regard to fair market values of
investments reflected in the financial statements.
19. Net asset value per share
Basic NAV per share is calculated by dividing the Company's net assets as
shown in the Statement of Financial Position that are attributable to the
ordinary equity holders of the Company by the number of Ordinary Shares
outstanding at the end of the period. As there are no dilutive instruments
outstanding, basic, and diluted NAV per share are identical.
31 March 31 March
2024 2023
Net assets per Statement of Financial Position £ 540,696,493 £ 556,264,845
Ordinary Shares in issue as at 31 March 505,099,478 481,399,478
NAV per share - Basic and diluted (pence) 107.05 115.55
20. Share capital and reserves
Share Capital
Share premium Special Merger reduction Capital Revenue
capital reserve reserve reserve reserve reserve reserve Total
(£) (£) (£) (£) (£) (£) (£) (£)
At 1 April 2023 4,813,995 315,686,634 349,856 - 111,125,000 125,584,414 (1,295,054) 556,264,845
Issue of ordinary £0.01 shares:
20 December 2023 140,000 15,666,000 - - - - - 15,806,000
Issue of ordinary £0.01 shares:
25 March 2024 97,000 - - 10,670,000 - - - 10,767,000
Share issue costs - (49,735) - (48,116) - - - (97,851)
Movement in special reserve - - (349,856) - 349,856 - - -
Dividends paid - - - - (36,384,962) - - (36,384,962)
Loss for the year - - - - - (30,041,779) 24,383,240 (5,658,539)
At 31 March 2024 5,050,995 331,302,899 - 10,621,884 75,089,894 95,542,635 23,088,186 540,696,493
Share Capital
Share premium Special reduction Capital Revenue
capital reserve reserve reserve reserve reserve Total
(£) (£) (£) (£) (£) (£) (£)
At 1 April 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Issue of ordinary £0.01 shares:
14 April 2022 1,363,637 148,636,363 - - - - 150,000,000
Transfer to capital reduction
reserve - (100,000,000) - 100,000,000 - - -
Share issue costs - (2,657,852) - - - - (2,657,852)
Movement in special reserve - - 163,200 (163,200) - - -
Dividends paid - - - (30,970,692) - - (30,970,692)
Profit for the year - - - - 60,826,822 2,585,473 63,412,295
At 31 March 2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
SHARE ISSUES
On 20 December 2023, the Company issued 14,000,000 ordinary shares at a price
of 112.9 pence per share, raising gross proceeds from the Placing of
£15,806,000.
On 26 March 2024, the Company issued 9,700,000 ordinary shares at a price of
111 pence per share, as consideration for the acquisition of the remaining 49%
stake in Porterstown Battery Storage Limited and Kilmannock Battery Storage
Limited (see note 12). Because this acquisition has increased the Company's
indirect ownership of the two investments above 90% (from 51% to 100%), merger
relief has been applied to the share issuance. As such, any premium issued on
these shares has been recognised as part of the merger reserve.
Ordinary shareholders are entitled to all dividends declared by the Company
and to all the Company's assets after repayment of its borrowings and ordinary
creditors.
Ordinary shareholders have the right to vote at meetings of the Company. All
ordinary Shares carry equal voting rights.
The nature and purpose of each of the reserves included within equity at 31
March 2024 are as follows:
• Share premium reserve: represents the surplus of the gross
proceeds of share issues over the nominal value of the shares, net of the
direct costs of equity issues and net of conversion amount.
• Special reserve: represents a non-distributable reserve
totalling the amount of outstanding creditors at the date of the Company's
approved reduction in capital. During the year, these creditors were paid off
and the remaining special reserve has been written off back against the
capital reduction reserve.
• Merger reserve: represents a non-distributable reserve
comprising any premium on a share issuance used as consideration for the
purpose of obtaining at least 90% equity stake in another company.
• Capital reduction reserve: represents a distributable reserve
created following a Court approved reduction in capital.
• Capital reserve: represents a non-distributable reserve of
unrealised gains and losses from changes in the fair values of investments as
recognised in the Capital account of the Statement of Comprehensive Income.
• Revenue reserve: represents a distributable reserve of
cumulative gains and losses recognised in the Revenue account of the Statement
of Comprehensive Income.
The only movements in these reserves during the period are disclosed in the
Statement of Changes in Equity.
21. Dividends
31 March 31 March
Dividend 2024 2023
per share (£) (£)
Dividends paid during the year
For the 3 month period ended 31 December 2021 2 pence - 6,900,718
For the 3 month period ended 31 March 2022 1 pence - 4,813,995
For the 3 month period ended 30 June 2022 2 pence - 9,627,990
For the 3 month period ended 30 September 2022 2 pence - 9,627,990
For the 3 month period ended 31 December 2022 2 Pence 9,627,990 -
For the 3 month period ended 31 March 2023 1.5 pence 7,220,992 -
For the 3 month period ended 30 June 2023 2 pence 9,627,990 -
For the 3 month period ended 30 September 2023 2 pence 9,907,990 -
36,384,962 30,970,693
The table below sets out the proposed final dividend, together with the
interim dividends declared, in respect of the financial year, which is the
basis on which the requirements of Section 1158 of the Corporation Tax Act
2010 are considered.
