TIDMGSF
RNS Number : 5927W
Gore Street Energy Storage Fund PLC
12 December 2019
12 December 2019
Gore Street Energy Storage Fund plc
("Gore Street" or the "Company")
Interim Results, Net Asset Value & Dividend Declaration
Gore Street Energy Storage Fund plc (ticker: GSF), London's
first listed energy storage fund investing in income producing
assets in the UK and internationally, is pleased to announce
interim results for the six months ended 30 September 2019.
Operational Highlights
-- Substantial AUM Growth during the period and year to date -
Our asset portfolio increased to 189 MW of UK and Ireland energy
storage projects
o Including a controlling interest in 160MW[1] portfolio of
Irish energy storage assets of which 60 MW benefit from long term
contacts
-- Growing operational portfolio - Post 30 September our
operating fleet is now 19 MW with another 10 MW expected to be
commissioned during December 2019
-- Key strategic partners - The Company secured a third major
strategic partner in NTMA, an Irish sovereign wealth investor with
significant renewable infrastructure experience, joining NEC ES and
Nippon Koei
Dividend Highlights
-- 4.0 pence per share in dividends declared for the period of 1 April 2019 to 30 September 2019
-- The Company continues to target a dividend of 7.0 pence per
share for the current year ending in 31 March 2020
-- This is one of the highest distributions of any London listed
renewable infrastructure investment company
Financial Highlights
-- GBP32.5m of new capital raised during the period, including
commitments from the NTMA, more than doubling the AuM of the
Company
-- NAV per ordinary share of 95.5 pence as at 30 September
2019[2] representing an uplift of 2.0% over the previous
quarter
-- Portfolio valuation of GBP20.5 m as at 30 September 2019
Portfolio
Gore Street operates a substantial and diversified portfolio of
energy storage projects with a substantial additional investment
pipeline of c. 350MW:
Project Location Capacity % Owned Site Type Status Commissioning Battery
- MW by the / Expected Provider
Company Commissioning
Great Industrial
Boulby Britain 6.0 99.99% Mining Operational Q4 2017 NEC ES
---------- --------- --------- ------------ ---------------- --------------- ----------------
Great Renewable
Cenin Britain 4.0 49% Generation Operational Q1 2018 TESLA
---------- --------- --------- ------------ ---------------- --------------- ----------------
Great
Port of Tilbury Britain 9.0 100% Port Operational Q4 2019 NEC ES
---------- --------- --------- ------------ ---------------- --------------- ----------------
Great Under
Lower Road Britain 10.0 100% Greenfield construction Q4 2019 NEC ES
---------- --------- --------- ------------ ---------------- --------------- ----------------
Ireland Design
Mullavilly (NI) 50.0 51% Greenfield stage Q1 2021 To be confirmed
---------- --------- --------- ------------ ---------------- --------------- ----------------
Ireland Design
Drumkee (NI) 50.0 51% Greenfield stage Q1 2021 To be confirmed
---------- --------- --------- ------------ ---------------- --------------- ----------------
Ireland Recently
Kilmannock (RoI) 30.0 51% Greenfield Acquired Q3 2021 To be confirmed
---------- --------- --------- ------------ ---------------- --------------- ----------------
Ireland Recently
Porterstown (RoI) 30.0 51% Greenfield Acquired Q3 2021 To be confirmed
---------- --------- --------- ------------ ---------------- --------------- ----------------
Net Asset Value
As at 30 September 2019, the estimated NAV increased to 95.5
pence per share, representing an uplift of 1.9 pence per share or
2.0% over the previous quarter[3].
Dividend Declaration
Gore Street has today declared an interim dividend of 2.0 pence
per ordinary share for the period 1 July 2019 to 30 September
2019.
CEO of Gore Street Capital, the investment adviser to the
Company, Alex O'Cinneide commented:
"We are delighted by the continuing successful momentum at Gore
Street. The energy storage market in which we operate continues to
be a key component on the international transition to a low carbon
economy. We have doubled the size of our capital during the
six-month period and significantly increased the size of our
investment portfolio. Our operational asset base also continues to
grow, with a further 10MW anticipated to come online by 31 December
2019. The transformational Irish portfolio acquisition secured our
third strategic partner in the NTMA, an Irish sovereign wealth
investor with major renewable infrastructure expertise. Our
pipeline has matured substantially since our IPO, and today we are
analysing opportunities not only in the GB and Ireland, but also
continental Europe, EUA and Canada.
We have delivered a satisfactory return for our shareholders
during the past six months. Our targeted dividend distribution of
7.0 pence per share is already one of the largest distributions of
any renewable infrastructure investment company.
As the international community continues to focus on building
further intermittent renewable energy generation, such as solar and
wind, while phasing out traditional stabilisers of the grid such as
coal, energy storage is ideally positioned to offer essential
services to enable countries to meet their carbon emission
targets."
The Legal Entity Identifier of the Company is
213800GPUNVGG81G4O21.
For further information:
Gore Street Capital Limited
Alex O'Cinneide Tel: +44 (0) 20 3826 0290
Shore Capital
Anita Ghanekar / Hugo Masefield (Corporate Advisory) Tel: +44 (0) 20 7601 6128
Henry Willcocks / Fiona Conroy (Corporate Broking)
Media enquiries:
Buchanan
Charles Ryland / Henry Wilson Tel: +44 (0) 20 7466 5000
Email: Gorestreet@buchanan.uk.com
JTC (UK) Limited, Company Secretary Tel: +44 (0) 20 7409 0181
Notes to Editors
About Gore Street Energy Storage Fund plc
Gore Street is London's first listed energy storage fund and
seeks to provide shareholders with a significant opportunity to
invest in a diversified portfolio of utility scale energy storage
projects. In addition to growth through exploiting its considerable
pipeline, the Company aims to deliver consistent and robust
dividend yield as income distributions to its shareholders.
Contents Page
Chairman's Statement 2 - 3
Strategic Report 4 - 6
Investment Advisor's Report 7 - 15
Statement of Directors' Responsibilities 16
Independent Auditor's review report to the members of Gore
Street Energy Storage Fund plc 17
Interim Condensed Statement of Comprehensive Income 18
Interim Condensed Statement of Financial Position 19
Interim Condensed Statement of Changes in Equity 20
Interim Condensed Statement of Cash Flows 21
Notes to the interim condensed financial statements 22 - 36
Directors and Advisors 37
Chairman's Statement
For the period ended 30 September 2019
I am pleased to present Gore Street Energy Storage Fund PLC
results for the period ending September 30 2019.
Performance and returns
Our assets continue to operate within expected parameters, with
the exception of one operational issue which was rectified. and
with further operating assets coming onstream, Fund cash flows are
targeted to continue to strengthen. It is our expectation that
current levels of operational efficiency will continue for the
remainder of the year. This period also saw the progression of two
further assets, Lower Road and Port of Tilbury with a combined 19MW
of capacity, becoming operational soon after the period end; we
note the commencement of projects at Drumkee and Mullavilly in
Northern Ireland also took place then and are progressing well.
These latter two projects, with a combined capacity of 100MW, are
the first arising from our acquisition of a total portfolio of
350MW in Ireland (190MW of which we hold under option). They are
expected to become operational in the first quarter of 2021. A
further two projects from that portfolio , Porterstown and
Kilmarnock in the Republic of Ireland, with 60MW of capacity, were
completed upon our successful participation in the auction for six
year fixed price contracts held in Ireland.
The attractive terms for the acquisition of the two Northern
Ireland assets and the revenue contracts available have already
enabled our independent valuers, BDO, to ascribe an increase in
value to these assets, alongside operational improvements which
significantly increase the lifespan of the assets. Overall we see
strong momentum in our NAV with an uplift in this period of 91.5p a
share to 95.5p. These valuations are derived by discounting future
revenue, including a significant risk premium, of 10% compared to
6% for operational assets. This provides considerable upside to
their valuation should the projects be completed on time and on
budget as the discount rate falls. It would also be a highly
encouraging indicator for the success of the Republic of Ireland
projects. However, the projects are still at an early stage and the
high discount rate used by BDO reflects the work ahead to bring the
assets onstream. Your Board will be keeping a careful eye on the
progress of these projects and the two in the Republic of Ireland
and ensure that they continue to be appropriately valued during
this time. Further uplift to the net asset value should be provided
by the reinstatement of the capacity market following the
satisfactory ruling of the European Commission. Following its
suspension, we took a conservative view of the outcome and wrote
off 12 months of capacity market revenues which we will be
receiving back. Its reinstatement is also a good indicator of
stability in our market and we welcome the move.
Since IPO the company has grown its portfolio to 189MW of
projects in operation or construction from 6MW, proved itself to be
competitive in new high value markets such as on the Island of
Ireland, focused on significant operational improvements in its
assets and received a strong mandate from a leading renewable
energy investor; whilst navigating a steep learning curve as the
first mover in this market. All of which we believe makes it well
placed to benefit from the significant long term opportunities
outlined at flotation.
Dividends
We continue to target a dividend of 7 pence per share with
respect to year ending 31 March 2020, which is one of the highest
distributions of any London listed renewable infrastructure
fund.
Acquisitions & Funding
We are pleased to report that our acquisition pipeline has been
fruitful, with the Company securing the rights to 350 MW of Energy
Storage Assets since March 2019. The Company continues to generate
a large pipeline of investment calibre opportunities on which
further growth can be developed.
This strong performance on the acquisitions side has been
mirrored by the announcement on 5 June 2019, that the Company
entered into an agreement with the National Treasury Management
Agency ("NTMA") for up to a GBP30m investment in the Company.
GBP1.5m was invested as part of the Initial Placing in August 2019
and an additional GBP9.5m was subsequently drawn in October 2019.
There is an additional GBP 15.5m commitment to be drawn for the
development of further projects in the Republic of Ireland.
Gearing
The Group will generally avoid using non-recourse debt at the
SPV level and aims to keep Group level borrowings within a prudent
range to reduce risk; the maximum gearing allowable presently is 15
% of Gross Asset Value. We ended the period with no external
borrowings.
Governance
The Company has an independent Board with experience in the
sector, comprising myself as chairman and three other non-executive
directors, which has worked well during the year.
The Audit, Remuneration and Nomination and Management Engagement
Committees are in place as sub-committees of the Board. The Board
is aware of the new matters set out in the updated AIC Corporate
Governance Code, has a range and depth of suitable and compatible
skills and is committed to achieving high standards of corporate
governance.
Patrick Cox
Chairman
Date: December 2019
Strategic Report
Introduction
The Directors present their Strategic Report for the period
ended 30 September 2019. Details of the Directors who held office
during the period and as at the date of this report are given on
page 37.
Investment Objective
The Company seeks to provide investors with a sustainable and
attractive dividend over the long term by investing in a
diversified portfolio of utility scale energy storage projects
primarily located in the UK and the Republic of Ireland, although
the Company will also consider projects in North America and
Western Europe. In addition, the Company seeks to provide investors
with an element of capital growth through the re-investment of net
cash generated in excess of the target dividend in accordance with
the Company's investment policy.
Investment policy
The Company is in the process of investment in a diversified
portfolio of utility scale energy storage projects. The portfolio
will be primarily located in the UK and the Republic of Ireland but
the Company will consider projects outside the UK, and the Republic
of Ireland in particular in North America and Western Europe.
Individual projects will be held within special purpose vehicles
into which the Company will invest through equity and/or debt
instruments. Typically, each special purpose vehicle will hold one
project but there may be opportunities where a special purpose
vehicle owns more than one project.
