Gore Street Energy Storage Fund (LON:GSF) used an investor presentation to outline a new strategic direction, changes to governance and incentives, and a commitment to cash distributions that the company said are designed to improve shareholder returns after what the new chair described as a “tricky ride” for investors.
Refreshed board and focus on aligning interests
Chairman Angus Gordon Lennox, who joined the board at the end of last year and became chair in January, said the board has been “completely refreshed” and has spent recent weeks conducting analysis to determine the “best way forward.” He emphasized a goal of re-engaging shareholders and aligning interests among the board, the manager, and investors.
Shift in strategy: from buy-and-hold to recycling capital
Manager representative Alex described the strategy pivot as a response to higher interest rates, arguing that at current “risk-free rate” levels, long-dated cash flows are less attractive than “short-term capital return.” The fund is moving away from a buy-and-hold approach toward a model described as “construct, augment, dispose, and return and recycle.”
Management said it will continue to prioritize revenue maximization, noting that the portfolio is diversified across markets and is achieving what it called best-in-class revenues within those markets. At the same time, the team acknowledged that the pace of energy storage build-out across markets has been higher than expected, pressuring revenues relative to earlier expectations.
As part of the new approach, the fund plans to divest certain assets and use proceeds to fund distributions. Management said it aims to avoid “forced or value-destructive transactions” by having multiple assets marketed at any time to preserve flexibility on timing and pricing. The company also discussed potentially using joint ventures with other financial sponsors for certain builds, depending on which route it views as most efficient for shareholders.
Dividend commitment and asset sale targets
The board committed to a quarterly dividend of 1.75 pence per share, starting immediately, equating to 7 pence per share annually (described as approximately £35 million per year). Lennox said the fund intends to provide shareholders with “certainty” around cash returns using what he characterized as responsible assumptions.
In the Q&A, Lennox said that at current conditions, the 7p annual distribution is expected to be funded by “a little over 2p” from revenues and about “5p from capital,” with capital coming from asset sales. Management noted that at higher historical revenue levels, the dividend would have been covered by operating cash flow.
Alex provided additional context on revenue conditions, citing a historical range in 2021–2022 of approximately £20–£24 per MW per hour at high points. He said the 7p dividend is fully covered at around £10–£12, but current blended revenues across the portfolio were described as “just under £7,” which does not fully cover the distribution from operations alone.
The company outlined disposal targets and related KPIs, including asset realization targets of £25 million in the coming year, at least £75 million in the year after, and a further £75 million in the following year. Management also said the fund will maintain leverage below 20% and stated it will not increase leverage to pay dividends.
U.S. tax credit proceeds and additional distribution
Management also addressed a separate cash return linked to U.S. tax credits. Lennox and Alex said the tax credit proceeds have been received, and that a 1.5 pence per share amount related to those credits is intended to be in addition to the 1.75p quarterly dividend. They said the release of the funds to shareholders was “imminent,” pending final documentation, and asked investors to bear with the company for “the next coming days.”
Augmentation plans, costs, and governance changes
The fund highlighted augmentation—adding additional battery cells to existing projects—as a key value-accretive activity, with a KPI of at least a 15% IRR for augmentation investments. Management said battery cell costs have declined about 40% over the last two years and characterized current CapEx pricing as favorable. In response to a question, Alex said the fund is looking at roughly £50 million of potential augmentation CapEx over the next two to three years, subject to returns and board oversight.
On governance and fees, the company said prior changes removed a performance fee and an exit fee, shifted the management fee to be half based on NAV and half on market capitalization, and announced that a 2% investment management agreement exit fee has now also been removed. The board said it has set “fierce KPIs,” and that a continuation vote scheduled for 2028 would be brought forward if KPIs—“including the payment of the quarterly 1.75p”—are not met.
During the Q&A, management discussed the sales process for the Cremzow asset in Germany, stating that the sale was “going to plan,” that interest has been strong, and that the market should expect an update within “the next 4–8 weeks.” The company also said current debt is about 17% of GAV and described debt servicing costs as “around 300 over.”
About Gore Street Energy Storage Fund (LON:GSF)
About Us: Gore Street Energy Storage Fund plc is London’s first listed energy storage fund, launched in 2018. The Company is the only UK-listed energy storage fund with a diversified portfolio across five grid networks. The Company is one of the principal owners and operators of battery storage facilities in Great Britain and Ireland and owns and operates facilities in Western Mainland Europe and the US. It is listed on the Premium Segment of the London Stock Exchange and included in the FTSE All-Share Index.
Energy storage technologies enhance power system stability and flexibility and are key tools for balancing out variability in renewable energy generation, facilitating the integration of more renewable energy supply into power grids.
