Gore Street Energy Storage Fund PLC (GSF)

[PrefInvestor]

Well Pref,
after some more thought, I've reluctantly bailed out of GSF. The SP is continuing to go down. Whilst I would like to have continued to hold, after a 30% loss it was certainly time to sell. Probably should have sold when the SP rebounded a bit a few weeks ago. I hope to buy again one day.
Sale proceedings used to top up HG Capital Trust (HGT - Private Equity Trust), Segro (SGRO) and Scottish American (SAIN).

Best regards
Coobster

Well coobster, I have to say that seems like the sensible thing to do to me, but I would say that wouldn’t I as I’ve already sold my holding !. Totally your call obviously. But then I believe in cutting my losses before taking too much damage, other people may feel differently and decide to hold (and hope). Theres no one right answer in this investing game.

For me there is no sign of an obvious end to this downtrend in the BESS trusts, we’ve no idea where the bottom is and if the dividends get cut then they might drop a lot further it seems to me. Sods law says they will spike up tomorrow now, but TBH I very much doubt it. Hope your alternatives work out well for you…..

ATB

Pref

[clissold345]

This website provides an interesting summary of recent developments in the UK battery storage sector:-

https://modoenergy.com/research/q4-upda ... y-services

Several websites now produce detailed performance and pricing related data for UK BESS systems, though I confess I have as yet been unable to correlate the performance of GSFs BESS systems provided here with information contained in their published financial results.

https://www.bessanalytics.com/performance

https://forecastdocs.modoenergy.com/doc ... orecasting

Thanks for providing the links. I had a quick look at bessanalytics.com. GSF list Breach as one of their GB assets in the last annual report. This must be Breach Farm on bessanalytics.com. The "Monthly Revenue/MW" chart for Breach Farm (Jan 2023 to Jan 2024) shows revenue in Jan 2024 was about half revenue in Jan 2023, which may (or may not) indicate a general fall in GB revenue.

[PrefInvestor]

Hi clissold345, yes revenues look to be down compared to a year ago. GRID lost another 10% today (gulp), but GSF ended flat - but was down earlier. Its diversified income stream ought to be a big help right now……you’d think.

ATB

Pref

[clissold345]

The GRID trading update today (link below) contains useful info about the Open Balancing System. My (non-technical) understanding is that GB BESS revenue should gradually rise this year. Factors that will lead to this include the launch of Balancing Reserve (March 2024) and Quick Reserve (summer 2024).

I hold GSF.

https://www.investegate.co.uk/announcem ... te/8016260

[PrefInvestor]

Well an RNS today from GRID which cancels the Q4 dividend and says that they will making a further announcement on dividend policy later.

https://www.londonstockexchange.com/new ... e/16313042

GRID down ~16% ATM this morning presumably on this news and GSF & HEIT both down ~6-8% in sympathy I suspect.

Not sorry I sold mine when I did.....the threat here has been apparent for some time now IMHO.

ATB

Pref

[BullDog]

There's a Zoom presentation this morning by GRID management. Anyone with an interest in the sector might wish to sign up to listen at GRID's website.

[idpickering]

Further Portfolio and Trading Update

https://www.investegate.co.uk/announcem ... te/8020805

Ian (No holding).

[daveh]

Some detail from the RNS:

Gore Street Energy Storage Fund plc ("the Company" or "GSF") notes the turbulence in the market and reconfirms its strong liquidity and its commitment to the current dividend policy. The Company also reconfirms its commitment to a diversification strategy, which has insulated it from the current dynamics of the GB market.

Overview:

Dividend policy

· GSF reaffirms its dividend target of 7% of NAV for the fiscal year. It has met its dividend target since listing.

· The Company's dividend cover has been trending upward and was fully covered in the last reported quarter (September-end 2023).

Revenue generation

· Further to the Company's update on 10 January (link here), the reported portfolio average revenue across all assets for the fiscal year-to-date stands at £15.1 per MW/hr (H1 & Q3), given its effective diversification strategy.

Liquidity

· The Company maintains a healthy balance sheet with low debt. As previously disclosed, the Company had £66 million in cash or cash equivalents as of 31 December 2023. Of the available $60 million in the Big Rock Facility, approximately $15.8 million had been drawn down as of 31 December 2023, and there were no draws on the Company's £50 million RCF with Santander.

Portfolio

· The Company's construction program is progressing per the schedule outlined on page 11 of its Interim Report (link here).

· The Company's operational fleet is on track to more than double by the end of 2024.

· Based on the build-out schedule, by the end of 2024, the Company's US assets will account for 55% of total operational capacity, while GB will account for less than 30% on a MWh basis.

