Gore Street Energy Storage Fund H2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
July 15, 2026

Key Takeaways

  • Negative Sentiment: NAV fell sharply from GBP 1.028 to GBP 0.749, mainly due to lower actual revenues, revised third-party revenue curves, and higher OpEx assumptions.
  • Neutral Sentiment: The board said the new valuation is a more realistic and prudent NAV, reflecting fresh leadership and updated assumptions reviewed with the audit committee.
  • Positive Sentiment: The company is continuing its capital recycling strategy, with sales processes underway for Irish pre-construction assets and Cremzow, while also pursuing augmentation projects.
  • Neutral Sentiment: Management reaffirmed a GBP 0.07 per share annual dividend target paid quarterly, and said the approach is meant to return capital broadly to all shareholders rather than use immediate buybacks.
  • Positive Sentiment: Operational performance remains solid, with 95% availability, around 650 MW operating capacity, and cost savings from in-house optimization, including lower asset management and insurance costs.
AI Generated. May Contain Errors.
Earnings Conference Call
Gore Street Energy Storage Fund H2 2026
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good morning and welcome to the Gore Street Energy Storage Fund plc Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd like to hand you over to Angus Gordon Lennox. Chair, good morning, sir.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

Good morning, and welcome everyone to my first annual results presentation. Also for those of you who don't know who I am, I'm Angus Gordon Lennox, I'm chairman of this company. On this presentation, we've also got Keith Pickard, who is the Chair of the Audit Committee, and three members from Gore Street Capital who will be talking to you as well. I think the first thing to say is that this new Board has only been in place since the 1st of February. These results are to the end of March, so it's literally two months of the new Board that we're talking about. Although of course, there's been a couple more months passed since the end of March. The new Board has taken significant action.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

In the first place, we have had a strategy review, and we announced that in March, as many of you may have met me at that point. A couple of things that we did. We promised to have a good hard look at this company, and we've done that, with some quite simple results, which we'll come onto later. I think the most important thing at this stage is that the NAV that we've announced this morning is, in our view, a realistic NAV and a change. The dividend that we've announced this morning is entirely in line with the new strategy that we announced in March. It's early days. We're taking action, and actually, as you'll hear now from Alex and the team, the company in the circumstances that it is doing well. Over to you, Alex.

Alex O'Cinneide
CEO at Gore Street Capital

Thank you very much, Angus. Good morning, everyone. Thank you for joining. Let me take you through some of the headlines here. Obviously, the thing which will grab most people's attention, of course, is this NAV decline from over the course of the year, now just under GBP 0.75. Sumi will take you through the detail of that NAV bridge. It is a NAV which is driven by third-party forecasts. Throughout its history, this company has taken what we believe is the appropriate way to look at NAV. We have an asset class which is volatile in terms of revenue, and the third-party curves have reflected that volatility with some material changes in their curves going forward. We've taken those curves into the DCF, and after a discussion with the Board and the audit committee, several adjustments to those curves leading to this NAV here of GBP 0.75.

Alex O'Cinneide
CEO at Gore Street Capital

Overall, what would I say here around the NAV and what does it mean in terms of storage? We've been investing in storage. This fund has been up and running since 2018. We are surprised at the build-out of storage. We always knew this would be a large asset class and one that was critical to the energy transition, but in some of the markets how we operate, the build-out of storage has been more than our expectations, and that supply-demand dynamic has led to an underperformance against revenue. That said, it's a 20-year asset class, a 20-year portfolio, and one which has reasonable volatility year-on-year. As Angus mentioned, we have a new Board, working very closely with that new Board who have been involved in every aspect of this business, including, of course, this set of results and this NAV.

Alex O'Cinneide
CEO at Gore Street Capital

We'll talk a little bit about the progress on strategy. That strategy is one of recycling capital and strong distributions. This fund has given back significant shareholder distributions, most recently last year with the ITC, a very significant amount of money, and previous to that, large amounts of distributions. We look to continue that with a series of disposals, which are in progress and progressing well. We'll end talking a little bit about some of our future plans in terms of augmentation and new developments, but constant focus in terms of delivering cash back to shareholders as we look at what is a dislocation in the market between share price and NAV. All investors on this call realize the importance of BESS. The BESS has proved itself to be the critical asset in our transition. It is an asset which revenues determined through volatility.

