Gore Street Energy Storage Fund (LSE:GSF) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the GORE STREET ENERGY STORAGE FUND PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the investor meet company platform.

0:32 Before we begin, I would like to submit the following poll, which will just appear on your screens now. And I would now like to hand you over to the management team from the GORE STREET ENERGY STORAGE FUND PLC. Alex, good morning, sir. Thank you. Thank you for the introduction. Good morning, everybody. Thank you for joining. I'm joined here by four of my colleagues, John, principal on our investment team Alicia, principal on the technical side, and Ben in our investor relations group. And I'm Alex Okeneva, the CEO and founder of GORE STREET. Next slide, please. We're very happy to present these results. Very pleased with these results. There's some really key metrics I want to draw out as go we through this presentation. Kind of overall financial highlights, total capacity of the portfolio, 1.2 gigawatts.

1:18 Operational capacity, just under 300 megawatts, but post period, that increased to 371 megawatts with the energization and operation of STONAI. NAV total return, point 7%. Operational EBITDA, 12,200,000. We'll talk about that in a while. But over but the last quarter we are engaged in, we went dividend cover positive on the basis of no new capacity. So that's a very interesting metric, which we'll talk more about. NAV per share, just under one thirteen. It's slight decrease from the last NAV driven wholly by a change in the discount rate and short term inflation numbers, and we'll talk about that on the NAV bridge. Next slide, please. So operational highlights.

2:05 19,300,000 of revenue during the period, 12,200,000 of operational EBITDA. GB revenue, let's think about the met pounds per megawatt hour as a as a key metric for us to understand performance here. Our GB revenue, England, Scotland, Wales, was £7.50 per megawatt. Our non GB revenue, just under £20 per megawatt per hour. So our non GB portfolio is really outperforming, the GB market. As investors who've been with us for a while would have heard us talk about the value diversification on again and again, we're operating in five different energy systems. They're all uncorrelated in terms of revenue. They're correlated in terms of investment thesis. So the same investment thesis supports our activities in California, Texas, Germany, Ireland, and GB.

2:55 But the diversification gives a very strong level of lowering volatility in our revenue, but it's also given us some materially higher revenue than we would have been in GB only.

3:06 And so operational dividend cover of 1.15 x of operational EBITDA of 8,300,000. So very strong results there, turning, dividend cover positive on the basis of no new operational capacity. So just driven by very strong revenue performance, particularly in Ireland and Texas. 79.9 megawatts only assets, ENERGY's reporting period. Big asset coming on stream for us, part of bringing on over 800 megawatts by in the next eleven months. So really step change in the operational capacity of the portfolio going from this 371 with Stony to 820 over eleven months. We are engaged in a quite complex revenue pattern. We have about 20 different ways of making money across our portfolio, and GORE STREET's manager is actively involved in optimizing those revenue sources to give us this very high level of profitability.

4:03 We have very strong balance sheet, 75,000,000 of cash or near term cash, de minimis amount of debt as we have been very conservative as we look at the headline rates on debt. Debt level will increase through the course of 2024, but still remain at a very low level as a percentage of gap. Next slide, please. John. Great. Thanks, Alex. So this page, we align the NAV bridge for the six month period from April 1 to September 30. This really reflects, as Alex mentioned, the macro change in discount rates and inflation, which together had a 4p negative impact on NAV as we increased the discount rates by 25 basis points across the board for all assets at all stages, whether preconstruction, construction, or operational.

4:55 So going through each of the items in turn, FUND and SUJITI HoldCo operating expenses are in line with kind of historical and as expected. On dividends, this 3.5p reflects the the 2p paid in the June end quarter and the 1.5p paid in the September end quarter. Cash generation is 12,200,000 EBITDA plus interest income of around 1,800,000, which is interest on the cash held, on account. On OpEx, we announced, at June end some internalization of certain asset management and o and m contracts, particularly within GB in Ireland, as well as some updated assumptions on the fleet wide insurance policies, which we have have started to initiate across the board. So that internalization of some of those core functions, which, you know, we've been to leverage through our in house asset management team has been something we've been focused on.

5:48 In terms of derisking of, assets, these largely include, Stony and Fermil assets, the two large, GB assets, which are either just been energized or to be energized imminently. So for STORAGE, there was a 25 basis point reduction reflecting that movement into energization. And for Ferrymule, we reduced, the discount rate by 50 basis points, which was, again, a result of real kind of derisking through the construction process to a point now where the asset from our side is effectively built, and we're just waiting for the, DNO to provide, the connection on their side. Just to note that these are still offset with that 25 basis point increase in additional discount rate hike. So Stony, for example, given it is offset, total basis points remains at the same discount rate, taking those two effects into account.

