Gore Street Energy Storage Fund Plc · LSE:GSF
Gore Street Energy Storage Fund — Investor Day (November 2024)
67 slides from Gore Street Energy Storage Fund's investor day presentation, Nov 6, 2024
Slide 1: Gore Street Energy Storage Fund plc Capital Markets Day
Gore Street Energy Storage Fund plc Capital Markets Day November 6th 2024
Slide 2: Gore Street Capital: Investment and commercial manager
Gore Street Capital: Investment and commercial manager
Slide 3: Gore Street Capital: Experienced manager
Gore Street Capital: Experienced manager Experienced leadership team supported by 45+ team members Leadership Team Gore Street possesses extensive expertise in sourcing, structuring the acquisition of, and managing the construction and operation of renewable energy assets globally Sumi Arima Alex O’
Slide 4: Investment Manager: Track record
Investment Manager: Track record 28 5 >22 Acquisitions in the storage sector Grids present in of storage opportunities evaluated in one year Over 100 years' worth of project finance expertise Key milestones in 2024 FY: • Share issuances to strategic partners in the current macro environment where an
Slide 5: Commercial Manager: In-house capabilities
Commercial Manager: In-house capabilities Asset Construction Commercial Trading Management Team Team Team Team Negotiation of Unique Asset uptime Cost per MW / commercial optimisation MWh contracts software Negotiation & Early pre- Best in class fire Peak shifting tailoring of qualification for safe
Slide 6: Energy storage is a unique asset class and rewards expertise
Energy storage is a unique asset class and rewards expertise Investment Expertise Continuity of management throughout the lifecycle of the asset - Screens a large number - Project financing - Continual review of of deals across multiple (potential inclusion revenue curves given high - Holistic view
Slide 7: Rapid growth at GSC supports GSF growth
Rapid growth at GSC supports GSF growth IPO & First CAISO market acquisition Enters Enters ERCOT transmission entered and RA contract of first 2 Irish Scottish market connected portfolio hits secured operational market market entered asset 1.17 GW assets 2018 2019 2020 2021 2022 2023 2024 In-house E
Slide 8: Investment Strategy
) Gore Street @ Energy Storage Fund Investment Strategy i) MUNIN | i } Mit WA AA
Slide 9: Original storage investment trust business model
Original storage investment trust business model GSF Overview: Origins of the fund and key IPO proposals • GSF IPOs as the first pure-play energy storage LSE-listed vehicle • The seed asset, “Boulby”, was monetised under a fixed-price contract known as EFR or Enhanced Frequency Response - grid balan
Slide 10: 6 years since IPO: What we saw in the storage market
6 years since IPO: What we saw in the storage market 1 Continued market growth 2 Volatility in revenue 3 Opportunity to outperform 4 Multiple business models 5 Limited access to equity Gore Street Energy Storage Fund | 10
Slide 11: Continued market growth: projected BESS market size
6 years since IPO 1 Continued market growth • Storage is a critical component for renewable Projected global market size of BESS1 penetration and as such continues to see rapid market growth 140 120 Projected Market Size / $ bn 100 • An increase in demand does not automatically lead to higher profit
Slide 12: Significant volatility in revenues of a single grid
6 years since IPO 2 Significant volatility in revenues of a single grid • The merchant revenue risk profile is evident — not only in Great Britain but in many regions around the world • This presents an opportunity for substantial outperformance over the original business plan, but it can also lead
Slide 13: Opportunities to outperform the market average (1/2)
6 years since IPO 3 Opportunities to outperform the market average (1/2) While worldwide macro-driven performance is difficult to Example: Introduction of a D* suite contract control, there are clear opportunities to outperform in GB – Dynamic Containment High (DCH) average storage returns. Choosing
