Full Year Results
15 July 2021
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, today announces Full Year Audited results for the year ended 31 March 2021.
To view a full version of the results in
To view Full Results Presentation in PDF format click here
View 2021 Full Year Results Presentation Recording click here
Financial Highlights for the year ended 31 March 2021
- NAV increased substantially to £145.1 million as at March 2021 (March 2020: £49.7 million), representing a 192% increase
- NAV per share increased 6.7% to 100.9 pence (31 March 2020: 94.6 pence)
- Total shareholder return for the period of 18.2% and 25% since inception as of 31 March 2021 (vs. 23.3% FTSE All-Share Index total return over the period 31 March 2020 to 31 March 2021 )
- Net income of £14.6 million, 3x increase compared to last fiscal year (31 March 2020: £4.7million)
- Quarterly dividend declared for the period of 1.0 pence per share. Total dividend for the year of 7.0 pence per share, as targeted
- Following the issuance of a further 91.3 million shares between June and December 2020, Issued Share Capital (ISC) increased to 143.9 million shares (31 March 2020: 52.5 million shares)
- Earnings per share (basic and diluted) of 16.06 pence
Operational Highlights for the year ended 31 March 2021
- Portfolio increased substantially to 440 MW as at 31 March 2021 (31 March 2020: 189 MW)
- The Company is now the largest operator of energy storage on the Irish grid with an estimated 66% market share and in addition Gore Street holds c. 10% market share of the c.1GW installed capacity of energy storage on the grid in Great Britain and is also one of the largest operators in the region
- Most importantly, Gore Street has been able to consolidate its position as a central player while selecting only the most attractive assets at prices that are considerably more attractive than those gathered by our major competitors
- Operational assets producing income increased from four to eleven projects in Great Britain (GB) and Ireland, resulting in an aggregate operational portfolio generating 210 MW
- 50.0 MW Mullavilly project in Northern Ireland
- 50.0 MW Drumkee project in Northern Ireland
- 20.0 MW Lascar project in Manchester
- 20.0 MW Hulley project in Cheshire
- 19.5 MW Larport project in Derbyshire
- 11.2 MW Ancala project, comprised of 10 sites across GB
- 10.0 MW Breach Farm project in Derbyshire
- 10.0 MW Lower Road project in Essex
- 9.0 MW Port of Tilbury project in London
- 6.0 MW Boulby site in North Yorkshire
- 4.0 MW Cenin project in Swansea
- All operational assets continued to perform within expectations, delivering steady revenue for the Company, whilst assets in construction remained on-track despite rolling lockdowns
- The Company’s further 190 MW of sites under construction remain on track as per the previously announced schedule
Post Period-end Highlights
- Gross proceeds of £135.0 million raised in April 2021 through an institutional placing and a retail offer at 102.0 pence per Ordinary Share, with the resultant total ISC increasing to 276.2 million
- Acquisition of a new 80.0 MW project, Stony Energy Storage Limited
- Portfolio increased to 15 projects with a total capacity of 520 MW of which 210 MW is operational
- Pipeline of c.880MW with 300 MW under exclusivity, located in GB, Ireland, Continental Europe and United States - as with other assets under construction, capital expenditure requirements would be staggered over a 12-to-18-month period
Environmental, Social and Governance
- We have renewed our commitments to the Global Impact Investing network for the year
- We are featured as a case study within the Green Economy Report produced by the London Stock Exchange which will be published 20 July 2021 as holders of the Green Economy Mark- which acknowledges that the fund derives greater than 50% of its revenues from green sources
- We became a UNPRI signatory after the reporting period in July 2021
Net Asset Value
As at 31 March 2021, the audited estimated NAV per Ordinary Share increased to 100.9 pence, compared with 94.6 pence per Ordinary Share at 31 March 2020, representing a total return including dividends over the period of 14.1 %.
The 1.0 pence per share declared dividend will be paid on or around 13 August 2021 to shareholders on the register on 23 July 2021. The ex-dividend date will be 22 July 2021.
CEO of Gore Street Capital, the investment adviser to the Company, Alex O'Cinneide commented:
“I am delighted to report that Gore Street had another exceptional period of successful growth as we continued to deliver successfully against our strategy and targets, delivering attractive returns to our investors in an important ESG sector. We grew substantially during the year with our portfolio of assets totaling 520 MW in aggregate, of which 210 MW is already operational, delivering strong cashflows for the company and underpinning quarterly dividends to our shareholders. During the period, we successfully raised a total of £90.7 million and post period-end raised a further £135 million in April 2021. This reflects the ongoing momentum of attractive opportunities in our pipeline, in May 2021, we acquired Stony Energy Storage Limited, an 80 MW project and our largest single asset acquisition to date.
Gore Street is well set to continue to grow with c.880 MW in our acquisition pipeline of which 300 MW is now under exclusivity and expected to be executed in the near term.
The global transition to clean and renewable energy generation remains a leading priority for governments in the UK and Ireland, as well as further afield, and our assets play a major role in enabling that transition, whilst creating significant value for our shareholders. I look forward to updating shareholders on our continued good progress.”
A copy of the annual report has been submitted to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism. The annual report and analyst presentation will also be available on the Company's website at https://www.gsenergystoragefund.com where further information on GSF can be found. Further, the annual report is included with this announcement here: http://www.rns-pdf.londonstockexchange.com/rns/2897F_1-2021-7-14.pdf
 Installed costs for GSF estimated based on date of IPO for seed assets (2018), and date of energisation of assets for subsequent years. Installed costs for Comparable funds based on publicly available information. Note: Installed cost £/MW for GSF may include the present value of future EPC milestone payments discounted at 10%
There will be a webinar for analysts at 9:30am (UK time) today. The webinar will be hosted by Alex O'Cinneide and Sumi Arima, respectively CEO and CIO of Gore Street Capital, GSF's Investment Adviser. To register for the event, please contact [email protected].
Presentation materials will also be posted on the Company's website www.gsenergystoragefund.com , alongside GSF's Annual Financial Report.
The Legal Entity Identifier of the Company is 213800GPUNVGG81G4O21.
The person responsible for releasing this announcement is Susan Fadil.
For further information:
|Gore Street Capital Limited|
|Alex O’Cinneide / Paula Travesso||Tel: +44 (0) 20 3826 0290|
|Shore Capital (Joint Corporate Broker)|
|Anita Ghanekar / Rose Ramsden (Corporate Advisory)||Tel: +44 (0) 20 7408 4090|
|Fiona Conroy / Henry Willcocks (Corporate Broking)|
|J.P. Morgan Cazenove (Joint Corporate Broker)|
|William Simmonds / Jérémie Birnbaum (Corporate Finance)||Tel: +44 (0) 20 7742 4000|
|Buchanan (Media Enquiries)|
|Charles Ryland / Henry Wilson / George Beale||Tel: +44 (0) 20 7466 5000|
|Email: [email protected]|
|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.
The Company targets an annual dividend of 7.0% of NAV per Ordinary Share in each financial year, with a minimum annual target of 7.0 pence per Ordinary Share, payable quarterly. Dividends are discretionary.
Gore Street Energy Storage Fund plc is listed on the LSE’s Premium Segment of the main market and is LSE Green Economy Mark accredited.
Figure 1: Key Metrics
|31 March 2020||31 March 2021|
|Net Asset Value (NAV)||£49.7 m||£145.1 m|
|NAV per share*||94. 6p||100. 9p|
|NAV Total Return**||10.6%||14.1%|
|Number of issued Ordinary shares||52.5 m||143.9 m|
|Share price based on closing price of indicated date||97.3 p||108.0 p|
|Premium to NAV***||2.9%||7.0%|
|Market capitalisation based on closing price at indicated date||£51. 1m||£155.4m|
|Portfolio’s total capacity||189.0 MW||380.0 MW|
|Dividends announced****||7.0 p||7.0 p|
* NAV per share is calculated as Total NAV divided by the total number of shares outstanding within the respective period.
** NAV total return is calculated as the difference between the closing NAV at 31 March 2021 and opening NAV at 31 March 2020 plus dividend paid for the period divided by opening NAV ((100.9-94.6+7)/94.6)*100). This is an alternative performance measure.
*** Premium to NAV calculated as the difference between the closing price on 31 March of 2021 to NAV on 31 March of 2021. (108-100.9/100.9)*100). This is an alternative performance measure.
**** A total of 6.0 pence in dividends was paid in the financial year and the remaining 1.0 pence is expected to be paid following the end of year Board meeting in July 2021.
***** Ongoing Charges: The expenses of managing the Company are reviewed quarterly by the Board. Ongoing charges are those expenses of a type that are likely to recur in the foreseeable future. The ongoing charges figure of 2.2% exclusive of performance fee - ((2,339,714/104,226,092.25)*100), (2.7% inclusive of performance fee - ((2,836,175/104,226,092.25)*100) is calculated as the ongoing charges incurred by the Company (including costs charged to capital but excluding interest) divided by the average undiluted net asset value (with debt at market value) for the period and expressed as a percentage. This is an alternative performance measure.