Alex O'Cinneide
CEO at Gore Street Capital

Owning a portfolio of BESS assets is to be long volatility on the energy system. More and more renewables get built, bigger and bigger effects of climate change, geopolitical lead to volatility in the energy system leading to higher revenues. Those revenues are then matched by the build-out of storage, which we have seen multiple higher growth than we imagined, for instance, in the G.B. Market and the Texas market in particular. This platform operating in five markets, well distributed, well diversified. We are geeky enough that we have done the regression analysis to show that that diversification strategy has reduced volatility very significantly and actually is also delivering a higher level of revenue than if we'd stayed in one market. Over nearly 650 MW in operation GBP 0.07 per share is our target distribution.

Alex O'Cinneide
CEO at Gore Street Capital

Outside of the operational portfolio, a significant amount of assets ready to go into construction. Some of the key metrics in terms of the portfolio, how it's distributed, 200 MW in California, operating under a very high contracted revenue contract, so strong revenue coming from our contracted portion of our revenue stack in California, 400 MWh in operation there. Nearly 300 MW operate in the island of Ireland. It's been the standout market for us consistently. We've done very well in that market. Only 20 MW in Germany, been a very high IRR asset for us, delivering very strong cash flows. Britain has been a lower market for us over the last 12 months, though we are overachieving against the market baseline. A market which is absolutely moved by the amount of storage at any one time on that market.

Alex O'Cinneide
CEO at Gore Street Capital

Same, I would say, in the Texas market, where we've seen a considerable build-out of storage, though that is lessening now, and a considerable build-out of solar and wind as the AI boom fuels huge amount of energy load increase. Key metrics, Sumi will go into much more details around this, but as I said, GBP 0.749 NAV, a dividend yield on that basis of 13.3%. Gearing, remain a very low-geared portfolio in comparison to our peers at the 22% level of gearing. Operational capacity, just under 650 MW, nearly a Gigawatt-hour of operational capacity. Contracted revenue, 31% contracted revenue, a lot of that's coming out of California, though with good contracts in place in the Republic of Ireland and in G.B. We also have floor pricing in our Northern Irish assets. Overall, I think good balance between contracted and merchant within it.

Alex O'Cinneide
CEO at Gore Street Capital

Availability, Alicja will talk more on technical side here, 95% availability. That is a market-leading number. Sumi?

Sumi Arima
Chief Investment Officer at Gore Street Capital

Thank you, Alex. Let me go through final section from page 11. This bridge shows movement in NAV over the year. As Alex mentioned, NAV fell from GBP 1.028-GBP 0.749 in this period, driven by lower actual revenues, revised revenue curves, and changes to our OpEx assumptions. Walking from left to right, we started at GBP 1.028. The DCF rollover added GBP 0.093. Actual revenue was lower than prior forecast, which cost us GBP 0.061. Largest item, revised revenue curve, was GBP -0.19, which I will detail next slide. Discount rates were GBP -0.006, OpEx, GBP -0.056, fund level expense GBP -0.023. Dividends, which paid out, was GBP -0.042. Inflation gave back GBP 0.011, and that all brings us to the GBP 0.749. Methodology, our key valuation inputs come from multiple independent providers, and all assessed by audit committee members.

Sumi Arima
Chief Investment Officer at Gore Street Capital

Under the DCF, pre-construction assets carry higher discount rates than operational ones, with commissioning dates updated for our latest expectations. BDO oversees the process, and EY reviews all material inputs and audits the accounts. In terms of the context of this year's NAV, following a second Board renewal with a new Audit Committee Chair, this NAV was set under the fresh leadership. The new Board went through the valuation in detail, reviewing key inputs and assumptions, and took a consciously prudent approach. There is a reason why the large scale of movement in this bridge. Next one. Yeah, thank you. Page 12, slide 12 shows the revenue curve movement. It is biggest single driver at GBP -0.19 NAV impact, with the largest revisions coming from G.B. and U.S. We use mid-case blended average from multiple third-party providers.

Sumi Arima
Chief Investment Officer at Gore Street Capital

Their updated forecast across both G.B. and the U.S. moved the valuation down by GBP 0.172 in aggregate. On top of that, the new curve includes additional GBP 0.018 of adjustment directed by audit committee. That means we applied the historical 12 months revenue track record or actuals to 2026 and 2027 forecast to bring near-term projection closer to the recent performance. That is a deliberately prudent step took by the audit committee. Together, these gives the GBP -0.19 drop in NAV. Alicja can go over the market dynamics in more detail in the later slide. Other valuation assumptions are listed here. Actuals, GBP -0.061. This is a variance between realized revenues and prior forecast for this year. In this year, revenue are below forecast due to poor market conditions, mainly G.B. and U.S. Inflation assumption, which is GBP +0.011. We modestly raised short-term assumptions across all markets.