Slide 14: Opportunities to outperform the market average (2/2)
6 years since IPO 3 Opportunities to outperform the market average (2/2) • Procurement & construction management act as a driver of capex and a mitigator for delays (excluding interconnection factors) i. Selecting the optimal battery while cognisant of capital £800k+ per MW discipline 2022 Estimated
Slide 15: Multiple business models with different risk and return profiles
6 years since IPO 4 Multiple business models with different risk and return profiles: i. Passive vs active management Key drivers ii. Tolling vs merchant Risk / Return iii. GB only vs global Expertise and iv. Pure play storage strategy vs multi-asset renewables fund sector knowledge v. Level of leve
Slide 16: Capital market appetite has decreased for storage investment trusts
6 years since IPO 5 Capital market appetite has decreased for investment trusts focused on storage • Higher interest rates diminish the attractiveness of • In storage, a potential mismatch exists between investor the investment trust business model expectations and merchant revenue profiles. GSF’s r
Slide 17: GSF’s Response
GSF’s Response Gore Street Energy Storage Fund | 17
Slide 18: Impact on GSF: Volatile revenue
Impact on GSF: Volatile revenue GSF manages volatile revenue streams based on three key strategic focuses: A. Geographical exposure to multiple markets B. Dividends linked to cash generation C. Modest leverage Gore Street Energy Storage Fund | 18
Slide 19: Management of volatile revenue: geographic exposure
Impact on GSF: Management of volatile revenue A. Geographic exposure to multiple markets 25 Quarterly Revenue Volatility (GB only) Standard deviation: £5.15 per MW/hr 20 £ per MW/hr Average quarterly revenue: • Geographical exposure diversification 5 markets i.e. 15 £13.84 per MW/hr GB, IRE, GER, CA
Slide 20: Management of volatile revenue: dividends linked to cash generation
Impact on GSF: Management of volatile revenue B. Dividends linked to cash generation o A fixed dividend payment does not match a merchant revenue profile o The dividend policy has therefore been tied to cash flow to align it with revenue streams: 1p per quarter for 3 quarters and target to pay 7p in
Slide 21: Management of volatile revenue: modest leverage
Impact on GSF: Management of volatile revenue C. Modest leverage Two debt facilities: • Santander RCF at the portfolio-level • CIT loan at the project-level (long-term fixed price RA contract supports securing project-level debt) GSF: Peers2: Gearing c.15% of GAV1 Gearing at c.25% of GAV following b
Slide 22: Impact on GSF: Outperform average returns
Impact on GSF: Outperform average returns GSC has developed as a purpose-built platform for Battery Energy Storage Systems In-house Trading • No conflict of interest • Ownership model versus agent approach • No reliance on external parties for the critical storage investment function External RTMs •
Slide 23: Capital constraints - focus on 750MW (1/3)
Impact on GSF: Capital constraints - focus on 750MW (1/3) • GSF has sufficient funding to reach an operational capacity of over 750 MW Gearing based on energisation of Big Rock, Dogfish, and Enderby1 0.30 800 700 600 0.20 Gearing (% of GAV) 500 Peak MW gearing 400 c.15% 300 0.10 200 100 0.00 0 FY202
Slide 24: Capital constraints - focus on 750MW (2/3)
Impact on GSF: Capital constraints - focus on 750MW (2/3) • GSF has sufficient funding to reach an operational capacity of over 750 MW • As no equity raise is anticipated, a capacity of 753.4 MW will represent a steady state Portfolio Capacity Buildout 1400 494.8 1200 1000 800 75.0 753.4 200.0 MW 60
Slide 25: Capital constraints - focus on 750MW (3/3)
Impact on GSF: Capital constraints - focus on 750MW (3/3) • GSF has sufficient funding to reach an operational capacity of over 750 MW • As no equity raise is anticipated, a capacity of 753.4 MW will represent a steady state • Therefore, GSF’s construction focus is on developing Big Rock and Dogfish
Slide 26: GSF business model discussion
