Release Date: July 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gore Street Energy Storage Fund PLC (LSE:GSF, Financial) reported a near GBP30 million operational EBITDA and a dividend yield of 11.6%, showcasing strong financial performance.
- The company has a diversified portfolio across multiple markets, including GB, Ireland, Germany, Texas, and California, which reduces volatility and increases revenue potential.
- Gore Street Energy Storage Fund PLC (LSE:GSF) maintains a robust balance sheet with over GBP60 million in cash and a low gearing ratio of 6.5%, expected to rise to 15% by year-end.
- The company is on track to significantly increase its operational capacity, with three major projects expected to come online soon, boosting total capacity to 750 megawatts.
- Gore Street Energy Storage Fund PLC (LSE:GSF) has successfully secured investment tax credits for its US projects, potentially bringing in $60 million to $80 million in cash inflow in 2025.
Negative Points
- The company's NAV dropped from 115p to 107p, primarily due to macroeconomic assumptions and a decline in GB market revenue forecasts.
- Revenue assumptions are conservative, with expectations of a prolonged recovery period in the GB market, not anticipated until at least 2028.
- The company faces challenges in raising equity for growth due to the current state of the investment trust market and high interest rates.
- There is a potential decline in revenue in the Irish and ERCOT markets due to anticipated changes in market conditions and asset build-up.
- Gore Street Energy Storage Fund PLC (LSE:GSF) has adjusted its dividend policy to a fixed 7%, reflecting a shift from NAV-based dividends to cash generation-based dividends.
Q & A Highlights
Q: Have competitors' holding agreements in the GB market influenced Gore Street's strategy?
A: Alex O'Cinneide, CEO, stated that while they are aware of various contract types in the market, Gore Street focuses on actively managing their assets to deliver best-in-class revenue. They are open to opportunities that exceed their base case.
Q: Is a one-hour battery duration still optimal in GB, and is retrofitting considered?
A: Alicja Kowalewska, Principal, confirmed that a one-hour system remains pragmatic in GB due to minimal uplift from longer durations. They are monitoring CapEx trends and will assess the situation for potential retrofitting.
Q: Can you explain liquidated damages?
A: Alicja Kowalewska explained that their contracts include robust liquidated damages clauses to offset risks from contractor delays. These arrangements are confidential but provide security to the portfolio.
Q: How does the RA contract in California compare to the GB capacity market contract?
A: Suminori Arima, CFO, noted differences such as the four-hour duration requirement in California, bilateral negotiations instead of public auctions, and more stringent technical requirements. The RA contract also represents a larger revenue portion compared to GB.
Q: Does the Labour Government support green trusts like GSF?
A: Alex O'Cinneide mentioned that while specific support for green trusts is unclear, the Labour Government's emphasis on renewable energy and grid reinforcement is expected to benefit energy storage revenues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
