Gore Street Energy Storage Fund (GSF), the £247m battery fund that last month survived a wind-down vote proposed by activist Saba Capital, has announced a two-year tolling agreement on its three Texas projects with Canada’s MAG Energy Solutions (MAG). From 19 October, MAG will manage the bidding, scheduling and dispatch of GFS’ Snyder, Sweetwater, and Westover assets and pay the fund £57,700/MW/year on 80% of each project’s capacity. The remaining 20% will keep its merchant exposure which MAG will trade and share with GFS. Fund manager Alex O’Cinneide said: “As indicated in the annual report, we have consistently explored commercial strategies to mitigate downside risk, which can be seen in the resource adequacy contract in the US and the DS3 contract in Ireland”. He added: “Ultimately, the agreement allows us to bridge the gap between higher expected returns in Texas in future years and current market conditions.”

Matthew Read, senior analyst at QuotedData, said: “This looks like a good outcome for Gore Street Energy Storage. Trading conditions in Texas have been challenging in what has become a cyclically depressed market, following the rapid expansion of battery storage capacity, and this agreement locks in revenue rates of around four times the annualised rates achieved in the June quarter, which is a substantial improvement on recent trading activity. Against the current backdrop, securing predictable revenues for the next two years makes sense and, longer-term, the Texas power market is expected to see growing electricity demand from the expansion of data centre capacity. At the company level, the expectation that contracted income will account for around 40% of group revenues this financial year should provide some reassurance to shareholders, albeit this certainty comes at the expense of some potential upside should market conditions recover.”

Seraphim Space (SSIT) has invested a further $23.1m (£17.5m) in Skylo Technologies, the US satellite communications company that accounted for 1.6% or £6.9m of its portfolio at 31 March. The investment from SSIT’s £137m C-share issue in May, means the investment trust has deployed just over half, or £69.6m, of the fund raise in five portfolio companies. This includes the further $15m (£11.3m) for Xona Space Systems that SSIT announced on Friday. SSIT first backed Skylo, a provider of seamless satellite connectivity to mobile phones and internet-of-things endpoints, in 2023. Its commercial partners include Google, Verizon and Deutsche Telekom. Andre Ronsoehr, an investment partner at Seraphim Space Manager, said: “Skylo’s strong management team and relationships across the communications ecosystem position the company well as terrestrial and non-terrestrial networks converge and direct-to-device connectivity grows.”

QuotedData’s Matthew Read said: “Skylo operates in an increasingly interesting part of the market, enabling ordinary mobile devices to connect via satellite when terrestrial networks are unavailable. As satellite connectivity becomes more closely integrated with conventional mobile networks, the potential addressable market is enormous and Skylo’s relationships with mobile operators, device manufacturers and chipset providers should give it an advantage as adoption accelerates. Ultimately, Skylo will still need to translate its technological promise into sustained commercial success, but the investment also illustrates how the C-share fund raising has given SSIT the firepower to stand its corner during fund raisings for promising holdings rather than risk dilution as they raise further capital.” 

Patria Private Equity (PPET) fund manager Alan Gauld expects “meaningful realisation activity from the portfolio in the short term” after a quieter third quarter saw distributions fall to £24.5m in the three months to 30 June from £43.8m in the previous quarter as a result of geopolitical instability and uncertainty over the software sector. The £874m European mid-market fund, which passed its 25th anniversary in June, grew 2.6% in euro terms (1.4% in sterling) but delivered a 7.2% total return to shareholders, including a £6.8m dividend and £3.1m of buybacks that helped narrow a share price discount currently at 30.5%. This was ahead of the FTSE All-Share’s 4.7% return. New investments totalled £52.8m across three primary fund and two secondary fund investments with drawdowns for existing investment commitments in line with recent quarters at £57.7m. Gauld said: “The underlying portfolio continues to grow and remains well diversified. PPET has continued to deploy into new opportunities through the cycle, with 53% of underlying portfolio company value relating to investments made in the last four years, following the rise in interest rates. We believe these investments will continue to drive the portfolio performance over the short to medium term.”

Matthew Read said: “While sterling strength has taken some of the shine off PPET’s performance, at least in the short term, the good news is that Patria’s underlying portfolio continues to make steady progress, despite the difficult economic backdrop. The ongoing challenge across the private equity sector is the slowdown in realisations and PPET has not been immune, with distributions almost halving to £24.5m while drawdowns remained elevated. This has pushed net gearing up a little but this looks very manageable – PPET still has £230.7m of available liquidity and its overcommitment ratio remains towards the bottom of its target range. Encouragingly, the manager expects realisations to pick up shortly and with more than half the portfolio invested in businesses acquired in the past four years, following the rise in interest rates, this could provide a good foundation for decent future returns. Furthermore, with the shares still trading on a c 30% discount to net asset value, there is considerable scope for shareholders to benefit if portfolio growth continues and the pace of exits improves.”

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