The Company will typically seek legal and operational control
through direct or indirect stakes of up to 100 per cent. in such
special purpose vehicles but may participate in joint ventures or
acquire minority interests where this approach enables the Company
to gain exposure to assets within the Company's investment policy
which the Company would not otherwise be able to acquire on a
wholly-owned basis. In such circumstances the Company will seek to
secure its shareholder rights through the usual protective
provisions in shareholders' agreements and other transactional
documents.
The Company currently intends to invest primarily in energy
storage projects using lithium-ion battery technology as such
technology is considered by the Company to offer the best
risk/return profile. However, the Company is ultimately agnostic as
to which energy storage technology is used by its projects and will
monitor projects with alternative battery technologies such as
sodium and zinc derived technologies, or other forms of energy
storage technology such as flow batteries/machines and compressed
air technologies, and will consider such investments, including
combinations thereof, where they meet the investment policy and
objectives of the Company.
The Company does not intend that the aggregate value of
investments outside the UK and the Republic of Ireland will be more
than 40 per cent. of Gross Asset Value (calculated at the time of
investment). The Company may invest cash held for working capital
purposes and pending investment or distribution in cash or
near-cash equivalents, including money market funds. The Company
may (but is not obliged to) enter into hedging arrangements in
relation to currency, interest rates and/or power prices for the
purposes of efficient portfolio management. The Company will not
enter into derivative transactions for speculative purposes. The
Company intends to invest with a view to holding assets until the
end of their useful life. However, assets may be disposed of or
otherwise realised where the Investment Advisor determines in its
discretion, that such realisation is in the interests of the
Company. Such circumstances may include, without limitation,
disposals for the purposes of realising or preserving value, or of
realising cash resources for reinvestment or otherwise.
Risk and diversification
The Board is focussed on ensuring that there is a sufficient
diversity of risk within the Company's portfolio. It is the
Company's intention that when any new acquisition is made that no
single project or interest in any project, will have an acquisition
price, or, if it is an additional interest in an existing
investment, the combined value of the Company's existing interest
and the additional interest acquired shall not be greater than 20
percent of Gross Asset Value calculated at the time of acquisition.
However, in order to retain flexibility, the Company is permitted
to invest in any single project, or interest in any project, that
has an acquisition price of up to a maximum of 25 per cent. of
Gross Asset Value, calculated at the time of acquisition. The
Company will target a diversified exposure with the aim of holding
interests in no fewer than 10 separate projects at any one time
once fully invested. Geographical diversification within the
Company's portfolio will be achieved through investments located
throughout the UK and the Republic of Ireland.
Strategic Report continued
Principal Risks and Uncertainties
Gore Street Energy Storage Fund's approach to risk management
and governance structure are set out in the Risk section of the
Annual report and accounts 2019, which can be accessed on the
Group's website at www.gsenergystoragefund.com.
The principal risks to the achievement of the Group's strategic
objectives for the remaining six months of its financial year are
unchanged from those reported on pages 48 to 53 of the Annual
report and accounts 2019, except for the following relating to
foreign exchange, instalment payments and procurement environment
have been added:
Risk: Changes in procurement methods relating to balancing
services, alteration to the length of contracts offered and pricing
across frequency response and Irish DS3 contracts. Failure to
secure new contracts to supply these services.
The procurement details and contract designs that National Grid,
Eirgrid and SONI use for the range of balancing services currently
varies. For example, in GB, firm frequency response contracts are
procured mainly through monthly tender process. This tender process
is currently undergoing a transition with the National Grid
currently working on the trial of a weekly auction mechanism to
procure firm frequency response service. This may have an impact on
pricing levels. Changes in the specification of services, for
example, relating to the speed and duration of the delivery of a
balancing service, may require battery storage projects to incur
additional investment and set up costs. In the Irish (NI and ROI)
market, DS3 uncapped contracts are awarded through semi-annual
procurement process. Until such time as the Company's assets are
awarded the contracts, there is a possibility that Eirgrid or SONI
may revise the technical requirements or pricing methodologies, or
new contracts may cease to be offered. After the award of DS3
uncapped contracts, there is a possibility that Eirgrid/SONI could
cancel the contracts at 12 months' notice at any stage over the
life of the contract.
Mitigant: The Company operates a revenue stacking strategy such
that each asset benefits from a range of revenue streams and
consequently has a lower reliance on any single contract mechanism
or market. The Company has a back-up revenue strategy which can be
enacted, incorporating wholesale arbitrage or involvement in the
balancing mechanism market, in the event the currently forecast
main revenue sources are terminated or unprofitable.
Risk: Instalment payment risk pertaining to battery system
suppliers repayment schedules.
With respect to some of the existing portfolio assets, the
Company has an agreed payment schedule with the relevant battery
supplier incorporating payments scheduled after the commercial
operation of the asset has begun. A part, or all of such payments
is planned to be paid from cash flow of the assets, although a
portion of the future instalment payments may be funded by the
Company's additional deployment of capital to the SPV which owns
the assets. The Company may enter into similar contracts for new
projects to allow the company to improve capital efficiency. With
this arrangement, there is a risk that the SPV owning the assets
may require significant additional capital contribution from the
Company to satisfy instalment payment obligations to the battery
suppliers post commercial operations, which may not be covered by
inherent operating cashflows of the SPV.
Mitigant: These instalment payments are arranged by the asset
SPV without any recourse to the Company. Therefore, there is no
contractual obligation to the Company in the event the asset SPV
fails to make a scheduled payments to the battery system suppliers.
The Company has strong relationships with various lenders in UK and
Ireland and, if required, an SPV would potentially be in a position
to finance the battery suppliers instalment payments though asset
bank financing of cashflow generating assets.
Risk: Foreign Exchange Risk
A portion of the Company's assets will operate in markets in
which Revenues are pegged to the Euro, or Capex and Intercompany
loans at SPV level may be denominated in Euro, creating a foreign
exchange exposure as the Company reports in GBP.
Mitigant: The Company may, in its discretion, hedge its currency
exposure under any specific project contract between Sterling and
any other currency in which the Group's income and payment
obligations may be denominated, in particular US Dollars and Euro.
The Company is in the process of reviewing various hedging
strategies with respect to its Euro exposure. There can be no
assurances or guarantees that the Company will successfully hedge
against such risks or that adequate hedging arrangements will be
available on an economically viable basis, and in some cases,
hedging arrangements may result in additional costs being incurred
or losses being greater than if hedging had not been used.
Strategic Report continued
Principal Risks and Uncertainties
Otherwise, there have been no material changes to the impact and
likelihood of the Company's other principal risks, which are
summarised below. This is not a comprehensive list of all potential
risks and uncertainties faced by the Group, but rather a summary of
the risks which may have a significant impact on its performance
and future prospects.
Risk relating to the Company and Operation of its Portfolio:
The Company relies on third party service providers, external
factors could affect these providers. We continue to review and
improve our governance and controls to protect our operational
infrastructure.
Risks arising from external factors including political, legal,
regulatory, economic and competitor changes, which affect the
Company's operations. There is significant continuing uncertainty
in the outlook for the global economy, in addition to the political
uncertainty linked to the forthcoming UK general election and UK's
planned exit from the EU. Although we cannot be immune to wider
market conditions and political instability, the Company's balance
sheet is well funded with no Company debt and a portfolio which has
a presence across both the UK and the Republic of Ireland. The
Company continue to monitor the impact of current geo-political
uncertainties as they develop.
Risk relating to Portfolio and Investment Strategy, and Tax Code
Compliance:
Risks in respect of specific asset investment decisions, the
subsequent performance of an investment or exposure concentrations
across the Company's portfolios. Risks arising from external
factors including political, legal, regulatory, economic and
competitor changes, which affect the Company's operations. Risks
relating to compliance failure regarding tax codes currently in
force, and possible changes in tax legislation which may be enacted
in the future. The Company continues to rely on third party experts
for the provision of Investment, Valuation and Tax advice.
The Half-year report provides an update on the Company's
strategy and business performance, as well as on market conditions,
which is relevant to the Company's overall risk profile and should
be viewed in the context of the Company's risk management framework
and principal risks as disclosed in the Annual report and accounts
2019.
Patrick Cox
Chairman
Date: December 2019
Investment Advisors Report
For the period ended 30 September 2019
About Gore Street Capital ("Investment Advisor")
The Investment Advisor was in operation since 2013 as a platform
to acquire, develop and manage global renewable energy assets. It
is headquartered in the UK and comprises a strong team of
investment professionals with significant experience in sourcing,
structuring and managing large renewable energy projects globally.
The Investment Advisor was the first to deploy privately-owned
large-scale battery projects in Britain.
Structure
Gore Street Energy Storage Fund plc (the "Company" or "GSF")
holds and manages its investments through UK limited companies
which are effectively 100% wholly owned by the Company, GSES 1
Limited, NK Energy Storage Solutions Ltd., GSC LRPOT Limited and
GSF IRE Limited. All project SPV's are not 100% owned.
Shareholders
Parent
GSF
-------------------------
Portfolio Holding
Company
GSES1
-------------------------
Portfolio Holding Portfolio Holding Portfolio Holding
Company Company Company
NK Energy Storage GSF IRE GSC LRPOT
Solutions
------------------------- ------------------
Project SPVs
See Note 12 for
ownership percentages.
-------------------------
Investment Advisors Report continued
For the period ended 30 September 2019
Investment Objective
The Company seeks to provide investors with a sustainable and
attractive dividend over the long term by investing in a
diversified portfolio of utility scale energy storage projects
primarily located in the UK and the Republic of Ireland, although
the Company also considers projects in North America and Western
Europe. In addition, the Company seeks to provide investors with an
element of capital growth through the re-investment of net cash
generated in excess of the target dividend in accordance with the
Company's investment policy.
Strategic Partners
The Company's cornerstone investors, NEC Energy Storage Inc.
("NEC ES") and Nippon Koei ("NK") remain strategic partners and
major shareholders since the IPO of the Company on 25 May 2018.
On 5 June 2019, the Company entered into an agreement with the
National Treasury Management Agency ("NTMA") for up to a GBP30m
investment in the Company. GBP1.5m was invested as part of the
Initial Placing in August 2019 and an additional GBP9.5m was
subsequently drawn in October 2019. There is an additional GBP
15.5m commitment to be drawn for the development of further
projects in the Republic of Ireland.
Investment Portfolio Summary
At period end, the Company's portfolio consists of eight
projects with a total grid connection capacity of 189.0 MW. Four of
those projects are situated in GB with two in Northern Ireland.
Rights to the remaining two projects in Republic of Ireland were
crystallised to 51% ownership post period end. Operating projects
represented 10.0 MW at the end of the period. In addition, post
period end a further 9mw asset became operational bringing the
portfolio total to 19MW.
The Investment Advisor has selected assets that deliver
portfolio diversification by multiple revenue streams, geographical
location, EPC contractors, O&M counterparties and
developers.
Portfolio Assets
As of 30 September 2019, the Company's portfolio consisted of
six assets as detailed below:
1. Boulby 2. Cenin
Location Cleveland, North Yorkshire Swansea, Wales,
United Kingdom United Kingdom
---------------------------- ------------------------
Size 6 MW 4MW
---------------------------- ------------------------
SPV Entity NK Boulby Energy Storage Kiwi Power ES B Limited
Limited
Percentage effectively
owned by GSF 100% 49%
Contract Type Behind-the-meter Co-location
Source of Revenue Frequency Response Frequency Response
Capacity Market Capacity Market
Service to the site
---------------------------- ------------------------
Site Type Industrial Mining Renewable Energy
---------------------------- ------------------------
Status Operational Operational
---------------------------- ------------------------
Commissioning / Expected Operational since Oct. 2016 Operational since Feb.
