Solid performance from Gore Street Energy Storage belies discount 

Gore Street Energy Storage Fund (GSF) announced a trading update for the 12 months ended 31 March 2024. The announcement highlighted the ongoing revenue growth of the portfolio, which was up 5% over the period while EBITDA increased by 2%. The company also noted that it raised capital via both equity and debt, enabling continued focus on key portfolio objectives.

Highlights for the period include:

• YoY increase in revenue and EBITDA. The portfolio generated an estimated £41.4 million of revenue during the fiscal year (31 March 2023: £39.3 million) and an estimated £28.4 million in operational EBITDA (31 March 2023: £27.8m).
• Stable revenue profile: Estimated average revenue of £15.1/MW/hr, highlighting the benefits of the diversification strategy.
• Outperformance vs GB: The company’s estimated non-Great Britain (GB) revenue average of £19.6 per MW/hr over the period, 2.2x the GB portfolio’s average of £8.8[3] per MW/hr, inclusive of Liquidated Damages payments.
• Increasing dividend cover: The company’s dividend cover continued to trend upward, with the estimated operational dividend cover being 0.78x and an estimated fund-level dividend cover of 0.56x, achieved from the average operational capacity during the period of 311.5MW. As the prioritised portfolio is built out, the company expects a material increase in dividend cover.
• Growing operational asset base: 45% increase in energised capacity achieved by year-end, with the successful energisation of Stony (79.9MW) and Ferrymuir (49.9MW).
• Positive trajectory: Energised capacity is scheduled to nearly double over the coming quarters based on the build-out of the prioritised portfolio. Upcoming projects where construction is mobilised include 57MW in GB and 275MW of assets in the US, including the 200MW Big Rock asset in California.

The company also acquired a 75MW pre-construction asset during the year, located in the Republic of Ireland, in addition to the remaining 49% stake in two of its existing Irish projects, Porterstown, a 90MW[4] asset, and Kilmannock, a 120MW[5] pre-construction asset.

CEO of Gore Street Capital, the investment manager to the company, Alex O’Cinneide, commented:

“I’m proud to present a strong set of operational results. The performance highlights ongoing year-on-year growth across the key industry metrics and revenue stability through the clear success of the Company’s strategy. Despite the turbulence seen in the sector, the Company achieved continued growth while demonstrating leadership and resilience.

“Across the sector, it is increasingly apparent that the range of strategies employed by asset owners are yielding increasingly different financial outcomes, with Gore Street producing revenues c.3x of our peers and lowering the volatility of those revenues by 50%. In the GB market, participants largely act as price takers, resulting in similar revenue generation across asset owners. However, it is clear that the impact of capital allocation strategies, whether based on gearing levels, geography concentrations or capital expenditure, is a key component of a company’s long-term viability. Within the sector, we have seen reports of a resurgence in GB revenue based on annualising a very limited data set of revenue over a 15-day period in April. It should be noted that GSF’s estimated average revenue of £15.1 / MW / hr (or £133k / MW / year) for the past 12 months is almost double that of what peers considered as an annualised highlight based on 15 days of trading in GB in April (equating to c.£70k / MW / year). GSF’s consistent outperformance is a testament to our prudent approach to capital allocation and operational excellence. We are the first asset owner to stack revenues in the Irish and German markets, and this control of the optimisation of our portfolio, we believe will continue to produce superior returns.

“The case for energy storage remains strong around the globe, with rising levels of renewable penetration creating an increased system need for flexibility assets. We are also seeing policy drivers emerge to promote the use of assets like those in the Company’s portfolio. The US assets continue to benefit from Investment Tax Credits under the Inflation Reduction Act while new energy storage mandates and potentially even support schemes are expected under new legislation agreed by the European Parliament.

“The combination of positive policy environments, falling technology costs and financial expertise held in-house at the Investment Manager ensures the Company remains well-positioned to deliver sustainable value to our shareholders.”