Sumi Arima
Chief Investment Officer at Gore Street Capital

Now it is ranging from 3%-3.7%, reflecting latest forecasts. Long-term one is kept unchanged at 2.5% for G.B. and 2.25% for E.U. and the U.S. They are all set with reference to third-party forecast or peer assumptions and market expectations rather than internal house views. Next one, OpEx, GBP -0.056. This is for prudence and with the Audit Committee guidance, we now included project oversight costs beyond routine O&M costs, which we have been including, but project oversight cost is included in the asset level cash flows from this NAV. This reflects a broader buyer universe for valuation to capture the full cost, which passive owner without management function would incur. Other adjustment here includes the insurance savings and O&M contract revisions. Lastly, discount rates, GBP -0.006. U.S. rate increased to reflect difficult conditions, but partly offset by construction assets moving into the operational status.

Sumi Arima
Chief Investment Officer at Gore Street Capital

G.B. and Irish rates were broadly flat, and that result in weighted average of 10.25% of discount rate, which is essentially flat compared to last year's 10.22%. Here, sensitivities and then scenarios. Headline of this page is the width of these ranges. NAV is highly sensitive to each of these assumptions. We took our best judgment on each of the assumptions, but these are judgments, our judgments. Another equally qualified professionals could reasonably differ, which is why we are being deliberate and prudent. On the top half of this one, 1% move in inflation shifts NAV about GBP 0.13 either way. Discount rate sensitivity is similar, but the opposite directions. FX looks small, GBP 0.015-GBP 0.016 for 3% move of FX rate, but the 3% move in FX is entirely realistic for FX.

Sumi Arima
Chief Investment Officer at Gore Street Capital

EPC is limited to GBP 0.02 of the NAV impact for 10% EPC cost move. This is because majority of our assets are becoming operational. The lower half shows scenarios, so uplift from non-operational asset progressing into the commissioning phase and then re-rated from the pre-construction discount rate to the operational discount rate. That impact will give us the GBP 0.137 of the upside. As you just saw in the earlier slide, impact of revenue assumption on NAV is large. That is also reflected at the bottom. Sensitivity range of the high and low revenue case is the widest in this slide, arranging from GBP -0.331 to GBP -0.205. Next one, moving on to balance sheet. The GSF group keeps deliberately lower gearing profile.

Sumi Arima
Chief Investment Officer at Gore Street Capital

At March 26, investments at fair value were GBP 373 million, and with cash on balance sheet and the working capital, total NAV was GBP 378.32 million. Aggregate group debt was GBP 105.82 million against the Gross Asset Value of the year, GBP 484 million. Gearing is 22%, which is up from 18% last year. This is reflecting Big Rock's debt and also higher Santander increased balance. Out of this GBP 106 million of debt, GBP 61 million is drawn under the Santander RCF at the HoldCo level, which is shared by Santander and Rabobank after syndication last July. The balance, GBP 44 million of debt, sits at the project level at the U.S. Big Rock facility with the First Citizens Bank. We retain flexibility.

Sumi Arima
Chief Investment Officer at Gore Street Capital

If you look at left-hand side, group cash of GBP 52 million, and in addition, GBP 38 million of undrawn debt capacities are available to support growth and augmentation. We move on to the next one. Concluding the finance section, this page gives a transparent bridge from revenue to total adjusted fund earnings. We start with top-line revenue of GBP 36.3 million, which is the GBP 7.3/MWh. Stepping down, revenue-related cost of GBP 3.5 million, which is 9.6% of revenue. That accounts for RTM fee, aggregator fee, and also the energy cost. Next one, other operating cost of GBP 10.8 million is the largest deduction, covering O&M, repairs, and site-level cost. Admin cost is GBP 2.8 million, and rent is GBP 1.2 million. We have liquidated damage that is GBP +2.7 million.

Sumi Arima
Chief Investment Officer at Gore Street Capital

That is from project delayed or did not have any access to the full revenue because of the delay. The lost revenue is partially reflected in this GBP 2.7 million of the positives. After below that, below operating line, HoldCo and plc expenses of GBP 7 million. This includes investment manager fees as well. The manager fee fell 16%, year-on-year, from GBP 5.1 million-GBP 4.3 million on the revised fee structure effective from October last year. Commercial management fee also went down by 8%. Debt cost, mainly on Big Rock interest and principal, plus the higher Santander loan balance. That is a cause of the increase and resulting in GBP 7.8 million of the cost. All in all, total adjusted fund earnings were GBP 5.96 million, which was down from GBP 9.8 million last year. While new assets became operational this year, disappointingly, revenue remained flat.