Commissioning 2018
---------------------------- ------------------------
Battery Supplier NEC ES Tesla
---------------------------- ------------------------
Investment Advisors Report continued
For the period ended 30 September 2019
Portfolio Assets continued
3. Lower Road 4. Port of Tilbury
Location Brentwood Port of Tilbury, London
United Kingdom United Kingdom
------------------------------- -------------------------
Size 10 MW 9 MW
------------------------------- -------------------------
SPV Entity OSSPV001 Limited OSSPV001 Limited
Percentage effectively
owned by GSF 100% 100%
Contract Type Front of the Meter Behind the Meter
Site Type Greenfield Port
------------------------------- -------------------------
Status Construction Final Pre Commissioning
------------------------------- -------------------------
Commissioning / Expected Targeted to become operational Asset became operational
Commissioning in Q4 2019 in October 2019.
------------------------------- -------------------------
Battery Supplier NEC ES NEC ES
------------------------------- -------------------------
5. Mullavilly 6.Drumkee
Location Northern Ireland Northern Ireland
Size 50 MW 50 MW
SPV Entity Mulavilly Energy Limited Drumkee Energy Limited
Percentage effectively
owned by GSF 51% 51%
Contract Type Front of the Meter Front of the Meter
Site Type Greenfield Greenfield
------------------------------- -------------------------------
Status Design-phase Design-phase
------------------------------- -------------------------------
Commissioning / Expected Targeted to become operational Targeted to become operational
Commissioning in Q4 2020 in Q1 2021
------------------------------- -------------------------------
Battery Supplier To Be Determined To Be Determined
------------------------------- -------------------------------
At period end the company held options to project rights,
subject to condition precedent, to a further 60.0 MW and extended
certain loans to the project vehicles. The projects were acquired
post period end on October 11, 2019 (please see Note 23). These
assets are situated in the Republic of Ireland and are scheduled
for start of
operations in Q3 2021. Please see below description of the Republic of Ireland assets.
7. Porterstown 8.Kilmannock
Location Republic of Ireland Republic of Ireland
Size 30 MW 30 MW
SPV Entity Porterstown Battery Storage Kilmannock Battery Storage
Limited Limited
Percentage effectively
owned by GSF 51% 51%
Contract Type Front of the Meter Front of the Meter
Site Type Greenfield Greenfield
------------------------------- -------------------------------
Status Post Acquisition Post Acquisition
------------------------------- -------------------------------
Commissioning / Expected Targeted to become operational Targeted to become operational
Commissioning in Q3 2021 in Q3 2021
------------------------------- -------------------------------
Battery Supplier To Be Determined To Be Determined
------------------------------- -------------------------------
Investment Advisors Report continued
For the period ended 30 September 2019
Market Update
Energy Storage Market
The energy storage market has the capacity to support delivery
of stacked or multiple services to the grid and to
commercial/industrial partners. While the Company's operational
assets currently provide firm frequency response ("FFR"), capacity
market services and Triad services, it is anticipated that
beginning as early as next year, the suite of services available at
market will expand to include Balancing Mechanism,
Wholesale/Trading, and Black Start (these services will be
explained in greater detail later in the document).
Energy Storage in Great Britain
Regulatory changes in the GB storage market are trending towards
a push for increased use of energy storage both as a renewables
enabler and as a component for electricity system flexibility.
With the increase in distributed generation and renewable
energy, the regulator for electricity and gas in GB, Ofgem, has
been reviewing electricity charging arrangements to ensure that
they continue to be fit for purpose. Ofgem will commence
implementation of legislation by year-end 2019 to enable more cost
reflective pricing, removal of barriers to market participants and
more effective ancillary markets.
A blackout event in August 2019 led to a greater procurement of
FFR volumes, resulting in a positive short-term market drive for
the storage market. The blackout may have also reinvigorated the
overall systems review by the National Grid and Ofgem. In addition,
Government legislation implemented on 28 of June 2019 is targeting
net zero emissions by 2050.
These events have potential to positively impact the energy
storage sector with potential for the energy storage market in GB
to grow from 2.9 GW in 2017 to between 5.9 GW to 9 GW by
2030.[4]
At the time of writing, uncertainty remains over Brexit as the
UK faces a General Election on 12 December 2019 and it's possible
impact on the British energy markets. The Investment Advisor's view
remains that potential changes to licences and codes should not
materially impact the Company's business.
The major revenue streams for the Company's assets in GB
are:
-- Firm Frequency Response Market
FFR is the largest source of revenues for the Company. Given the
intermittent nature of renewable energy generation, FFR aims to
stabilize the grid around a target frequency. The Investment
Advisor anticipates amendment to a weekly auction format by
National Grid, currently under trial[5], moving away from the
current monthly format. The shorter format will likely result in
improved optimisation of the stack of revenue opportunities
available to battery storage companies.
-- Triad market
Triad income is based on the peak shifting service applied
during the three half-hour periods of highest demand (Triad) on the
GB electricity transmission system (between November and February
each year). The demand during a Triad is measured as the net demand
on the transmission system (measured at the grid supply point where
the distribution and transmission network meet). If suppliers can
contract with generators embedded within the distribution network
to export during likely Triad periods, then the effect is to reduce
their net demand at the grid supply point, thereby reducing their
exposure to Triad charges.
Network charging is under review by the GB regulator, Ofgem, and
could result in an amendment or elimination of Triad. The
Investment Advisor has assumed no Triad income across its portfolio
after April 2023.
-- Capacity Market (CM)
The UK capacity market is a policy mechanism that provides a
long-term revenue stream to storage systems based on their
availability for dispatch.
Investment Advisors Report continued
For the period ended 30 September 2019
Energy Storage in Great Britain continued
The Company previously reported the suspension of the capacity
market on 15 November 2018, following a legal challenge to the
original State Aid approval. Following the suspension, the Company
wrote off 12-months of capacity market revenues. On 24 October 2019
the European Commission ruled in favour of the Capacity Market,
enabling the UK Secretary of State to immediately issue 'trigger
letters' to reinstate the scheme, prompt the collection of deferred
payments and approve conditional T-1 auction capacity
agreements[6].
With the reinstatement and the confirmation of back payments for
the suspended period, the Company's net asset value will be revised
upwards to reflect the reinstatement of its accrued and anticipated
capacity market revenues in all four assets (29 MW) within GB.
Prospective Revenue Streams for the assets in GB are:
-- The Balancing Mechanism
National Grid is responsible for balancing the GB system in real
time. It uses the balancing mechanism ("BM") as one of the main
tools to perform this role. In the BM, it is able to accept bids
and offers from available market participants to decrease or
increase their output (respectively). By comparison to FFR, it is a
much larger market of 1 GWh[7].
National Grid has been working on widening access to the BM to
make it more accessible for smaller generators, remove barriers to
entry, improve existing routes to the BM and create new routes to
market.
The Investment Advisor is reviewing options for entering the BM
with selected sites in the future.
-- Wholesale Trading
The wholesale electricity markets relate to generation,
transmission, distribution, and supply of electricity, trading in
wholesale electricity or cross-border exchanges in electricity.
Wholesale trading can be implemented in conjunction with
participating in the Balancing Mechanism and the Investment Manager
is evaluating an integrated, cross market strategy.
-- Black Start
The National Grid has developed Black Start as a procedure to
restore power in the event of a total or partial shutdown of the
national electricity transmission system. The National Grid has set
out its intention to broaden participation in this market, with
storage assets able to participate. Competitive tenders are
underway covering three zones.
Energy Storage in Ireland
Since the last report, the Investment Advisor has announced the
successful participation in the Irish fixed-term auctions for
system services. This auction occurred under the multi-year DS3
programme ("Delivering a Secure, Sustainable Electricity System").
The aim is to meet the challenge of operating the all-Ireland
electricity system in a secure manner while achieving the 2020
renewable electricity target (40% by 2020; a 70% target for 2030
was announced by the Irish Minister Richard Bruton in March 2019).
A key focus of DS3 is the procurement of services needed to operate
the system following the increasing prevalence of renewables. The
Irish Governments' commitment to such progress, combined with the
Republic of Ireland's high growth economy, makes it a particularly
attractive market from a renewables perspective.
There are two main procurement routes for system services under
the DS3: (a) a 'volume uncapped' route offering contracts but with
no pre-set terms or timeframes for those contracts, and (b) the
'volume capped' route with competitive tendering for 6-year fixed
term contracts. The Company has majority ownership of, and a
preferred return from the two assets under the uncapped regime in
Northern Ireland.
Investment Advisors Report continued
For the period ended 30 September 2019
Energy Storage in Ireland continued
The Company's two assets in the Republic of Ireland successfully
participated in the first tender under the volume capped route
(which took place in August 2019) and secured 60MW out of the 110MW
procured by EirGrid. The volume capped contracts are offered for a
six--year term. The Company has majority ownership of, and a
preferred return from the Porterstown and Kilmannock assets under
the capped regime in the Republic of Ireland. The assets are
scheduled to commence service delivery by 1 September 2021.
The Company is preparing for participation in the DS3 uncapped
market through two 50 MW projects in Northern Ireland. The uncapped
market offers a five-year term up to 30 April 2023, with an option
for the Transmission System Operator (TSO) to extend by up to three
years. The TSO can also terminate early on 12 months' notice.
The Advisor anticipates further developments in a positive
direction for storage as other markets build a best practice model
for the treatment of storage in network regulation.
Investment Performance -
The NAV per share for the Company as at 30 September 2019 was
95.5 pence.
NAV Bridge (31 March 2019 to 30 September 2019)
NAV Bridge NAV
GBP Million
----------------------------------- ---- ------------
NAV as of 31 March 2019 28.1
Offering Proceeds 6.34
Offering expense -0.16
Fund Opex -0.59
Interest and management fee
income 0.24
Dividends -0.31
Acquisition and Capex, net of
distribution -11.50
Distribution from SPV's -0.27
Increase in NAV of Portfolio SPVs
(from 31 March to
30 September 2019) 14.01
----------------------------------------- ------------
Total NAV (30 September 2019) 35. 87
The NAV per share as at 31 March 2019 was 92 pence per share
(30,600,000 issued Ordinary Shares). The NAV per share as at 30
September 2019 was 95.5 pence per share (37,562,148 issued Ordinary
Shares).
Valuation of the Investment Portfolio
The Investment Advisor is responsible for providing a fair
market valuation of the Company's underlying assets. The results of
fair market value of the Company's investment portfolio are
presented to the Company's Board of Directors for their review and
approval. Investments are reported at the Directors' estimate of
fair value at the reporting date. Investment Valuations are
calculated by Management quarterly and reviewed on a sample basis
by a third party in the mid-year and end of year reports. For this
period, the Independent Valuer, BDO performed valuations on all
assets held by the company with the exception of the Company's
Republic of Ireland assets and Cenin.
The Investment Advisor uses a Discounted Cash Flow ("DCF")
method for all the projects. The methodology adheres to IFRS 13 as
well as the International Valuation Standards Council ("IVSC").
The Investment Advisor applies multiple assumptions in the
valuation models as detailed below:
General
-- Discount rate: For the assets currently in operation, the
Investment Advisor applied a discount rate from 6.0% to 10%. The
6.0% discount rate is applied only for revenue contracted periods
for operational assets, reflecting the lower risk associated with
National Grid as a counterparty. The 10% discount rate is applied
for projects in the early construction or pre-construction
stage.
Investment Advisors Report continued
For the period ended 30 September 2019
Valuation of the Investment Portfolio continued
Revenue
-- Movement in working capital: Change in working capital
(period-on-period current assets less current liabilities) is
incorporated into project cash flows through an assessment of
relevant balance sheet operating line items (e.g.: changes in
receivables, payables and VAT balance).
