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Gore Street Energy Storage believes it's time for batteries to shine in renewable transition

Renewable assets are all about cashflow and less the underlying NAV

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Investors wanting safe, steady income have had to look further afield due to the impact of the pandemic.

Half of the FTSE100 have cut dividends this year, while bond yields are now close to zero or even negative.

Institutions have already twigged renewable energy is one segment bucking this trend and have flooded money into wind farms and solar operators.

But that is only half the story according to Alex O’Cinneide, the manager of the Gore Street Energy Storage Fund PLC (LON:GSF).

He believes that while the focus in renewables so far has been on generation and replacing fossil fuels, with production now established a change in emphasis is on the way.

As coal and nuclear plants are decommissioned, ways to tailor renewable energy to meet peaks and troughs are required and this means energy storage or batteries.

Gore Street was the first specialist battery fund to be listed in London, says O’Cinneide, and plenty of progress has been made since its IPO in 2018.

From an initial capacity of 6Mw, Gore Street now has 239Mw of capacity built or planned within its portfolio though its pipeline currently runs to an almost four times that or additional 900Mw of potential projects.

O’Cinneide believes, though, that this is only the tip of what promises to be huge market going forward.

How to make the weather-fuelled electricity generation reliable has always been able the challenge for renewables but batteries solve the problem of when and where the wind blows or the sun shines.

And as the amount generated by renewable energy sources increases, so will the need for ways to store and release the energy generated as required

Driven by this need, technology is advancing in leaps and bounds, says O’Conneide.

Renewable energy needs storage to function, he says O’Cinneide and the transition to a low carbon economy and rise of electric vehicles (EVs) are propelling the market forward

EVs are a big opportunity for battery operators, he says and innovations to replace combustion engines have led to a massive price decline in the cost of lithium-ion batteries and made them economical for the national electricity grids.

It is that theme that Gore Street is playing, he says. 

EVs driving prices lower

“We can buy critical assets at cheaper and cheaper prices to supply the grid’s needs.”

But the strategy is also around education, he adds and building the understanding of the benefits of storage both in the marketplace and among investors.

“Wind and solar are understood from low carbon and cost angles, but the message about why is storage is also important is also starting to get through.”

That is evident in easier planning for new UK projects, how the grid is allowing it to connect, and a more straightforward process for permits and building.

A recent law change, for example, means government approval is no longer required in England for projects over 55Mw and or in Wales over 350Mw.

That was a big boost for Gore Street, says O’Cinneide, but key in future will be a continued decline in the price of lithium-ion batteries and steady growth in renewable usage, he says.

“As long as those two things continue, we will see growth in our asset class”.

Developments at a macro level suggest he is unlikely to be disappointed.

Europe, meanwhile, has earmarked €550bn to help develop renewable technology and help groups based in the EU break the current dominance of Asia-based battery suppliers.

Behind that, is a forecast that the full battery cycle from mining production and through to recycling might be worth as much €250bn euros by 2025.

Healthy dividend yield

Recent results saw Gore Street pay its stated dividend target of 7p, which at the current share of 105p gives a yield of 6.7%.

At 104p, Gore Street is valued at £82mln, which might seem modest given the sums being bandied about, but, as O’Cinneide, says it was a pioneer in London and is building its track record.

In the year to March, NAV rose to 94.6p, which means the shares currently trade at a healthy premium.   

 The trust has also been active in raising money and followed a £20mln funding round in the last financial year with a further £23.7mln in June.

One fund manager also pointed out that renewable assets are all about cashflow and less the underlying NAV.

 “Generating assets are highly cash-generative, or they should be, and it should be less about that NAV and more about the cash flow that those assets generate.”

As Gore Street’s portfolio matures and the trust overall gets larger and more diversified, that should be good news both for the trust and investors looking for income.

Quick facts: Gore Street Energy Storage Fund PLC

Price: 103 GBX

Market: LSE
Market Cap: £79.49 m


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Gore Street Energy Storage's (LON:GSF) Alex O'Cinneide says the decline in lithium-ion batteries and growth in renewables bodes well for the continued growth for energy storage as an asset class. ''Our increasing use of renewable energy is exactly why we have a need for energy storage'', he...

on 12/8/20

4 min read