Net Asset Value
There was a NAV increase of 6.3 pence per share in the fiscal year, which represents a net asset total return of 14.1 per cent inclusive of dividends paid during the fiscal year. From IPO to 31 March 2021, the Company has delivered a net asset total return of 20.7 per cent inclusive of dividends paid during each fiscal year.
Figure 2: Net Asset Value of GSF: quarterly progress
|Quarter End||Pence per share|
Since IPO, the Company has targeted an annual dividend of 7.0 pence in each financial year. The Company is pleased to announce that as of the publication date, the Company has declared total dividends of 7.0 pence with respect to the period ending 31 March 2021, as targeted.
Dividends in respect of Quarter Ends
|30 June 2020||2.0p|
|30 September 2020||2.0p|
|31 December 2020||2.0p|
|31 March 2021||1.0p*|
* 1.0 pence declared for the period, is expected to be paid after the July board meeting.
I am pleased to present Gore Street’s third annual report and accounts for the year ended 31 March 2021, which shows a material progression in the growth of both our Company and the energy storage industry in general. In a year marked with so much volatility and uncertainty we are particularly proud of our delivery of growth in the portfolio and our continued focus on sustainability, as promised to our investors.
Year in Review
This fiscal year, once again, marks a number of milestones for Gore Street.
We exceeded a £100 million market cap, ending the fiscal year at £155.4 million. Post year-end (by the time of publication), our market cap rose to £307.71 million* , resulting in our inclusion in the FTSE All Share Index.
We increased our operational portfolio seven-fold in the past year, and now have 210 MW across two different jurisdictions generating revenue for the Company (constituting 48% of total portfolio as of 31 March 2021). The size of the portfolio has increased by a factor of sixteen since our IPO only three years ago.
We became the largest operator of energy storage in Northern Ireland, adding 100 MW to the Irish grid and acquired an additional 81 MW of operational assets in Great Britain, making us amongst the largest energy storage portfolios in Britain and the largest in Ireland.
We are pleased to have been featured recently in the LSE’s 2021 Green Economy report, which notes the market’s appreciation of the role our energy storage portfolio plays in supporting “ever larger amounts of renewable energy for hundreds of thousands of UK homes”** .
We are changing our website to better communicate our services and performance to the public. I expect soon to include data that more deliberately tracks the environmental impact of our operational services in the UK and Ireland.
Overview of Revenue and Operational Performance
The regulatory and market frameworks for energy storage are maturing rapidly with many early participants leaving the energy storage market as the required level of expertise and performance increases.
We are proud to note that Gore Street and its partners, in record time, have met the National Grid’s demands for early delivery to the grid of a new frequency service, dynamic containment. Delivery of this service resulted in a 65 per cent increase in the operational portfolio’s average revenue against anticipated earnings.
We maintained high operational performance of British assets in the fiscal year, averaging a 93 per cent delivery success rate across the portfolio*** , with no health or safety incidents in the year. We faced some challenges with one of our earliest developments, NK Boulby (6MW), which is undergoing a series of upgrades to allow it to hold and meet its power requirements. With the exception of NK Boulby, all assets delivered a robust and reliable performance throughout the fiscal year, operating near nameplate portfolio capacity at an average of 98%.
Our deal pipeline remains extensive. We have 300 MW in exclusivity as of the date of publication. Our strong focus on cost has allowed us to reduce our average cost of deployment per MW by 47% since IPO, which, alongside our expertise in monetisation of our portfolio, marks us out as the preeminent investor in this space. Our pipeline reflects that we are now looking beyond the UK and Ireland to mainland Europe and North America for opportunities to support and collaborate with regional and national power stakeholders in the transition from fossil fuels to renewable energy.
*Market captilisation as of 12 July 2021.
**Green Economy Report is available at: 20 July 2021.
***Delivery success is calculated by measuring an asset’s availability for grid services, exclusive of downtime scheduled for planned maintenance.
The Board declared dividends amounting to 7p per Ordinary Share in the fiscal year, with the final 1p payment scheduled for distribution around the time of publication of this report.
We view the quality and culture of our investment management team as key to our success. It is a high-performing culture that emphasises productivity and financial and operational responsibility. The manager has attracted great people representing a diverse array of perspectives, cultures, and skills. This growing team is working collaboratively and efficiently for the benefit of the Company and has done so admirably notwithstanding the challenges arising from remote working during the COVID-19 pandemic, a fact which I wish to acknowledge with thanks on behalf of the Board.
Environmental and Social Sustainability
The Company’s role in maintaining the stability of national and regional grids during their transition to clean energy was recently recognised by the award of the London Stock Exchange’s Green Economy Mark, which is provided to companies that derive 50% or more of their revenues from environmental solutions. We have started to collate data to better assess the impact and effectiveness of our systems in supporting the net zero ambitions of the grid systems that we support.
The Company aims always to operate in a manner that safeguards public health, property and the environment and is proud to note that it has had no health or safety incidents or community complaints in the fiscal year.
Gore Street is aware of its responsibility as a leader in this nascent industry to promote the continuous integration of economically, environmentally and socially sustainable practices into its investment, construction and operational decision making. We commit to transparently communicating our progress in implementing and improving our processes over the coming years.
COVID- 19 And Other Risks
The spread of the coronavirus (COVID-19) and its associated public policy containment measures has created significant volatility and uncertainty for businesses across the globe. In accordance with government policy the Investment Manager closed its offices obliging team members to work from their places of residence whenever possible. It is to the great credit to all involved, individually and as a team, that these restrictions have not negatively impacted the Company’s productivity nor its construction activities in Northern Ireland. On the contrary, the Mullavilly and Drumkee sites were commissioned slightly ahead of schedule and both began generating revenue on March 30, 2021. It remains to be seen what potential longer term effects, if any, there will be as a result of prolonged social isolation on our businesses, including the effects on our Investment Manager’s employees, our suppliers, vendors or on our operational performance. We discuss COVID and other principal risks alongside our mitigation strategies on pages 39 to 41.
DIRECTORS RESPONSIBILITIES PURSUANT TO SECTION 172
The Directors are responsible for acting in a way that they consider to be in good faith and most likely promote the success of the Company for the benefit of its members as a whole. In doing so, Directors must have regard for the needs of stakeholders amongst other matters set out in section 172 when performing their duties as discussed in the corporate governance report on pages 50 to 52
VIABILITY AND GOING CONCERN
The Directors have assessed the prospects of the Company over a period of five years and confirm our reasonable expectation of viability and continuance over that term. The Board deemed this period appropriate due to the early stage of development of both the Company and its investment portfolio after 28 months of trading, and the nature of the business in which the Company is involved.
The Directors’ assessment of Gore Street’s viability and going concern are discussed in the corporate governance report on pages 48 to 49.
The Company has a robust pipeline in Great Britain, Western Europe and North America. This reflects growing demand for large scale grid storage solutions as systems transition from fossil fuels to renewable energy. We will continue to build on our proven track record of operational and technological skills in bringing projects from the planning stage into operation, while doing so at competitive deployment costs per MW and with a strong focus on sustainable investment returns for shareholders
Date: 14 July 2021
Importance of Storage
The UK and Ireland are among the many countries transitioning from fossil fuels to renewable and other low carbon generation options as part of the global commitment to mitigate climate change. The transition presents challenges and opportunities. Among the challenges are the intermittency of weather-dependent renewables vis-a-vis consistent power demand, creating difficulty for network operators. Rapid advancements in battery technology have enabled grid-scale battery storage systems to emerge as a key solution to solar and wind intermittency, as well as to serve as a pivotal tool in avoiding major grid outages and blackouts.
Gore Street is a pure-play energy storage investor.
The Company seeks to provide investors with a sustainable and attractive growth portfolio over the long term by investing in a diversified portfolio of utility-scale energy storage projects primarily located in the UK and Ireland, while actively evaluating opportunities for expansion into attractive market within OECD countries. In addition, the Company aims to make annual discretionary dividend payments to shareholders at a target rate of 7% of NAV (and a target minimum rate of 7p per Ordinary Share).
The Company will not invest in any projects under early-stage development so that, save in respect of construction and final delivery of the battery systems, the key components of the projects (with respect to land, planning permissions and grid offers) are in place before or at the time of acquisition.
Gore Street has assessed hundreds of opportunities since IPO and maintains a discipline of only investing in energy storage opportunities that meet our investment policy and criteria. We have established a strong network of diligent project developers with an understanding of the environmental and regulatory guidelines for early-stage project development to ensure that projects identified for investments meet (or will meet) land, planning and grid energisation requirements by the time of acquisition.
We have a coordinated and leveraged approach to investments in the renewable energy sector. Our experienced team of investment professionals have the necessary legal, financial and technical experience to properly evaluate developmental and operational opportunities within British, Irish, continental European and American markets. We design our projects with flexibility in mind, so that they are able to adapt to the evolving storage policy climates in these markets and to the changing regulatory and technological landscapes implemented by national and regional grids.
We have a competent deal team to manage transaction structuring, risk allocation, and project transfers in an efficient and timely manner.
