Gore Street En. Regulatory News (GSF)

18 December 2020

Gore Street Energy Storage Fund plc

(the "Company" or "Gore Street")

Positive Asset Management Update

Smaller Related Party Arrangements: Upgraded operational asset management services brought in-house

Further to the disclosure in the Company's prospectus dated 30 November 2020, the Board of Gore Street is pleased to announce that it has entered into a Commercial Management Agreement (the "CMA") with Gore Street Technical Management Limited ("GSTM"), a wholly owned subsidiary of Gore Street Capital Limited (the "Investment Manager"), in connection with additional management services to be provided in respect of the Company's growing portfolio of battery storage assets. In addition, the Company announces certain amendments to the terms of its AIFM agreement with the Investment Manager (the "AIFM Agreement").

This is a core element of the Company's existing strategy to bring control of the asset management of Gore Street's growing portfolio in-house to deliver greater value for shareholders and optimise asset performance. These mandatory costs are expected to be charged at or below market rate, while currently these costs are being paid to external third parties for this service.

The Commercial Management Agreement

Pursuant to the CMA, GSTM will provide certain additional services to the Company. These include services in respect of both the Company's development projects (the "Construction Services") and operational assets (the "Operational Services"). The services provided under the CMA will help to provide the oversight and cost transparency required for the growing portfolio of battery storage assets, with an experienced team providing a dedicated service for the Company.

The Construction Services include, inter alia, managing development related matters that arise in relation to each development project until the project has been commissioned, overseeing the exercise of lease options and negotiation of lease terms and overseeing the construction phase of the project. In consideration for the provision of the Construction Services, GSTM is entitled to receive a fixed fee per development project per annum of £110,750 for a maximum term of 1.5 years in respect of each development project.

The Operational Services include, inter alia, facilitating the timely response to issues on site, including dispatch of engineering resources and technicians, assessing daily performance of energy storage assets, identifying and monitoring project operations risks and issues and interfacing with and holding accountable the asset manager and operation and maintenance provider. In consideration for the provision of the Operational Services, GSTM is entitled to receive a maximum fixed fee per operational asset of £20,000 per annum, with a lower fee per annum payable in respect of certain smaller projects within the Company's portfolio.

The CMA may be terminated on 6 months' written notice and is subject to earlier termination on the occurrence of certain events.

Amendment to the AIFM Agreement

The Company has also entered into an amendment to its existing AIFM Agreement with the Investment Manager, pursuant to which the Investment Manager will be providing accounts administration services as well as additional transactional support services to the Company. In respect of the accounts administration services, the Investment Manager will be entitled to a fixed fee per annum of £50,000, plus an additional nominal fee per asset per annum in respect of each energy storage project held (beginning with, and including, the tenth energy storage project). The transactional support services fee is a fixed fee of £124,596 per annum.

In addition, under the terms of the AIFM Agreement, the Investment Manager is currently entitled to receive from the Company an advisory fee payable quarterly in arrear calculated at the rate of one-fourth of one per cent. of Adjusted Net Asset Value. For these purposes "Adjusted Net Asset Value" means Net Asset Value, minus cash on the Company balance sheet. Pursuant to the proposed amendment to the AIFM Agreement, the definition of "Adjusted Net Asset Value" will now mean Net Asset Value, minus "Uncommitted Cash", where Uncommitted Cash means cash that has not been allocated for repayment of a liability on the balance sheet of any member of the Company's group. For the avoidance of doubt, Adjusted Net Asset Value shall not exceed Net Asset Value.

Costs of provision of management services

Based on the size of the existing portfolio, the additional costs for the Company in relation to the management services set out above are expected to be approximately £650,000 per annum, based on the current number of the Company's subsidiaries and near-term pipeline. These costs are accounted for within the SPVs and by bringing these mandatory services in-house at what is expected to be at or below market prices.

In consideration for services already rendered and set up, a one-off fee of £181,026.59 (plus VAT to the extent applicable) will be paid to the Investment Manager, calculated in accordance with the fee structure set out above, as part of the smaller related party arrangements.

The Investment Manager and any member of its group are related parties of the Company for the purpose of the Listing Rules. Based on the amounts involved, the arrangements constitute a smaller related party transaction as set out in Listing Rule 11.1.10R.

The Board believes that the arrangements will be beneficial to shareholders for the following reasons:

· cost and transparency: a transparent cost base for the Company, with the fixed costs per asset expected to deliver cost savings, particularly as the Company moves towards larger MW projects, and with the other fixed costs reducing as the fund size grows; and

·  control, oversight and direct accountability: increased control over the asset management and construction management services, accounting and transaction support services for the Company from a dedicated team that has specialist expertise in respect of battery storage assets.

Pat Cox, Chairman of Gore Street, commented:

"The Board believes after carefully reviewing the proposals that there is a clear and compelling commercial and operational rationale for this decision. These changes will provide the Company with a complete suite of beneficial services to further enhance the performance of our growing portfolio of assets, a central feature of the Company's focus.

The Gore Street Capital and Gore Street Technical Management teams, strengthened by additional experienced hires and adding to significant existing in-house expertise, will bring a wealth of skills to the highly specialist field of battery storage asset management and will add measurable value to the Company.

We are confident that this will result in considerable benefits for the Company by way of implementing increased efficiencies across the portfolio, based on fixed cost per asset service fees. Importantly, we believe these key services are being executed at, or below, market prices. This decision provides additional transparency on the overall cost base together with a more bespoke and dedicated level of service for the Company, as the operational and development portfolio continues to grow."

For further information:

Notes to Editors

About Gore Street Energy Storage Fund plc

Gore Street is London's first listed energy storage fund and seeks to provide Shareholders with a significant opportunity to invest in a diversified portfolio of utility scale energy storage projects. In addition to growth through exploiting its considerable pipeline, the Company aims to deliver consistent and robust dividend yield as income distributions to its Shareholders. 

The Company targets an annual dividend of 7.0% of NAV per Ordinary Share in each financial year, subject to a minimum target of 7.0 pence per Ordinary Share. Dividends are paid quarterly.

https://www.gsenergystoragefund.com