Gore Street Energy Storage Fund Plc (GSF) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Gore Street Energy Storage Fund plc Interim Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll, which will just appear on your screens now. And I would now like to hand you over to the management team from the Gore Street Energy Storage Fund plc. Alex, good morning, sir.

Thank you. Thank you for the introduction. Good morning, everybody. Thank you for joining. I'm joined here by 4 of my colleagues, John, the Principal on our investment team; Alicja, Principal on the technical side and Ben in our Investor Relations group. And I'm Alex O'Cinneide, the CEO and Founder of Gore Street. Next slide, please. We're very happy to present these results. Very pleased with these results. There's some really key metrics I want to draw out as we go through this presentation and kind of overall financial highlights. Total capacity of the portfolio, 1.2 gigawatts. Operational capacity, just under 300 megawatts, but post-period, that increased to 371 megawatts with the energization and operation of Stony. NAV total return, 0.7%. Operational EBITDA, GBP 12.2 million. We'll talk about that in a while. But the last quarter, we are engaged in, we went dividend cover positive on the basis of no new capacity. So that's a very interesting metric, which we'll talk more about. NAV per share, just under 113p, a slight decrease from the last NAV, driven wholly by a change in the discount rate and short-term inflation numbers. And we'll talk about that on the NAV bridge. Next slide, please. So operational highlights, GBP 19.3 million of revenue during the period. GBP 12.2 million of operational EBITDA. GB revenue, let's think about the pounds per megawatt hour as a key metric for us to understand the performance here. Our GB revenue; England, Scotland, Wales was GBP 7.50 per megawatt. Our non-GB revenue, just under GBP 20 per megawatt per hour. So our non-GB portfolio is really outperforming the GB market. As investors who've been with us for a while would have heard us talk about the value again and again. We're operating in 5 different energy systems. They're all uncorrelated in terms of revenue. They're correlated in terms of investment thesis. So the same investment thesis supports our activities in California, Texas, Germany, Ireland and GB. But the diversification gives a very strong level of lowering volatility in our revenue, but it's also given us a materially higher revenue than we would have been GB only. So operational dividend cover of 1.15x of operational EBITDA at GBP 8.3 million. So very strong results there, turning dividend cover positive on the basis of no new operational capacity, so just driven by our strong revenue performance, particularly in Ireland and Texas. 79.9 megawatts Stony asset energized during the reporting period, a big asset coming on stream for us, part of bringing on over 800 megawatts in the next 11 months. So, really step change in the operational capacity of the portfolio, going from this 371 megawatts with Stony to 820 megawatts over 11 months. We are engaged in a quite complex revenue pattern. We have about 20 different ways of making money across our portfolio. And Gore Street's manager is actively involved in optimizing those revenue sources to give us this very high level of profitability. We have a very strong balance sheet, GBP 75 million of cash or near-term cash, de minimis amount of debt, as we have been very conservative as we look at the headline rates on debt. Debt level will increase through the course of 2024, but still remain at a very low level as a percentage of GAV. Next slide, please. John?