Responsible management and monitoring
We work to continuously integrate environmental, social and governance considerations into every aspect of our investment process. At the time of publication, we have applied to become a UNPRI signatory and have committed to comply with the EU’s SFDR Article 8 regulations.
INVESTMENT MANAGER’S REPORT
The Company has an interest in twenty-three assets held within 14 portfolio companies*.
*Stony Energy Storage Limited, the last of the 14 holding companies, was acquired post-fiscal year.
Summary of Recent Portfolio Developments
In the fiscal year 2021, the Company increased its operational portfolio seven-fold, and now has 210 MW generating revenue (constituting 48% of total portfolio MW as of 31 March 2021).
The acquisition of Anesco’s operational portfolio of 5 companies comprising 14 sites in October 2020 increased the Company’s British operational portfolio by 81 MW, generating cashflow immediately upon acquisition.
Despite construction during the peak of the Covid-19 pandemic, the Company’s assets in Northern Ireland, Mullavilly and Drumkee, were commissioned in March 2021 generating revenues in the Irish DS3 services market.
The acquisition of Ferrymuir in June 2020 represents the Company’s first activity in Scotland, with construction expected to commence in the last quarter of 2021.
Porterstown, one of the Company’s assets in the Republic of Ireland, was one of just a few storage assets to be offered the opportunity to expand its operational capacity from 30 MW to 90 MW. The Company’s other Irish asset, Kilmannock, has also applied for increased capacity.
Stony, an 80 MW project in England, was acquired after the fiscal year in May 2021, bringing the total Company portfolio as of the date of publication to 460 MW. Upon approval of Kilmannock’s
application for expansion, the Company’s portfolio would increase to 520 MW.
Figure 4: Portfolio by Stage – in MW (460 MW as at the date of publication)
As of the date of publication, the Company will have increased the portfolio size by nearly 16 times since the date of its initial public offering in May 2018, and upon approval of Kilmannock expansion, will be at nearly 18 times larger since the date of its IPO.
The Company has an 86 per cent increase in its operational portfolio when compared to 2020 and a 69 per cent increase on overall portfolio capacity when compared to 2020 (excluding the potential Kilmannock expansion).
Figure 6: Operational Performance for the Period
On average, the Company’s delivery success rate throughout the fiscal year was 93 per cent across its entire portfolio. NK Boulby had periods of unplanned downtime during the fiscal year, although by year end it was operational and delivering frequency response services at a reduced capacity of 4MW. The Company is replacing equipment at the site to better meet its power requirements. With the exception of NK Boulby, all assets were operationally reliable during the fiscal year, operating near nameplate portfolio capacity at an average of 98%.
Health & Safety
There were no HSE incidents at any sites during the period.
Revenue Stacking During the Fiscal Year
The Investment Manager constantly assesses options for revenue generation. Profitability maximisation remains a key aspect of Gore Street's revenue stacking strategy. The majority of the portfolio assets provide frequency services (EFR, FFR and DC) that reward the Company for fast response with delivery durations of 30-minutes minimum. An overview of the suite of available market services in the British and Irish markets is provided in pages 26 to 29 below.
The Company received higher than anticipated frequency revenues due to delivery of a new service, dynamic containment, which (for the period between its introduction in October 2020 to March 2021) was achieving prices capped at £ 17/MW/h, as compared to £ 10.3/MW/h for Fast Frequency Response during the same period**. National Grid has announced an expected demand of 1 GW for dynamic containment services and the Investment Manager intends to continue to exploit its early participation in service delivery until demand is satiated.
The Investment Manager participates in wholesale trading when appropriate to exploit spikes in market volatility. For instance, during the march-end quarter of 2021, the Investment Manager identified and took advantage of revenue trading opportunities to deliver payments higher than the available suite of frequency response revenue.
The Company’s sites in Northern Ireland became operational at the end of the fiscal year. Both benefit from DS3 uncapped revenue contracts and are expected to form a significant and meaningful part of Company’s revenue mix going forward, not least because of EirGrid and SONI’s announcement of an extension of the DS3 programme until 2024.
**Past performance is not a guarantee of future results.
Figure 7: Revenue Performance for the Period
GB Revenue Outlook
Electricity transmission and distribution network operations are increasingly complex, due in part to increased penetration of variable renewable energy, with more rapid changes in power generated and increased frequency and power quality stability. As a result, grid operators need to procure capacity that can react quickly to fluctuations in generation and provide frequency and power quality stability. This manifests itself in an ever-increasing demand for battery storage projects which can address the supply and quality issues.
The introduction of a new frequency service, Dynamic Containment, in the British markets in October 2020, resulted in the Company earning approximately double the revenue price of last year’s frequency response service. The GB storage market was further incentivized in the reporting period, by certain changes to market regulations in the form of reduced levies on stand-alone storage facilities and a reduction in capacity charges of approximately 30% (location-dependent). Storage is now also exempt from variable ‘BSUoS’ charges (system charges related to National Grid’s balancing of the demand and generation on the transmission system), which could potentially reduce the costs associated with operating storage systems.
(a) Frequency Services:
Frequency services balance supply and demand of electricity to ensure that frequency remains at 50 Hz (+/- 1%). As grid technology increases in complexity, the need for balancing services increases.
Dynamic Containment is a more complex form of frequency response that requires a faster response in the event of a sudden demand or generation loss in order to manage the imbalance in frequency in under a second.
(b) Capacity Market:
The Capacity Market is a stable contract of between one to fifteen years in duration, to deliver power at times of peak demand to the grid. 87 per cent of the GB portfolio participates in the capacity market (as at fiscal year-end) and 100 per cent of the portfolio is expected to participate in the Capacity Market by October 2021.
The Company’s GB portfolio benefited in the fiscal year from the highest capacity price awarded to storage at auction to date, with the recent T-4 auction (delivery year 2025/26) generating 2.5X previous revenues.
(c) Energy Trading:
The trading markets provide an opportunity to buy and sell power at attractive rates. Energy storage systems remain well-suited to take advantage of price volatility and the Company opportunistically participates in both Balancing Mechanism actions (‘instructions’ by the National Grid to registered systems, to balance the network in real-time) and in energy trades between consumers and generators.
Irish Revenue Outlook
The Company’s assets in Northern Ireland (NI) and the Republic of Ireland (ROI) participate in the ‘Delivering a Secure, Sustainable Electricity System’ program (“DS3”program) and the Integrated Single Energy Market (“I-SEM”) providing revenue streams which are substantively similar to the ones in Great Britain.
DS3 services as a whole represent one of the most complex packages of grid balancing activities available in the world, with extensive prequalification testing and performance monitoring requirements that confirm a battery system’s capacity to manage a ‘service system stacking’ approach that generates similar revenue stacks to those generated by the Company’s systems in GB. The Company’s management of the DS3 complexities is rewarded by lucrative revenues with potential to exceed the 10% IRR target.
In March 2021, the system operator announced a 12-month extension of the DS3 service to 30 April 2024.
Our ESG Commitment
The Company is committed to the continuous integration of ESG assessments into its investment, construction and operational decision making, and aims to transparently communicate about our progress through participation in the following initiatives:
The Company has begun to adopt the UNPRI’s six principles for better understand of environmental, social and governance impact and is taking active steps to improve its voluntary reporting by 2022 and to support the promotion of acceptance and implementation of these principles in the industry. The Company became a UNPRI signatory after the reporting period.
The Company is committed to integrating the Article 8 requirements of the EU’s Sustainable Finance Disclosure Regulation (SFDR), a component of the EU Action Plan on Sustainable investment, and will disclose, in accordance with the regulations, data on our assessments of the sustainability of our investment strategy and operations, beginning in 2022.
The Company agrees that transparency and consistent disclosure of environmental impact are key tools in improving the sustainability. The TCFD Framework focuses on disclosure of Governance, Strategy, Risk Management, and Metrics & Targets and it is the Company’s intent to continue to integrate information on its performance into its financial reporting and climate-related financial disclosures, beginning in 2022.
Principal Risks and Uncertainties
The Board routinely incorporates a review of the Company’s risk assessment matrix into its quarterly meetings and has carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, as identified below.
The Company has no employees and is reliant on the performance of the Investment Manager and its other advisors to achieve its investment goals.
Mitigant: The AIFM Agreement contains a key-man provision allowing the Company to terminate the agreement if the chief executive at the Investment Manager is unable to carry out his duties and obligations to the Company in accordance with the terms of his appointment. The investment, regulatory, asset management and transactional components of the Investment Manager’s responsibilities are supervised by a team of management professionals to mitigate the key-man risks. The Investment Manager’s team in turn self-regulates with the support and counsel of qualified market experts. With respect to asset valuation, the Investment Manager routinely engages reputable third-party valuers to confirm and review its NAV calculations on a bi-annual basis. The Investment Manager also engages a third-party such as NEC, Fluence, BYD and Tesla to conduct an annual audit of its risk and compliance policies and procedures and to mitigate against any cultural drivers that could harm investors or the portfolio.
Changes to the design of the energy market, or to the specifications for revenue services, network charges, access to networks or to other market rules or legislation, could impact revenue projections for portfolio assets.