6:36 On revenue curves, as for all orders to quarters, the curves were updated in the context of the four grids in which we have operational assets. In GB, the curves dropped. And in ERCOT, they also kind of fell slightly. But on this was kind of, you know, offset by increases in both the Irish curves and also California. It's probably worth reiterating from our side the effective, kind of the impact of GB suppressed pricing and falling curves has not been so large, on our sides due to what we anticipate as appropriate forecasting in in previous periods. So those kind of reduced curves, we did not roll back as much as potentially some of our competitors have done.

7:19 And then in terms of other DCF changes, these include updated repowering assumptions, releases of certain contingencies throughout the construction process, the effective asset rollover, updated commission dates for some of the GBS sets like Fermil, and then also just some updated CapEx assumptions, which we have you know, as we've gone through the procurement process, we have updated pricing on some of our assets which are about to enter construction. So I think just to kind of the takeaway from this slide really is, we've put it down in the in the bottom left hand side. The macro assumptions were the largest, driver of the the net decline. So if you if you took a scenario excluding kind of the the effects of inflation, and also discount rates, you would see a net per share of a 116.9p.

8:09 So on the slides, we just outlined the curves, which we've used across the portfolio, on the on the merchant basis, so excluding the impact of any, capacity market contracts in in those markets where we do have them. As you'll see, you know, as kind of indicated earlier, the GB curve did see a decrease compared to kind of our f y twenty three assumptions as of March end. That reflects the current drop in in, you know, market prices and really is more of a near term decrease compared to what we previously forecast. In the longer term, I think we we, you we we believe kind of the the the pricing, which, kind of we we previously forecast, we we will hit, and it's kind of the, I guess, the the run rate pricing in GB is kind of what we've seen and what we expect to move forwards. In Ireland, the the curve saw an uplift compared to what we previously seen.

8:59 I think it's particularly worth noting in this, in this period, and at least you will kind of, I think, go into more detail later on. But in this period, yeah, in the Irish market, it is really expected to be seasonal, where the summer, you would typically expect kind of lower, wind penetration, which feeds into the d s three scaler. But in over this period, there was actually there was kind of quite a number of storms, and high wind in Ireland. So the prices, over the summer months were actually elevated to to those similar to what we see in in winter. And that's, either fed through to the updated curves. And we've also seen in Ireland some delayed grid connection for new batteries coming online, which means, I guess, the the the expected saturation and penetration of new batteries will not be seen. So that's led to an increase in the curves there.

9:46 In The US, both curves in California and Texas remained closely in line with what we previously assumed in terms of assumption, so there was no great change. So on this, slide, we've just provided some additional, context on the assumptions used on both, the OpEx and CapEx, sides as we mentioned earlier. Within the manager itself, the technical team has grown, and given additional experience and expertise. Certain aspects have been internalized. So as I mentioned earlier, largely relating to asset management and o and m services, which we previously outsourced. Many of those would be able to kind of insource now within within the portfolio fleet, such as, you know, fleet wide insurance assumptions across the portfolio.

10:40 Again, on the, during the periods within ERCOT, the Texas market, we switched we switched our route to market provider, to Tenaska, which is a more sophisticated optimizer. And in the period, we were able to qualify those assets into the more lucrative ECRS service, which we benefited from particularly in the the later quarter to September end. And that really was able to kind of capitalize on kind of those those higher revenues in the seven months. On the CapEx side, we've also updated repowering assumptions based on slightly higher battery price increases, which for the forward curves, which we always price into one now. So the assumed, repowering of, of, yeah, of the the projects, the batteries when they hit a certain level of thresholds, capacity compared to nameplate capacity.

11:31 However, as as you maybe were, the majority of our, services have been in ancillary services across the fleet, so that is typically lower levels of cycling.

11:42 So if significant remaining useful life beyond, you know, before repowering is required in general. And for some of the assets going into the construction phase, we've updated CapEx costs and estimates for EPC and balance of plan balance of planned items. And that really just reflects the latest contractual discussions and estimates which we've been discussing with our with our contractors. On the right hand side, as you'll see from inflation discount rates, we've seen a decrease in inflation assumptions based on the updated macro view as of September end. And as indicated earlier, we we've included a 25 basis point increase in discount rates across the board for all the effort assets. And you see the the breakdown as we kind of derisk through the process for the, pre construction phase. Kind of we discount assets at, kind of 10 half to 11% down through into the into the kind of energized phase, for contracted down to kind of seven to to seven and a quarter to nine and a quarter percent. And the in contracted income, which is the majority majority of of kind of cash flows, we assume around 8.75 to 9.25%.