Great. Thanks, Alex. So this page, we outline the NAV bridge for the 6-month period from 1st of April to 30th September. This really reflects, as Alex mentioned, the macro change in discount rates and inflation, which together had a 4p negative impact on NAV, as we increased the discount rates by 25 basis points across the board for all assets at all stages, whether pre-construction, construction or operational. And so going through each of the items in turn. Fund and Subsidiary Holdco operating expenses are in line with kind of historical as expected. And on dividends, this 3.5p reflects the 2p paid in the June end quarter and the 1.5p paid in the September end quarter. Cash generation is GBP 12.2 million EBITDA, plus interest income of around GBP 1.8 million, which is interest on the cash held on account. On OpEx, we announced at June end, some internalization of certain asset management and O&M contracts, particularly within GB and Ireland, as well as some updated assumptions on the fleetwide insurance policies, which we kind of have started to initiate across the board. So, that internalization of some of those core functions, which we've meant to leverage through our in-house asset management team has been something we've been focused on. In terms of the de-risking of assets, these largely include Stony and fair new assets, the 2 large GB assets, which are either just been energized or to be energized imminently. So for Stony, there was a 25 basis point reduction, reflecting that movement into energization. And for Ferrymuir, it reduced the discount rate by 50 basis points, which was again a result of real kind of de-risking through the construction process to a point now where the asset from our side is effectively built. And we're just waiting for the DNO to provide the connection on that side. Just to know that these are still offset with that 25 basis point increase in additional discovery hike. So, Stony, for example, given it was offset, total basis points remains at the same discount rate, taking those 2 effects into account. On revenue curves, as for all audited quarters, the curves were updated in the context of the 4 grids in which we have operational assets and in GB, the curves dropped. And in ERCOT, they also kind of fell slightly, but this was kind of offset by increases in both the Irish curves and also California. And it's probably worth reiterating also the effective kind of the impact of GB suppressed pricing and falling curves has not been so large on our side due to kind of what we anticipate as appropriate forecasting in previous periods. So, those kind of reduced curves did not roll back as much as potentially some of our competitors have them. And then in terms of other DCF changes, these include updated repowering assumptions, the releases of certain contingency throughout the construction process, the effective asset rollover, updated commissioning dates for some of the GB assets like Ferrymuir and then also just some updated CapEx assumptions, which we have. As we've gone through the procurement process, we have updated pricing on some of our assets, which are about to enter construction. So, I think just a kind of the takeaway from this slide really is we put it down in the bottom left-hand side, the macro assumptions were the largest driver of the NAV decline. So if you took a scenario excluding kind of the effects of inflation and also discount rates, you would see a NAV per share of 116.9p. So this slide, we just outlined the curves, which we've used across the portfolio on the merchant basis. So excluding the impact of any capacity market contracts in those markets where we do have them. And as you'll see and as kind of indicated earlier, the GB curve did see a decrease compared to kind of our FY '23 assumptions as of March end. That reflects the current drop in market prices and really is more of a near-term decrease compared to what we previously forecast. In the longer term, I think what we believe kind of that the pricing, which kind of we previously forecast, we will hit. And it's kind of the, I guess, the run rate pricing in GB is kind of what we've seen and what we expect to move forwards. In Ireland, the curve saw an uplift compared to what we've previously seen. I think it's particularly worth noting in this period. And Alicja will kind of, I think, go into more detail later on. But in this period -- yes, in the Irish market, it is really expected to be seasonal, where the summer, you would typically expect kind of lower wind penetration, which feeds into the DS3 scaler. But over this period, there was actually -- there was kind of quite number of storms and high wind in Ireland. So the prices over the summer months were actually elevated to those similar to what we see in winter. And that's either fed through to the updated curves, and we've also seen in Ireland some delayed grid connection for new batteries coming online, which means, I guess, the expected saturation and penetration of new batteries will not be seen. So that's led to an increase in the curves there. In the U.S., both curves in California and Texas remained closely in line with what we previously assumed in terms of assumptions. So there was no great change. So on this slide, we've just provided some additional context on the assumptions used on both, the OpEx and CapEx side, as we mentioned earlier. Within the manager itself, the technical team has grown. And given additional experience and expertise, certain aspects have been internalized. So, as I mentioned earlier, largely relating to asset management and O&M services, which we previously outsourced. Many of those we'd be able to kind of insource now within the portfolio fleet, such as fleet-wide insurance assumptions across the portfolio. Again, during the period within ERCOT, the Texas market, we switched our route-to-market provider to TANESCO, which is a more sophisticated