New US investment and revised management agreement at Gore Street – Gore Street Energy Storage is buying a portfolio of eight energy storage assets in Texas from Perfect Power Solutions Texas, LLC. The portfolio consists of eight 9.9 MW storage projects totalling 79.2 MW. Three of the projects – which are each 2-hour duration / 20 MWh systems – have been operating since September 2021 and the remaining five should enter operation within twelve months, delivering an expected total portfolio of c.160 MWh. Following the acquisition, the company will have 262 MW in operating assets, and a total portfolio of 708 MW, including the 28 MWh German acquisition announced last week.
This is Gore Street’s first US investment, and further diversifies the company’s revenue streams and geographic exposure. The assets participate in Electric Reliability Council of Texas (ERCOT) which provides electricity to most of the state and is one of four main grid interconnections in North America. Texas has significantly increased the deployment of intermittent renewable energy (wind and solar) whilst baseload thermal (mainly coal) generation is being retired across the state. The assets help to balance ERCOT’s grid by providing ancillary services, primarily through Response Reserve Service (RRS) market. In addition, the assets can participate in Day Ahead / Real Time Trading to capture market and system wide volatility.
The three operational sites use LG Energy Solutions lithium-ion batteries. The operational projects’ modular design and unused land in site may present future expansion opportunities to extend the assets in both power and energy capacity.
New management agreement
Gore Street is also revising its commercial management agreement.
Since 2020, Gore Street Operational Management has provided services in respect of the company’s construction projects, and its commercial operations and Gore Street Capital has, under its investment management agreement, provided accounting and administrative services.
- Construction services include, amongst other things, single point supervision and management of EPC tenders and selection, lease, commissioning, and other construction related matters.
- Operational services include, amongst other things, single point supervision and management of asset, operations, maintenance and revenue optimisation related matters.
- Administrative services include, amongst other things, single point supervision of audit and asset accounting services as well as commercial management of the company’s service contracts.
The board wants to make sure that the company has the capacity and capability to manage its future growth.
Gore Street Operational Management will take on the administrative services job and the scope of the job will be expanded to include ESG administration and will allow for oversight (with prior board consent) of other matters including treasury, tax and secretarial services. It will also allow for expansion of services as the company continues to move into jurisdictions outside of the UK and the Republic of Ireland.
The cost of the services detailed above will be calculated at the lower of: (a) the Operation’s Manager’s cost of service plus a 15% mark-up, and (b) 1% of the NAV. Details of any operational management costs will be set out in the annual financial statements.
The construction and operational services will be incurred at the underlying SPV (special purpose vehicle – the holding companies for energy storage projects) level whilst the majority of the administrative services will be delivered to the top-level company.
Based on the amounts involved, the arrangements constitute a smaller related party transaction as set out in Listing Rule 11.1.10R. That means shareholders don’t need to vote to approve the change.
GSF : New US investment and revised management agreement at Gore Street