Mitigant: The diversification of assets across the United Kingdom and Ireland mitigates the impact of changes in any single market product. In addition, the Investment Manager aims to stack revenue contracts, resulting in a diversification of income streams available to each asset, in order to minimise the portfolio’s reliance on any single contract mechanism or market service and protect against regulatory shifts within any specific market service.
Technology Manufacturer Risks
Gore Street’s portfolio currently consists only of lithium-ion batteries provided by four different battery manufacturers: NEC, Fluence, BYD and Tesla. Each site contains multiple battery stacks connected in parallel, with each stack containing modules of battery cells that are partially independent and can be replaced and repaired separately, thereby partially limiting the impact of failure of any module of cells. The performance of each asset is nonetheless dependent on scheduled maintenance and timely repair by these service providers.
Mitigant: The Company remains technologically agnostic and continues to evaluate other economically viable energy storage opportunities. The Company is not under an exclusivity agreement with any individual manufacturer and will tender projects scheduled to commence construction in 2022 and 2023 to multiple engineering, procurement and construction (EPC) bids in order to continuously diversify its portfolio of manufacturers and maintenance providers. The Company utilises a full wrap, so that the EPC is responsible for all equipment used in the BESS (Battery Energy Storage System) and the EPC has subcontractors.
The Company's investments will predominantly be in unquoted assets whose fair value involves the exercise of judgement.
Mitigant: The Investment Manager routinely utilises market experts to opine on the reasonableness of key data utilised in the asset valuation process (such as energy price forecasts). In addition, portfolio assets are valued by independent third-parties on a bi-annual basis, providing further objectivity to the portfolio valuation process including the review of discount rates.
COVID- 19 Disruption Risks
Lock-down restrictions and potential illness associated with the Covid-19 pandemic could have the ability to delay the operations and construction activities of the Company.
Mitigant: The Company remains in strict compliance with Government guidelines to maximise the use of remote working and has adopted software and collaboration programs to ensure the continued efficiency of the Investment Management team. The Company’s contractors have implemented responsible policies and HSE guidelines to ensure proper management of COVID risks during construction. The Company works closely with its contractors and their suppliers to mitigate the impact of potential supply chain delays and ensure timely development of portfolio projects.
Britain’s exit from the European Union and the resulting decoupling of European and British electricity and Capacity markets could result in electricity price volatility and further legislative changes.
Mitigant: The Company will continue to monitor British market regulations closely. It will also maintain its stacked revenue strategies, which maximise participation in diverse ancillary services and minimise exposure to the more volatile power trading market. In addition, the Company aims to further diversify its portfolio into North America in order to further diversify revenue streams.
The Company relies on EPC contractors for battery construction and it relies on the relevant transmission systems operator (TSO) for timely energisation and connection of that battery storage asset to the national grid. There is a risk that either construction party could delay the target commercialisation date.
Mitigant: The Company works closely with EPC contractors to ensure timely performance of services and imposes liquidated damage payments under the EPC contracts for EPC delays in delivery. The Company seeks commitments from TSOs to a target energisation date as a condition to project acquisition and provides maximum visibility on project development to TSOs in order to encourage collaboration towards that target energisation date.
Company financials (including any dividend payouts) are denominated in British Pounds. However, the Company has assets in Northern Ireland and Ireland with expenditures and revenues either denominated in or pegged to Euros.
Mitigant: The Company is negotiating a hedging facility with Santander bank to ensure appropriate management of its Euro exposure.
The Company is exposed (either directly or through its primary service providers) to server, software, and communications risks in managing its portfolio operations.
Mitigant: The Company manages server risks through implementation of systems’ firewalls and has installed redundancies in its systems to manage communications risks. The Company has implemented a requirement for annual certification from service provides of system security as part of the Company’s onboarding process.
To ensure that the Company maintains a holistic view of risk management, Gore Street and the Board will continue to monitor the following emerging risks and assess their potential to adversely impact operations: (i) insurance market requirements, (ii) environmental frameworks governing energy storage, (iii) potential changes to the UK tax structure; and (iv) changes to future investor accreditation resulting from Brexit.
The Directors present their report together with the audited financial statements for the period from 1 April 2020 to 31 March 2021. The Corporate Governance Statement on pages 55 to 70 forms part of this report. The Directors’ Report together with the Strategic report comprise the “management report” for the purposes of Disclosure Guidance and Transparency Rule 4.1.5R.
Principal activity and status
The Company was incorporated in England and Wales on 19 January 2018 with company number 11160422 and registered as an investment company limited by shares under Section 833 of the Companies Act 2006. On 25 May 2018, the Company’s ordinary shares were admitted as a Premium Listing and commenced dealings on the Main Market of the London Stock Exchange (“LSE”). The Company has, subsequent to its launch, entered the Investment Trust Company (“ITC”) regime for the purposes of UK taxation. The Company is a Member of the Association of Investment Companies (“AIC”).
During the period the Company, through GSES 1 Limited, has successfully acquired four new facilities, of which all facilities are majority owned by the Company. The registered address of GSES 1 Limited is The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF. The Chairman’s statement and Investment Managers report expands on the business activity and acquisitions in the period.
Results and dividends
The financial statements of the Company for the period appear on pages 96 to 101. Total Comprehensive income for the year 31 March 2021 was £14,594,694 (31 March 2020 £4,789,273). The Directors recommend a fourth interim dividend of 1 pence per share be paid, bringing the total dividend in respect of the period ended 31 March 2021 to 7 pence per share (7 pence per share 31 March 2020).
Subject to market conditions and performance, financial position and financial outlook, it is the Directors’ intention to pay an attractive level of dividend income to Shareholders on a quarterly basis. The targeted annual dividend for 31 March 2021 of 7.0 pence per Ordinary share will have been met, the annual target thereafter is an annual dividend of 7.0 per cent of NAV per Ordinary Share in each financial year, subject to a minimum target of 7.0 pence per Ordinary Share.
As at 31 March 2021, 276,224,622 ordinary shares were in issue (52,548,815 31 March 2020) and no other classes of shares were in issue at the respective 2020 and 2021 year end .
Risk management and internal control
The Board is responsible for financial reporting and controls, including the approval of the Annual Report and Accounts, the dividend policy, any significant changes in accounting policies or practices, going concern and treasury policies including the use of derivative financial instruments. The board takes comfort that it has outsourced and received assurance from those service providers regarding their internal controls and risk management processes. During the period the Board has carried out a robust assessment of the principal risks and uncertainties facing the Company and how they are being mitigated, as described on pages 39 to 41.
The Board meets at least every quarter to review the Company’s performance against its strategic aims, objectives, business plans and budgets and ensures that any corrective action considered necessary is taken. Additional meetings are held as required to deal with the business of the Company in a timely manner. Directors are expected to attend all meetings of the Board and all meetings of those committees on which they sit, as well as the Annual General Meeting (“AGM”). Meetings called outside the scheduled quarterly Board meetings may need to be convened at relatively short notice and therefore at times when not every director is available. Every meeting during the period was convened with an appropriate quorum and with the Directors independent of the Investment Manager.
The Company maintains £10million of Directors’ and Officers’ Liability Insurance cover for the benefit of the Directors, which was in place throughout the period and which continues in effect at the date of this report.
All Directors are Non-Executive Directors. All the Directors will seek re-election at the AGM in accordance with the recommendation of the AIC Code. Full details of the processes by which Directors can be appointed or replaced are set out in the Articles of Association.
As at 31 March 2021 the following shareholders have a disclosable interest of 3 per cent or more in the ordinary shares of the Company:
|Shareholder||Number of ordinary shares||Per centage of issued share capital|
|National Treasury Management Agency||11,730,910||8.15%|
|First Avenue Capital||7,987,357||5.55%|
|Senecca Investment Managers||6,491,000||4.51%|
|Nippon Koei Energy||6,000,000||4.17%|
|EFG Harris Allday||4,611,324||3.21%|
|Hawksmoor Investment Management||4,330,000||3.01%|
The Company made no political contributions during the period.
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose the Company’s measured carbon emissions sources under the Companies Act 2006 (Strategic report and Director’s report) Regulations 2013. The Company is a closed-ended investment company which has no employees and so its own direct environmental impact is minimal.
The Company has no employees and therefore no employee share scheme or policies for the employment of disabled persons or employee engagement.
Restrictions on transfer of securities in the Company
There are no restrictions on the transfer of securities in the Company, except as a result of:
- The FCA’s Listing Rules, require certain individuals to have approval to deal in the Company’s shares: and,
- The Company’s Articles of Association, allow the Board to decline to register a transfer of shares, or otherwise impose restriction on shares, to prevent the Company, the Investment Manager from breaching any law or regulation.
The Company is not aware of any agreements between holders of securities that may result in restrictions on transferring securities in the Company.
Securities carrying special rights
No person holds securities in the Company carrying special rights with regards to control of the Company.
Change of control
The Company is not aware of any person who, directly or indirectly, owns or controls the Company. The Company is not aware of any arrangements the operations of which may give rise to a change in control of the Company.