optimizer. And in the period, we were able to qualify those assets into the more lucrative ECRS service, which we benefited from, particularly in the later quarter to September end. And that really was able to kind of capitalize on kind of those higher revenues in those elements. On the CapEx side, we've also updated repowering assumptions based on slightly higher battery price increases, which -- for the forward curves, which we always price into one NAV. So the assumed repowering of the projects of the batteries when they hit a certain level of threshold capacity compared to nameplate capacity. However, as you maybe aware, the majority of our services have been in ancillary services across the fleet. So that's typically lower levels of cycling, say our significant remaining useful life beyond before repowering is required in general. And for some other assets going into the construction phase, we've updated CapEx costs and estimates for EPC and balance of plant items. And that really just reflects the latest contractual discussions and estimates, which we've been discussing with our contractors. On the right hand side, as you'll see from inflation discount rates, we've seen a decrease in inflation assumptions based on the updated macro view as of September end. And as indicated earlier, we've included a 25 basis point increase in discount rates across the board for all the assets. And you see the breakdown as we kind of de-risked through the process. For the pre-construction phase, kind of, we discount assets at kind of 10.5% to 11%, down through into the kind of energized phase. For contracted, down to kind of 7.25% to 9.25%. And the uncontracted income, which is the majority of our kind of cash flows, we assume around 8.75% to 9.25%. Just to kind of reiterate, all of the ancillary services and trading, which constitutes a large portion of our revenues across all different grids, we categorize as uncontracted revenues. And then at the bottom, you see sensitivities. So, they share the impacts of some of the key inputs for which we generally update in alter periods on a -- and this is shown on a pence per share basis within NAV, with inflation and discount rates having the largest impact as you'll see. We believe these are appropriate measures, and we have the -- in terms of disclosure, we have high levels of disclosure amongst our peers on those 2 aspects. Next slide, please, Ben. Thank you. So on this slide, you can see the benefits, I think, of international diversification. As Alex indicated, the fund achieved operational EBITDA during the period of GBP 12.2 million and fund EBITDA of GBP 8.5 million, which resulted in a dividend cover of 0.72x operational and 0.5x for the fund over 6 months. Again, over the kind of later quarter, we achieved operational dividend cover of 1.15x, and also we were over 1x on a kind of fund EBITDA basis. When you kind of look at the GB market itself, whilst that's being experienced suppressed pricing over the period, you see on the right-hand side, the breakdown of EBITDA by grid. It's actually quite stark. So, for example, ERCOT, for which we have 30 megawatts in operation, contributes 28% of EBITDA compared to 9% for GB, for which in this period we had 110 megawatts. And this is all on the basis of the 291 megawatts in operation. Obviously we've now energized Stony, which is an additional 80 megawatts. And as we will show in slides later on, we will have more than 800 megawatts in operation by the end of 2024. So in the absence of any additional fundraisers, this will be on the same basis of dividend denominator. So that is the kind of basis of -- as we kind of -- the money, the cash that we raised previously that is used to fully fund the build out of this additional pipeline, which is going to be online by the end of 2024.

So just a snapshot of the update of operational portfolio across all geographies and across the fund. So the notable change that has already been touched upon is Stony. So 80 megawatts that we energized in August. It's located near Milton Keynes in England. That asset is now out of the reporting period, has been made operational and is actually trading as of December. It's a very positive milestone achieved for 80 megawatts in GB. So, GB now constitutes 51% of the portfolio. And the combined assets in Republic of Ireland and Northern Ireland are 35%, with Texas just below 10% and Germany, Germany 6%. So that creates that diversification that we'll be touching upon over the next slides. Next slide, please. So touch upon the revenues and how they have been realizing themselves over the past 2 quarters and particularly with some focus on September end and that spike that you can see on this graph. So revenues across our portfolio are seasonally hedge. That is a result of sort of strong winter and summer variations in the fleet performance across the portfolio. So generally, the trends that we expect to see, the predictable trends is that Irish assets that operate in the uncapped regime should be seeing a relative stronger performance in winter. So, winter generally indicates a higher wind penetration. Revenues in DS3 uncapped in Ireland are monetized by scalers that are highly focused on the satisfaction of electricity demand by the relative renewable energy generation. If that generation is higher, such as in winter, and if the buildup of renewables also increases, then the revenues generally are increasing. And that's what we're seeing in winter. This summer has been slightly different. We actually have seen high levels of wind, particularly in July and August. And that has driven above base case performance in that season for the Irish assets in uncapped regime. ERCOT assets in Texas have behaved as expected in terms of very strong performance in summer. They have definitely exceeded some of the expectations, particularly in August. Our Texas assets have generated around GBP 150 per megawatt per