31 March 31 March
Dividend 2024 2023
per share (£) (£)
Dividends declared for the year
For the 3 month period ended 30 June 2022 2 pence - 9,627,990
For the 3 month period ended 30 September 2022 2 pence - 9,627,990
For the 3 month period ended 31 December 2022 2 pence - 9,627,990
For the 3 month period ended 31 March 2023 1.5 pence - 7,220,992
For the 3 month period ended 30 June 2023 2 pence 9,627,990 -
For the 3 month period ended 30 September 2023 2 pence 9,907,990 -
For the 3 month period ended 31 December 2023 2 pence 9,907,990 -
For the 3 month period ended 31 March 2024 1.5 pence 7,576,492 -
37,020,462 36,104,962
22. Transactions with related parties
Following admission of the Ordinary Shares (refer to note 20), the Company and
the Directors are not aware of any person who, directly or indirectly,
jointly, or severally, exercises or could exercise control over the Company.
The Company does not have an ultimate controlling party.
Details of related parties are set out below:
DIRECTORS
On 1 May 2023, Lisa Scenna was appointed as a Director. Patrick Cox, Chair of
the Board of Directors of the Company, is paid a director's remuneration of
£77,000 per annum, (2023: £70,625), Caroline Banszky is paid a director's
remuneration of £57,000 per annum, (2023: £52,500), with the remaining
directors' remuneration of £47,000 each per annum, (2023: £43,750).
Total director's remuneration, associated employment costs and expenses of
£306,556 were incurred in respect of the year with £9,824 being outstanding
and payable at the year end.
INVESTMENT ADVISOR
The Investment Advisor, Gore Street Capital Limited (the "Investment
Advisor"), is entitled to advisory fees under the terms of the Investment
Advisory Agreement amounting to 1% of Adjusted Net Asset Value. The advisory
fee will be calculated as at each NAV calculation date and payable quarterly
in arrears.
For the avoidance of doubt, where there are C Shares in issue, the advisory
fee will be charged on the Net Asset Value attributable to the Ordinary Shares
and C Shares respectively.
For the purposes of the quarterly advisory fee, Adjusted Net Asset Value means
Net Asset Value, minus Uncommitted Cash. 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. At 31 March there was no uncommitted cash.
Investment advisory fees of £5,542,596 (2023: £4,914,324) were incurred
during the year, of which £1,387,354 was outstanding as at 31 March 2024,
(2023: £nil outstanding).
In addition to the advisory fee, the Advisor may be 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. No performance fees were accrued as at
31 March 2024, (2023: £2,457,164).
GSS, a direct subsidiary to the Investment Adviser, provided commercial
management services to the Company resulting in charges in the amount of
£672,351 being paid by the Company (2023: £855,692). During 2023, recharges
related to staff under the commercial management agreement (CMA) was changed
from a cash basis to an accruals basis. Historically, all staff costs were
recharged under the CMA only when paid, resulting in volatility in the
corporate services recharges. They are now recharged quarterly in line with
the accrued expenditure throughout the year. As a result of the change in
recognition during the year, a "catch-up" adjustment was posted to recognise
accrued staff-related expenses in 2023. The catch-up adjustment effectively
recognises costs associated with two years (2022 and 2023). In subsequent
periods, all staff costs will continue to be recharged on an accrual basis -
ensuring only 1 years' expenses are recognised in each reporting period.
INVESTMENTS
The Company holds 100% interest in GSES 1 Limited through equity and a loan
facility. Transactions and balances held with GSES 1 for the year are all
detailed within note 12.
On 25 March 2024, the Company directly acquired the remaining 49% of both
Porterstown Battery Storage Limited and Kilmannock Battery Storage Limited
through an issuance of shares in the Company on 26 March 2024 (see note 20).
This acquisition, along with the existing 51% stake of Porterstown and
Kilmannock held by GSF IRE Limited, takes total ownership for the Company and
its subsidiaries to 100%. Post year end, this 49% stake was transferred down
to GSF IRE Limited by way of an intercompany loan through GSES 1 Limited.
Refer to Note 12 for further details.
23. Guarantees and 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. The Facility was increased to £50 million in June 2023. Under these
agreements, the Company acts as chargor and guarantor to the amounts borrowed
under the Agreements by GSES1 Limited. As at 31 March 2024, an amount of
£5,535,292 has been drawn on this facility (2023: £nil).
The Company had no contingencies and significant capital commitments as at the
31 March 2024.
24. Post balance sheet events
The Directors have evaluated the need for disclosures and / or adjustments
resulting from post balance sheet events through to 12 July 2024, the date the
financial statements were available to be issued.
Post year end, further to the direct acquisition of the remaining 49% of both
Porterstown Battery Storage Limited and Kilmannock Battery Storage Limited,
the Company transferred these new equity stakes down to GSF IRE Limited by way
of an intercompany loan through GSES 1 Limited.
The Board approved on the 11 March 2024, the issuance of an interim dividend
of 2 pence per share. This dividend totalling £9,907,990 was paid to
investors on 12 April 2024.
There were no adjusting post balance sheet events and as such no adjustments
have been made to the valuation of assets and liabilities as at 31 March 2024.
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Accounts for the year ended 31 March 2023 and do
not constitute the statutory accounts for that year. The 2023 Annual Report
and Accounts have been delivered to the Registrar of Companies and included
the Report of the Independent Auditors which was unqualified and did not
contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Accounts for the year ended 31 March 2024 and do not constitute the
statutory accounts for the year. The 2024 Annual Report and Accounts include
the Report of the Independent Auditors which is unqualified and does not
contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The 2023 Annual Report and Accounts will be delivered to
the Registrar of Companies in due course.
Neither the contents of the Company's webpages nor the contents of any website
accessible from hyperlinks on the Company's webpages (or any other website) is
incorporated into, or forms part of, this announcement.
1 (#_ftnref1) Includes project level and fund level debt
2 (#_ftnref2) Based on 31 March 2024 share price
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