-- Foreign exchange rate: Rate is based on the spot rate as of
30 September 2019 and relevant forward rate on that day.
-- Contracted revenues based on the actual contracted prices and
estimated availability, forecast cash flow increments and forecast
receipt timings
-- Uncontracted revenues based on the unit price forecast from third party research house(s).
-- Future optimum mix of various revenue contracts based on
in-house expertise and advice from industry experts (third party
consultants).
Operating Expenses
-- Expenses based on (a) contracted prices under long term
agreement (e.g. machinery maintenance and lease contract) or (b)
most recent actuals/quotes with inflation adjustments.
-- Energy cost based on system efficiency from EPC's technical specifications, published transmission/distribution network tariff and third-party electricity price forecast.
Capital Expenditure
-- Capital expenditure based on (a) contracted prices and its
payment schedule and (b) estimated future price based on third
party forecast and/or in-house view referencing most recent pricing
levels.
Portfolio Summary
(A) Great Britain (Excluding Northern Ireland) Portfolio
1. Boulby (6 MW)
From April 2019 to September 2019, Boulby's average availability
for frequency services was circa 85% attributable primarily to a
short-term failure of its inverter. Excluding this incident,
availability was 97% inclusive of planned maintenance work and
system disconnection failure.
2. Cenin (4 MW([8]) )
From April 2019 to September 2019, Cenin's average availability
was 97.4%. The majority of time offline related to state of charge
management or minor system issues (less than 3 hours), with an
incident of failure in the site's communication system resulting in
the site going offline for 23 hours on July 23.
3. Lower Road (10 MW)
The Company finalised its investment in Lower Road in September
2018 by acquiring OSSPV001, an SPV owning the rights to the
project. Project construction is near completion and delivery is
expected in Q4 2019.
4. Port of Tilbury (9 MW)
The Company finalised its investment in Port of Tilbury in
September 2018 by acquiring OSSPV001. At time of writing,
construction was operational by October 18, 2019.
The Company has the option to upgrade and increase capacity from
4.5 MWh to 9 MWh within the first 3.5 years after the start of
operations.
The fair market value of the above Great Britain (Excluding
Northern Ireland) portfolio was GBP6,241,261 calculated using the
discounted cash flow methodology.
Investment Advisors Report continued
For the period ended 30 September 2019
Portfolio Summary continued
(B) Northern Ireland Portfolio
5. Mullavilly
On 4 June 2019, the Company acquired 51% of Mullavilly Project
in Northern Ireland with a total installed capacity of 50.0 MW. Low
Carbon, the seller and developer, maintains 49% ownership of the
Project.
The estimated total capex required for the Mullavilly Project is
c. GBP 20 million. The capex will be funded either from operating
cash flow from the asset or by GSF by way of a shareholder loan
(SHL) carrying 10% interest, stepping down to 9% upon
commissioning. GSF will share excess profits (following loan
repayment) with Low Carbon.
The Mullavilly Project is expected to derive revenues from the
"DS3" or "Delivery Secure Sustainable Electricity System" Programme
operated in Northern Ireland as well as the Irish Capacity
Remuneration Mechanism and wholesale trading revenues (the latter
after the end of DS3 services). The Company intends to participate
under the DS3 Standard Contracts tender in October 2020 and proceed
with testing throughout December and January. Operations are
estimated to start at the end of Q4 2020.
The project is on track and in its design stage.
5. Drumkee
On 4 June 2019, the Company acquired 51% of Drumkee Project in
Northern Ireland with a total installed capacity of 50.0 MW. Low
Carbon was the Projects' seller and developer; and are 49% equity
partner is each Project.
The estimated total capex required for the Drumkee Project is c.
GBP 20 million. The capex will be funded either from operating cash
flow from the asset or by GSF by way of a shareholder loan (SHL)
carrying 10% interest, stepping down to 9% upon commissioning. GSF
will share excess profits (following loan repayment) with Low
Carbon.
Similarly to Mullavilly the project, the Drumkee Project is
expected to derive revenues from the "DS3" Programme as well as the
Irish Capacity Remuneration Mechanism and wholesale trading
revenues (the latter after the end of DS3 services). The Company
intends to participate under the DS3 Standard Contracts tender in
October 2020 and proceed with testing throughout December and
January. Operations are estimated to start at the end of Q1
2021.
The project is on track and in its design stage.
The fair market value of the Company's 51% share (inclusive of
equity and debt) of the Northern Ireland Portfolio was
GBP10,973,092 calculated using the discounted cash flow
methodology.
(C) Republic of Ireland Portfolio
6. Republic of Ireland Assets
On 4 June 2019, the Company acquired the rights to purchase
controlling interests in a portfolio of two assets in the Republic
of Ireland ("RI Projects") from renewable energy developer, Low
Carbon subject to the RI Projects' receipt of grid and revenue
contracts.
On 9 August 2019, it was announced that the two 30 MW projects
were successful in Eirgrid's DS3 auction process; consequently The
value of loans provided by the Company to the asset SPV to enable
completion of the EirGrid contracting and grid connection
requirements was GBP3,281,622. Rights to ownership of 51% of these
Asset SPV's crystallised post period end.
Investment Advisors Report continued
For the period ended 30 September 2019
Governance
The Investment Advisor regularly reviews all energy storage
assets to ensure they are compliant with planning consent and
additional conditions set by the relevant local councils. Over the
past six months we have added to both our Investment and Technical
staff, bolstering what was already an experienced and skilled team.
As the Fund continues to grow, we look forward to making further
additions over the coming months.
Investment Pipeline
Investment opportunities under exclusivity arrangements or
advanced negotiations are listed below.
Exclusive Assets or in advanced stage of negotiations
Project Location Total project size
- MW
------------------- ----------------------
Project 1 United Kingdom 40
------------------- ----------------------
Project 2 United Kingdom 10
------------------- ----------------------
Project 3 United Kingdom 50
------------------- ----------------------
Project 4 United Kingdom 20
------------------- ----------------------
Project 5 Ireland 30
------------------- ----------------------
Project 6 Ireland 30
------------------- ----------------------
Project 7 Ireland 22.5
------------------- ----------------------
Project 8 Ireland 50
------------------- ----------------------
Project 9 Belgium 25
------------------- ----------------------
Project 10 Germany 11
------------------- ----------------------
Project 11 United States 40
------------------- ----------------------
AIFM
On December 2 2019 Gore Street Capital Limited was authorised
and regulated by the Financial Conduct Authority. A further
application is pending with regard to "passporting", after which
process is completed Gore Street Capital Limited will take over the
role of AIFM from Mirabella LLC on January 1 2020.
Gore Street Capital
Investment Advisor
Date: December 2019
Statement of Directors' Responsibilities
in respect of the preparation of the Interim Financial
Statements
The Directors, who are required to prepare the financial
statements on a going concern basis unless it is not appropriate,
are satisfied that the Company has the resources to continue in
business for the foreseeable future. In making this assessment, the
Directors have considered information relating to present and
future conditions, including future projections of profitability
and cash flows.
The Directors confirm that to the best of their knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting" as adopted
by the EU;
b) the Half-year report includes a fair review of the
information required by:
i) DTR 4.2.7R of the Disclosure Rules and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year ending 31 March 2020 and
their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the remaining
six months of the financial year; and
ii) DTR 4.2.8R of the Disclosure Rules and Transparency Rules, being
(i) related party transactions that have taken place in the first
six months of the financial year ending 31 March 2020 which have
materially affected the financial position or performance of Gore
Street Energy Storage Fund PLC during that period; and (ii) any
changes in the related party transactions described in the Annual
report and accounts 2019 that could materially affect the financial
position or performance of the Gore Street Energy Storage Fund PLC
during the first six months of the financial year ending 31 March
2020.
The Directors of Gore Street Energy Storage Fund PLC and their
functions are listed below
Patrick Cox, Chairman and Chairman of the Management Engagement
Committee
Caroline Banszky, non executive Director and Chairman of the
Audit Committee
Malcolm Robert King, non executive Director
Thomas Scott Murley, non executive Director
Patrick Cox
Chairman
Date: December 2019
INDEPENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF GORE STREET
ENERGY STORAGE FUND PLC
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2019 which comprises the Interim
Condensed Statement of Comprehensive Income, the Interim Condensed
Statement of Financial Position, the Interim Condensed Statement of
Changes in Equity, the Interim Condensed Statement of Cash Flow and
the related explanatory notes that have been reviewed. We have read
the other information contained in the half yearly financial report
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2019 is prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
Date December 2019
Interim Condensed Statement of Comprehensive Income
For the period ended 30 September 2019
1 April 2019 to 30 September 1 April 2018 to 30 September
2019 2018
Notes (GBP) (GBP)
---------------------- ------- ------------------------------------ ------------------------------------
Revenue Capital Total Revenue Capital Total
---------------------- ------- ---------- ---------- ------------ ---------- ---------- ------------
Gain/(loss) on
Investment at
fair value through
profit and loss 7 - 2,219,191 2,219,191 - (110,380) (110,380)
Investment income 8 236,065 - 236,065 18,863 - 18,863
Administrative
and other expenses 9 (568,130) (568,130) (286,295) (286,295)
Profit/(loss)
before tax (332,065) 2,219,191 1,887,126 (267,432) (110,380) (377,812)
Taxation 10 - - - - - -
---------------------- ------- ---------- ---------- ------------ ---------- ---------- ------------
Profit/(loss)
after tax and
loss for the period (332,065) 2,219,191 1,887,126 (267,432) (110,380) (377,812)
---------------------- ------- ---------- ---------- ------------ ---------- ---------- ------------
Total comprehensive
profit/(loss)
for the period (332,065) 2,219,191 1,887,126 (267,432) (110,380) (377,812)
---------------------- ------- ---------- ---------- ------------ ---------- ---------- ------------
Profit/(loss)
per share (basic
and diluted) -
pence per share 11 5.86 (1.23)
All Revenue and Capital items in the above statement are derived
from continuing operations.
The Total column of this statement represents Company's profit
and loss account, prepared in accordance with Interim Financial
Reporting and interpretations adopted by the European Union. The
return on ordinary activities after taxation is the total
comprehensive income and therefor no additional statement of other
comprehensive income is presented. The supplementary revenue and
capital columns are presented for information purposes in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies. All items in the above
statement derive from continuing operations of the Company. No
operations were acquired or discontinued in the year.
The notes on pages 22 to 36 form an integral part of these
financial statements.
Interim Condensed Statement of Financial Position
As at 30 September 2019
Company number 11160422
Notes 30 September 2019 31 March 2019
(GBP) (GBP)
------------------------------------------------------ ------ ------------------ --- --------------
Non - Current Assets
Investments at fair value through the profit or loss 12 20,485,555 6,482,964
------------------------------------------------------ ------ ------------------ --- --------------
20,485,555 6,482,964
Current assets
Cash and cash equivalents 13 10,537,140 17,223,770
Trade and other receivables 14 5,070,670 4,616,613
15,607,810 21,840,383
Total assets 36,093,365 28,323,347
------------------------------------------------------ ------ ------------------ --- --------------
Current liabilities
Trade and other payables 15 220,982 207,510
220,982 207,510
Total net assets 35,872,383 28,115,837
------------------------------------------------------ ------ ------------------ --- --------------
Shareholders equity
Share capital 375,621 306,000
Share premium 6,173,275 67,476
Special reserve 186,656 186,656
Capital reduction reserve 28,284,177 28,590,177
Capital reserve 1,654,127 (565,064)
Revenue Reserve (801,473) (469,408)
------------------------------------------------------ ------ ------------------ --- --------------
35,872,383 28,115,837
Total shareholders equity 35,872,383 28,115,837
------------------------------------------------------ ------ ------------------ --- --------------
Net asset value per share 18 0.96 0.92
The half yearly financial statements were approved and
authorised for issue by the Board of directors and is signed on its
behalf by;
Patrick Cox
Chairman
Date: December 2019
The notes on pages 22 to 36 form an integral part of these
financial statements.