Sumi Arima
Chief Investment Officer at Gore Street Capital

Although revenue was flat because of new assets becoming operational, it has the operating cost and debt cost from new asset that is pulling down earnings. This wraps up my section, and Alicja can go over market section. Thank you.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

Thank you, Sumi. I will just go to the next slide. Apologies. The portfolio has averaged GBP 7.3/MWh, and this shows the effect of diversification of the portfolio across all the markets in which we have our assets, and also overperforms against a single G.B. market strategy. The strongest markets in the portfolio in this period have been consistently Ireland and also Germany. Ireland is driven predominantly by DS3 policy, which is very much tailored to batteries and strongly correlated to the renewable penetration in that grid, and this has increased last year. The share of energy that comes from renewables has increased in Ireland as a percentage share of demand, and that has allowed us to offset some of the changes that Irish regulator has introduced in the past to control the budget associated with ancillary services.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

Their decision to decrease some of the factors controlling the DS3 revenues have been offset by the need to have ancillary services on the grid driven by renewables and overall GBP 14, nearly GBP 15, is a very strong performing market and consistently over all the operational years, also with very high availability of our assets, above 98% in that market. In Germany, strong performance, still driven very much by renewable penetration in summer. Strong solar input from photovoltaic installation in that country means that system operator has high needs to regulate and balance the system, and therefore our batteries were able to participate in aFRR, which is now a predominant revenue stream in our stack. Overall, still shows positive needs for batteries in that market, and again, strong performance of Cremzow asset there. In U.K., we have seen two sides of a story.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

The first half of the year has been relatively stronger than financial year 2024/2025. We have seen day-ahead spreads about 16% higher in this financial year. It also has translated into higher revenues in [DSTAR suite]. However, the winter has been significantly milder than 2024/2025, and we have seen a 48% decrease of day-ahead spreads, which then has led to significant decrease in overall revenues available to both merchant component and ancillary services. We have seen some impact from policy changes, notably the change in ABSVD methodology, which in the past has favored non-balancing units. Weaker performance in Texas in terms of revenues predominantly driven by low demand or lower than anticipated demand growth and stronger renewable growth offsetting that demand increase.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

We do expect that this is going to change quite fundamentally as the backlog of data centers will be consistently coming online in Texas, very much driving rapid demand growth and scarcity events, which are a fundamental factor driving revenues in that region. Closing with California. In California, we have fundamentally mostly a contracted revenue profile with Resource Adequacy constituting about 76% of our revenue stack. The merchant component has declined in that market by 40% year-on-year. That has fundamentally been reflected in the overall revenue profile of that market. Moving on to the next slide. In terms of our in-house GSET, the trading team performance, the team has onboarded nearly 114 MW over the last financial year, and that mostly constituted assets in Texas.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

We're pleased to say that the team has outperformed benchmarking in terms of using Modo Energy benchmarks for the relevant duration. In G.B., our portfolio is consistently, at the moment, a one-hour system, and the team has outperformed against that. In Texas as well, since the time when the team has taken over. We have seen overall strong 14% over-performance against the two-hour benchmark, against the backdrop of lower revenues in this market. In terms of the technical performance and the overall developments in our portfolio. The portfolio has maintained its level of availability through active management. The 95% availability is on par with last year's performance. To manage the portfolio and reduce costs, we have focused on using and developing our in-house data technology platform. It allows us to leverage the vast amount of operational data and use it more efficiently and consistently across the portfolio.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

This platform effectively allows us to identify faults more clearly, respond faster, and overall decrease the costs. Through this technology, we have reduced asset management costs by a little bit more than GBP 300,000 per year. We have also, through very strong track record in safety, and our leading industry engagements, particularly on fire safety standards, we have managed to also drive down very significantly our insurance premiums in the portfolio. That is more than GBP 500,000 per annum just in insurance savings. We are also, at the moment, undertaking augmentation process for Stony and Ferrymuir assets. This is going very much on time and on budget, and we expect these processes to continue and complete by end of this calendar year as we envisage.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

Against the backdrop of this work, so maintaining live assets, so augmenting the assets as they operate, Stony and Ferrymuir have maintained operational, and therefore the availability levels that you see here are unaffected, which is a very good outcome. Lastly, reporting on our ESG KPIs. Over the course of financial year, the portfolio has abated 15,000 tons of CO2. We put this in the context, that is more than 300 passenger cars traveling on the road for a year, and it constitutes a strong increase from previous year. As well as the portfolio has stored 56, nearly 57 GWh of energy. Again, for context, this is 23,000 households using energy in a year.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