12:52 Just just to kind of reiterate all of the end services and trading, which constitutes a large portion of our revenues across all different grids, we we categorize as uncontracted revenues.

13:06 And then at the bottom, you see sensitivities. So they share the impacts of some of the key inputs for which we generally update in all the periods on a and this is shown on a pence per share basis within that with inflation and discount rates having the the lowest impact as you'll see. We believe these are appropriate measures, and we have the you know, in terms of disclosure, you know, we have we have high levels of disclosure amongst our peers on those two aspects.

13:34 Next slide, please, Ben. Thank you. So on the slides, you can see the benefits, I think, of international diversification. As Alex indicated, the fund achieved operational EBITDA during the period of 12,200,000 and fund EBITDA of 8,500,000, which resulted in a dividend cover of put 70 operational and point five for the fund over six months. Again, you know, over the kind of late quarter, we achieved operational dividend cover of 1.15 times, and also we're over one times on a kind of full EBITDA basis. When you kind of look at the, GB market itself, whilst that's, you know, being, experienced suppressed pricing over the period, you see on the on the right hand side, the breakdown of EBITDA by grid is actually quite stock. So for example, ERCOT, for which we have 30 megawatts in operation, contributes 28% of EBITDA compared to 9%, for GB, which for which in this period, we had a 110 megawatts.

14:36 And, this is all on the base of the 291 megawatts in operation. Obviously, we've now energized which is an additional 80 megawatts. And as we will show in slides later on, you know, we will have more than 800 megawatts in operation by the end of twenty twenty four. So in the absence of any additional fundraisers, this will be on the same basis of dividend denominator.

14:59 So that that is the kind of basis of, you know, as as we kind of the money the cash that we've raised previously, that is used to fully fund the build out of this additional this this additional pipeline, which is gonna be online by the end of twenty twenty four.

15:17 So just a snapshot of the update of operational portfolio across across all geographies and across the fund. So the notable change that has already been touched upon is is STONAI, so 80 megawatts that we energized in August. It's located near Milton Keynes in England. That asset is now out of the reporting period, has been made operational and is actually trading, as of December. It's a very positive milestone achieved for for for 80 megawatts, in GB. So GB now constitutes 51% of the portfolio, and, the combined assets in Republic Of Ireland and Northern Ireland are 35, with Texas, just just below 10, and and and Germany, 66%.

16:07 So that creates that diversification that we'll be touching upon over the next slides. Next slide, please.

16:22 So touch up on the revenues and how they have been realizing themselves over the past two quarters and particularly with some focus on on September end and that that's that's spike that you can see on the on this on this graph. So revenues across our portfolio are seasonally hedged. That is a result of

16:48 sort of strong winter and summer variations in in the fleet performance across the portfolio. So, generally, the trends that we expect to see, the predictable trends is that Irish assets that operate in the uncapped regime should be seeing a relative stronger performance in winter. So winter generally indicates a higher wind penetration. Revenues in DS three uncapped in Ireland are monetized by skillers that, are highly focused on the satisfaction of, electricity demand by the relative renewable energy generation. If that generation is higher, such as in winter, and if the buildup of renewables also increases, then the the revenues generally are, increasing, and that's what we're seeing in, in winter.

17:47 This summer has been slightly,

17:50 different. We actually have seen high levels of wind, particularly in July and August, and that that has, driven, above, base case performance for in that season for the Irish assets in in uncut regime. ERCOT assets in Texas have behaved as expected in terms of very strong performance in summer. They have definitely exceeded some of the expectations, particularly in August. Our Texas assets have generated, around 150 per megawatt per hour, which as you would have seen from other slides and and and in comparison, order of magnitude higher than, for example, fleet in, in GB. That is really driven by

18:37 scarcity of generation occurring in summer with high, temperatures, in in ERCOT, where effectively some of the older thermal fleet in ERCOT is is unable to operate in those high temperatures. Next slide, please. This is a very interesting interesting way of illustrating effectively what happens to variation of revenues across quite a long historical period that you can see on the x as axis when diversification is added to the to the portfolio. So looking at average revenues across GB and then deriving a standard deviation from from from this historical period that you can see.