Interim Condensed Statement of Changes in Equity
For the period ended 30 September 2019
Share Share premium Special Capital Capital Revenue Total shareholders
capital reserve reserve reduction reserve Reserve equity
(GBP) reserve (GBP)
(GBP) (GBP) (GBP) (GBP) (GBP)
---------------------- --------- -------------- --------- ----------- ---------- ---------- -------------------
For the period ended 30 September 2018:
As at 1 April 2018 - - - - - - -
Comprehensive loss
for the period
Loss for the period - - - - (110,380) (267,432) (377,812)
---------------------- --------- -------------- --------- ----------- ---------- ---------- -------------------
Total comprehensive
loss for the period - - - - (110,380) (267,432) (377,812)
---------------------- --------- -------------- --------- ----------- ---------- ---------- -------------------
Transactions with
owners
---------------------- --------- -------------- --------- ----------- ---------- ---------- -------------------
Ordinary shares
issued at a premium
during the period 306,000 30,294,000 - - - - 30,600,000
Share issue costs - (551,459) - - - - (551,459)
Issue of redeemable
preference shares 12,500 - - - - - 12,500
Redemption of
redeemable
preference shares (12,500) - - - - - (12,500)
Transfer to special
reserve - (186,656) 186,656 - - - -
Transfer to capital
reduction reserve - (29,508,177) - 29,508,177 - - -
As at 30 September
2018 306,000 47,708 186,656 29,508,177 (110,380) (267,432) 29,670,729
---------------------- --------- -------------- --------- ----------- ---------- ---------- -------------------
For the period ended 30 September 2019:
As at 1 April 2019 306,000 67,476 186,656 28,590,177 (565,064) (469,408) 28,115,837
Comprehensive profit
for the period
Profit for the
period - - - - 2,219,191 (332,065) 1,887,126
---------------------- -------- ---------- -------- ----------- ---------- ---------- -----------
Total comprehensive
profit for the
period 306,000 67,476 186,656 28,590,177 1,654,127 (801,473) 30,002,963
---------------------- -------- ---------- -------- ----------- ---------- ---------- -----------
Transactions with
owners
---------------------- -------- ---------- -------- ----------- ---------- ---------- -----------
Ordinary shares
issued at a premium
during the period 69,621 6,265,934 - - - - 6,335,555
Share issue costs - (160,135) - - - - (160,135)
Dividends - - - (306,000) - - (306,000)
As at 30 September
2019 375,621 6,173,275 186,656 28,284,177 1,654,127 (801,473) 35,872,383
---------------------- -------- ---------- -------- ----------- ---------- ---------- -----------
Capital reduction reserve and revenue reserves are available to
the Company for distributions to Shareholders as determined by the
Directors.
Note: Capital reserve and Revenue reserve have been renamed from
Revaluation reserves and Retained earnings, respectively, from
previous naming conventions.
The notes on pages 22 to 36 form an integral part of these
financial statements.
Interim Condensed Statement of Cash Flow
For the period ended 30 September 2019
1 April 2019 1 April 2018
to to
30 September 30 September
2019 2018
(GBP) (GBP)
---------------------------------------------------- -------------- --- --------------
Cash flows used in operating activities
Loss for the period 1,887,126 (377,812)
Net (gain)/ loss on investments at fair value
through the profit and loss (2,219,191) 110,380
Increase in trade and other receivables (454,057) (4,695,294)
Increase in trade and other payables 13,472 177,663
---------------------------------------------------- -------------- --- --------------
Net cash used in operating activities (772,650) (4,785,063)
Cash flows used in investing activities
Purchase of investments (11,783,400) (8,091,831)
Net used in investing activities (11,783,400) (8,091,831)
Cash flows used in financing activities
Proceeds from issue of ordinary shares at
a premium 6,335,555 30,600,000
Share issue costs (160,135) (551,459)
Issue of redeemable preference shares - 12,500
Redemption of redeemable preference shares - (12,500)
Dividends (306,000) -
Net cash inflow generate from financing activities 5,869,420 30,048,541
Net change in cash and cash equivalents for
the period (6,686,630) 17,171,647
---------------------------------------------------- -------------- --- --------------
Cash and cash equivalents at the beginning 17,223,770 -
of the period
---------------------------------------------------- -------------- --- --------------
Cash and cash equivalents at the end of the
period 10,537,140 17,171,647
---------------------------------------------------- -------------- --- --------------
The notes on pages 22 to 36 form an integral part of these
financial statements.
Notes to the interim condensed financial statements
For the period ended 30 September 2019
1. General information
Gore Street Energy Storage Fund plc (the "Company") was
incorporated in England and Wales on 19 January 2018 with
registered number 11160422. The registered office of the Company is
7(th) Floor, 9 Berkeley Street, London, W1J 8DW. Its share capital
is denominated in Pound Sterling (GBP) and currently consists of
ordinary shares. The Company's principal activity is to invest in a
diversified portfolio of utility scale energy storage projects
primarily located in the UK, although the Company will also
consider projects in North America and Western Europe.
2. Basis of preparation
Statement of compliance
The half yearly financial statements for the period ended 30
September 2019 have been prepared in accordance with IAS 34,
Interim Financial Reporting and interpretations adopted by the
European Union, and in accordance with the Companies Act 2006 as
applicable to companies using IFRS. The financial statements have
been prepared on a historical cost basis except for the investment
portfolio at fair value through the profit or loss. The accounting
policies and methods of computation are the same as those applied
in the Company's annual financial statement.
The half yearly financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Company's
annual financial statements as at 31 March 2019. The comparative
period for the prior year is for the six months ended 30 September
2018.
Functional and presentation currency
The currency of the primary economic environment in which the
Company operates (the functional currency) is Pound Sterling ("GBP
or GBP") which is also the presentation currency.
Going concern
The Company's business activities, together with the factors
likely to affect its future development performance and position,
are set out in the Investment Advisor's Report. The Company faces a
number of risks and uncertainties. The Company continues to meet
day-to-day liquidity needs through its cash resources.
As at 30 September 2019, the Company had net current assets of
GBP15,387 million (31 March 2019: GBP21.633 million) and had cash
balances of GBP10,537 million (31 March 2019: GBP17.224 million)
(excluding cash balances within investee companies), which are
sufficient to meet current obligations as they fall due. The major
cash outflows of the Company are the payment of dividends and costs
relating to the acquisition of new assets, both of which are
discretionary. The Company had no outstanding debt as at 30
September 2019 (31 March 2019: same).
The Directors have reviewed Company forecasts and projections
which cover a period of not less than 12 months from the date of
the approval of these financial statements, taking into account
foreseeable changes in investment and trading performance, which
show that the Company has sufficient financial resources. On the
basis of this review, and after making enquiries, the Directors
have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the interim financial statements.
3. Significant accounting judgements, estimates and
assumptions
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of
assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to the
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
During the period the Directors considered the following
significant judgements, estimates and assumptions:
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless they
provided investment related services to the Company. To determine
that the Company continues to meet the definition of an investment
entity, the Company is required to satisfy the following three
criteria:
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
3. Significant accounting judgements, estimates and
assumptions
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b) the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Company meets the criteria as follows:
-- the stated strategy of the Company is to deliver stable
returns to shareholders through a mix of energy storage
investments;
-- the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not
have had access to individually; and
-- the Company has elected to measure and evaluate the
performance of all of its investments on a fair value basis. The
fair value method is used to represent the Company's performance in
its communication to the market, including investor presentations.
In addition, the Company reports fair value information internally
to Directors, who use fair value as the primary measurement
attribute to evaluate performance.
The Directors are of the opinion that the Company has all the
typical characteristics of an investment entity and continues to
meet the definition in the standard. This conclusion will be
reassessed on an ongoing basis.
Valuation of Investments
Significant estimates in the Company's financial statements
include the amounts recorded for the fair value of the instruments.
By their nature, these estimates and assumptions are subject to
measurement uncertainty and the effect on the Company's financial
statements of changes in estimates in future periods could be
significant. These estimates are discussed in more detail in note
17 together with the effect of estimates on cash flow.
4. New and revised standards and interpretations
New and revised IFRSs adopted by the Company
The accounting policies used in the preparation of the financial
statements have been consistently applied during the period ended
30 September 2019.
The Company has adopted IFRIC 23 - Uncertainty over Income Tax
Treatments, however, the Directors have determined there to be no
uncertain tax positions, therefore application of IFRIC 23 does not
have an impact on the Company's financial statements.
There are no further standards, amendments or interpretations in
issue at the reporting date which have been issued but are not yet
effective and that are deemed to be material to the Company.
5. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below:
Investment Income
Interest income is recognised on an accrual basis and in the
Statement of Comprehensive Income.
Expenses
Expenses are accounted for on an accrual basis and charged to
the Statement of Comprehensive income. Share issue cost is taken
from equity. Expenses are charged through the Revenue account
except those which are capital in nature, including those which are
incidental to the acquisition, disposal or enhancement of an
investment, which are accounted for through the Capital
account.
Net gain or loss on investments at fair value through profit and
loss
Gains or losses arising from changes in the fair values of
investments are recognised in the Statement of Comprehensive Income
in the period in which they arise. The value of the Investment may
be increased or reduced by the assessed fair value movement.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
5. Summary of significant accounting policies continued
Taxation
The Company is approved as an Investment Trust Company ("ITC")
under sections 1158 and 1159 of the Corporation Taxes Act 2010. The
approval is subject to the Company continuing to meet the
eligibility conditions of the Corporations Tax Act 2010. The
Company intends to ensure that it complies with the ITC regulations
on an ongoing basis and regularly monitors the conditions required
to maintain ITC status.
From 1 April 2015 there is a single corporation tax rate of 19%.
Current Tax and movements in deferred tax asset and liability is
recognised in the Statement of Comprehensive Income except to the
extent that it relates to the items recognised as direct movements
in equity, in which case it is similarly recognised as a direct
movement in equity. Current tax is the expected tax payable on any
taxable income for the period, using tax rates enacted or
substantively enacted at the end of the relevant period.
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an
obligation to pay more tax or a right to pay less tax in the future
have occurred. Timing differences are differences between the
Company's taxable profits and its results as stated in the
financial statements. Deferred taxation assets are recognised
where, in the opinion of the Directors, it is more likely than not
that these amounts will be realised in future periods, at the tax
rate expected to be applicable at realisation.
A deferred tax asset has not been recognised in respect of
surplus management expenses, as the Company is unlikely to have
sufficient future taxable revenue to offset against these.
Investment in subsidiaries
Subsidiaries are entities controlled by the Company. Control
exists when the Company is exposed, or has rights, to variable
returns from its involvement with the subsidiary entity and has the
ability to affect those returns through its power over the
subsidiary entity. In accordance with the exception under IFRS 10
Consolidated financial statements, the Company is an investment
entity and therefore only consolidates subsidiaries if they provide
investment management services and are not themselves investment
entities. All subsidiaries are held at fair value in accordance
with IFRS 9 and therefore not consolidated.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and call deposit
held with the bank on a 32 day notice which can be readily
converted to cash.
Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently stated at amortised cost less loss allowance
which is calculated using the provision matrix of the expected
credit loss model.
Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently stated at amortised cost.
Dividends
Dividends are recognised when they become legally payable, as a
reduction in equity in the financial statements. Interim equity
dividends are recognised when legally payable. Final equity
dividends will be recognised when approved by the shareholders.
Equity
Equity instruments issued by the Company are recorded at the
amount of the proceeds received, net of directly attributable issue
costs. Costs not directly attributable to the issue are immediately
expensed in the Statement of Comprehensive Income.
Financial Instruments
In accordance with IFRS 9, the Company classifies its financial
assets and financial liabilities at initial recognition into the
categories of amortised cost or fair value through profit or
loss.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
5. Summary of significant accounting policies continued
Financial Instruments continued
Financial assets
The Company classifies its financial assets at amortised cost or
fair value through profit or loss on the basis of both:
-- the entity's business model for managing the financial assets
-- the contractual cash flow characteristics of the financial asset
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding. The Company includes in this category short-term
non-financing receivables including cash and trade and other
receivables.
Financial asset measured at fair value through profit or loss
(FVPL)
A financial asset is measured at fair value through profit or
loss if:
a) its contractual terms do not give rise to cash flows on
specified dates that are solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
b) it is not held within a business model whose objective is
either to collect contractual cash flows, or to both collect
contractual cash flows and sell; or
c) it is classified as held for trading (derivative contracts in an asset position).
The Company includes in this category equity instruments and
loans to investments.
Financial liabilities
Financial liabilities measured at amortised cost
This category includes all financial liabilities, other than
those measured at fair value through profit or loss, including
short-term payables.
Recognition and derecognition
Financial assets and liabilities are recognised on trade date,
when the company becomes party to the contractual provisions of the
instrument. A financial asset is derecognised where the rights to
receive cash flows from the asset have expired, or the Company has
transferred its rights to receive cash flows from the asset. The
Company derecognises a financial liability when the obligation
under the liability is discharged, cancelled or expired.
Impairment of financial assets
The Company holds trade receivables with no financing component
and which have maturities of less than 12 months at amortised cost
and, as such, has chosen to apply an approach similar to the
simplified approach for expected credit losses (ECL) under IFRS 9
to all its trade receivables. Therefore the Company does not track
changes in credit risk, but instead recognises a loss allowance
based on lifetime ECLs at each reporting date.
The Company's approach to ECLs reflects a probability-weighted
outcome, the time value money and reasonable and supportable
information that is available without undue cost or effort at the
reporting date about past events, current conditions and forecasts
of future economic conditions.
The Company uses the provision matrix as a practical expedient
to measuring ECLs on trade receivables, based on days past due for
groupings of receivables with similar loss patterns. Receivables
are grouped based on their nature. The provision matrix based on
historical observed loss rates over the expected life of the
receivables and is adjusted for forward looking estimates.
Fair value measurement and hierarchy
Fair value is the price that would be received on the sale of an
asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction
takes place either in the principal market for the asset or
liability, or in the absence of a principal market, in the most
advantageous market. It is based on the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
5. Summary of significant accounting policies continued
Fair value measurement and hierarchy continued
The fair value hierarchy to be applied under IFRS 13 is as
follows:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are carried at fair value and
which will be recorded in the financial information on a recurring
basis, the Company will determine whether transfers have occurred
between levels in the hierarchy by reassessing categorisation at
the end of each reporting period.
6. Fees and expenses
Accounting, secretarial and Directors
JTC (UK) Limited acts as secretary and administrator for the
Company through the Administration and Company Secretarial
Agreement. JTC (UK) Limited is entitled to a GBP35,000 annual fee
for the provision of Company Secretarial services and a GBP25,000
annual fee for the provision of accounting and administration
services, based on a Company Net Asset Value of up to GBP30
million. An ad valorem fee based on total assets of the Company
which exceed GBP30 million will be applied as follows:
- 0.1% on assets from GBP30 million to GBP75 million, plus
- 0.05% on assets from GBP75 million to GBP150 million, plus
- 0.04% thereafter
During the period, expenses incurred with JTC (UK) Limited for
administrative and secretarial services amounted to GBP33,211 (30
September 2018: GBP21,226) with GBP15,000 (31 March 2019:
GBP15,000) being outstanding and payable at the period end.
AIFM
The AIFM, Mirabella Financial Services LLP (the "AIFM"), is
entitled to receive from the Company, in respect of its services
provided under the AIFM agreement, an initial fee of GBP10,000 plus
a monthly fee of GBP7,500 for the term of the AIFM agreement.
During the period, AIFM fees amounted to GBP61,466 (30 September
2018: GBP26,539) with the GBP74,162 being outstanding and payable
at the period end (31 March 2019: GBP66,346).
Investment Advisory
The fees relating to the Investment Advisor are disclosed within
note 21 Transactions with related parties.
7. Net capital gain/(loss) on investments at fair value through
the profit and loss
30 September 30 September
2019 2018
(GBP) (GBP)
------------------------------------------- ------------- --- -------------
Net capital gain/(loss) on investments at
fair value through the profit and loss 2,219,191 (110,380)
2,219,191 (110,380)
------------------------------------------- ------------- --- -------------
8. Investment Income
30 September 30 September
2019 2018
(GBP) (GBP)
-------------------------------- ------------- --- -------------
Bank interest income 38,092 18,863
Interest income on NEC Advance 181,973 -
Management fee income 16,000 -
236,065 18,863
-------------------------------- ------------- --- -------------
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
9. Administrative and other expenses
30 September 30 September
2019 2018
(GBP) (GBP)
------------------------------------------------- ------------- --- -------------
Administration fees 33,211 21,226
Statutory Audit fees (includes initial accounts
audit for 2018) 32,500 36,000
Non Audit services (interim review) 24,000 -
Directors remuneration 45,000 31,731
Directors & Officers' insurance 5,475 5,198
Investment advisory fees 150,389 40,499
Legal and professional fees 177,184 79,145
Management fees 61,466 26,539
Marketing fees 9,365 22,528
Sundry expenses 29,540 23,429
568,130 286,295
------------------------------------------------- ------------- --- -------------
10. Taxation
The Company is recognised as an Investment Trust Company ("ITC")
for accounting periods beginning on or after 25 May 2018 and is
taxed at the main rate of 19%.
30 September
30 September 2019 2018 (GBP)
(GBP)
----------------------------------------------- ------------------ --- -------------
(a) Analysis of tax charge/ (credit) for
the period
Current tax
UK corporation tax at 19% - -
----------------------------------------------- ------------------ --- -------------
Deferred tax
Origination and reversal of timing differences - -
----------------------------------------------- ------------------ --- -------------
Tax on profit on ordinary activities - -
----------------------------------------------- ------------------ --- -------------
Provision for deferred tax
Movement in provision:
Provision at start of period - -
Deferred tax charged in the Statement
of Comprehensive Income - -
----------------------------------------------- ------------------ --- -------------
Provision at the end of period - -
----------------------------------------------- ------------------ --- -------------
Deferred tax (asset)/ liability not recognised (131,558) -
----------------------------------------------- ------------------ --- -------------
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
10. Taxation continued
30 September
30 September 2019 2018 (GBP)
(GBP)
--- ------------------ --- -------------
Reconciliation of tax charge
Profit/(loss) on ordinary activities before
tax 1,887,126 (377,812)
Tax on loss on ordinary activities at
standard CT rate of 19% 358,554 -
Effects of:
Expenses not deductible for tax purposes - -
Deferred tax not recognised 56,451 -
Changes in tax rate 6,641 -
Unrealised (gain)/loss on fair value adjustments (421,646) -
Tax charge/ (credit) for the period - -
-------------------------------------------------- ---------- ----------
11. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing the
profit or loss for the period attributable to ordinary equity
holders of the Company by the weighted average number of ordinary
shares in issue during the period. As there are no dilutive
instruments outstanding, basic and diluted earnings per share are
identical.
30 September 30 September
2019 2018
(GBP) (GBP)
--------------------------------------------- ------------- -------------
Net gain/(loss) attributable to ordinary
shareholders 1,887,126 (377,812)
Weighted average number of ordinary shares
for the period 32,197,870 30,600,000
Profit/(loss) per share - Basic and diluted
(pence) 5.86 (1.23)
--------------------------------------------- ------------- -------------
12. Investments
Place of business Percentage ownership 30 September 2019 31 March 2019
(GBP) (GBP)
------------------------- ------------------- --------------------- ------------------ --------------
GSES1 Limited ("GSES1") England & Wales 100% 20,485,555 6,482,964
The Company meets the definition of an investment entity.
Therefore, it does not consolidate its subsidiaries or equity
method accounted for associates but, rather, recognises them as
investments at fair value through profit or loss. The Company is
not contractually obligated to provide financial support to the
subsidiaries and associate and there are no restrictions in place
in passing monies up the structure.
The investment in GSES1 is financed through equity and a loan
facility available to GSES1. The facility may be drawn upon up to
GBP10 million and is available for a period of 20 years from 28
June 2018. The rest is funded through equity. The loan is interest
bearing and attracts interest at 5% per annum. Investments in the
indirect subsidiaries are also structured through loan and equity
investments and the ultimate investments are in energy storage
facilities. Realisation of increases in fair value in the indirect
subsidiaries will be passed up the structure as distributions on
the equity investment. GSES1 controls NKESS, and GSC LRPOT and GSF
IRE as listed below which in turn hold an interest in project
companies as disclosed in the in table below.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
12. Investments continued
Immediate Place of Percentage Ownership Investment
Parent business ownership
---------------------------- ---------- ------------ ------------- ------------- -------------
NK Energy Storage Solutions GSES1 England &
Limited ("NKESS") Wales 100% Wholly owned
NKESS England &
NK Boulby Energy Storage Wales 99.998% Wholly owned Boulby
NKESS England & Partially
Kiwi Power ES B Wales 49% owned Cenin
GSC LRPOT Limited ("GSC GSES1 England &
LRPOT") Wales 100% Wholly owned
OSSPV001 Limited GSC LRPOT England & 100% Wholly owned Lower Road
Wales Port of
Tilbury
GSES1 England &
GSF IRE Limited Wales 100% Wholly owned
GSF IRE England & Partially
Mullavilly Energy Limited Wales 51% owned Mullavilly
GSF IRE England & Partially
Drumkee Energy Limited Wales 51% owned Drumkee
13. Cash and cash equivalents
30 September 31 March
2019 2019
(GBP) (GBP)
-------------------------------------- ------------- -----------
Cash at bank 10,537,140 223,770
Notice deposit held at Barclays bank - 17,000,000
10,537,140 17,223,770
-------------------------------------- ------------- -----------
14. Trade and other receivables
30 September 2019 31 March 2019
(GBP) (GBP)
---------------------------------- ------------------ --------------
VAT recoverable 102,366 22,554
Prepaid D&O insurance 13,337 298
Prepaid Investment Advisors fees 95,414 23,800
Other Debtors 91,810 69,961
Advance to NEC ES 4,500,000 4,500,000
Interest on advance to NEC ES 181,973 -
Prepaid share issue costs 85,770 -
5,070,670 4,616,613
---------------------------------- ------------------ --------------
The Company advanced to NEC ES an advance of GBP4,500,000 on the
date at which it was admitted to the Premium segment of the London
Stock Exchange. The advance remains to be used in conjunction with
the Company's purchase of products, equipment and/ or services from
NEC ES for the projects in which the Company is to be invested. The
Company's purchase of such products and equipment from NEC ES is
conditional upon NEC ES' ability to meet the requirements of the
Company's projects and subject to the terms and pricing of the
products, equipment and/ or services being provided on market
standard terms (as defined by the Company). The advance would have
been forgiven up to the amount of investments of which the Company
takes possession / ownership. If for example the value of the
investment was GBP4.5 million, the fund would not pay any more.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
14. Trade and other receivables continued
As NEC ES was unable to supply to the Company products,
equipment and/ or services on terms agreeable to the Company to the
value of the Company's advance within 12 months from the date of
the Company's admission on the London Stock Exchange, NEC ES would
within 14 days of the end of such period pay to the Company (a) the
balance of the advance payment less the amount of value that has
been supplied to the Company in that period and (b) interest on the
balance accrued from the date of admission at a rate of 3 per cent,
per annum. At the end of the initially described term, but not a
termination of the agreement, it was agreed between NEC ES and the
Company that NEC ES could continue to hold the GBP4.5m advance,
accruing the years interest payable and 3% coupon. As at 30
September 2019, although EPC contracts were signed between NEC ES
and the Company and projects are under construction, no payment
under these EPC contracts were due at period end and the balance
remained outstanding, with interest accruing at the rate of 3 per
cent, per annum. It is expected that this advance will be settled
within 18 months with the EPC contracts currently in place.