Director’s share dealings
The Directors have adopted a code of Director’s dealing in ordinary shares, which is in accordance with the Market Abuse Regulation. The Board is responsible for taking all proper and reasonable steps to ensure any dealings by Director’s, or persons closely associated with them, are in compliance with the Market Abuse Regulation.
Articles of Association
These are available on the Company’s website at https://www.gsenergystoragefund.com/ or by application to the Company Secretary. Any amendment to the Company’s Articles of Association may only be made by passing special resolution of the Shareholders of the Company.
Branches outside the UK
The Company does not have any branches outside the UK.
Powers of the Directors
The Board are responsible for managing the business affairs of the Company in accordance with the Articles, the Companies Act and the investment policy and have overall responsibility for the Company’s activities including its strategy, investment activities and reviewing the performance of the portfolio.
Powers in relation to the Company issuing its shares
Subject to company law and the Articles of Association, the Directors are authorised to issue shares of such number of tranches and on such terms as they determine, provided that such terms are consistent with the provision of the Articles.
Statutory information contained elsewhere in the annual report
Information required to be part of this Directors’ report can be found elsewhere in the annual report and is incorporated into this report by reference, as indicated below:
- Future developments, pages 23 and 41
- Engagement with suppliers, customers and others with business relationships with the Company, pages 50 to 52
- Corporate Governance statement, pages 55 to 70
- Manager and service providers, pages 61 to 62
- Directors’ names and biographies, pages 64 to 66
- Directors’ interest in shares, page 80
- Financial instruments, note 5, page 108
- Share capital reserves, note 20, pages 129 to 131
- Transactions with related parties, note 22, pages 133 to 134
- Post balance sheet events, note 24, page 135
Disclosures of financial risk management objectives and policies and exposure to financial risks are included in note 18 to the financial statements.
Disclosures in relation to the Company’s business model and strategy have been included within the Investment Manager’s report on pages 23 to 41. Disclosures in relation to the main industry trends and factors that are likely to affect the future performance and position of the business have also been included within the Investment Manager’s report.
Disclosure of information to Auditors
All of the Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the auditors for the purposes of their audit, and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware.
Ernst & Young LLP were appointed as auditors by the Directors during the period and have expressed their willingness to continue as auditor for the financial year ending 31 March 2022. A resolution to re-appoint Ernst & Young LLP as auditors to the Company will be proposed at the AGM.
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the Directors as further disclosed on pages 42 to 47. The Board operates under a framework for corporate governance which is appropriate for an Investment Company.
Gore Street Energy Storage Fund plc is an investment trust and has been compliant with section 1158 of The Corporation Tax Act, 2010. The ordinary shares were admitted to trading on the Premium Segment of the Official List of the London Stock Exchange on 25 May 2018.
The Board of Gore Street Energy Storage Fund plc has considered the principals and provisions of the Association of Investment Companies Code of Corporate Governance (AIC Code). The AIC Code addresses the Principals and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principals and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more relevant information to Shareholders.
The Company has complied with the Principals and Provisions of the AIC Code. The AIC Code is available on the AIC website (www.theaic.co.uk/aic-code-of-corporate-governance) It includes an explanation of how the AIC Code adopts the Principals and Provisions set out in the UK Code to make them relevant for investment companies. The Company is a member of the AIC.
Audit Committee’s Report
The Audit Committee (the Committee) is chaired by Caroline Banszky and comprises all the Directors. The Committee operates within clearly defined terms of reference and includes all matters indicated by Rule 7.1 of the UK FCA’s DTRs and the AIC Code. The terms of reference were reviewed during the year under review and were updated to enhance the Committee’s scope to consider key risks facing the Company. The Board is satisfied that the Committee is properly constituted with at least one member of the Committee who is a chartered accountant with recent and relevant financial experience.
The Committee plays an important role in the governance of the Company, with its principal activities focused on the integrity of financial reporting, quality and effectiveness of external audit, risk management and the system of internal control.
The Committee meets a minimum of twice a year, and at such other times as the Committee shall require. The Administrator and representatives of the Investment Manager may be invited to attend meetings as and when deemed appropriate.
We met two times during the financial year ended 31 March 2021. These meetings were attended by the committee members, as well as representatives of the Investment Manager, Gore Street Capital Limited, the Company Secretary, JTC (UK) Limited, the Independent Auditor, Ernst & Young LLP and the independent valuer BDO LLP.
The Audit Committee operates within clearly defined terms of reference which are reviewed on annual basis and approved by the Board. The terms of reference include all matters indicated by Disclosure Guidance and Transparency Rule 7.1 and the AIC Code.
Third parties may be invited to attend meetings as and when deemed appropriate.
Summary of the Role and Work of the Audit Committee
The function of the Committee is to ensure that the Company maintains the highest standards of integrity, financial reporting, internal and risk management systems and corporate governance. The main duties of the Audit Committee are:
- Monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company’s financial performance and reviewing significant financial reporting judgements contained in them.
- Reporting to the Board on the appropriateness of the Board’s accounting policies and practices including critical judgement areas and going concern and the viability statements.
- Reviewing the valuation of the Company’s investments prepared by the Investment Manager and their underlying assumption, we review the work of the independent valuer BDO LLP bi-annually prior to making a recommendation to the Board on the valuation of the Company’s investments.
- Meeting regularly with the Auditor to review their proposed audit plan and the subsequent audit report and assess the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit work.
- Making recommendations to the Board in relation to the appointment, re-appointment or removal of the Auditor, and approving their remuneration and the terms of their engagement.
- Monitoring and reviewing annually the Auditor’s independence, objectivity, expertise, resources, qualification and non-audit work.
- Reviewing the effectiveness of the accounting and internal control systems of the Company and considering annually whether there is a need for the Company to have its own internal audit function.
- Reviewing and considering the UK Code, the AIC Code, the FRC Guidance on Audit Committees and the Company’s institutional investors’ commitment to the UK Stewardship code; and
- Reviewing the risks facing the Company and monitoring the risk matrix.
The Audit Committee is required to report formally to the Board on its findings after each meeting on all matters within its duties and responsibilities.
During the year, the Audit Committee has had regular contact and meetings with the Investment Manager, the Administrator and the Independent Auditor. These meetings and discussions focused on, but were not limited to:
- A detailed analysis of the Company’s half year and interim NAVs.
- Reviewing the risk matrix of the Company.
- Reviewing the Company’s corporate governance framework.
- Reviewing the internal controls framework for the Company, and those of the Administrator and the Investment Manager with respect to the Company.
- Considering the ongoing assessment of the Company as a going concern.
- Considering the principal risks which took into consideration the effects of the Covid-19 pandemic and period of assessment for the longer-term viability of the Company.
- Reviewing the detailed stress tests for the viability of the Company to ensure that going concern basis is appropriate.
- Monitoring compliance with AIFMD, the AIC code and other regulatory and governance frameworks.
- Reviewing and approving the audit plan in relation to the audit of the Company’s Annual Report and financial statements.
The primary role of the Committee in relation to financial reporting is to review with the Investment Manager, the Administrator and the Auditor the appropriateness of the half-year report and Annual Report and financial statements, concentrating on, amongst other matters:
- The quality and acceptability of accounting policies and practices.
- The clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements.
- Amendments to legislation and corporate governance reporting requirements and accounting treatment of new transactions in the year.
- The impact of new and amended accounting standards on the Company’s financial statements.
- Whether the Audit Committee believes that proper and appropriate processes and procedures have been followed in the preparation of the half year report and Annual Report and financial statements.
- Whether the Annual Report and financial statements, taken as a whole, are fair, balanced, and understandable and provides the information necessary for Shareholders to assess the Company’s performance, going concern, viability, business model and strategy.
- Material areas in which significant judgements and estimates have been applied or there has been discussion with the Auditor; and
- Any correspondence from regulators in relation to the Company’s financial reporting.
Ernst & Young LLP, the Independent Auditor, attended the formal Audit Committee meetings held during the period. Matters discussed included the Independent Auditor’s assessment of interactions with the Investment Manager and the Administrator, confirmation that there has been no restriction in scope placed on them, the independence of their audit and how they have exercised professional skepticism.
The Audit Committee discussed the planning, conduct and conclusions of the external audit as it proceeded. At the Audit Committee meeting in advance of the year end, the Audit Committee discussed and approved the Independent Auditor’s audit plan. The Audit Committee considered:
- the more bespoke disclosure regarding the assessment of going concern and long term viability for the required statements by the Board which took into consideration the effects of Covid 19 pandemic and having completed the assessment do not consider it to be a key area of risk for the Company; and
- identified the carrying value of investments as a key area of risk of misstatement in the Company’s financial statements.
Assessment of the Carrying Value of Investments
The Company’s accounting policy is to designate investments at fair value. As a consequence, the Committee reviewed valuation policies processes and application. The most influential area of judgement within the Accounts relates to the valuation of these investments. The key estimates and assumptions include the useful life of the assets, revenue estimates, the discount factors utilised, the rate of inflation, and the price at which the power and associated benefits can be sold. In particular, the Audit Committee carefully considered the impact of the change in Capacity Market Income recognition and associated assumptions in relation to the valuation of the assets that have been included in the 31 March 2021 valuation. At the year end, the Company engaged BDO as independent valuation experts/advisors to help the committee form a view as to the reasonableness as to the valuations.