19:26 Visually, you can see a large variation of revenues across different, quarters, and the standard deviation was around five pounds per megawatt. And that, then has quite significantly changed when, our portfolio has, had seen the addition of assets in Ireland, assets in Texas, and assets in Germany. That one standard deviation has now reduced to 2.7, so it has nearly halved the variance. And, also, the addition of addition of of other, of other, jurisdictions have also increased, has increased the overall average of revenues. Those revenues are highly uncorrelated across geographies, so we don't expect any any more global movements in terms of impact from from seasonality to to change, and that natural hedge should should remain in place.

20:27 Next slide, please. So just a overall summary of how we think about stacking revenues, for for the portfolio. So our batteries, very much focus on, being able to capture revenues, new revenue streams in the markets we already exist in, but also being able to very quickly, step into new markets and and and take advantage of being a first mover. In, in terms of ancillary services where we provide, frequency and power quality support to system operators. We effectively capture capture across all our geographies around 15 different services.

21:13 So that does require technical expertise in being able to prequalify and and continue to meet performance requirements. In most markets, there are stringent performance requirements for those ancillary services, and there are penalties if those performance measures are not not met. However, it does mean that a good operator with an experienced asset management team is able to capitalize on that strong technical track record.

21:43 In terms of trading, we effectively now access trading in all our markets in which we have assets, definitely in GB. That's a big part of the portfolio strategy. Obviously, when the opportunity arises, We have now started trading also across Ireland. We are trading in Germany, and, we have trading capability. And when it's appropriate, we do access that in in in ERCOT. Last but not least, capacity market contracts, generally long term contracts, which allow system operators to secure capacity with a very predictable long term, timeline, usually around ten to to fifteen years. Notably, we will be speaking more about the resource adequacy contracts that we will be, capturing with our big rock project in in California. That's a very important part of the overall revenue stack for that asset and for that geography.

22:44 If we can go to the next slide. Thank you. So just a a recap of all the revenue strategies across, different, different grids. Ireland, very much still focused on the d s three, services. It's it's, it's a strong performance market with relatively slow accession rate for, for batteries due to generate grid delays. The budget has now been confirmed for the next year as not being changed, and the rates have not been changed. We don't expect them to change in January. This is very positive news, overall for that market. It's it is driven by generally much slower pace of build outs than was anticipated by by and generally also by overall kind of lesser budget consumption than than they predicted.

23:34 We have been also accessing trading in this market and testing out smaller amounts of volume to see whether there's an upside, and we have been able to generate significant upside as you can see from the slide. It's not the linear it's not the linear type of behavior that ups upside is limited to, only effectively opportunities where, and and time, windows where d s three is, if is of a lesser value. So it's it's not that you release the whole battery capacity that it's a multiplier of what we have captured there. In ERCOT, effectively, really strong performance was driven by ancillary services. That is the outcome of ERCOT releasing a new service, ECRS, which they have released, really off the back of, trying to reinforce, the transmission system and generally electricity market that have seen volatility and, obviously, various storms and very negative events in the past few years over winter, especially.

24:40 So we expect that ERCOT will continue to build out additional fleet of tools to be able to mitigate against any further events like URE STORM, for example, from from a couple of years ago. We expect to continue to capture those ancillary services and that to be majority of the stock. However, when opportunity comes, our assets are positioned and able to capture trading trading revenues when when that becomes a more optimized strategy. In GB, really focusing on being able to access all portfolio of revenues. This is going to be particularly important as we don't expect that, saturation in the DSTAR services should change.

25:29 However, there is a number of other policy movements and market mechanism movements like the open balancing platform that should be changing the the revenue stock and still to be seen. How it will in what extent it's going to affect the revenue stock, but we expect it will definitely have a positive upside impact on on the results in GB. In Germany, a market where we have with a new partner, new route to market partner partner inspired, we have access now a large depth of short term trading, algorithmic trading. This is always asset backed, but allows us to, take a near term positions and, churn effectively, trades, and that has resulted in in a very large share of trading, 64% in in, in terms of the stock.

26:22 It's it's a very positive, outcome. Again, if we were just focused on ancillary services, we would have seen a significant, probably around 20% lower revenue performance in that market. Thank you, Alicia. Quite a complex picture. We're engaged in multiple types of revenue activities in individual markets, but I think it's worthwhile then bringing you back to actually what does that mean, you know, follow the cash, how are we actually doing in terms of revenue per grid. And I think it's really interesting. You look at this breakdown, Northern Ireland and The Republic Of Ireland. Ireland is one energy system. We're averaging for this period just over £17 per megawatt for every hour in operation.