15. Trade and other payables
30 September 2019 31 March
2019
(GBP) (GBP)
------------------------ ------------------ ---------
Administration fees 15,000 15,000
AIFM fees 74,162 66,346
Audit fees 89,000 65,000
Directors remuneration 11,426 9,725
Accrued IPO costs - 13,200
Professional fees 16,145 25,553
Other creditors 15,249 12,686
220,982 207,510
------------------------ ------------------ ---------
16. Categories of financial instruments
30 September 2019 31 March
2019
(GBP) (GBP)
------------------------------------------ ------------------ -----------
Financial assets
Financial assets at amortised cost:
Cash and cash equivalents 10,537,140 17,223,770
Trade and other receivables 5,070,670 4,616,613
Fair value through profit or loss:
Investments 20,485,555 6,482,964
Total financial assets 36,093,365 28,323,347
------------------------------------------ ------------------ -----------
Financial liabilities
Financial liabilities at amortised cost:
Trade and other payables 220,982 207,510
Total financial liabilities 220,982 207,510
------------------------------------------ ------------------ -----------
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019.
17. Fair Value measurement
Valuation approach and methodology
The Company utilises three traditional valuation approaches that
are generally accepted and typically used to establish the value of
a business; the income approach, the market approach and the net
assets (or cost based) approach. Within these three approaches,
several methods are generally accepted and typically used to
estimate the value of a business. The income approach indicates
value based on the sum of the economic income that an asset, or
group of assets, is anticipated to produce in the future.
Therefore, the income approach is typically applied to an asset
that is expected to generate future economic income, such as a
business that is
considered a going concern. Free cash flow to total invested
capital is typically the appropriate measure of economic income.
The income approach is the DCF approach and the method discounts
free cash flows using an estimated discount rate (WACC).
Another method (also known as the Market Method or
Capitalisation of Earnings method) involves applying appropriate
multiples/ratios to the historical, current and/or forecast
earnings of a company. The multiples/ratios are derived from the
financial metrics available for comparable companies, adjusted to
reflect such factors as size, wider range of activities and
liquidity. Multiples are currently used to cross check the
valuation and are not a significant input. Some sectors tend to use
non-financial industry-specific multiples to determine the value of
businesses. Within the renewable energy infrastructure sector, the
most common ratio is GBPEnterprise value ("EV")/Megawatts ("MW")
which captures the installed capacity of a renewable energy project
and is the market method used to value the investment assets of the
Company.
Valuation process
The Company held a portfolio of lithium-ion energy storage
investments with a capacity of 8.0 Megawatt ("MW") operational and
19.0 MW pre operational (the "Investments") through its subsidiary
companies. The Investments comprise six projects: Boulby, Cenin
(49% owned by the Company), Lower Road, Port of Tilbury, Mullavilly
and Drumkee. All of these investments are based in the UK. The
Directors review and approve these valuations following appropriate
challenge and examination. The current portfolio consists of
non-market traded investments and valuations are analysed using
forecasted cash flows of the assets and used the discounted cash
flow approach as the primary approach for both operational assets
and pre-operational assets for the purpose of the valuation. The
Company engages external, independent and qualified valuers to
determine the fair value of the Company's investments or are
produced by the office of the Investment Advisor. As at 30
September 2019, the fair values of the investments in NK Boulby
Energy Storage Limited, (which owns Boulby Project), OSSPV001
Limited (Lower Road and Port of Tilbury) , and the Mullavilly
Energy Limited and Drumkee Energy Limited (Mullavily and Drumkee
respectively) has been determined (presented by the Investment
Advisor and reviewed) by BDO LLP. All other investments are valued
by the Investment Advisor.
Quantitative information
The below table summarises the significant unobservable inputs
to the valuation of investments.
Investment Valuation Significant Significant Fair Value Fair Value
Technique Inputs Inputs
Description (Range) (GBP) (GBP)
30 September 31 March
2019 2019
-------------------------- ------------ --------------- -------------- -------------- -----------
Great Britain (Excluding DCF Discount rate 6% - 8% 6,241,261 6,485,965
Northern Ireland) Revenue /MWH GBP5.5 -GBP40
Portfolio GBP/MWH
Northern Irish Portfolio DCF Discount rate 9% - 10% 10,973,092 -
Revenue /MWH GBP8 -GBP21
GBP/MWH
ROI Portfolio DCF Discount rate 10% 3,281,622 -
Revenue /MWH EUR6 - EUR15
EUR/MWH
Intermediate Holding
Company Value (10,420) (2,999)
Total Investments 20,485,555 6,482,964
--------------------------------------------------------- -------------- -------------- -----------
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019.
17. Fair Value measurement continued
Sensitivity Analysis
The below table reflects the range of sensitivities in respect
of the fair value movements of the Company's investments.
Investment Valuation Significant Sensitivity Estimated effect Estimated effect
Technique Inputs on Fair Value on Fair Value
Description 30 September 31 March
2019 2019
-------------------------- ------------ ---------------- ------------ ----------------- -----------------
Great Britain (Excluding
Northern Ireland)
Portfolio DCF Revenue +10% 2,342,678 1,384,900
-10% (2,544,498) (1,550,047)
Discount rate +1% (733,595) (618,700)
-1% 844,588 686,693
-------------------------------------------------------- ------------ ----------------- -----------------
Northern Ireland
Portfolio DCF Revenue +10% 3,092,629 N/A
-10% (3,346,899)
Discount rate +1% (1,693,901)
-1% 1,997,658
-------------------------------------------------------- ------------ ----------------- -----------------
Republic of Ireland
Portfolio DCF Revenue +10% 2,501,242 N/A
+10% (2,428,613)
Discount rate +1% (1,533,455)
-1% 1,855,738
-------------------------------------------------------- ------------ ----------------- -----------------
Valuation of financial instruments
The investments at fair value through profit or loss are Level 3
in the fair value hierarchy and the reconciliation in the movement
of this Level 3 investment is presented below. No transfers between
levels took place during the period.
Reconciliation 30 September 2019 31 March
2019
(GBP) (GBP)
----------------------------------------------- ------------------ ------------
Opening balance 6,482,964 -
Purchases during the year 11,783,400 8,561,656
Proceeds from investments - return of capital - (1,513,628)
Total fair value movement through the profit
or loss 2,219,191 (565,064)
Closing balance 20,485,555 6,482,964
----------------------------------------------- ------------------ ------------
A minority shareholder of NK Boulby has a right to receive a
certain share of NK Boulby distributions once NK Energy Solutions
realises excess return over an agreed hurdle return from it's
investment into NK Boulby. Based on free cash flow forecast used to
compute the net asset value of NK Boulby for this period, it is not
expected to reach the threshold return and thus no payment to the
minority shareholder is taken into account. However, if the actual
cash flow significantly exceeds the forecast cash flow used for
current net asset value, a part of the excess cash flow may be
distributed to the minority shareholder, impacting the ultimate
fair value.
18. Net asset value per share
Basic NAV per share is calculated by dividing the Company's net
assets as shown in the Statement of Financial Position that are
attributable to the ordinary equity holders of the Company by the
number of ordinary shares outstanding at the end of the period. As
there are no dilutive instruments outstanding, basic and diluted
NAV per share are identical.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
18. Net asset value per share continued
30 September 31 March 2019
2019
------------------------------------------------ --------------- ---------------
Net assets per statement of financial position GBP 35,872,383 GBP 28,115,837
Ordinary shares in issue as at reporting date 37,562,148 30,600,000
NAV per share - Basic and diluted (pence) 0.96 0.92
------------------------------------------------ --------------- ---------------
19. Share capital
Ordinary Share Share premium Special Capital Total
shares capital reserve reserve reduction
Number (GBP) reserve
(GBP) (GBP) (GBP) ( GBP)
---------------------------------- ----------- --------- -------------- --------- ----------- -----------
As at 19 January 2018 - - - - - -
Issue of 50,000 redeemable
preference shares - one
quarter paid up - 12,500 - - - 12,500
Redemption and cancellation
of 50,000 redeemable preference
shares - (12,500) - - - (12,500)
Issue of ordinary shares
of GBP0.01 and fully paid
at GBP1 - 25 May 2018 30,600,000 306,000 30,294,000 - - 30,600,000
Share issue costs - (531,691) - - (531,691)
Transfer to capital reduction
reserve and special reserve - - (29,694,833) 186,656 29,508,177 -
Dividends - - - - (918,000) (918,000)
As at 31 March 2019 30,600,000 306,000 67,476 186,656 28,590,177 29,150,309
---------------------------------- ----------- --------- -------------- --------- ----------- -----------
As at 1 April 2019 30,600,000 306,000 67,476 186,656 28,590,177 29,150,309
Issue of ordinary shares
of GBP0.01 and fully paid
at GBP1 - 19 August 2019 6,962,148 69,621 6,265,934 - - 6,335,555
Share issue costs - (160,135) - - (160,135)
Dividends - - - - (306,000) (306,000)
As at 30 September 2019 37,562,148 375,621 6,173,275 186,656 28,284,177 35,019,729
---------------------------- ----------- -------- ---------- -------- ----------- -----------
Share capital and share premium account and capital reduction
reserve
On incorporation the Company issued 1 ordinary share of GBP1
which was fully paid up and 50,000 redeemable preference shares of
GBP1 each which were paid up to one quarter of their nominal value.
On 17 July 2018 the Directors resolved to redeem the 50,000
redeemable preference shares.
On 21 May 2018, the Board approved the proposed placing and
offer for subscription (together the "Placing") of up to 100
million ordinary shares of GBP0.01 each in the capital of the
Company at a price of GBP1 per ordinary share. It was intended that
the ordinary shares of the Company would be admitted to trading on
the Premium Segment of the Main Market of the London Stock Exchange
("Admission"). On 25 May 2018, the Company issued 30,600,000
ordinary shares at a price of 100 pence per share, raising net
proceeds from the Placing of GBP30,600,000. Admission subsequently
took place on 25 May 2018. The consideration received in excess of
the par value of the ordinary shares issued of GBP30,294,000 was
credited to the share premium. Capital reduction reserve and
revenue reserves are available to the Company for distributions to
Shareholders as determined by the Directors.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
19. Share capital continued
Following a successful application to the High Court and
lodgement of the Company's statement of capital with the Registrar
of Companies, the Company was permitted to reduce the capital of
the Company by an amount of GBP29,694,833. This was affected on 16
August 2018 by a transfer of that amount from the share premium
account to distributable reserves. A special reserve was created
out of the distributable reserve for creditors outstanding as at
the date of reduction being 16 August 2018 and the balance
transferred to capital reduction reserve. The outstanding creditors
as at 16 August 2018 were GBP186,656 and GBP29,508,177 was
transferred to capital reduction reserve. The capital reduction
reserve is classed as a distributable reserve and dividends paid by
the Company are currently being offset against this reserve.