The uncertainty involved in determining the fair value investment valuations represents significant risk in the Company’s financial statements. An inherent risk of management override is present as the Investment Manager’s fee is calculated based on NAV (as disclosed in note 22 to the financial statements). The Investment Manager is responsible for calculating the NAV with the assistance of the Administrator, prior to approval by the Board.
On a quarterly basis, the Investment Manager provides a detailed analysis of the NAV. This analysis highlights any movements and assumption alterations to the NAV of the previous quarter. NAV movements and the principles behind changes in assumptions are considered and challenged by the Chairman of the Audit Committee and subsequently approved by the Board. The Audit Committee is satisfied that the key estimates and assumptions used within the valuation model are appropriate and that the investments have been fairly valued.
The Audit Committee has established a set of ongoing processes with a view to satisfying particular needs of the Company with respect to managing the risks to which it is exposed. The process is one whereby the Investment Manager has identified the key risks to which the Company is exposed and recorded them on a risk matrix together with the controls employed to mitigate these risks. The Audit Committee is responsible for reviewing the risk matrix and associated controls before recommending to the Board for consideration and approval. The Audit Committee is also responsible for challenging the Investment Manager’s assumptions to ensure a robust internal risk management process. By their nature, these procedures provide a reasonable, but not absolute, assurance against material misstatement or loss. Regular reports are provided to the Audit Committee highlighting material changes to risk ratings.
The Audit Committee discussed and reviewed the internal controls in place at the Investment Manager and the Administrator. Discussions were centered around assurances at operational level; internal oversight; and independent objective assurance.
The Audit Committee concluded that these frameworks were appropriate for the identification, assessment, management and monitoring of financial, regulatory and other risks, with particular regard to the protection of the interests of the Company’s Shareholders.
The Audit Committee considers at least once a year whether or not there is a need for an internal audit function. Currently it does not consider there to be a need for an internal audit function, given that there are no employees in the Company and all outsourced functions are with parties who have their own internal controls and procedures. In light of the growing portfolio of assets under management the requirement for an internal audit function is under active discussion and review with the Investment Manager.
EFFECTIVENESS OF THE AUDIT PROCESS
The Audit Committee assessed the effectiveness of the audit process by considering Ernst & Young LLP’s fulfilment of the agreed audit plan. This assessment included the review of reporting presented to the Audit Committee by Ernst & Young LLP and the discussions at the Audit Committee meeting, highlighting such issues that arose during the course of the audit. In addition, the Audit Committee also sought feedback from the Investment Manager and the Administrator on the effectiveness of the audit process. For this financial period, the Audit Committee was satisfied that there had been appropriate focus and challenge on the primary areas of audit risk and assessed the quality of the audit process to be good.
The Audit Committee seeks to ensure that any non-audit services provided by the Independent Auditor do not conflict with their statutory and regulatory responsibilities, as well as their independence, before giving written approval prior to their engagement.
The Audit Committee has a policy regarding the provision of non-audit services by the external Auditor which precludes the Independent Auditor from providing any of the prohibited non-audit services as specified in the FRC Revised Ethical Standard 2019. The Audit Committee monitors the Company’s expenditure on non-audit services provided by the Independent Auditor, who should be engaged for non-audit services in circumstances where they are deemed to be the most commercially viable supplier, and prior approval of the Audit Committee has been sought. During the year the only non-audit service provided by EY was the interim review. The Audit Committee was satisfied that the provision of these Non-Audit Services did not provide threats to the Independent Auditors’ independence.
The Audit Committee is required to consider the independence of the external Auditor. In fulfilling this requirement, in addition to its own internal assessment, the Audit Committee has considered a report from Ernst & Young LLP describing its arrangements to identify, report and manage any conflict of interest and the extent of non-audit services provided by them. The Audit Committee has concluded that it considers Ernst & Young LLP to be independent of the Company.
The Auditor is required to rotate the audit partner every five years. The current partner is in her third year of tenure. There are no contractual obligations restricting the choice of external auditor and the Company will consider putting the audit services contract out to tender at least every ten years. In line with the FRC’s recommendations on audit tendering, this will be considered further when the audit partner rotates every five years. Under the Companies Act, the reappointment of the external Auditor is subject to shareholder approval at the AGM.
Having carried out the review described above and having satisfied itself that the Auditor remains independent and effective, the Audit Committee has recommended to the Board that Ernst & Young LLP be reappointed as Auditor for the year ended 31 March 2022.
ANNUAL GENERAL MEETING
The Chair of the Committee will be present at the Company’s AGM to answer questions on the Audit Committee’s activity and matters within the scope of the Audit Committee’s responsibilities.
FAIR, BALANCED AND UNDERSTANDABLE STATEMENTS
The production and audit of the Company’s Annual report and accounts is a comprehensive process, requiring input from a number of contributors. To reach a conclusion on whether the Company’s annual report and accounts, taken as a whole, are fair, balanced and understandable, as required under the AIC Code, the Board requested that the Audit Committee advise on whether we considered that the Annual Report fulfilled these requirements.
In outlining our advice, we considered the detailed reviews undertaken at various stages of the production process by the Investment Manager, third party independent valuer, BDO LLP, Administrator and the Audit Committee, which are intended to ensure consistency and overall balance. We then discussed with the Investment Manager and Administrator the process of how this was put together and received a series of drafts of the Company’s Annual report and accounts. These were scrutinised and discussed thoroughly at an Audit Committee meeting. Additional comfort was also sought from the Investment Manager and Administrator in relation to the conclusion reached by the Board.
As a result of the work performed, we have concluded and reported to the Board that the Annual Report and accounts for the period ended 31 March 2021, taken as a whole, are fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, business model and strategy.
EFFECTIVENESS OF THE COMMITTEE
A detailed and rigorous evaluation of the Committee was undertaken as part of the overall evaluation. The skills and experience of the members was found to appropriate, including recent and relevant financial experience. The Committee will be concentrating on personal development and training as the regulatory focus on audit and Audit Committees increases. The Committee was found to be functioning effectively.
Chairman of the Audit Committee
Date: 14 July 2021
Remuneration & Nomination Committee Report
The Board has prepared this report in line with the AIC Code as well as the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI2008/410) and the Companies Act 2006.
Under the requirements of Section 497 of the Companies Act 2006, the Company’s Auditor is required to audit certain disclosures contained within the report. These disclosures have been highlighted and the audit opinion thereon is contained within the Auditor’s Report on pages 87 to 95.
Annual Statement from the Chairman of the Remuneration & Nomination Committee
The Committee comprises of the full Gore Street Energy Storage Fund Plc Board with Pat Cox as Chair and consists solely of non-executive directors. The Committee has responsibility for reviewing the remuneration of the Directors, specifically reflecting the time commitment and responsibilities of the role and meets at least annually. The Committee also undertakes external comparisons and reviews to ensure that the levels of remuneration paid are broadly in line with industry standards and members have access to independent advice where they consider it appropriate.
We concluded that there is no need to change the remuneration policy this year, the policy being approved in 2019.
In accordance with the articles of association and the AIC Code, we considered the current levels of remuneration and whether they reflect the time commitment and responsibilities the Company calls for. During the year neither the Board nor the Committee has been provided with external advice of services by any person but has received industry comparison information from the Company Secretary in respect of Directors’ remuneration. The remuneration policy set by the Board is described below.
Individual remuneration packages are determined by the Remuneration and Nomination Committee within the framework of the remuneration policy. The Directors are not involved in deciding their own individual remuneration with each Director abstaining from voting on their own remuneration.
At the end of the preceding year the Committee undertook a benchmarking exercise of directors’ remuneration across the Company’s peer group and considered the current level of remuneration for each individual board member. It was agreed that directors’ remuneration should increase in line with the increased capitalisation of the Company up to a maximum capitalisation of £100m to bring the directors remuneration in line with market rates and the remuneration set out in the Prospectus at IPO from which the directors’ had taken a temporary reduction to reflect the reduced market capitalisation of the Company. The Committee decided in March 2021 that as directors had received increases during the year to match the reflected growth of the Company, any further additional increase was not appropriate at this time and that no additional uplift would be made until such time as further growth of substance had been achieved..
Below is Gore Street’s remuneration policy. This policy was adopted on 14 August 2019 and will next be put to a Shareholder vote at the 2022 AGM as part of the regulatory three yearly approval process.
The Company’s policy is to determine the level of Directors’ fees with due regard to the experience of the Board as a whole, the time commitment required, and to be fair and comparable to non-executive directors of similar companies. The Company may also periodically choose to benchmark Directors’ fees with an independent review to ensure they remain fair and reasonable.
Directors’ fees will be adjusted from time to time and will be subject to Shareholder approval in the subsequent AGM. The Directors may elect to apply the cash amount equal to their annual fee to subscribe for, or to purchase, ordinary shares. The Directors are entitled only to their annual fee and their reasonable expenses. No element of the Directors’ remuneration is performance related, nor does any Director have any entitlement to pensions, share options or any long-term incentive plans from the Company.