27:10 It's a really significant result. As Alicia said, we expected actually this summer in Ireland to be making less than that given that we're tied to the level of wind generation across the island, and there's more wind generation in winter, obviously. But very strong wind penetration, very strong winds leading to good wind generation and therefore leading to our assets. We're carrying out a very valuable service to keep the grid stabilized and therefore accruing significant revenue. In Britain, it's about £7.50 per megawatt per hour in operation. We're tracking the market. I think any energy storage player in GB is kind of plus or minus 5%. We're we're kind of engaged in similar strategies. This is a a reasonable number.

27:57 You might recall, obviously, during 2021 sorry, 2122. GB was a very profitable market. We, at the time, were wrong on the upside. We thought it would be less revenue. So these numbers we're seeing here in 2023 are on trend for our projections. Germany, just under £9 per megawatt. We expect to see some pickup in this as we go into the winter months, but then again, this is on base case. ERCOT, the Texas market, obviously, a standout performer at 40 per megawatt per hour. Put it into context, you know, we have 30 megawatts in operation in in in in Texas. We would have had to have, you know, nearly a 150 megawatts in operation in GB for similar level of revenue.

28:45 So really strong set of return on investment, for sure, given how much money we were making for the individual assets, but characteristic by high temperatures in the summer, aging gas infrastructure, not able to cope with those high temperatures, and a high electricity demand. Overall then, 15 it's over £15 per megawatt for every hour in operation. Portfolio weighted average, really strong results, you know, over nearly two x what we would be making if we were GB only. So diversification is not only smoothing out the revenue volatility from individual markets. It's also delivering to us an absolute higher level of revenue. If I look across our peer groups, we'll be making the absolute highest level of revenue, not just on per megawatt basis, but absolute numbers as well as EBITDA.

29:32 Next slide, please. Great. So this slide illustrates the portfolio build out capacity over time as we move forwards as we expect to energize significant projects throughout 2024 to reach more than 800 megawatts by the end of next year. So as you see, the the the first, we've got 371.5 megawatts total in operation at the moment, which includes that Stony asset, which was energized recently. Ferrymule is the next GB asset, which we expect to come online in January next year. We're we've done all the work on our side in terms of construction. We're actually waiting for the the counterpart, DNO, to finish their works and actually connect the system.

30:18 And then the 57 megawatt NDB project, again, in GB scheduled to be energized in June next year. Moving into international markets. So PBSL two is the extension of the Portstown project in The Republic Of Ireland. 60 megawatts there. We expect that to be in operation by June next year. And then the two larger US projects, so Big Rock, which is the California project, we acquired the project rights for that in in March this year. We already acquired the batteries, and now we're in the process of kicking off the kind of balance upon EPC, and getting that project, into construction, with a with a target digitization date of December 24. And, again, Dogfish, another project, which we acquired the project rights for in January this year.

31:07 We're just kicking off the EPC process sorry, the construction process now, having, you know, looked looked at EPC procurement options and, again, expect that to be fully commissioned by the end of next year. So if you look at the total, 830 megawatts by the end of next by the end of twenty twenty four, that is all funded through existing cash reserves and or, you know, available debt, which we have. As Alex mentioned, we're yet to draw on, those debt facilities in any meaningful way, but we did announce the $60,000,000 project financing at Big Rock, which we will be drawing on for that project. And then, you know, as as an as we need to draw on additional funds as we as the remaining cash we we seek to build out these projects is drawn down, we will do so.

31:55 So up until the end of twenty twenty four, all these projects are fully funded from existing resources. Beyond that, we have projects again in 2025 in Texas, which they're the Dawson surrounds phase two projects. And then beyond that, we have additional projects in Middleton, which is the 2026 COD project in GB, and then 19 Megawatts in addition in in Ireland, which we will look to commission. We do have, you know, the option to look at the to extend the accordion within our existing facility to to fund these build outs and also kind of as alluded to in the interim report this morning, you know, potentially looking to recycle capital through the kind of existing portfolio, which we can use to invest into potentially more attractive higher growth markets.

32:43 If we look at the the bottom graphs and and slides, we see the split by geography in terms of portfolio. That is on a megawatt basis. But if you if you took it on a megawatt hour basis, whereby we have longer duration systems in in ERCOT and Caissou, which, you know, satisfy the actual mock construct in in in those areas. That split would be kind of nearer on a per megawatt hour basis, kind of near 50% across The US. Moving across to the kind of system duration itself, you you'll you'll see that split. We do retain optionality across, all of our well, across our systems to be able to increase, the duration as and when, the mock opportunity presents itself. At the moment, as, you know, you heard from Alicia, largely in GB, that's been dominated by ancillary to date. It does not require longer duration systems, but at the appropriate time when there is the trading opportunity, you know, we we may seek to expand, duration in in GB assets.