GSF business model discussion Current strategy vs alternative strategy Reasoning 1. Active management vs passive management 1. Full asset lifecycle management capability – actively managing with complete in-house resources 2. Merchant vs tolling 2. At the current market price tolling remains unattra
Slide 27: Next Steps
CIO section Next Steps Gore Street Energy Storage Fund | 27
Slide 28: Beyond 750MW: Pre-construction assets
Beyond 750MW: Pre-construction assets • GSF has c. 500MW projects at preconstruction stage, in Pre-construction assets Capacity addition to the 753.4 MW of operational/ construction assets Mineral Wells 9.95 MW/19.9 MWh • GSF to review strategy of pre-construction assets based on: Cedar Hill 9.95 MW
Slide 29: Valuation and dividend strategy
Valuation and dividend strategy • As an investment trust, GSF reports Net Asset Value (NAV). However, the significant QoQ movements in third-party forecasts leads us to consider whether NAV is the only appropriate valuation metric • In addition to NAV, GSF therefore provides alternative valuation me
Slide 30: Conclusion
Conclusion Target: • Construct and operate a well-balanced, high-performing portfolio of storage assets with a wider strategy scope Through continuously adapting to market dynamics, including: • Monetisation strategies • Portfolio rebalancing • Capital structure optimisation • Comprehensive business
Slide 31: Financial Performance & Investment Overview
Financial Performance & Investment Overview
Slide 32: GSF’s diversified portfolio
GSF’s diversified portfolio Project Phase - by MW1 Region - by revenue1 Revenue - by service1 8% 15% 7% 24% 34% 4% 40% £ 41.4m FY2023/24 portfolio revenue 85% 26% 57% Operational GB Ireland Grid Balancing Construction Peak Shifting Pre-construction Germany Texas Trading £527 m Revenue / £m Annual EB
Slide 33: Highlights
Highlights STRONG REVENUE GENERATION GROWING OPERATIONAL FLEET £41.4m Total Revenue 371.5 MW Portfolio Operational FY22/23: £39.3m (FY23/24) FY22/23: 291.6 MW capacity (FY23/24) £28.4m Operational EBITDA 753.4 MW energised Projected capacity FY22/23: £27.8m (FY23/24) FY23/24: 421.4 MW by Mar-25 ROBU
Slide 34: Alternative valuation metrics and outlook
Alternative valuation metrics and outlook Given the volatility in revenue forecasts, NAV per share can be evaluated in conjunction with alternative metrics. Based on a weighted average of peers in the sector on a MW basis, a series of multiples were lower for GSF.1,2 40 35 30 25 20 15 10 5 - EV/EBIT
Slide 35: Contracted revenue streams (1/3)
Contracted revenue streams (1/3) BESS is a primarily merchant asset class through wholesale trading and ancillary services. However, as the industry has evolved there has been an increased focus on contracted revenue streams. Examples of these include; capacity market contracts, tolling agreements,
Slide 36: Resource adequacy contract (2/3)
Resource adequacy contract (2/3) GSF has secured a 12-year RA contract for its 200 MW / 400 MWh Big Rock project Key Features Contracted Capacity + • Resource adequacy refers to the Reserve Margin state’s electricity grid's ability to reliably meet the power demands CAISO’s of all consumers, prevent
Slide 37: Key terms of the agreement (3/3)
Key terms of the agreement (3/3) • Resource Adequacy (RA) contract secured for the 200 MW Big Rock asset in California with J Aron, a subsidiary of Goldman Sachs, expected to commence in Summer 2025. • This is a stackable, fixed price contract worth over $14 million annually for 12 years, marking a
Slide 38: Optimal capital structure
Optimal capital structure GSF is an outlier within the subsector with debt % of GAV amounting to c. 15% compared 1 to its peer average of c.25% Debt % of GAV Debt/MW (£000’s) GSF’s GAV June-end 2024 250 30% 200 Equity 20% 150 (June-end 100 24) 10% 50 £584 m Debt (June- 0 end 24) 0% GSF Peers GSF Pee
Slide 39: Investment tax credit
Investment tax credit Asset owners can deduct part of renewable energy project costs Stand alone, BESS has from federal taxes or sell the been eligible for ITC benefits since Q4 2022. % credits for cash to third parties, who can use them to offset their own tax liabilities. Therefore, GSF’s projects
