Gore Street En. Share Chat (GSF)

Krustysmegma - Are you talking about maps on https://www.gsenergystoragefund.com. I can't see them. Where are they?

If you click on the different maps there's a breakdown of operational vs energised assets for each country/state. Accepting these things can often be out of date in my experience so should probably be viewed as a guide rather than a definitive list.

Krustysmegma - thanks for pointing this out. Yes Stony is "Operational". It says Ferrymuir is "Pre-construction", which must be an error, since in the last trading update they said Ferrymuir was energised.

On the company's website, Stony is listed as operational, Ferrymuir as energised. There are lots of assets that are listed by the company as energised but not yet operational: https://www.gsenergystoragefund.com/content/about/portfolio

Etotheipi - GSF have reported that Stony and Ferrymuir are energised but I don't think they've reported that they are operational. No one should assume they're operational until GSF have said so.

That RNS specifies the dividend target policy, I'm saying that the actual dividends are driven by revenue. Usually these work out to be the same but can be more or less. Compare this to an IT investing in private equity like HGT, the returns are mostly capital so the nav is very important. Capital returns are realised when an asset is sold. In this case GSF are not looking to build assets to sell on and realise capital, they are building assets to generate returns. Although unlikely it's possible that an battery asset could halve in value but the revenue remain the same in cash terms, the dividend shouldn't be affected. Unlikely because the value of a battery asset is driven by it's revenue potential. In this case the board will congratulate themselves for beating the 7% of NAV dividend target or put more into the reserves to increase the dividend cover providing they meet the IT rules. IMHO.

The dividend paid clearly needs to remain within the limits imposed by Investment Trust status rules, but the company has nevertheless determined that the dividend paid will be based on the NAV, within those rules. See RNS dated 22 Mar 2022 for full details.

I looked into the requirements to remain, I think it's 85% of income

"(1) An investment trust must not retain in respect of an accounting period an amount which is greater than 15% of its income for the accounting period.

(2) The investment trust must distribute as a dividend the amount required to comply with paragraph (1) before the filing date for the investment trust’s company tax return for the accounting period. "

How income is calculated opens up a whole world of pain but I think the dividend amount is independent of the nav.

My post on 23rd May wasn't entirely accurate. Not all the non GB rates did hold up in FY24. The trading update says that German rates fell 47% in FY24. "Following a period of exceptionally high returns attributed to geopolitical events, the German asset has reverted to a more normalised revenue level, aligning with initial underwriting and disclosed third-party forecasts." So after (expected) big falls in GB and German rates GSF's FY24 revenue was apparently "saved" by Ireland and Texas (up 39% and 56% respectively).

Clisshold345, I think they are the same. The annual report states the operational capacity to be 291.6MW and this increased by 45% is 422MW which is the same as the energised capacity quoted elsewhere.

The dividend policy is based on the nav which sets the dividend target. It's only a target and the board has discretion to pay more or less. Also the policy can change every year and we get to vote on it, so the nav at year end is used but the percentage can change. There's also the distribution requirement to remain an IT, 15% of profits I believe. I think it's possible for the nav to fall, revenue to riseand dividends to rise. What I should have said is that the nav is less important than growth trusts.

Etotheipi - Not sure how NAV doesn't matter when the divi is set against it in percentage terms?

The author of the article made a major error. The energised capacity is 421.4MW (not the operational capacity).

Https://www.solarpowerportal.co.uk/gore-streets-operational-bess-capacity-up-45/

Uncle_Doug I think the NAV is largely irrelevant as GSF are not building assets to sell on, it's the revenue that's important. As more projects reach completion the revenue increases moving the dividend cover closer to 1, all other variables remaining the same.

Uncle_Doug - yes I'm not entirely convinced. GB rates have recovered a little, which increases GB revenue a little and Stony and Ferrymuir are now operational (or will be in a month or two), which increases GB revenue a little. I think getting to fund-level dividend cover > 1.0 by end of FY2025 (31st March 2025) is perfectly possible - as long GSF's non-GB rates hold up.

Hmm - not convinced. I'm concerned that the NAV continues falling and the dividend cover is not anywhere near enough. For me div cut is very much on the cards. Wait and see on this one.

Yes, nicely summarised StarBright. I only wish I had funds available to add at this level.

Sounds like we are all on the same page - projects moving from development to operational status will be a small net positive for the NAV. It will be important for GSF to manage newsflow around this topic effectively.

Also, I do believe that the NAVs of projects tend to be discounted whilst in the construction stage and get re-evaluated once in commerical production (have seen something similar at NESF recently). So there is quite likely some upside revaluation as GSF's existing projects under construction commence commercial production

Let's hope so TheTrotsky, I think any sign of a NAV increase or at least an indication that the bottom of the NAV cycle may have been reached will be very positive for the SP here. For me it's the only major cloud on the horizon following yesterday's positive trading update.

Krusty, I would imagine the recent travails in the UK BESS market haven't helped the NAV and although GSF has a diverse portfolio I would expect increases in the UK BESS price to start feeding through to increases in the NAV going forward.

OK I'll give you that StarBright, but I don't think that's going to have a significant impact on the NAV. And whilst coverage of the dividend from fcf will indeed be a significant milestone, and very much to be looked forward to, it won't impact the dividend itself which is based on the NAV. The NAV has been reducing for some time now (31 Dec 111.0; 30 Sep 112.9; 30th Jun 116.0) and, whilst we're still well within the window of 107 - 114 to maintain the 7.5p per annum dividend, we could definitely do with a NAV uplift being reported for 31st March (likely to be released mid-June based on last year).

I think once the market expectation/suspicion of a divi cut like its two peers recedes this should tick back. Market still too nervous to reach £1 anytime soon but steady rises with the divi will do me

Well.... that's not quite true. The NAV won't double as you say @Krustysmegma, but I'd expect some uplift as the discount rates used for those assets should reflect the greater certainty achieved by moving from development to operational status. And "proper" coverage for the dividend - ie fund level free cashflow > cash cost of divi - will be a notable milestone. I don't think the fund yield will be 11%+ when coverage is reached.

All to play for with significant upside possible if development projects are commercialised into a lower interest rate / lower inflation environment.