33:41 We future proofed, you know, in terms of the projects we've acquired. We we try to pre future proof those in order to to make those extensions as and when required. And then split by stage on the on the right hand side, you'll see that now kind of about one quarter operational. By the end of twenty twenty four, that will flip such that three quarters will be in operation of the total portfolio. Yeah. I think just off just just a few comments on that. Right? So really interesting tipping point here. 371 megawatts today, eleven months, which is not a long time in the world of infrastructure. Assets in construction funded, progressing well. Ferry is disappointing. The asset is built when we're waiting for Scottish Power, but we are in active conversations with them on a near daily basis to hold this January timing that they've given us. But, you know, really strong set of portfolio assets coming on stream here over the course of 2024, including, of course, our big rock asset in California, a really important asset to the overall portfolio.

34:40 So a step change in the portfolio makeup, but continue to build out our diversification. We're continuing to build out to a really strong level of operational portfolio. Ben? On this slide, we're giving a high level view of the, the frameworks we use we use to record and report the company's ESG performance. In the sense there, you'll see SFDR. This is a European framework which the company adopted back in 2022. The framework is looking at the framework is aiming at reducing greenwashing and improving transparency to investors. So that's a framework we voluntarily adopted, and you'll see reporting for that included in the company's annual report and included in the company's ESG report, which comes out on an annual basis. TCFD in the top left, that is a UK framework, which looks at climate related, opportunities and risks.

35:30 An interesting framework, which is is quite, forward looking. They expose different scenarios and and how that could affect the company, and its operations. PRI on the top right, that's a new framework for the company. As its name indicates, looks at, responsible investing, and the company completed its first filing for that, during the reporting period, so, in September 2023. On the left hand side, the, the the metrics there, they are the key, sustainably in the key sustainable say sustainability indicator metrics which the fund has chosen. Three and a half thousand tons of c o two avoided, and that's during the previous fiscal year. And that's based off a operational portfolio of 291 Megawatts. As the portfolio grows, we will expect those sustainability metrics to increase as well. And, bottom left hand corner, Fair Cobalt Alliance.

36:24 This is, this is an interesting organization that the company again joined during reporting periods, and is part of our engagement along the supply chain along the company's supply chain. Although, GSF doesn't directly source cobalt, its suppliers obviously do, and joining this initiative working to improve conditions in the mines and working with the local communities where the conflict minerals are sourced. Thank you. So in conclusion, we have a strong portfolio in construction, which, we're we're very happy with the progress. Of course, the grid operators remain under pressure in terms of switching on, not just energy storage assets, but solar, wind, data centers, housing estates, hospitals. So we we appreciate the difficulties they have, but we are working very closely with them around holding to, the dates in our projections, but a step change in the operational portfolio from 371 to 820 over the next eleven months. And we believe we are the cost leader in terms of megawatts fully installed.

37:31 When we look at published data, our our assets seem to be at the at the the right level in terms of cost. We have our own internal procurement group, which is active in the market with a range of different suppliers to maintain that cost advantage that we bring to our projects. And, of course, we have the best in class revenue generation. Against the GB only strategy, we're making two x the revenue that we would have. We're well positioned in five very important markets, GB, Ireland, Germany, Texas, and California. And we we believe that revenue generation maximization will continue as we look out into 2024. Overall, the firm continues to deliver against its targets. We continue to build out the portfolio. We continue to optimize the revenue opportunity in our portfolio, and we're engaged across the entire value chain to deliver value to our investors.

38:21 I think we have time now for some questions which came through. Perfect. Alex, John, Alicia, Ben, if I may just jump back in there. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. And, Ben, obviously, we did receive a number of presubmitted questions ahead of today's event. And as you can see there in the q and a tab, we've also received a number of questions throughout your presentation this morning as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Ben, if I may hand over to you now just to share the q and a session with the team, and then I'll pick up from you at the end. Thank you. Absolutely.

39:10 Thank you very much. So the first question we've had in would be you have done well minimizing gearing expenses. What is the policy going forward, and do you have a facility in place? Yep. I can say that. So, yeah, as kind of we alluded to in the earlier slides, we this year, we've, upsized our kind of RCF at the corporate level, which has gone from 25,000,000 up to 50,000,000 facility. That remains undrawn, as it stands. But we've added that additional flexibility to be able to to use, as as we move forwards, should should the, the the pricing and the opportunity present itself from a build up perspective. We also added the project level financing at Big Rock. So that's a $60,000,000 US facility.