Slide 40: BESS Portfolio Management
1) Gore Street @ Energy Storage Fund BESS Portfolio Management | at i) MUNIN | i NH Hie J uly iH {Ii} |
Slide 41: Commercial Manager: Full technical capabilities
Commercial Manager: Full technical capabilities Due Diligence EPC Construction Commercial O&M Asset Mgmt End of Life Grid connection & Inverter selection Build contracts: Track Route to Market (RtM) O&M take on site Performance Site de- network guidelines Grid code compliance costs &
Slide 42: Portfolio overview
Portfolio overview GSF’s operational portfolio is 497 MW 421.4 MW in the GB market 22 MW in 1 the German Market GB & Northern Ireland (GBP) (50 Hertz) 1. Boulby 6.0 MW | 6.0 MWh 9. Larport 19.5 MW | 19.5 MWh 2. Cenin 4.0 MW | 4.8 MWh 10. Ancala 11.2 MW | 11.2 MWh 385 MW across the 3. POTL 9.0 MW | 4
Slide 43: Market overview – available revenue
Market overview – available revenue 3 Types of Service Revenue Streams available Grid Balancing Peak Trading Shifting Great • Dynamic Containment • Capacity • Market Britain • Dynamic Moderation Market Arbitrage Trading • Dynamic Reserve • Triads • Balancing 3%(1) Mechanism Ireland • DS3 uncapped •
Slide 44: Seasonality of revenue per grid
Seasonality of revenue per grid Total Revenue (in £000s/MW) by Grid since IPO 160 140 Revenue per Grid (£000's/MW) 120 100 80 60 40 20 0 Jun-end Mar-end Jun-end Mar-end Jun-end Mar-end Sep-end Dec-end Jun-end Mar-end Mar-end Sep-end Dec-end Jun-end Sep-end Dec-end Jun-end Mar-end Sep-end Dec-end Sep
Slide 45: ERCOT revenues: Past and future
ERCOT revenues: Past and future ERCOT summer revenue was lower than previous years Summer 2024: Revenue Drivers ERCOT was better prepared; lessons learned from Winter Storm Uri and Storm Heather, and the high temperatures the previous summer. ERCOT market evolution Temperatures didn’t spike over 100
Slide 46: Impact of falling CAPEX on the portfolio
Impact of falling CAPEX on the portfolio 2.6x decrease in LFP cell prices from BESS capex has fallen considerably the 160 March 2022 to July 20241 last two years 140 LFP Cell price ($/kWh) 120 • Driven by2: 100 1. Drop in critical mineral prices 80 2. Increased manufacturing capacity and 60 economie
Slide 47: Construction & Procurement
1) Gore Street @ Energy Storage Fund Construction & Procurement | at i) MUNIN | i NH Hie J uly iH {Ii} |
Slide 48: Overview of construction progress
Overview of construction progress Enderby Big Rock Dogfish Capacity: 57 MW/57 MWh Capacity: 200.0 MW/400.0 MWh Capacity: 75.0 MW/75.0 MWh Grid: GB Grid: CAISO Grid: ERCOT Target Energisation: Dec-24 Target Energisation: Dec-24 Target Energisation: Feb-25 Updates: Updates: Updates: • BESS ready to en
Slide 49: Asset Management
1) Gore Street @B nergy Storage Fund Asset Management ol IAAI HM
Slide 50: Role of asset management
Role of asset management Asset Management’s purpose is to improve profitability of the fleet. 1. Facilitate revenue performance • Target maximum availability of assets to generate revenue. • Provide technical support to enter new markets (and regions) quickly and effectively. • Use data to drive con
Slide 51: Data-driven asset management
Data-driven asset management Build Skilled Asset Portfolio-wide Battery analytics Asset platform Management insurance software and controls + Team Fleet-level policy with Advanced algorithms Fleetwide visibility 5 FTEs with varied reduced premiums to analyse battery in a single portal, skillsets on
Slide 52: Opportunities greater than the sum of the parts
Opportunities greater than the sum of the parts Commercial Performance Decision-Making • RTM services w/o hardware • Dynamic opportunity costs of • Faster market entry commercial decisions • Outages awareness • Inform design choices of pipeline • Increased availability • Asset awareness: automated f
Slide 53: Asset Optimisation
1) Gore Street @B nergy Storage Fund Asset Optimisation ol IAAI HM
Slide 54: The value of internalising trading