We announced in March a new strategy, which took a lot of hard work to get there, but it is actually pretty simple. It is to use operational income and capital from disposals to return some of that capital back to you shareholders, on the basis that there is then additional capital to be used to create value and growth through augmentation and selective investment. It is quite a simple thing. It is early days. It is very early days, so bear with us. There is one key thing. We are absolutely laser-focused on not reducing value for shareholders. We want to increase value for shareholders, and we want to return some of that capital to shareholders while we are doing that. We are absolutely sure that we do not want to destroy value by doing anything in too hurried a way.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

It is really important that we do continue along this strategy so that we can get more credibility and indeed, create value for shareholders. Alex?

Alex O'Cinneide
CEO at Gore Street Capital

Thank you, Angus. Yes, as Angus mentioned there, a strategy around recycling of capital. We are engaged in sales processes on Irish pre-construction and Cremzow, as the market has been informed, and those processes are going well. We are happy with the progress on that. We, of course, and as Alicja mentioned, engaged in our augmentation and a range of more augmentations to complete as we bring our portfolio where its one hour is to longer duration. Of course, a key part of this is distribution back to shareholders. GSF, through its history, has distributed very significant amount of capital back last year with the ITC, which the market, I think, had rightly had a level of concern around, given the policy environment in the U.S.

Alex O'Cinneide
CEO at Gore Street Capital

That was delivered successfully above the guidance, we will continue on that path as we look and seeing where the portfolio can be both strengthened and disposals can be made in terms of rewarding to shareholders. As we look in terms of those distributions at GBP 0.07, focused on that as a key metric, driven by operational performance. I would say, yes, the last year's revenue has been below expectations. Really what we have is an asset class which has over-delivered in terms of capacity being built, and that gives quite high levels of volatility within the markets we operate. That said, as Alicja went through in terms of her slide, we can see a portfolio which is generating 50% more revenue than we would be on a like-for-like basis if we had stayed in GB, and it is doing so with a very appropriate conservative level of debt.

Alex O'Cinneide
CEO at Gore Street Capital

We have also been focused, of course, on the cost side, major contracts have been renegotiated, leading to significant cost savings for shareholders. As we continue to look at areas that we can overachieve against the market through the use of data, through the use of optimization, those initiatives continue at pace. 417 MW in sales process and then another 130 MWh in augmentation. We will continue to report to the market on those, both of those activities are going well. In conclusion, what would I say? We have a portfolio which is well-distributed between key markets. It is a portfolio which has a high level of contracted income, up to 30%, also floor pricing in place in key markets such as Northern Ireland. We have a portfolio which has a level of revenue significantly above the baseline from our home market in G.B.

Alex O'Cinneide
CEO at Gore Street Capital

We also have a portfolio which is absolutely driven by supply-demand dynamics, where private funds have increased their exposure very significantly in G.B. and Texas, especially to energy storage assets, leading to a decline in revenue. Our NAV, which is obviously a headline piece of news from today, features that as we take down the third-party curves. We have consistently used the mid case, we have consistently used the average, those third-party curves are forecasting a decline in revenue. We have taken them into our DCF. Thank you everybody for your time, and we will move to questions.

Operator

That's great. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via Investor Meet Company. As you can see, we have received a number of questions throughout today's presentation. Ben, if I could just hand back to you to share the questions with the team, and I'll pick up from you at the end.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Great. Thank you very much, and thank you for the questions submitted so far. If there are any more questions, please put them in the chat. First question, which was pre-submitted, is around the augmentation. How are the two-hour duration extension projects progressing, and what is the target megawatt hour capacity at the end of the year?

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

Maybe I can answer. It's progressing really well. We expect no issues and no delays to this process. Also because the way we undertake augmentation is very tailored and very effectively indicating the foresight that we have done in the design process. The assets have been designed with augmentation in mind. Effectively, it's a simple DC, so basically a direct current cell movement exercise. We are bringing new cabinets with cells, but we're not affecting the inverters, and therefore, we're not affecting anything to do with the network operator. Therefore, there is no dependency on any delays from DNOs from their processes. We are targeting end of this year, and the assets will come sequentially on one by one in October, November, December. Very much ahead of schedule at the moment, and we anticipate no issues. We're adding one hour into Stony and Ferrymuir, so 130 MWh.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next pre-submitted question is, what has been the impact of the Iran conflict on revenues, and how long do you anticipate that will last for?