40:02 That can be drawn for the purpose of building out constructing the California asset itself, and we will seek to draw that down as we progress through the construction process over the next twelve months. Now in terms of taking those two together, if they were all fully drawn, that would constitute around 99 to 100,000,000 of fully drawn debt on a on a sterling basis, which is effectively around 15% of GAV, which is still relatively conservative level when we look at, you know, kind of leverage levels across the board. We do have, as mentioned, the opportunity to exercise an accordion on our on our kind of RCF basis up to a maximum of 30% of GAV should we choose to to be able to potentially fund those projects beyond 2024.

40:53 But, obviously, we'll we'll assess that in the context of, you know, capital optimization, as we move through 2024. You know? But, yeah, it could involve, as you mentioned, some capital recycling across some of our projects to reinvest in other in other markets. So, obviously, given prevailing pricing and debt debt costs, we we do we are cognizant of those, but we believe in, you know, a conservative level of gearing going forward. Thank you very much. The next question, is around geographical split. So, what is the geographical split of the portfolio, and would you consider reallocation of capital to higher profitability markets such as The US? Yep. So, we have an investment policy. 40% of the portfolio needs to be GB in Ireland, and and we're obviously well over that.

41:42 So that's, that's the the kind of line, 60% then rest of world, which is Mainland Europe, and America for us at this point. For sure, we are in a very good position in that we're active in the five different energy systems. So we can turn on or turn off capital allocation to each of those different jurisdictions, you know, as as we want. We are in the business of delivering returns to our investors. So if we saw good prices for assets in, for instance, GB, and we wanted to recycle that capital into the Irish market or the California market or the airport market, we'd absolutely do that. So, we're that is that kind of portfolio optimization is an activity that we're consistently engaged in. Thank you very much. The next one, please explain hourly income in a simple way.

42:31 Is it twelve hours or twenty four hours, and does it include weekends? So, generally, the the the the revenues really are optimized across a twenty four hour window. We don't really have markets in which we operate with long term with long term hedges or or or forwards. So, generally, the way the way we think about optimization, the way our partners also execute optimization is that predictions are being made about day ahead spreads, and that sets out the opportunity cost of bidding for ancillary services, in most markets. Generally, on the day ahead markets, you also procure ancillary services.

43:21 It's, set up in that way. For example, in ERCOT, it's set up in that way also in, Germany. So effectively, prediction and view about the spreads and also stand to also realize ancillary services prices. So, generally, if we do not clear in in in a in a in a wholesale market, then we would, effectively move to, to ancillary service that would have been, that would have been, secured as a as an as an alternative. Generally, over twenty four hour period, I would say that we hold state of charge at the position where batteries are ready to deliver ancillary services. So it it could be changing across twenty four hours depending on the level of energy throughput that the service requires.

44:16 But throughout the day, we would generally slowly manage that state of charge and top up. So, generally, you know, we don't execute a strategy where we charge up where the prices are low during the night and discharge during the during the day in high prices because that would effectively mean that the battery has not been utilized. And between those two arbitrage events, we would generally, manage state of charge slowly in ancillary services during the day and then discharge, in the high, peak hours. That's that's probably kind of a simplified view over twenty four hours. Between the between those between those day and night positions or day and night relative prices, we would always have ancillary services provided in between so that batteries are never really sitting idle.

45:10 Yeah. I mean, I think another thank you, Lisa. Another way to think about that is the whether we're discharging or not discharging, it depends on what service we're in. Right? So the number on the r and s saying, how much we're making hourly income, that is for every hour in that quarter. That's the average revenue we have in that quarter. But how the the the battery is operated across that quarter depends on these different types of services. So, in grid balancing, our assets are 50% full of electricity, so they can be a consumer generator, and the grid operator will ping our assets, second by second, to be honest, for which we will charge them an hourly rate for the length of the contract. And so overall, the number you see here in the r and s about how many hours, and what our average revenue per hour is, that is the amount of hours available in that quarter.

46:03 Thank you very much. We have one more question here on, on commercial. So that is, as the market becomes more saturated, will trading become a greater component of income? How is the company adding to its strategy to tackle the effects of market saturation? Yeah. So I would say, among our list of peers, we are carrying out the most level of trading. That is in the German market and the Irish market. We're very actively involved in in wholesale trading. Not so much the GB market that is yet is not a profitable market for trading, though we are well set up to avail of trading revenues when and if that becomes available to us. But we're very active already, trading in Ireland and in Germany, and very successful for us. So an active manager against the wholesale trading markets and generating revenue right now.