On 5 June 2019, the Board approved the proposed placing and
offer for subscription (together the "Placing") of up to 50 million
ordinary shares of GBP0.01 each in the capital of the Company at a
price of GBP1 per ordinary share. It was intended that the ordinary
shares of the Company be admitted to trading on the Premium Segment
of the Main Market of the London Stock Exchange ("Admission"). On
19 August 2019, the Company issued 6,962,148 ordinary shares at a
price of 100 pence per share, raising net proceeds from the Placing
of GBP6,130,651. Admission subsequently took place on 19 August
2019.
The consideration received in excess of the par value of the
ordinary shares issued of GBP6,335,555 was credited to the share
premium account.
Ordinary shareholders are entitled to all dividends declared by
the Company and to all of the Company's assets after repayment of
its borrowings and ordinary creditors. Ordinary shareholders have
the right to vote at meetings of the Company. All ordinary shares
carry equal voting rights. An interim dividend of 1 pence per share
is paid at 27 June 2019 and a further dividend of 2 pence per share
is proposed by the Directors as at 30 September 2019. The total
dividends paid for the period to 31 March 2019 was 4 pence per
share.
20. Reserves
The nature and purpose of each of the reserves included within
equity at 30 September 2019 are as follows:
-- Share premium reserve: represents the surplus of the gross
proceeds of share issues over the nominal value of the shares, net
of the direct costs of equity issues and net of conversion
amount.
-- Capital reduction reserve: represents a distributable reserve
created following a Court approved reduction in capital.
-- Revenue Reserves represent cumulative net gains and losses
recognized in the Statement of Comprehensive Income.
The only movements in these reserves during the period are
disclosed in the Statement of Changes in Equity.
21. Transactions with related parties
Following admission of the ordinary shares, the Company and the
Directors are not aware of any person who, directly or indirectly,
jointly or severally, exercises or could exercise control over the
Company. The Company does not have an ultimate controlling
party.
Details of related parties are set out below:
Directors
Patrick Cox, Chairman of the Board of Directors of the Company,
is paid director's remuneration of GBP33,000 per annum; Caroline
Banszky is paid Directors' remuneration of GBP21,000 per annum,
with the remaining Directors being paid directors' remuneration of
GBP18,000 per annum. Total Director's remuneration of GBP45,000 (30
September 2018: GBP31,731) was incurred in respect of the period
with GBP11,426 (31 March 2019: GBP3,749) being outstanding and
payable at the period end.
Investment Advisor
The Investment Advisor, Gore Street Capital Limited (the
"Investment Advisor"), is entitled to advisory fees under the terms
of the Investment Advisory Agreement amounting to 1/4(th) of 1% of
Adjusted Net Asset Value. The advisory fee will be calculated as at
each NAV calculation date and payable quarterly in arrears.
For the avoidance of doubt, where there are C Shares in issue,
the advisory fee will be charged on the Net Asset Value
attributable to the Ordinary Shares and C Shares respectively.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
21. Transactions with related parties continued
Investment Advisor continued
For the purposes of the quarterly advisory fee, Adjusted Net
Asset Value means:
(i) for the four quarters from First Admission, Adjusted Net
Asset Value shall be equal to Net Asset Value;
(ii) for the next two quarters, Adjusted Net Asset Value shall
be equal to Net Asset Value minus Cash on the Company's Statement
of Financial Position, plus any committed Cash on the Company's
Statement of Financial Position;
(iii) thereafter, Adjusted Net Asset Value shall be equal to Net
Asset Value minus Cash on the Company's Statement of Financial
Position.
Investment advisory fee of GBP150,389 (30 September 2018:
GBP40,499) was paid during the period of which GBP95,414 (31 March
2019: GBP83,716) was paid in advance. The Investment Advisor waived
a portion of its fees which resulted in a reduction of 61.24% on
the actual fees incurred by the Company.
In addition to the advisory fee, the Advisor is entitled to a
performance fee by reference to the movement in the Net Asset Value
of Company (before subtracting any accrued performance fee) over
the Benchmark from the date of admission on the London Stock
Exchange.
The Benchmark is equal to (a) the gross proceeds of the Issue at
the date of admission increased by 7 per cent. per annum (annually
compounding), adjusted for: (i) any increases or decreases in the
Net Asset Value arising from issues or repurchases of Ordinary
Shares during the relevant calculation period; (ii) the amount of
any dividends or distributions (for which no adjustment has already
been made under (i)) made by the Company in respect of the Ordinary
Shares at any time from date of admission; and (b) where a
performance fee is subsequently paid, the Net Asset Value (after
subtracting performance fees arising from the calculation period)
at the end of the calculation period from which the latest
performance fee becomes payable increased by 7 per cent. per annum
(annually compounded).
The calculation period will be the 12 month period starting 1
April and ending 31 March in each calendar year with the first year
commencing on the date of admission on the London Stock
Exchange.
The performance fee payable to the Investment Advisor by the
Company will be a sum equal to 10 per cent. of such amount (if
positive) by which Net Asset Value (before subtracting any accrued
performance fee) at the end of a calculation period exceeds the
Benchmark provided always that in respect of any financial period
of the Company (being 1 April to 31 March each year) the
performance fee payable to the Investment Advisor shall never
exceed an amount equal to 50 per cent of the Advisory Fee paid to
the Investment Advisor in respect of that period. Performance fees
are payable within 30 days from the end of the relevant calculation
period. No performance fees were accrued as at 30 September
2019.
During the period the Investment Advisor provided operations
management services to project companies (refer to note 12)
resulting in the amount of GBP106,289 (30 September 2018:
GBP28,371) being charged to the project companies by the Investment
Advisor.
The charge per period of operations management services provided
by the Investment Advisor to project companies (refer to note 12)
amounts to GBP106,289 (30 September 2018 GBPGBP28,371) for the
period.
22. Capital commitments
The Company has a commitment of circa. GBP8 million to invest
into projects that involve NEC ES. Of this amount, GBP4.5 million
has been advanced to NEC ES as mentioned in note 14. These projects
depend on NEC ES providing, directly or indirectly, a supply of
products, equipment and/ or services required for those projects
within 12 months from the date of admission, provided NEC ES has
the ability to meet the requirements of such projects and the terms
of pricing of the products, equipment or services to be provided
are on standard market terms. The Company's obligations in respect
of the NEC ES commitment shall be discharged once NEC ES and/ or
any of its affiliates received contractual commitments in respect
of relevant project(s) in an amount equal to or greater than the
amount of the NEC ES investment, or the lapse of the commitment
period. At the period end this commitment is still in existence as
a consequence of the duration of contracts which are nearing
completion. One project is commissioned, the other is due for
commissioning in December 2019. These projects, which were entered
into prior to the lapse date, comprise commitments of totalling of
circa GBP8m.
The Company had no contingencies and no other significant
capital commitments at the reporting date.
Notes to the interim condensed financial statements
continued
For the period ended 30 September 2019
23. Post balance sheet events
Placing Programme
On the 4th of October the company announced an additional
funding commitment from the Company's strategic partner, the
National Treasury Management Agency ("NTMA"). NTMA, Ireland's
sovereign wealth fund, funded GBP9.5m to be used by the Company for
developing the RI Projects.
On October 11 2019, an application for admission to the premium
segment of the Official List has been made to the Financial Conduct
Authority and to the London Stock Exchange for admission of
10,106,610 ordinary shares of 1 penny each at a price of 93.8 pence
per share.
On the 17th of October 1,264,071 new Ordinary Shares were issued
at 93.8p per share to other parties, as the concluding element of
that placing programme.
Purchase of Republic of Ireland Assets
On 4 June 2019, the Company acquired the rights to purchase
controlling interests in a portfolio of four projects totalling
160MW in Northern Ireland ("NI Projects") and the Republic of
Ireland ("RI Projects") from renewable energy developer, Low Carbon
subject to the RI Projects' receipt of grid and revenue contracts.
The 160MW includes the RI Projects, each with 30MW of capacity
located in Porterstown, County Kildare and Kilmannock, County
Wexford.
The Irish government is determined to support energy storage
within the Delivering a Secure Sustainable Electricity System
programme (the "DS3 Programme"). The purpose of the DS3 programme
is to enable Ireland to meet its target of 75% non-synchronous and
renewable (i.e. wind and solar) electricity across the all-island
network. The DS3 market consists of both fixed and standard
contracts available across the Irish grid in both the Republic of
Ireland and Northern Ireland.
On 9 August 2019, EirGrid announced that the RI Projects' bids
in the highly competitive DS3 capped market tender were successful
and the projects were awarded contracts for the full 60MW of
capacity. The RI Project vehicles have executed the DS3 contracts
on 24 September 2019 and made payments of fees necessary to begin
grid connection works.
The completion of the acquisition of the two RI assets which, as
announced 4 October 2019, were successful in gaining two six-year
fixed revenue contracts, occurred on 11 October 2019.
Dividends
An interim dividend of GBP751,243 (2 pence per share) was
declared on 11 September 2019, which pertains to the quarter ended
30 June 2019. The interim dividend was subsequently paid during
October 2019.
There were no further events after reporting date which requires
disclosure.
Directors and Advisors
Directors
Patrick Cox - Chairman
Caroline Banszky
Malcolm Robert King
Thomas Scott Murley
Registered office
The Scalpel
18th Floor
52 Lime Street
London
EC3M 7AF
AIFM
Mirabella Financial Services LLP
Cordium
Norfolk House
31 St James's Square
London
SW1Y 4JJ
Investment Advisor
Gore Street Capital Limited
Michelin House
81 Fulham Road
London
SW3 6RD
Independent Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
Administrator and Secretary
JTC (UK) Limited
The Scalpel
18th Floor
52 Lime Street
London
EC3M 7AF
Registrar and Receiving Agent
Computershare Investor Services Plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
Legal Advisor
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
Placing Agent and Broker
Shore Capital
Cassini House
57 St James Street
London
SW1A 1LD
Depositary
INDOS Financial Limited
St Clements House
27-28 Clements Lane
London
EC4N 7AE
Independent Valuer
BDO LLP
55 Baker Street
London
W1U 7EU
Ticker: GSF
[1] Includes both of Northern Ireland and Republic of
Ireland.
[2] Value of dividend declared on 11 September (2.0 pence per
share) has not been deducted in this figure since the payment date
was after 30 September 2019.
[3] NAV per share is 93.5 after subtracting dividend declared on
11 September 2019. It is lower by 0.1 pence per share compared to
93.6 NAV as of 30 June 2019. 93.5 NAV is before subtracting value
of the dividend declared for this quarter.
[4]
https://www.nortonrosefulbright.com/en-mo/knowledge/publications/4eb35d75/scaling-up-energy-storage-in-great-britain-progress-on-change
[5]
https://www.nationalgrideso.com/publications/future-balancing-services
[6] Capacity Market reinstatement: letters from BEIS to National
Grid ESO and ESC, 25 October 2019. URL:
https://www.gov.uk/government/publications/capacity-market-reinstatement-letters-from-beis-to-national-grid-eso-and-esc-october-2019
[7] Aurora Energy Report : Distributed and Flexible energy
meeting (31 October 2019)
[8] 2.0 MW proportionately to the Company's share shareholding
portion
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FFAEFFFUSEDE
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December 12, 2019 02:01 ET (07:01 GMT)
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