- Fast-growing energy storage fund
- Demand is driven by fossil fuel decommissioning
- The aim is to generate a 7% dividend yield for investors
What it does
Gore Street (LON:GSF) provides energy storage for the National Grid and its equivalent in Ireland using nothing more sophisticated than the lithium-ion battery technology that powers your phone or electric cars (but on a much larger scale).
Demand is driven by the decommissioning of fossil fuel and nuclear facilities and the switch to green energy sources, which are now responsible for 40% of UK’s energy requirements.
The unpredictability of the wind and solar means there has to be infrastructure to store electricity in times of plenty that feeds it into the system to balance the grid as well as contributing at times of peak demand.
“Without assets such as ours, renewables would not work; the grid would fall over,” said adviser Alex O'Cinneide. “Our assets become the stabilisation force.”
Yield target
Gore Street’s aim is to deliver a healthy return for its investors in the form of a 7% dividend yield.
How it’s doing
In April 2021, the company said it is to raise funds through a placing of shares at 102p.
Proceeds will be deployed towards the company's development pipeline of 1.3 gigawatts (GW) of earnings-enhancing opportunities and the near-term potential completion of an acquisition of an 80 megawatts (MW) project expected in the coming weeks.
Also, funds from the share issue will be used to accelerate the development of the company's existing portfolio, including the Republic of Ireland assets' expansion from 30MW to 90MW.
At the end of March, the company announced it had passed several growth milestones on its portfolio as its operational assets doubled to 210 megawatts.
In an update, the group said its two Northern Ireland sites, Mullavilly and Drumkee, are now complete and generating revenue. Despite Coronavirus (COVID-19), the company said the two 50MW projects were completed on budget and in time to capture the earliest possible window to start earning revenues under the Northern Ireland DS3 contracts.
Gore Street said the new sites almost double its operational portfolio, which now comprises 210MW across 11 projects in Great Britain and Ireland and is expected to double operating cash flow.
The firm added that the DS3 contracts available for these two assets have attractive return profiles, likely to be “considerably higher” than its 10% internal rate of return (IRR) target for portfolio assets.
Meanwhile, Gore Street said its Porterstown project in the Republic of Ireland (ROI) has recently successfully contracted Fluence for a fully wrapped construction of the battery system and has secured an option to expand its capacity from 30MW to 90MW. Following an update from Eirgrid, phase one is now expected to be commissioned in the first quarter of 2022 with phase two to follow in due course.
In line with this expansion, the company said that Kilmannock, its other ROI asset in construction, has an equally significant expansion proposal, from 30MW to a potential 90MW, which is currently going through an application process. Gore Street said it is engaging with stakeholders to secure a streamlined construction schedule with a definitive connection date to be confirmed.
Over the six months to end September 2020, Gore Street's net asset value (NAV) per share rose to 97.3p (2019: 94.6p) including an earlier £23.7mln fundraise.
Net income was £2.8mln (March 31m 2020: £4.7mln) and the interim dividend for the period was 2p, which was in line with its commitment to pay 7p a year.
What the manager says; Alex O'Cinneide
“Gore Street Capital is strongly positioned to take advantage of a major pipeline of 1.3GW of attractive accretive opportunities. We look forward to leveraging our experience and proven capital discipline to find the best opportunities to generate further shareholder value."
Inflexion points
- Additional acquisitions of both operational assets and those under development
- Yield target of 7%
- Recent investment from Japanese oil group JXTG
What the broker says: Liberum
Liberum said that with a £24m capital raise during the six month period and a further £60m raised earlier, the company is well-positioned to expand the portfolio further, with the manager reporting a potential pipeline of 1.3GW of assets across the UK, Ireland, Europe and the US.
“Recent acquisitions and the commissioning of 130MW of construction assets (expected in 2021) will support the 7.0p dividend target, which represents a sector high 6.8% dividend yield.”
As a result of the acquisition, the size of Gore Street’s portfolio of operating assets rose to 110Mw from 29Mw and its portfolio overall to 320Mw.
Blue Sky
Industry experts see the potential for at least 30,000 MW in additional storage installations if the UK is serious about reaching its long-term climate targets