The Directors hold their office in accordance with the Articles of Association and their appointment letters. No Director has a service contract with the Company, nor are any such contracts proposed. The Directors’ appointments can be terminated in accordance with the Articles of Association and without compensation. Under the Company’s Articles of Association, all Directors are entitled to remuneration determined from time to time by the Board and approved by the Shareholders.
DIRECTORS’ REMUNERATION REPORT
Details of Directors’ Remuneration (Audited)
The emoluments in respect of qualifying services of each person who served as a Director during the period are shown below. All the Directors are paid a basic annual fee of £40,000 quarterly in arrears for their services. In addition to this fee, Pat Cox is paid an additional £17,500 per annum for his role as Chair of the Board. Caroline Banszky is paid an additional £5,000 per annum for serving as Chair of the Audit committee. No Director has waived or agreed to waive any emoluments from the Company in the current year. No other remuneration was paid or payable by the Company during the current period, nor were any expenses claimed by or paid to them other than for expenses incurred wholly, necessarily and exclusively in furtherance of their duties as Directors of the Company.
The remuneration levels for the Directors were set at the time of IPO in May 2018 at a reduced level to reflect the £30million of equity raise. As the market capitalisation of the Company has grown during the year the Directors’ remuneration was reviewed and increased to reflect the current market capitalisation (capped at £100million) to realign the Directors’ remuneration in a stepped process to reflect the original intended level of remuneration pre IPO. Whilst this has resulted in stepped increases of substantial change the directors’ do not propose to apply any further remuneration increases until such time as further Company growth of substance has been achieved.
|Director||Year ended 31 March 2022||Year ended 31 March 2021 (£)||Year ended 31 March 2020 (£)||Percentage change 20-21|
*This includes £17,500 per annum in respect of serving as Chair of the Board.
**This includes £5,000 per annum in respect of serving as Chair of the Audit committee.
No director received any taxable benefits during the year ended 31 March 2021
The remuneration levels for the forthcoming year 2021/2022 for the Directors are shown in the above table.
In accordance with FCA Listing Rules 9.8.6(R)(1), Directors’ interest in the shares of the Company (in respect of which transactions are notifiable to the Company under FCA Disclosure and Transparency Rule 3.1.2(R)) as at 31 March 2021 were as follows:
|Director||Number of ordinary shares||Per centage of Issued share Capital|
All the Directors’ share interests shown above were held beneficially.
Tom Murley as a US resident has limited options for owning shares. The platform through which he owned shares closed and he was forced to sell. He is looking for a new platform through which to purchase shares.
Relative Importance of Spend on Pay
The difference in actual spend between 31 March 2021 and 31 March 2020 on Directors’ remuneration in comparison to distributions (dividends and share buybacks) and other significant spending are set out in the table below:
|Payments made during the year ended 31 March 2021||Payments made during the year ended 31 March 2020|
|Directors’ total remuneration||127,906||90,000|
|Buy back of Ordinary Shares||-||-|
There are no executive directors, nor are there any employees of the Company, so there are no statements to make on any consultations, comparisons, or pay and employment conditions within the Company.
Statement of consideration of shareholder views
The levels of remuneration were set out in the Prospectus and did not receive any negative comment from the investment community before or after the IPO. The AGM will give the opportunity for opinions to be aired and demonstrated formally through the voting process and will provide the basis for future discussions and developments.
Payments to past directors or for loss of office
There are no payments to disclose. Under the terms of the Directors’ Remuneration Policy there would be no compensation for loss of office.
Statement of voting at general meeting
The Directors Remuneration Policy was put to a binding vote at the AGM on 14 August 2019 and is due for renewal at the AGM in 2022. The Directors Remuneration Report was subject to an advisory vote at the AGM on 19 August 2020.
The voting outcome is set out in the table below:
|Resolution approve directors’ remuneration report 2020||Resolution approve remuneration policy 2019|
|Total votes validly cast||30,548,695||20,123,202|
|Total votes cast as a per-centage of issued share capital||39.58%||65.76%|
*includes discretionary vote
+A vote withheld is not a vote in law and is not counted in the calculation of votes for or against a resolution.
Approval of the Remuneration Report
An ordinary resolution for the approval of this Directors’ Remuneration Report will be put to Shareholders at the forthcoming AGM.
The Committee’s responsibilities are reviewing annually the structure, size, and composition (including the skills, knowledge, and experience) required of the Board and making recommendations to the Board with regard to any necessary changes.
Considering the succession planning and replenishment of Directors as the Board and Company progresses, identifying and nominating candidates to fill Board vacancies as and when they arise and taking into account the challenges and opportunities facing the Company, and what skills and expertise are needed on the Board for the future.
Reviewing annually the time required from the Directors and using performance evaluation to assess whether the Directors are spending enough time on their duties.
The Board recognises the benefits that diversity brings. Our approach is to appoint the best possible candidate, considered on merit against objective criteria and in accordance with the Equality Act 2010, rather than to set quotas for a particular aspect that may deflect from achieving this fundamental target every time. At the date of this report, 25% of the Board was female.
In light of the ongoing development in governance best practice, the Committee decided that the Company should have a formal diversity policy, which the Board adopted on 19 September 2018. Diversity includes and makes good use of differences in knowledge, and understanding of relevant diverse geographies, peoples, and their backgrounds including race or ethnic origin, sexual orientation, gender, age, disability or religion. Appointments to the Board will be made on merit and objective criteria, in the context of complimenting and expanding the skills, knowledge and experience of the Board as a whole.
A formal and rigorous board evaluation was conducted internally this year. It was based on a questionnaire covering a range of board level topics, with accompanying reviews of each Committee, which addressed issues specific to that Committee, as well as self-assessments by the Directors. The results were reviewed and discussed by the Remuneration and Nomination Committee and then the Board.
It was concluded that the Board members work effectively together to achieve the Company’s objectives and that each director has the time and continues to contribute effectively.
The following actions were highlighted, and actions initiated where appropriate:
- More focus to be spent on long term strategy with a board and investment manager session to be scheduled with this focus.
- Delivery of reports for board packs should be improved and delivered to the Company Secretary at least a week in advance.
- As part of good practice, the Board should contact the top shareholders, reminding them that they are available for discussion. Due to Covid constraints the Board have yet to undertake a site visit and this will be scheduled as soon as government guidelines allow.
The Nomination Committee considered succession planning during the year and noted that currently all four Directors’ tenure of nine years expires on the same date and that therefore there was a need to fresh the board over the next five years.
This Directors’ Remuneration Report was approved by the Board on 14 July 2021 and is signed on its behalf by Patrick Cox (Director and Chair of the Remuneration and Nomination Committee)
Chairman of the Remuneration and Nomination Committee
Date: 14 July 2021
Management Engagement Committee Report
The Management Engagement Committee is comprised of all the independent directors of the Company: Caroline Banszky, Malcolm King, Thomas Murley and me, Patrick Cox (Chair). The Committee’s two principal functions are:
- To review annually the compliance by the Investment Manager with the Company’s investment policy as established by the Board and with the Advisory and Services Agreement entered into between the Company and the Investment Manager from time to time (the “Management Agreement”); and
- To review annually the performance of any other key service providers to the Company.
The Committee is required to report formally to the Board on its findings after each meeting on all matters within its duties and responsibilities.
The Committee will meet as and when required, but formally at least once a year.
JTC (UK) Limited attend our meetings as Secretary to the Committee. In addition, we will invite representatives of the Investment Manager to attend as required.
The Committee met once in the period under review and all members were present. During this meeting, Committees terms of reference were reviewed and no alterations were made.
Investment Manager Review
When reviewing the Investment Manager’s performance, the Committee considers its compliance with the terms of the Management Agreement as well as its overall performance against the Company’s objectives.
The Committee also reviews the relationship with the Investment Manager including (but not limited to):
- Making recommendations on the Investment Manager’s remuneration;
- Approving the terms of engagement of the Investment Manager and the terms of the Management Agreement;
- Assessing annually the Investment Manager’s independence and objectivity taking into account relevant regulatory requirements;
- Assessing annual the qualifications, expertise and resources of the Investment Manager; and
- Meeting regularly with the Investment Manager and at least twice a year, to discuss the Investment Manager’s remits, the performance of the Company’s investments and any issues arising from the management of the Company’s investments.
The Committee also reviews the level and method of remuneration of the Investment Manager pursuant to the terms of the Management Agreement, including the methodology of calculation of the relevant annual fee. The review of these fee arrangements seeks to ensure that the methodology does not encourage excessive risk and that it rewards demonstrably superior performance by the Investment Manager in managing or advising on the portfolio against the stated investment objective when compared to a suitable benchmark or peer group.
Under the terms of the Management Agreement, the Investment Manager is entitled to receive from the Company an advisory fee payable quarterly in arrears calculated at the rate of one-fourth of one per cent of Adjusted Net Asset Value minus “Uncommitted Cash”, where uncommitted Cash means cash that has not been allocated for repayment of a liability on the balance sheet of any member of the Group. Adjusted Net Asset Value means Net Asset Value, minus cash on the Company balance sheet.