Share price up significantly this morning (nearly 9%).

[clissold345]

One thing to be aware of with BESS funds is that commercial operation doesn't start until months after energisation starts. Eg for Stony, energisation started in July 2023 and commercial operation started in Dec 2023. So an asset energised in 2024 may not bring in any revenue in 2024. I hold GSF.

[PrefInvestor]

Further Portfolio and Trading Update

https://www.investegate.co.uk/announcem ... te/8020805

Ian (No holding).

Well GSF's share price has clearly been significantly bolstered by todays RNS standing behind the dividend, though its fallen back to about 5.8% up as I write this at 12:09. I note that they didnt provide any earnings figures/analysis in the RNS to support their statement that they can afford to pay the dividend, that would be a matter of concern for me as even their Sept 2023 Final Report appeared to show revenues reducing in 2024 ?.

We’ll just have to wait and see I guess, clearly GSF with their international diversification are far better placed than GRID & HEIT which are totally dependent on UK revenues. Even they managed a slightly positive share price move this morning.

ATB

Pref

[clissold345]

According to James Carthew on Citywire, the UK Balancing Mechanism is currently unable to make best use of BESS. If the Balancing Mechanism worked better, BESS would be used more and would sometimes be able to supply power at lower prices than power currently being bought from gas plants.

"... As far as I can make out, the grid’s systems are not yet fully equipped to cope with battery storage and, as a consequence, gas plants are being fired up in response to supply shortages rather than the ESO opting to use batteries. The grid is opting to buy power from gas plants at higher prices than battery storage projects are prepared to supply it – battery storage is being ‘skipped’ in the balancing mechanism. That increases the UK’s vulnerability to volatile gas prices and means that we are burning more fossil fuel than we need to. It is also keeping power prices higher through the day than they otherwise would be. ..."

https://citywire.com/investment-trust-i ... s/a2435535

[clissold345]

I can't see any horrors in this announcement. I hold GSF.

"The Company's Board of Directors has approved a dividend of 2.0 pence per share for the December-end quarter."

"Post-period, the Company generated an estimated average hourly revenue of £16.1 per MW/hr in January and February 2024, demonstrating the resilience of the Company's diversified portfolio."

"Post-period, the Company's energised capacity increased by 49.9 MW to reach 421.4 MW, following the successful energisation of Ferrymuir on 12 February. The Company remains on track to increase its operational capacity above 800 MW over the next 12 months."

https://www.investegate.co.uk/announcem ... on/8082267

[PrefInvestor]

I can't see any horrors in this announcement. I hold GSF.

Well sadly the horrors have already happened havent they..... Back in Sept 2022 they were 123p, today even after a 5.5% increase on this announcement they are sitting at ~66p. They've paid about 13.5p in dividends in that time.

I hope they recover but to do so will require UK interest rates to start to fall I suspect.

Good luck to anyone still holding here.

ATB

Pref

[daveh]

I can't see any horrors in this announcement. I hold GSF.

Well sadly the horrors have already happened havent they..... Back in Sept 2022 they were 123p, today even after a 5.5% increase on this announcement they are sitting at ~66p. They've paid about 13.5p in dividends in that time.

I hope they recover but to do so will require UK interest rates to start to fall I suspect.

Good luck to anyone still holding here.

ATB

Pref

So now is the time to buy! In Sep 22 they were sitting on an approx. 10% premium to NAV. So you were paying £1.10 for pound coins. Now they are at a discount of approx. 40% to NAV, so you could now buy those pound coins for just 60p and what's more those pound coins will pay you 7-8p a year for just keeping them in your pocket.

Interestingly the NAV in Sep 22 was 109p, today it is 112p. So the performance is entirely down to the change in sentiment and the premium falling to a large discount. So if you believe the NAV is at all close to being accurate then GSF are a bargain.

(I hold)

[PrefInvestor]

So now is the time to buy! In Sep 22 they were sitting on an approx. 10% premium to NAV. So you were paying £1.10 for pound coins. Now they are at a discount of approx. 40% to NAV, so you could now buy those pound coins for just 60p and what's more those pound coins will pay you 7-8p a year for just keeping them in your pocket.

Well so goes the logic Im well aware. But Ive bought trusts at big discounts before (including this one when it got back into the 90s last time round) only for them to fall further.

When I see some sign of a sustained recovery maybe Ill buy back in, but not yet. Ive recently sold the last remnants of my NESF, FSFL, TRIG & ORIT which I progressively sold down as they've fallen. Still holding UKW, BSIF & JLEN that are still total return positive for me. Thats enough renewables for for me right now.