46:52 Thank you. This one, I think we we did touch on briefly in the presentation. But last week, the ESO announced the launch of the open balancing platform using bulk bulk dispatch optimizer to enhance the use of energy storage in the balancing mechanism. Have you noticed any difference for the use of your assets? Do you think this or other plan changes in 2024 will have a material impact on GSF? So it's been only two days. I I must admit this is too short horizon to be kind of making, strong statements about, change to the revenue just yet. We know that that there has been a material amount of instructions, about 2,500 instructions just in Monday, as of, as of the position as of December 13. So, it it has had a material impact of of on number of effectively calls upon batteries.

47:46 I would only say that this is material in that sense that it shows National Grid commitment to, lower the cost of balancing to consumers. So batteries are inherently more efficient to dispatch. They are not like gas speakers that require to sit and run to be able to then be ramped up or run down. So I expect that the batteries will be called upon more and more now that it requires it's much less manual as a dispatch. It will really, really be dependent on the prevailing prices in the market and and, of course, the number of congestion that might happen in in the GB system that will require local generation. But as fundamentally, as renewable generation increases and we're not usually able to keep up with the pace of transmission build outs to manage congestion, I do expect that batteries will play a a big role in in management of that congestion through balancing and using batteries is just a natural the most cheapest way to do it, and National Grid has a regulatory obligation to to minimize the cost to consumers.

48:58 Thank you. And one more on revenues in GB. So what products are available to UK best assets to provide fixed revenues? Yeah. I mean, I'll quickly take that. It's always been available to capacity market contract. Right? So that is about between 1015% of revenue. And for all of our assets, we have those multiyear long term contracts index linked. So that always exists. There is also other products coming into market where we could partner with utilities to get a fixed rate return over our assets for a period of time. So there is, you know, a more there's more maturity in the market construct, which and, of course, we thought it one of the leading edge of this. We can see different ways of fixing a more variable. It's all about what the cost of fixing is versus the variable upside, and so we're expanding that at all times. But the The UK mark the GB market, UK market has always had a capacity market construct, and we are successful in those contracts.

49:56 Thank you. And one more would be on the inflation reduction act. Did GSF enter Texas and California due to the inflation reduction act? And is there a possibility that this act could be repealed next year? Yeah. I don't know if I'm qualified to to quote on whether the act could be repealed next year. I think it'd be very difficult to repeat. You have to go through congress and need a filibuster, I believe. So we don't view this as a very, very high risk, in terms of, it being repealed, especially given where our assets are actually being, coming into operation, then we should receive cash back on the inflation reduction act. That said, you know, we are expecting, you know you know, tens of millions of dollars back in terms of CapEx being switched on. But it's not quite as simple as that. If the inflation reduction act wasn't there, less assets would get built, and therefore, our existing assets of the incumbent would generate more revenue because there'll be a scarcity. Now that revenue would be over a longer period of time than the than the cash influx in 2024, 2025, for instance.

51:06 But, you know, it's a complex picture. Right? You're incentivizing market to build. Right? So more assets are getting built to compete with our assets. If you don't incentivize that as that market, less assets get built. Therefore, our assets should accrue more revenue. Overall, though, we we hope and don't believe this is a high risk. Thank you. Take a few more. So one question here. You stated STORAGE was energized. Is it in commercial operations yet or just switched on and in testing? So I can confirm that STORAGE as of December is now trading, so it is in commercial operation. Great. Thank you very much. If I hand back over to Jake. Perfect. Ben, Alex, John, Alicia, thank you very much indeed for addressing all of those questions that that came in from investors this morning.

51:57 Of course, we will be able to give you back all of the questions that were submitted today as well as any others that do come through immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the platform. But, Alex, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that would be great. Yeah. Thank you. You know, again, we believe a strong period, a period that shows the value of diversification, a period that shows the value of tight control of the assets in terms of revenue optimization. For sure, energy storage remains this critical asset of our energy transition, and we can see that in all the markets that we're operating in. One of the components of energy storage, though, it is more or less a merchant asset class, and therefore, our ability to lower volatility versus having, for instance, a GB only strategy, I think, very important, and once you be able to see that now in these figures.

53:00 It's the first quarter we turned, yeah, dividend cover positive, So we're very pleased about that, especially off the back of not actually operational capacity increase. But on that basis, we have a significant operational capacity increase over the next eleven months, and we're very focused on bringing those assets on time and on budget. And I want to thank all our investors again. Alex, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of GORE STREET ENERGY STORAGE FUND PLC, we would like to thank you for attending today's presentation.

53:46 That now concludes today's session. So good morning to you all.