Alex O'Cinneide
CEO at Gore Street Capital

Maybe I'll have a go first. Taking a step back, the energy storage portfolio is long volatility on the energy system. The more volatile the energy system is, the more revenues will accrue, balanced out by how much storage there is to answer that demand. I think what we have seen over the last few months is increased volatility in the British market, and therefore we've seen some higher revenue. I think we were probably expecting a little bit more, given some of the very big moves we saw in, for instance, the oil price. In the U.S., the volatility has been a little less, mainly because they are a gas producer themselves. The gas prices haven't moved as much, the oil price has. We've seen some uptick.

Alex O'Cinneide
CEO at Gore Street Capital

It's hard to really determine whether the uptick we've seen in G.B. revenues is to do with the war, there definitely is another layer of volatility. Alicja, I don't know if you have comments as well.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

I would agree with that. Generally, gas is still setting prices in majority in the markets where we operate. Great Britain, Texas, Germany, and of course, California as well. Probably lesser of an impact in Ireland, where it's very much driven by renewable penetration, and the remuneration there is driven by incentive to operate in times of high renewables. Overall, I would say that we have seen mixed bag of impact of gas prices, and it has very much to do with intricacies of how the operational systems are being balanced by operators. From time to time, you see that especially in G.B. system, operators favor calling in gas peakers to control imbalance on the system. Overall, the fundamentals are that gas price is still a driving factor in setting the spreads. There should be an ongoing impact if gas prices are elevated.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next question, again pre-submitted, is has the fund considered doing share buybacks to take advantage of the discount to NAV?

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

Perhaps I'll come in on that. At the moment, we're returning capital and revenue, but we're returning capital and revenue to all shareholders effectively at NAV by declaring these dividends, which we feel is better than selective buybacks at a big discount for the shareholder body as a whole. However, we haven't said that we're not going to do buybacks. We need to make sure that we have the resources to do so. Clearly for NAV enhancement in the future, if we've got excess capital, which is for the future, when we've got excess capital, we will look at the potential returns on buying shares at a large discount versus the potential returns of new developments, et cetera. Yeah, we haven't done any yet.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

We think that the way that we're returning capital at the moment is fair and equal for all shareholders, but we will consider them in the future when we have excess capital to deploy.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next question is on fact sheets. What is being done to improve the content?

Alex O'Cinneide
CEO at Gore Street Capital

We're moving to quarterly only. We think the monthly, we weren't able to give enough information through the monthly, given the listed rules. We've added new content to the quarterly, and that was published this morning, I believe, Ben. Investors can see that. I think we've always been at the forefront of getting out as much content as possible. It needs to be as balanced, though. I think going forward on quarterly fact sheets to try and get information as soon as possible at the hands of investors especially, we have a very large retail audience, we think will be more useful.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next one is a few of these questions, I'll bundle them together. It is, income does not sustain the dividend, is this a wind up?

Alex O'Cinneide
CEO at Gore Street Capital

Let me take that first, of course, I'll hand over to Angus as well. The strategy that was announced in March is a strategy of distributions and recycling. We obviously had a tough year on the revenue side, which was disappointing, particularly as we had so much capacity coming on stream. We need to look at this asset class and this portfolio in its context. Its context is that when we started investing into energy storage, and our first assets came on stream in 2018, we underwrote those assets to between GBP 7 and GBP 8 per MWh of operation. At the top, in G.B. at the top in 2020 and 2021, we were receiving between GBP 20 and GBP 25 per MWh. Then we've seen variability going all the way down to GBP 3-GBP 4.

Alex O'Cinneide
CEO at Gore Street Capital

Right now, we're at GBP 7.50 across the portfolio. For sure, we see difficulties on the revenue side for the last year. What we have is a portfolio which is well distributed, which has good upside, which can move pretty heavily in terms of revenue, depending on macro effects such as gas, that Alicja went through, such as supply demand, the build-out of renewables, and climate change. A lot of those are there, one shouldn't gauge the viability of the portfolio to deliver dividends just on this one snapshot on an asset which is built to last for 20 years. That said, we recognize the share price and the discount, we have consistently delivered back significant shareholder distributions. As compared to the listed infrastructure, we've done very well in terms of those distributions back. We need to figure out a way to solve that discount.

