Member Info for StarBright

The completion and energisation of these 3 projects is a big achievement for which some credit is due. As they come online in revenue generation terms - I think they have the opportunity to earn merchant/trading revenue quite soon, but the more stable reserve contract in the US won’t activate until June - their combined impact will be transformational in terms of earnings. Most importantly, in terms of dividend cover.

Realising the ITC is evidently important too. The risks associated with this have evidently jump-scared investors; it’s often the first topic referenced when I speak with my network of former colleagues and clients. It’s a narrative that seems to have significant cut-through in messaging terms, perhaps because it fits so well with the Trump/anti-renewables/DOGE themes. But the company persists in indicating confidence that it will secure the rebate, when it would be easy for it to just adopt a “wait and see” message. I am hopeful that we’ll wake one day to an RNS saying it’s in the bag.

The RNS today alludes to the evident debate between the board and the manager regarding the use of the proceeds. There is a natural tension here; the manager no doubt wanting to have cash to deploy in new/exciting projects. They have employees to keep engaged and - hey - doing stuff is fun. But the board are likely getting a strong message from shareholders that the discount must be addressed. The likes of SABA and (now) Achilles are lurking, their threat is real.

The golden scenario is:

1. the ITC is realised

2. the ITC proceeds are deployed in an immediately shareholder-friendly way

3. the “super-dividend” is funded restoring the 7p for the last 12m

4. 7p+ divi pa going forward (on a fully covered basis) is committed

All of this might be achieved in the next few months. If it is, expect the share price to re-rate positively. There is work to do first however…

Excellent RNS this morning:

- Dogfish (US), Big Rock (US) and Enderby (UK) all up & running

- Energised capacity reaches 753.4 MW / 924.1 MWh

- No apparent threat to US ITC’s….

“Gore Street Energy Storage Fund plc (LSE: GSF), the internationally diversified energy storage fund, is pleased to announce the energisation of its remaining in-construction assets: "Dogfish" (75 MW / 75 MWh, Texas) and "Enderby" (57 MW / 57 MWh, Great Britain).

Energised capacity reaches 753.4 MW / 924.1 MWh

The successful energisation of all remaining assets under construction marks a pivotal milestone in transitioning to a steady-state portfolio, with the energised portfolio capacity now at the targeted 753.4 MW / 924.1 MWh. This significant milestone represents a 79% increase in MW capacity, including the energisation of the "Big Rock" asset in California, US (200 MW / 400 MWh) announced in January. All assets are scheduled to be revenue-generating in FYQ1 (by June-end) of the upcoming Financial Year (FY25/26). The non-GB assets now represent 61% of the total energised portfolio on a MW basis, highlighting the Company's internationally diversified strategy.

Investment Tax Credits

While the Trump administration has taken action regarding the permitting of onshore and offshore wind, no action has been taken regarding the Investment Tax Credits (ITCs). External legal counsel has also advised that there has been no change to the eligibility of the Company's projects to qualify for the ITCs, and ITC applications will be filed as soon as possible. In addition, the Investment Manager continues to negotiate the sale of the ITCs; no change in market appetite or pricing from well-established ITC buyers has been seen, reflecting overall market confidence.

As previously communicated to the market, the application of the ITC proceeds will prioritise shareholder value. The Board is actively assessing this matter and engaging with shareholders and the Investment Manager on their use. Options under consideration include returning capital to shareholders through mechanisms such as a buy-back program, repayment of debt, investing in the portfolio, or a combination of the above.“

5% is sufficient to require the company to hold an EGM, and to propose specific resolutions. So in GSF’s case that’s a holding of less than £12m. And if the fund were working with some existing holders who are keen to see change, it might not even need to buy the whole £12m. A “war-chest” of £50m is more than enough to get the attention of boards in this sector.

The attention of Achilles could be a very positive development for holders of whichever funds it chooses to target.

