Gore Street Energy Storage Fund (GSF) has released its annual results for the financial year ending 31 March 2023.
- Over the 12 month period GSF’s NAV increased by 47.8%, to £556.3m. Its NAV per share increased by 5.9%, to 115.6p per share. This reflects a NAV total return of 12.3% and 48% since 31 March 2022 and IPO, respectively.
- GSF generated a negative share price total return over the year, at -4.6%. This was a result of the trust trading on a 12.8% discount at the financial year end, down from the 3.8% premium it traded on at the end of its prior financial year. GSF currently trades on a 22.8% discount.
- GSF declared a dividend of 7.5p per share for the period, equivalent to a 6.95% yield, based on end-of-period share price. GSF’s dividends paid over the year were not fully covered by operational income however, with a 0.9x coverage ratio.
- GSF expanded its debt facility from £15m to £50m, with the option to increase it beyond this. As of 31 March 2023 GSF has yet to draw down on this facility.
- The most noteworthy development for GSF was its oversubscribed issuance in April 2022, which raised £150m for the trust.
- GSF’s portfolio saw strong growth over its financial year, with total capacity increasing to 291.6MW, up from 231.7MW as of the previous year end.
- New projects acquired over the year include: 144.65MW across 8 assets in Texas US, a 200MW construction asset in the UK, and a 200MW construction-ready asset in California, US. GSF’s regional diversification has improved over the year, with only 42% of its assets located in the UK. GSF is also fully funded to meet all its contractual obligations and payments for the next 18 months.
- The portfolio’s EBITDA increased by 19% over the year, though its average discount trade did increase from 8.3% to 10.1%.
Gore Street’s chairman, Patrick Cox, commented:
“There have been considerable macroeconomic shifts in the reporting period – ranging from rising short-term inflation and interest rates to increasing construction costs – due, in part, to the unprecedented financial market conditions that have developed over the financial year. Our investment manager has demonstrated sound risk management and resilience within this context, adopting effective measures to mitigate their impact on the portfolio.
“Despite these conditions, the fundamental growth drivers for energy storage remain strong, driven by the worldwide transition to low-carbon energy generation and further reinforced by the global concern over energy security. We remain confident in the company’s ability to deliver sustainable dividends and attractive capital growth for our investors over the long term.
“We begin the next reporting period cautiously optimistic, recognising the opportunities that our diversified strategy presents. The current pricing landscape in GB necessitates an international approach granting access to a wide range of revenue streams across uncorrelated markets, 2023 and beyond will illustrate this as we bring more international capacity online.
“The appropriate assumptions employed by the company, coupled with the continued growth of our fund and diligent work by the investment manager, provide reassurance amidst the recent pricing volatility experienced within the energy storage industry and prepares us for future market developments.
“We find ourselves at a pivotal juncture for the company’s growing presence across five geographically diverse grids, which I am delighted to say is contributing to the company’s continued growth in the face of declining revenue in the GB market.”
[QD comment: Yet another sad tale of a highly successful private-asset strategy trading at an increasingly wider discount. It seems that positive earnings growth, improving portfolio allocation, and an oversubscribed capital raise has done little to change recent sentiment around GSF (and the wider unlisted universe). The management team have even upped their discount rate to double digits, keeping ahead of the prevailing interest rate rises. We can’t think of much more the board could do to help improve the prospects for GSF, as the investment strategy seems to be genuinely successful, bar implementing a share buyback scheme. Though given the profitable opportunities the management team continue to identify, it may be more aligned with long-term shareholder interest to continue with a successful strategy rather than bow to near-term pressures and divert cash to buying back shares. Given GSF’s results, it may be another wait-and-see moment for investors, waiting for the market confidence to return, and a return for GSF to the premium it only recent traded on.]