Alex O'Cinneide
CEO at Gore Street Capital

We will do so on the basis of a going portfolio where we will continue to recycle. Angus, I don't know if you have anything to add to my answers.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

There's not very much to add to that, other than to say that this is quite a young industry that's proving to be quite cyclical, as Alex has already described. Also that in terms of the strategy, we are in the early days of that strategy. This Board's only been in place since the 1st of February, so we're in the early days. That strategy is predetermined by some selective sales, which are progressing well. Once those sales have been achieved, and indeed perhaps others in the future, then, as I said earlier, we'll take a view as to whether new developments and augmentations, et cetera, will be more advantageous than, for instance, buying back shares. All we care about is what's best value for shareholders. We think that's going to take a bit of time, but we're certainly not in wind down.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

We just need to sell some assets in order to execute on the strategy. The strategy, as has been said a number of times, will include investment in the future, as well as handing out distributions to shareholders.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you very much. The next two questions are clarifications. Why has the quarter four dividend not been declared for this year? That was declared this morning. You've seen the fact sheet and with payment date of around the 1st of September. The next question is, what do you hope to pay by way of a dividend this year? The dividend target is GBP 0.07 for the year.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

It's GBP 0.0175 a quarter.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Moving from [Martin F.], is the correlation between inflation and discount rate to NAV sensitivity positive or negative?

Sumi Arima
Chief Investment Officer at Gore Street Capital

Let me take that. Inflation and discount rates are correlated on the opposite way. To that, sorry, interest rate goes up, then inflation discount rate usually goes up, because the discount rate is set based on the, for example, Treasury rate or gilt rate. That's going to go up as well. But the impact of the NAV is opposite. If the inflation goes up, that gives a positive value to NAV, can be offset by the higher discount rate, which is the reducing NAV. But there are always time gap. Government does not, or central bank does not necessarily react quickly against any kind of inflation. There might be time lag from that.

Alex O'Cinneide
CEO at Gore Street Capital

I think it's just worth commenting just because that question on NAV, and Sumi pointed it out earlier, reasonable investment professionals could have easily looked at NAV in a different way. In fact do, because we see a multitude of ways of people looking at the same curves. It's interesting when you look at that slide that Sumi presented on sensitivities. If a high case in revenue had been chosen, or if a different inflation rate or a different FX number, NAV would have moved absolutely in the opposite direction by the same amount. We're obviously comfortable with this NAV as a fair representation to shareholders, engaged, using third party curves, using the mid case, using our average, and then in dialogue with the audit committee about near term results and how they feed into it.

Alex O'Cinneide
CEO at Gore Street Capital

Reasonable investment professionals could have looked at this NAV in a different way, and in fact, in other periods, they do.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next from [Jeremy S.], can you confirm if higher inflation leads to increase in NAV?

Sumi Arima
Chief Investment Officer at Gore Street Capital

Yes, in general, because you have already invested and you have the asset up and running, at the historical CapEx is already paid. You will benefit from the higher revenue if the revenue is impacted by inflation. Our revenue is higher than our cost, in general. The positive cash flow increment is expected, so it will result in the higher NAV. Obviously, it will be 100% uncertain, but in general, gross asset value will increase on that basis.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next from [Lyle M.], does the company foresee further extending battery duration?

Alex O'Cinneide
CEO at Gore Street Capital

I'll let Alicja jump in here. What we have seen, and it's worthwhile making it a snapshot. In the U.K., we are one hour going to two hours. An excellent point to do that augmentation. We picked the low point in CapEx, so we're building it, I think, at 50% lower than we would have two years ago. We're very pleased with the return on invested capital for that augmentation. That's one hour going to two hours. In Texas, we already run two hours. In California, we're running as a four-hour system. In Germany, as a 90 minute. Ireland, obviously, will be the one where we look at augmentation naturally taking place.

Alex O'Cinneide
CEO at Gore Street Capital

Augmentation takes place for us to be able to gather more revenue from a different type of revenue source than auxiliary services, so from energy trading, so where you want to actually deliver power for longer. Alicja? Alicja, I think you're on mute.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

Is that better now? Can you actually hear me? Okay. Apologies. In the past, we have very carefully timed augmentation, and we very often kind of went against the mainstream of augmenting at times when effectively it was a little bit of a hopeful thinking from the market. We time it, and that goes to Alex's point of choosing the U.K. moment very carefully, and we might continue to do so as we evaluate the CapEx movements and continue to evaluate to our duration curves. In Ireland, market is slowly shifting to recognize merchants of the trading component and some of the policy introductions by EirGrid supported, like the dispatch program, which means that batteries are more frequently realizing their physical trading positions.