The value of internalising trading Battery experts Synergy with asset management • 8 years of market exposure • Perfectly placed to balance • Active in 5 different regions and commercial vs technical decisions expanding • Maximise asset life value • In-house Construction & Asset • Full understanding
Slide 55: A battery focussed, data-driven solution
A battery focussed, data-driven solution • Software has been fully developed in-house • Focussed entirely on storage assets • Monitors assets and markets, create forecasts, determines optimal strategies, and optimises in real-time • Each asset has unique qualities and characteristics • We optimise e
Slide 56: Summary
7) Gore Street @ Energy Storage Fund Summary
Slide 57: Overview: drivers of BESS
Overview Multiple factors influence the development and build out of BESS. Falling CAPEX and rising renewable penetration can increase the build-out of BESS as a stabilisation asset. Renewables Installed Capacity Drivers of BESS 500 400 1. Rising policy support for a greener grid 300 GW i.e. BESS an
Slide 58: Macroeconomic impacts on the portfolio
Macroeconomic impacts on the portfolio The average lithium-ion battery pack and The case for retrofitting assets is driven by: 210 cell price (volume weighted) 1 1 Falling capex increasing the economic case for retrofitting assets with one hour of additional 190 14% duration. GSC continues to evalua
Slide 59: Supportive policy environment for BESS
Supportive policy environment for BESS The fundamentals of energy storage remain unchanged. Rising renewable penetration requires grid balancing services, such as those provided by BESS. As such, governments are increasing their support for energy storage. Rising policy support for energy storage th
Slide 60: Future of the Inflation Reduction Act
Future of the Inflation Reduction Act The Inflation Reduction Act, passed in late 2022, promises $369 bn of investment of energy security and climate change initiatives over ten years. This act created Investment Tax Credits for energy storage projects. While Republicans have been vocal in their opp
Slide 61: Near term focus: derisking the portfolio
Near term focus: derisking the portfolio Dogfish RA Contract Big Rock All significant physical works Foundation piles installed completed to safe-harbour Secured stackable long term and enclosure onsite the 10% Investment Tax contracted expected to Credit enhancement, contribute up to 40% of t
Slide 62: Closing Remarks – From GSF Directors
Closing Remarks – From GSF Directors
Slide 63: Chair of GSF
Chair of GSF Patrick Cox Chair Mr Cox has significant board experience and, in addition to his role as Chair of the Board of the Company, he is currently Chair of Ecocem Ltd – a low carbon cement producer - and of Supernode Ltd – a tech company developing next generation superconducting cable system
Slide 64: GSF & GSC’s unique approach
GSF & GSC’s unique approach Construction Asset RtM Commercial Management Key technical functions ensure high asset availability, optimal revenue strategies are pursued, and buildout costs remain competitive. Geographical and technical diversification Continued payment of dividends for the last 5 FY
Slide 65: Conclusion
Conclusion Consistent delivery Best in class revenue against targets Competitive cost per generation De-risking the portfolio MW fully installed The Company continues to Supported by the create value for Manager’s in-house asset shareholders despite The manager primarily challenging GB market manage
Slide 66: Contact
Contact Gore Street Capital – Shore Capital – Joint J.P. Morgan Cazenove – Joint The Investment Manager Corporate Broker Corporate Broker Alex O’Cinneide / Paula Travesso Anita Ghanekar (Corporate Advisory) William Simmonds/ Jérémie Birnbaum / Ben Paulden Fiona Conroy (Corporate Broking) (Corporate
Slide 67: Disclaimer
Disclaimer This presentation has been prepared by Gore Street Capital Limited ("Gore Street Capital") for to any resident thereof. Any failure to comply with these restrictions may constitute a violation of information and discussion purposes only and should not be considered to be an offer or the s
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