200MW Battery Storage Acquisition and Business Update
31 October 2022
Largest MW Project Acquisition to Date
Gore Street Energy Storage Fund plc (ticker: GSF), London's first listed energy storage fund supporting the transition to low carbon power, is pleased to announce that it has agreed to acquire from Kona Energy a 200MW construction-ready energy storage project (the "Project") in Heysham, North West England. The Project is one of the largest storage projects in Europe and GSF's largest acquisition to date. With this acquisition, GSF's portfolio will consist of 25 projects with a total capacity of 898MW in operation and construction in the UK, Ireland, Germany and the US.
The Project has secured all land rights, grid connection and planning consent. The Project will connect to National Grid's main transmission network rather than the local distribution network, meaning it will operate independently from an intermediary distribution network operator. This will potentially open additional revenue opportunities while reducing capex and operating costs. This is GSF's second main transmission-connected site following the acquisition of the 57MW Enderby project in 2021.
Grid connection is expected to be no later than Q4 2026; however, GSF's Investment Manager, Gore Street Capital Limited (the "Investment Manager"), will seek to accelerate the connection date while maintaining a cost-efficient EPC procurement process. The final capex will depend on the selection of the system duration. The Project has the flexibility to deploy a storage system with a duration of up to 2 hours. The Project is expected to deliver an unlevered IRR at least in line with GSF's target return.
Energy security and affordability remain national priorities, key themes that the Company's assets address daily. The Company's operational portfolio continues to perform well, supported by strong demand and higher-than-expected revenue.
The Company's capital structure leaves GSF exceptionally well placed in the current environment and crucially not exposed to increases in debt servicing costs. The Company is also benefiting from higher-than-expected interest rates on its cash holdings, which have, in turn, positively impacted overall dividend cover.
The Investment Manager believes that the Company is well positioned in the context of the current macroeconomic environment, not least given de-minimis borrowing exposure and strong geographical diversification, including:
- Fixed price EPC contracts in place for all GB sites under construction and are therefore not adjusted or affected by inflation;
- The Company's current capital structure means that it is not exposed to any meaningful increased debt servicing costs;
- The Company's cash holdings are benefiting from increased interest rates, supporting the Company's dividend coverage ratio;
- The Company is well diversified geographically, with more than 60% of its operational portfolio located outside Great Britain. In particular, revenue from the portfolio companies located in Ireland, Germany and the US have benefitted from favourable FX rates during the September end quarter;
- The Investment Manager is pricing potential acquisitions with IRRs at the upper end of the Company's target IRR of 10-12%; and
- The Company would like to reiterate its commitment to a progressive dividend policy with a target yield of 7% of NAV per annum.
Alex O'Cinneide, CEO of Gore Street Capital Limited, the Company's investment manager, commented:
"We are delighted by the Company's continued good progress over the past 12 months. Despite recent market volatility, the Company's operational fleet continues to yield higher-than-expected revenue across our markets.
With the acquisition of this landmark 200MW transmission-connected project from Kona Energy, our largest acquisition yet, the Company has further strengthened its leadership position in the GB market. We are encouraged that an asset of this scale will benefit from being connected to the main transmission network, providing attractive running cost savings and potential additional revenue streams. We remain very selective on new acquisition opportunities focusing on those, such as this project, with significant cost and revenue advantages.
Additionally, the Company's portfolio now benefits from diversification across four high-growth markets, having recently entered the European and North American Markets. This strategy of avoiding country single risk is clearly of benefit to our shareholders given recent events. These acquisitions are indicative of the increasing number of international opportunities in the Company's pipeline.
We are continually encouraged by the support of key stakeholders as we grow GSF further and take advantage of potential new investments from our compelling pipeline of domestic and international opportunities. Our continued focus on acquisition pricing discipline and strength of revenue per MW/h all support GSF in delivering its dividend target of 7% to shareholders."
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 / Iain Sexton (Corporate Advisory)
Fiona Conroy (Corporate Broking)
Tel: +44 (0) 20 7 408 4090
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]
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 an 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.