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

That also supports potentially looking to increase the duration in Ireland that is currently very efficient 30-minute portfolio to look into extending this. This will be very much driven by the interplay between CapEx and continuously assessing that the timing is right for increased duration.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. Next question. Do you have or have you considered any tolling or floors?

Sumi Arima
Chief Investment Officer at Gore Street Capital

Yes. We've been sounding the market all the time, and whenever we see the attractive one, we will engage on that. We always monitor the market. We can potentially announce some sort of tolling arrangement whenever it's ready.

Alex O'Cinneide
CEO at Gore Street Capital

Yeah. I think I would add to that, if we look at our revenues in G.B., which is one of the more developed tolling markets, we're overachieving against what we see in tolls. We do have a high level of contracted, so 30% contracted and then another significant portion of megawatts with a floor contract. There is a good level of stability in that, just even outside of the diversification. As Sumi says, of course, we are talking to the market at all times in each of the markets we operate to see whether a toll will be attractive for the portfolio.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. One more. Why did Ireland's revenue fall despite megawatt, pounds per megawatt performance improving year-on-year?

Alicja Kowalewska-Montfort
Commercial Managing Director at Gore Street Capital

The revenues themselves increased per megawatt basis. However, we are realizing the ownership share from this year onwards, so the total quantum has decreased.

Sumi Arima
Chief Investment Officer at Gore Street Capital

Let me add a little bit. Basically, we've been paid 100% of cash flow until last year, where original acquisition structure designed to GSF to get the 100% cash flow until we get the 100% amount paid back, plus the certain return threshold is realized, which we have already achieved. After that, any kind of excess will be paid with the co-investor shareholder on the pro rata to shareholding ownerships. That has kicked in recently.

Alex O'Cinneide
CEO at Gore Street Capital

It's actually counterintuitively good news. We overachieved against the shareholder loans we funded with a high level of interest, so we paid that much faster, we moved now to the ordinary equity position with our co-investor, the Irish assets have overachieved massively against base case.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. A clarification question from [David S.] In terms of the dividend timetable going forward, are we looking at ad hoc dividends or quarterly? The last dividend was paid in April, now nothing till September. Grateful for some clarification.

Alex O'Cinneide
CEO at Gore Street Capital

I think the Board are aiming for a quarterly distribution, Angus and Keith. I just wanted to clarify that.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

Yep. No, quarterly distributions.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you. One more question on the dividends. Given the hurdle set by dividends, how much will be left for augmentation and growth?

Alex O'Cinneide
CEO at Gore Street Capital

Depends on distributions and revenue, right? As I mentioned earlier, a long-dated asset class with short-term volatility in revenue. We are managing through that, through the appropriate use of debt, the appropriate use of diversification, and selective disposals. The strategy here depends on the correct level of recycling, and we are focused on doing that, managing, as Alicja says, the right CapEx cycle against the right revenue opportunity. That changes on a yearly basis. We look at revenues per grid

Sumi Arima
Chief Investment Officer at Gore Street Capital

Also we look at the debt level. Although we will be maintaining the debt level at the modest level, we can always think about the potentially approach level debt as well. Also we can potentially introduce co-investor to our project, which can pay for the augmentation CapEx. We explore various possibility of external financing, but we always try to control a debt level on the modest level.

Ben Paulden
Investor Relations Manager at Gore Street Capital

Thank you very much. That concludes the Q&A for today. I will pass back over to Angus for closing remarks.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

Well, I just want to thank you all for taking so much time out to listen to our story, which is still in its early stages, as I've said a number of times. We created a new strategy. We are executing on that strategy. To do things faster, we believe would not be in the best interests of the shareholders, but to do it as we are currently doing is. I would just like to thank, once again, all of you for taking the time out. The other thing that I would say is that the Board, the five members of the Board, including Keith and myself who are on this call, would be delighted to answer any questions you have or any points you wish to make.

Angus Gordon Lennox
Angus Gordon Lennox
Chair at Gore Street Energy Storage Fund plc

Meanwhile, let it be clear that we are here to make sure that we get best value in the medium to long term for you as the shareholders, and we are fully committed to that.

Operator

That's great. Thank you for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Executives
    • Angus Gordon Lennox
      Angus Gordon Lennox
      Chair
Analysts
    • Alex O'Cinneide
      CEO at Gore Street Capital
    • Sumi Arima
      Chief Investment Officer at Gore Street Capital
    • Alicja Kowalewska-Montfort
      Commercial Managing Director at Gore Street Capital
    • Ben Paulden
      Investor Relations Manager at Gore Street Capital
Powered by Quartr