This is interesting. Christopher Mills (a respected fund manager) and associates have raised £50m+ for a new fund “Achilles”:

https://www.londonstockexchange.com/news-article/market-news/publication-of-prospectus-result-initial-placing/16908674

“The Company's investment strategy will be to invest in a concentrated portfolio of closed-ended investment companies, admitted to trading on a market of the London Stock Exchange, with a focus on alternative assets (being assets other than publicly quoted equities) and to seek to maximise value for Shareholders through constructive activism. The Company will seek to identify underperforming or undervalued assets and unlock value and will take an active role in engaging with the boards and the investment managers of investment companies within its portfolio…”

It was inevitable that the huge discounts that have opened up in the sector would attract attention. I am surprised it has taken so long. This should be good news for the holders of funds targeted by Achilles. Watch this space…

Some attention from one of the TG/X ramping groups might be a welcome catalyst here. I’m surprised ZIOC hasn’t seen this yet - it has all of the necessary ingredients; low volume, low free-float, price history at higher levels, outlandish punter “valuations”, single-share obsessive BB posters etc. Any P&D outfit worthy of the name should find this easy to get up and running….

Who remembers JOHNRAMBO…?

This is interesting. Christopher Mills (a respected fund manager) and associates have raised £50m+ for a new fund “Achilles”:

https://www.londonstockexchange.com/news-article/market-news/publication-of-prospectus-result-initial-placing/16908674

“The Company's investment strategy will be to invest in a concentrated portfolio of closed-ended investment companies, admitted to trading on a market of the London Stock Exchange, with a focus on alternative assets (being assets other than publicly quoted equities) and to seek to maximise value for Shareholders through constructive activism. The Company will seek to identify underperforming or undervalued assets and unlock value and will take an active role in engaging with the boards and the investment managers of investment companies within its portfolio…”

It was inevitable that the huge discounts that have opened up in the sector would attract attention. I am surprised it has taken so long. This should be good news for the holders of funds targeted by Achilles. Watch this space…

This is interesting. Christopher Mills (a respected fund manager) and associates have raised £50m+ for a new fund “Achilles”:

https://www.londonstockexchange.com/news-article/market-news/publication-of-prospectus-result-initial-placing/16908674

“The Company's investment strategy will be to invest in a concentrated portfolio of closed-ended investment companies, admitted to trading on a market of the London Stock Exchange, with a focus on alternative assets (being assets other than publicly quoted equities) and to seek to maximise value for Shareholders through constructive activism. The Company will seek to identify underperforming or undervalued assets and unlock value and will take an active role in engaging with the boards and the investment managers of investment companies within its portfolio…”

It was inevitable that the huge discounts that have opened up in the sector would attract attention. I am surprised it has taken so long. This should be good news for the holders of funds targeted by Achilles. Watch this space…

This is interesting. Christopher Mills (a respected fund manager) and associates have raised £50m+ for a new fund “Achilles”:

https://www.londonstockexchange.com/news-article/market-news/publication-of-prospectus-result-initial-placing/16908674

“The Company's investment strategy will be to invest in a concentrated portfolio of closed-ended investment companies, admitted to trading on a market of the London Stock Exchange, with a focus on alternative assets (being assets other than publicly quoted equities) and to seek to maximise value for Shareholders through constructive activism. The Company will seek to identify underperforming or undervalued assets and unlock value and will take an active role in engaging with the boards and the investment managers of investment companies within its portfolio…”

It was inevitable that the huge discounts that have opened up in the sector would attract attention. I am surprised it has taken so long. This should be good news for the holders of funds targeted by Achilles. Watch this space…

@swazers:

Your report shows ROA 8.5%, ROE 12.3%, ROIC 9.7%. Can you explain how these ratios are reported as positive, given that the company isn’t profitable..?

How does a loss-making company have Interest Coverage of 7.1x..?

Where are the options (your report lists active trading at 42.25, 65 and 90 strikes) priced and traded..?