Im especially wary of the BESS trusts where there is huge competition for not that much business it seems to me. Agree GSF is best placed there due to its geographical diversification, but even so.

Good luck and I hope todays rally continues.

ATB

Pref

[clissold345]

So now is the time to buy! In Sep 22 they were sitting on an approx. 10% premium to NAV. So you were paying £1.10 for pound coins. Now they are at a discount of approx. 40% to NAV, so you could now buy those pound coins for just 60p and what's more those pound coins will pay you 7-8p a year for just keeping them in your pocket.

Interestingly the NAV in Sep 22 was 109p, today it is 112p. So the performance is entirely down to the change in sentiment and the premium falling to a large discount. So if you believe the NAV is at all close to being accurate then GSF are a bargain.

(I hold)

I only have a basic understanding of accounts and BESS. Some people have doubts about the return on investment (ROI) from BESS. Eg they think GSF won't be able to increase the NAV and pay 7% of NAV long-term (=five years or more?). GSF have done well with their BESS projects so far (though commercialisation always takes longer than they predicted?). I hold GSF.

[clissold345]

In the last interims GSF give operational dividend cover for the quarter ending 30 September 2023 = 1.15x. I think that just reflects how much money they took out of their subsidiaries. They could take out 1.0x or 1.5x if they wanted to. We don't know how profitable the subsidiaries are so we don't know if taking 1.15x is sustainable in future quarters/future years?

[clissold345]

Quotes below from a Citywire article dated 20 March 2024. You have to register to read the article.

"The dividend remains uncovered, with Jefferies’ Matt Hose previously estimating 0.5% cover for the financial year to 31 March [2024] with a slight improvement to 0.6% in the current fourth quarter."

"The manager expects to be dividend-covered based on projected 2025 revenues and an increase in operational assets. Given this conviction, we would prefer to see the manager switch to a variable dividend policy from 2025 to give themselves some wiggle room should any region disappoint."

https://citywire.com/investment-trust-i ... n/a2438665

[clissold345]

"The manager expects to be dividend-covered based on projected 2025 revenues and an increase in operational assets. Given this conviction, we would prefer to see the manager switch to a variable dividend policy from 2025 to give themselves some wiggle room should any region disappoint."

If a region disappoints then that should be reflected in the NAV, so GSF's target of paying 7% of NAV in dividends may be achievable. I'd say GSF already have a variable dividend policy.

[PrefInvestor]

Quotes below from a Citywire article dated 20 March 2024. You have to register to read the article.

"The dividend remains uncovered, with Jefferies’ Matt Hose previously estimating 0.5% cover for the financial year to 31 March [2024] with a slight improvement to 0.6% in the current fourth quarter."

"The manager expects to be dividend-covered based on projected 2025 revenues and an increase in operational assets. Given this conviction, we would prefer to see the manager switch to a variable dividend policy from 2025 to give themselves some wiggle room should any region disappoint."

https://citywire.com/investment-trust-i ... n/a2438665

I had a look at the GSF Strategic Report for the year ended 31 March 2023 here:-

https://www.gsenergystoragefund.com/doc ... t-2023.pdf

I was looking for information relevant to revenue, cash generation and dividend cover. I picked out the following points:-

Page 30 cash on hand £123.7m enough to fund all remaining capex for the planned portfolio expansion. So no extra debt or funding is required to complete the planned expansion programme it would seem.

Page 26 makes it clear that the 7p dividend was already not covered at the time of this 2023 annual report as the available cash flow at that time was 6p.

Page 25 500MW extra generation capacity to be energised before the end of 2024 (to add to existing portfolio capacity of 291.6MW). One would hope that revenue from this extra capacity might be sufficient to cover the gap in dividend cover ??????.

Pages 29-34 the management look to have performed extensive modelling of various scenarios with their effect on NAV and revenues. On the face of it these look encouraging.

So perhaps GSF can weather the storm and are just suffering from the apparently far worse prospects of the likes of GRID and HEIT who don’t have the benefit of GSFs international diversification, can’t say that for sure though !.

I guess if you still own GSF shares right now then holding hoping for a recovery might be the best plan, if they can recover. The share price does seem to have found some stability in the mid 60s. I have to say though their current 11.2% dividend yield does look like a red flag to me. I have no plans to re-enter GSF anytime soon myself. Tried it once, not keen to try again.

And on a day like today 21/3/24 with most equities up significantly, but GSF about 2.8% DOWN, why would you want to hold GSF when there are so many more attractive options, some good dividend payers ?. Not me anyway. Each to their own though….

ATB

Pref