The Investment Manager is also entitled to a performance fee calculated by reference to the movements in the Net Asset Value (before subtracting any accrued performance fee) which is linked to gross proceeds raised on the Company’s IPO plus a 7% hurdle, and is set out in the Prospectus dated 30 November 2020.
The Investment Manager is paid a further fixed fee of £75,000 per annum to cover the incremental costs of providing additional services as AIFM.
During the year the Management Agreement was amended to:
- change the term of adjusted NAV to mean net asset value minus uncommitted cash. Uncommitted cash means all cash on the Company’s balance sheet other than committed cash. Committed cash means cash that has been allocated for repayment of a liability on the balance sheet of any member of the group.
- an additional fixed fee payable quarterly in advance with effect from 1 October 2020 to the Investment Manager of £50,000 per annum to support the administrative and accounting function, plus an additional per asset fee of £6,000 per annum in respect of each energy storage project held by the group beginning with (and including) the tenth energy storage project, calculated and payable quarterly in arrear with effect from 1 October 2020 and based on the number of energy storage assets held by the Group at each quarter end.
- a fixed fee of £10,382.97 per month payable monthly in arrear with effect from 1 October 2020 to Investment Manager for the provision of corporate services. Corporate services is defined in the side letter and is in relation to supporting the execution of investment transactions and managing third party advisors.
In addition, the following changes to the management agreement were implemented with fees being payable to the Investment Manager by each respective subsidiary:
- a short-term fee for development and management of assets through to completion of construction, for a maximum term of one and one-half years.
- During the period the Investment Manager and Company entered into a Commercial Management Agreement for the provision of the Construction Services and the Operational Services. The Investment Manager shall be entitled to receive a fixed fee of £110,750 per Development Project per annum (the “Construction Services Fee”), for a maximum term of 1.5 years in respect of each Development Project and in respect of the Operational Services to be provided by the Commercial Manager pursuant to this Agreement, the Commercial Manager shall be entitled to receive a fixed fee of £20,000 per Operational Asset per annum, save for the Ancala Assets in respect of which the fixed fee shall be £6,000 per annum.
The Committee reviewed the fee arrangements, compared them with comparable Investment Trusts and concluded that they were reasonable. The Committee agreed to undertake a full review of the Investment Manager’s remuneration and terms and conditions in 2022.
Following its review, the Committee have determined that the Investment Manager was generally performing satisfactorily and had complied with the terms of its engagement and had met its obligations to the Company. The Committee and Investment Manager discuss opportunities for improvements in communications on an ongoing basis. The committee recommended the Investment Manager’s continued appointment to the Board.
Other service providers
The Committee also review the performance of the Company’s other service providers and in particular:
- Monitors compliance by providers of other services to the Company with the terms of their respective agreement from to time;
- Reviews and considers the appointment and remuneration of providers of services to the Company; and
- Considers any points of conflict which may arise between the providers of services to the Company.
The Committee also carried out a full performance review of all its service providers at its last meeting during which all terms of engagement and fees were carefully considered by the Committee.
Sanne Group Administration Services (UK) Limited (“Sanne”) served as Administrator during the period.
Under the terms of the Administration Agreement, Sanne is entitled to:
(a) an annual fee in respect of the accounting and administration services it will provide of £50,000.
(c) an annual value fee of:
- 0.05% of NAV to the extent that NAV is between £30m and £75m.
- 0.025% of NAV to the extent that NAV is between £75m and £150m; and,
- 0.02% of NAV to the extent that such NAV exceeds £150m.
The Committee found the Company’s service providers were all performing satisfactorily and concluded that the relevant appointments should continue.
An evaluation of the Committee was undertaken as part of the overall evaluation. The Committee was found to be functioning effectively.
Date: 14 July 2021
Statement of Comprehensive Income
For the Year Ended 31 March 2021
|Notes||Year Ended 31 March 2021||Year Ended 31 March 2020|
|Net gain on investments at fair value through profit and loss||7||-||16,205,729||16,205,729||-||5,585,522||5,585,522|
|Administrative and other expenses||9||(2,844,035)||-||(2,844,035)||(1,711,360)||-||(1,711,360)|
|Profit before tax||(1,611,035)||16,205,729||14,594,694||(796,249)||5,585,522||4,789,273|
|Profit after tax and profit for the year||(1,611,035)||16,205,729||14,594,694||(796,249)||5,585,522||4,789,273|
|Total comprehensive income for the year||(1,611,035)||16,205,729||14,594,694||(796,249)||5,585,522||4,789,273|
|Profit per share (basic and diluted) – pence per share||11||16.06||11.78|
All Revenue and Capital items in the above statement are derived from continuing operations.
The Total column of this statement represents Company’s Income Statement prepared in accordance with IFRS. The return on ordinary activities after taxation is the total comprehensive income and therefore 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 issue by the Association of Investment Companies.
The notes on pages 102 to 135 form an integral part of these financial statements.
1.1 Statement of Financial Position
As at 31 March 2021
Company Number 11160422
|Notes||31 March 2021|
|31 March 2020|
|Non – Current Assets|
|Investments at fair value through profit or loss||12||80,694,275||30,412,493|
|Cash and cash equivalents||13||60,152,317||15,028,142|
|Trade and other receivables||14||5,364,168||4,963,527|
|Trade and other payables||15||1,075,819||713,659|
|Total net assets||145,134,941||49,690,503|
|Capital reduction reserve||20||17,446,348||25,516,500|
|Total shareholders equity||145,134,941||49,690,503|
|Net asset value per share||19||1.01||0.95|
Statement of Financial Position (continued)
As at 31 March 2021
Company Number 11160422
The annual financial statements were approved and authorised for issue by the Board of directors and are signed on its behalf by;
Date: 14 July 2021
The notes on pages 102 to 135 form an integral part of these financial statements.
1.2 Statement of Changes in Equity
For the Year Ended 31 March 2021
|Share premium reserve|
|Capital reduction reserve|
|Total shareholders equity|
|As at 1 April 2020||525,488||19,707,058||186,656||25,516,500||5,020,458||(1,265,657)||49,690,503|
|Profit for the year||-||-||-||-||16,205,729||(1,611,035)||14,594,694|
|Total comprehensive profit for the year||-||-||-||-||16,205,729||(1,611,035)||14,594,694|
|Transactions with owners|
|Ordinary shares issued at a premium during the year||913,229||89,850,900||-||-||-||-||90,764,129|
|Share issue costs||-||(1,844,233)||-||-||-||-||(1,844,233)|
|As at 31 March 2021||1,438,717||107,713,725||186,656||17,446,348||21,226,187||(2,876,692)||145,134,941|
Capital reduction reserve and revenue reserves are available to the Company for distributions to Shareholders as determined by the Directors.
The notes on pages 102 to 135 form an integral part of these financial statements.
Statement of Changes in Equity (continued)
For the Year Ended 31 March 2020
|Share premium reserve|
|Capital reduction reserve|
|Total shareholders equity|
|As at 1 April 2019||306,000||67,476||186,656||28,590,177||(565,064)||(469,408)||28,115,837|
|Profit for the year||-||-||-||-||5,585,522||(796,249)||4,789,273|
|Total comprehensive profit for the year||-||-||-||-||5,585,522||(796,249)||4,789,273|
|Transactions with owners|
|Ordinary shares issued at a premium during the year||219,488||20,235,032||-||-||-||20,454,520|
|Share issue costs||-||(595,450)||-||13,199||-||(582,251)|
|As at 31 March 2020||525,488||19,707,058||186,656||25,516,500||5,020,458||(1,265,657)||49,690,503|
The notes on pages 102 to 135 form an integral part of these financial statements.
1.3 Statement of Cash Flows
For the Year Ended 31 March 2021
|Cash flows used in operating activities|
|Profit for the year||14,594,694||4,789,273|
|Net profit on investments at fair value through profit and loss||(16,205,729)||(5,585,522)|
|Increase in trade and other receivables||(400,641)||(346,914)|
|Increase in trade and other payables||362,160||506,149|
|Net cash used in operating activities||(1,649,516)||(637,014)|
|Cash flows used in investing activities|
|Purchase of investments||(34,076,053)||(18,344,007)|
|Net cash used in investing activities||(34,076,053)||(18,344,007)|
|Cash flows used in financing activities|
|Proceeds from issue of ordinary shares at a premium||90,764,129||20,454,520|
|Share issue costs||(1,844,233)||(582,251)|
|Net cash inflow from financing activities||80,849,744||16,785,393|
|Net increase / (decrease) in cash and cash equivalents for the year||45,124,175||(2,195,628)|
|Cash and cash equivalents at the beginning of the year||15,028,142||17,223,770|
|Cash and cash equivalents at the end of the year||60,152,317||15,028,142|
|During the year, interest received by the Company totaled £1,098,000 (2020: £634,192).|
The notes form an integral part of these financial statements.
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