Discretionary Fund Managers, also known as Wealth Managers, Private Client Portfolio Managers etc etc. The likes of Rathbones, Brewin Dolphin, Cheviot, Charles Stanley. Many of these bought renewables funds for their income-focussed clients toward the end of the low interest rate period. The funds provided yield for client portfolios, but evidently with a level of capital risk that the DFM’s failed to understand properly. As rates rose - particularly as gilts became more attractive - the relative attractiveness of renewable fund yields decreased, and fund prices fell steadily. DFM’s don’t like explaining losses to clients, they are historically very VERY poor at seeing across the bottom of valuation valleys. As prices slid, other factors emerged - notably arcane changes in cost disclosures and the consolidation among major DFM businesses. These factors combined and DFM’s became determined sellers of the funds; the proverbial rush for the door in the burning cinema. Under the resultant selling pressure, prices for these funds have collapsed.

But the underlying economics of some renewables trusts (including FSFL) aren’t horrible for new investors. In particular some have juicy yields that are genuinely underpinned by recurring cashflows, and boards that have understood the need to focus on shareholder returns.

TLDR; the predictable incompetence and herd instincts of Discretionary Fund Managers may have created a perfect storm for renewables funds, some of which now offer excellent value for braver investors.

*In the meantime such holders are being paid ~10% via a fully covered DIVIDEND (sorry for typo)

Continuation vote if discount continues to exceed 10%. But with the fund trading at a >30% discount, there’s a huge buffer to NAV. If a continuation vote were “lost”, new-ish holders with low averages would have material protection, in fact they might reasonably hope to achieve some upside. In the meantime such holders are being paid ~10% via a fully covered discount.

The sector as a whole continues to be one of the most hated - particularly by the DFM’s who loved it previously. But it is entirely possible that hindsight will show these last few months to have been a wonderful buying opportunity for value/income investors. It is obviously not without risk, but it’s also possible to see how strong returns can be generated.

Plenty to like in the 2 RNS released today:

1. Change of management fee basis indicates that the board are listening to shareholders, and will represent a material (to the dividend) cost saving.

2. Dividend coverage at 1.4x for last quarter, but more importantly reconfirmed as 1.3x going forward despite roll-off of some older favourable contracts

3. NAV is stable with only minor movements across categories

Against this are “poor irradiation” in Q4 and an evident delay in offloading the Aus assets, neither of which are likely to be durable problems.

They have other projects / initiatives that could generate newsflow also.

…interesting placing.

Good commitment by insiders - including a first buy for one with an interesting cv - who’ve taken 30% of the shares issued. One to watch.

Interesting FT story today about GLEN's DRC assets - from which there may or may not be any read-across. No direct mention of Zanaga, but the article asks whether such preliminary discussions indicate a "...significant shift in strategy...". I'll leave interpretation to this board's resident sleuths.

Yes, I understand that DRC isn't etc etc

Sorry if you don't have an FT sub...

https://www.ft.com/content/eb7a0c36-b7b1-4ae3-9e07-418eb5fe7745

Now that the bubble in infrastructure investment companies has well and truly burst, there are some (like NESF) that exhibit four key characteristics:

1. They can be purchased at a material discount to their declared NAV

2. They have a (very) high yield, that is fully covered (or thereabouts)

3. They have management teams who've accepted focusing on investor returns rather than exciting projects

4. DFM's have been (probably are still) big sellers - generally a good sign!

An interesting balance of risk and reward. Hindsight may show this period to have been an excellent buying opportunity. Not for the faint-hearted, and remember you have to be prepared to buy on the way down if you want to catch the turn. DYOR etc....

A different kind of keller / bunker may be needed…

I don’t see that the delay changes much, at least not for those with investor time horizons. If anything it’s a small positive as it confirms an incoming inflection point of some sort. Free-float shareholders here have always been relying upon Elphick/GLEN etc to fight their corner and extract value. Looks like another round has become necessary…

BTW can we please stop thinking that the many mining industry “conferences” are of any relevance? The amount of time/energy wasted here discussing Indaba, FMF etc is just embarrassing.

Nah - just 17 trades all kiddy-sized so far today suggests that investors are holding strong, and traders are notable by their absence.