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] 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] (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 tCO2e 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
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
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/.
Please click on the following link
to view the document: 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.
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.
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 tCO2e
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
since March 2023
|
Changes in
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)
|
£10.12
|
|
|
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 year6. 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%
|
|
Other7
|
3,795
|
38%
|
|
Total8
|
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%
|
|
Total9
|
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)
|
£(000's)/
MW/yr
|
£/MW/hr
|
£(000's)/
MWh/yr
|
£/MWh/hr
|
|
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
prices10 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
|
TBC11
|
|
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 Matrix13
|
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
|
79.615
|
|
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 Value16 (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 $270bn17 of new investments in clean
energy projects and manufacturing was announced within the first
year of the legislation being passed and 33.818 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 GW19 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 power grid operators in
the United Kingdom, Ireland, Germany, Texas and 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
specifications and requirements for service delivery (including
network charges or changes to market rules) could negatively impact
cash flow or constrain revenue projections for assets within the
region in which a change occurs and thereby reduce the net asset
value of the affected assets.
|
The Company has assets in five grids
to mitigate the impact of one grid's changes.
In addition, the Manager aims to
stack revenue contracts to vary the types of income streams
received from each system operator and within each market to
mitigate against revenue risk.
|
ó
|
|
Inflation
|
The Company's profit projections are
based in part on its budget for capital and operating expenditure
incurred in the construction, operation, and maintenance of its
portfolio of battery storage assets. These include, amongst other
things, the cost of battery cells, inverters, the cost of power
required to charge the batteries and the labour costs for
operations.
There is a risk that unanticipated
inflation will increase capital expenditure and operating costs
materially beyond budget, without a commensurate impact on
revenues, with the consequence of reducing profitability below the
investment 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.
|
The Company ensures that it
generates revenues in the markets in which it incurs operating
costs from a diverse mix of short, medium and long-term contracts
that are subject to fixed or floating contract prices. As revenues
are pegged to operating expenditure, the Company shall aim to
neutralise inflationary increases (e.g., cost of power to charge
the batteries) by rebalancing its revenue services (e.g., changing
the timing or bases for charging batteries to either reduce costs
or increase revenues) as appropriate to maintain its investment
forecast. The long-term Capacity Market contracts of up to 15 years
are index linked.
|
ó
|
|
Exposure to Lithium-Ion Batteries, Battery Manufacturers and
technology changes
|
The portfolio currently consists
only of lithium-ion batteries. The Group's battery energy storage
systems are designed by a variety of EPC providers, but the
underlying lithium-ion batteries are manufactured primarily by BYD,
CATL and LG Chem. While the Company considers lithium-ion battery
technology to be 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 to provide similar or more
efficient services to power markets at comparable or lower costs,
reducing the portfolio's market share of revenues in the medium or
long term. There is also a risk that batteries might be unavailable
due to delays caused by supply chain issues.
|
The Company remains technology
agnostic and continues to evaluate other economically viable energy
storage opportunities to reduce its exposure to lithium-ion and
further diversify its portfolio mix. The Company is mindful of the
ESG risks associated with the production and recycling of
batteries.
The Company is not under an
exclusivity agreement with any individual battery manufacturer and
will manage its supply framework agreements in a manner that allows
it to take advantage of any improvements or amendments to new
storage technologies as they become commercially viable, as well as
mitigating any potential supply chain issues.
|
ó
|
|
Service Provider
|
The Company has no employees and has
delegated certain functions to several service providers,
principally the Manager, Administrator, depositary and registrar.
Failure of controls, and poor performance of any service provider,
could lead to disruption, reputational damage or loss.
|
Service providers are appointed
subject to due diligence processes and with clearly documented
contractual arrangements detailing service expectations.
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.
|
ó
|
|
Valuation of Unquoted Assets
|
The Company invests predominantly in
unquoted assets whose fair value involves the exercise of judgement
by the Investment Manager. There is a risk that the Investment
Manager's valuation of the portfolio may be deemed by other third
parties to have been overstated or understated.
|
The Investment Manager routinely
works with market experts to assess the reasonableness of key data
used in the asset valuation process (such as revenue and inflation
forecasts) and to reassess its valuations on a quarterly 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.
|
ó
|
|
Delays in Grid Energisation or Commissioning
|
The Company relies on EPC
contractors for energy storage system construction, and on the
relevant transmission systems and distribution systems' owners
(TSO) for timely energisation and connection of that battery
storage asset to the transmission and distribution networks
appropriately.
There is a risk that either the EPC
contractor or relevant TSO could delay the target commercialisation
date of an asset under construction and negatively impact projected
revenues.
|
The Company works closely with EPC
contractors to ensure timely performance of services and imposes
liquidated damage payments under the EPC contracts for certain
delays in delivery.
The Company seeks commitments from
TSOs to a target energisation date as a condition to project
acquisition and provides maximum visibility on project development
to TSOs to encourage collaboration towards that target energisation
date.
The Manager factors in delays by
adjusting the valuation on an ongoing basis.
|
ó
|
|
Currency Exposure
|
The Company is the principal lender
of funds to Group assets (via intercompany loan arrangements) for
their investments in projects, including projects outside of the
UK. This means that the Company may indirectly invest in projects
generating revenue and expenditure denominated in a currency other
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.
|
The Company acts as guarantor under
currency hedge arrangements entered into by impacted subsidiaries
to mitigate its exposure to Euros and US Dollars. The Company will
also guarantee future hedging arrangements as appropriate to seek
to manage its exposure to foreign currency risks.
|
ó
|
|
Cyber-Attack and Loss of Data
|
The Company is exposed (through the
server, software, and communications systems of its primary service
providers and suppliers) to the risk of cyber-attacks that may
result in the loss of data, violation of privacy and resulting
reputational damage.
|
Among other measures, the Company
ensures its contractors and service providers incorporate firewalls
and virtual private networks for any equipment capable of remote
access or control. Cybersecurity measures are incorporated 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.
|
á
|
|
Physical and transitional climate-related
risks
|
The Company's assets are located in
several different countries, some of which experience extreme
weather, which could have a physical impact on the assets and as a
result affect shareholder returns.
Climate change may also affect the
development of technologies, markets and regulations.
|
The Manager's due diligence and site
design processes factor in climate change-related risks when
selecting sites and assets and designing systems to operate within
a range of temperatures.
The Manager reports to the Board on
developments in these areas regularly, including recommendations
for the Company to acclimate to technological, market or regulatory
change, including any driven by climate change.
|
á
|
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
premium
reserve
(£)
|
Special
reserve
(£)
|
Capital
reduction
reserve
(£)
|
Capital
reserve (£)
|
Revenue
reserve
(£)
|
Total
shareholders equity
(£)
|
|
As at 1 April 2022
|
3,450,358
|
269,708,123
|
186,656
|
42,258,892
|
64,757,592
|
(3,880,527)
|
376,481,094
|
|
Profit 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
31 March
2024 (£)
|
Year Ended
31 March
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.