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Gore Street Energy Storage comments on share price fall

large scale batteries lined up with a field in the distance

Alex O’Cinneide, CEO of the investment manager, commented:

“I wish to address fellow shareholders directly regarding the recent performance of the company’s share price, which has been disappointing, particularly considering the company’s continued impressive operating performance. In light of this, the investment manager, Gore Street Capital has purchased shares, as announced on 3 October. [1,260,000 shares at 78.58p]

Energy storage faces the same challenges as the rest of renewable infrastructure in a high-interest environment. It is important to recognise, however, that despite these difficulties, our commitment to the company’s objectives remains unchanged. We are successfully executing against the strategy laid out to investors and delivering on the commitments made, including those regarding dividend distributions to our shareholders. Our dividend coverage is the highest amongst peers and will continue to increase and be underpinned as significant new capacity comes on stream over the next 12 months.

In terms of operational progress, we have achieved significant milestones. Stony has been energised, and we remain confident of reaching our goal of 813.4MW operational capacity by the close of 2024.

In our sector, there have been higher assumptions over future revenue opportunities than we foresaw, and those assumptions have had to be unwound. This has given the impression that volatility over energy storage revenues is higher, and therefore, investors are placing a higher risk premium on funds like ours. What that view fails to consider is the difference in strategy enacted by those funds.

The company’s unique diversification strategy, which has seen the deployment of operational assets across four uncorrelated markets, has reduced revenue volatility by about 50%. The company’s balance sheet reflects prudent management, with the lowest debt levels amongst our peers.

While markets remain turbulent, our team is more determined than ever to navigate these challenges successfully. We remain focused on our objectives and are fully committed to delivering value for shareholders.”

Pat Cox, chair of the company, commented:

“The board notes the recent weakness in share price, which, in our view, significantly underrates the best-in-class performance of our portfolio. Our operational assets have consistently met and often exceeded expectations, especially in our international markets, where recent revenue generation has surpassed projections. It is important to emphasise that our operating portfolio demonstrates strong performance on the international stage and reinforces our confidence in the strategic choices we have made.

We would like to reassure shareholders that despite the recent market conditions, the company’s balance sheet remains strong, it continues to perform particularly well operationally, and we remain committed to delivering value for our shareholders.”

[QD comment (James Carthew): The precipitous fall in the share prices of the battery storage funds seem well overdone to me. Gore Street Energy Storage is now trading on a yield of 11%, the highest in the renewable energy sector, and I cannot see what might put that dividend under threat. As a higher proportion of the power that we generate comes from renewables, more storage is needed. We have been quicker to address that in the UK than many other markets (in large part thanks to the listed funds), and that is reflected in the lower returns in GB markets. However, Gore Street’s great strength is its international diversification. That ought to be better rewarded in its rating.]

Update on quarter to end September 2023

The operational fleet demonstrated strong performance, generating an estimated weighted average revenue of £18.9/MW/hr during the September-end quarter. Performance is broken down by grid below:

  • Ireland: Unseasonably high wind penetration led to estimated revenues of over £20.2/MW/hr during the three months. This is especially pleasing for the company given that these months have historically been “off-season”, yielding lower revenues.
  • Texas: Record-breaking monthly revenue was generated in August following the company’s prequalification for the new ECRS ancillary service, aligning with historical trends of high summer revenue due to heatwaves and grid scarcity. The Portfolio generated an estimated average of £65.2/MW/hr during the three months in this market.
  • Great Britain (GB): Revenue in GB remains subdued and remains the company’s lowest revenue market, which we believe will continue. The estimated average revenue for the GB portfolio was £6.6/MW/hr for the three months.
  • Germany: Stable revenue was maintained despite declining ancillary service prices due to sufficient spreads that allow energy storage to profit from energy arbitrage. The estimated average revenue for the three-month period was £10.4/MW/hr.

Capital Structure:

The company remains well-capitalised, with about £75m in cash or cash equivalents as of 30 September 2023 without any outstanding debt. Of the 187MW scheduled to come online in GB over the next nine months, about 85% of the required capex has already been paid. The company currently remains undrawn on its existing £50m revolving credit facility. In addition, the company continues to progress towards securing USD denominated project-level debt for its Big Rock asset in California.

Construction Progress:

The company remains on track to bring its operational portfolio to 813.4MW by the end of 2024. A breakdown of progress is detailed below:

  • GB: Significant strides have been made in completing assets, with Stony (79.9 MW) energised in September 2023 and Ferrymuir (49.9 MW) awaiting confirmation from the grid operator to bring it to energisation with all energy storage package work complete and ready to be energised. Enderby is still on track for and targeting energisation in June 2024.
  • California: The Big Rock asset (200.0 MW) construction is proceeding well, with key equipment procured and on-site works scheduled to commence this year. The project remains within budget and on track to meet its energisation date in 2024.
  • Texas: Contracts for advanced engineering and procurement of HV equipment for Dogfish (75.0 MW) have been signed, with further agreements in progress. The project remains on track for its energisation in 2024.
  • Ireland: Engineering and procurement for Porterstown Phase II (60.0 MW) are underway and are on track for energisation in October 2024.

GSF : Gore Street Energy Storage comments on share price fall

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