hour, which as you would have seen from other slides and in comparison, order of magnitude higher than, for example, fleeting in GB. That is really driven by scarcity of generation occurring in summer with high temperatures in ERCOT, where effectively some of the older thermal fleet in ERCOT is unable to operate in those high temperatures. Next slide, please. This is a very interesting way of illustrating effectively what happens to variation of revenues across quite a long historical period that you can see on the X axis when diversification is added to the portfolio. So looking at average revenues across GB and then deriving a standard deviation from this historical period that you can see. Visually, you can see a large variation of revenues across different quarters, and the standard deviation was around GBP 5 per megawatt. And that then has quite significantly changed when our portfolio had seen the addition of assets in Ireland, assets in Texas and assets in Germany. That one standard deviation has now reduced to 2.7. So it has nearly halved the variance. And also the addition of other jurisdictions have also increased, has increased the overall average of revenues. Those revenues are highly uncorrelated across geographies. So, we don't expect any more global movements in terms of impact from seasonality to change, and that natural hedge should remain in place. Next slide, please. So just a overall summary of how we think about stacking revenues for the portfolio. So our batteries very much focus on being able to capture revenues -- new revenue streams in the markets we already exist in, but also being able to very quickly step into new markets and take advantage of being a first mover. In terms of ancillary services where we provide frequency and power quality support to system operators, we effectively capture across all our geographies around 15 different services. So, that does require technical expertise in being able to pre-qualify and continue to meet performance requirements. In most markets, there are stringent performance requirements for those ancillary services. An there are penalties if those, performance measures are not met. However, it does mean that a good operator with an experienced asset management team is able to capitalize on that strong technical track record. In terms of trading, we effectively now access trading in all our markets in which we have assets, definitely in GB. That's a big part of the portfolio strategy. Obviously, when the opportunity arises, we have now started trading also across Ireland. We are trading in Germany, and we have trading capability. And when it's appropriate, we do access that in ERCOT. Last but not least, capacity market contracts. Generally, long-term contracts, which allow system operators to secure capacity with a very predictable long-term timeline, usually around 10 years to 15 years. Notably, we will be speaking more about the resource adequacy contracts that we will be capturing with our Big Rock project in California. That's a very important part of the overall revenue stack for that asset and for that geography. If we can go to the next slide. Thank you. So just a recap of all the revenue strategies across different grids. Ireland, very much still focused on the DS3 services. It's a strong performance market with relatively slow accession rate for batteries due to general grid delays. The budget has now been confirmed for the next year, has not been changed and the rates have not been changed. We don't expect them to change in January. This is very positive news overall for that market. It is driven by generally much slower pace of build-out than was anticipated by EirGrid and generally also by overall kind of lesser budget consumption than they predicted. We have been also accessing trading in this market, and testing out smaller amounts of volume to see whether there's an upside. And we have been able to generate significant upside, as you can see from the slide. It's not a linear type of behavior. That upside is limited to only effectively opportunities where a time windows where DS3 is of a lesser value. So it's not that you release the whole battery capacity, that it's a multiplier of what we have captured there. In ERCOT, effectively really strong performance was driven by ancillary services. That is the outcome of ERCOT releasing a new service ECRS, which they have released really off the back of trying to reinforce the transmission system and general electricity market that have seen volatility and obviously, various storms and very negative events in the past few years over winter, especially. So, we expect that ERCOT will continue to build out additional fleet of tools to be able to mitigate against any further events like Uri storm, for example, from a couple of years ago. We expect to continue to capture those ancillary services, and that to be majority of the stock. However, when opportunity comes, our assets are positioned and able to capture trading revenues when that becomes a more optimized strategy. In GB, really focusing on being able to access all portfolio of revenues. This is going to be particularly important as we don't expect that situation in that these services should change. However, there is a number of other policy movements and market mechanism movements like the open balancing platform that should be changing the revenue stack and still to be seen. How it will -- in what extent it's going to affect the revenue stack? But we expect it would definitely have a positive upside impact on the results in GB. And Germany, a market where we have -- with a new partner, new route-to-market partner. Inspired, we have access now a large depth of short-term trading algorithm trading. This is always asset-backed, but allows us to take near-term positions and churn effectively trades. And that has resulted in a very large share of trading, 64% in terms of the stock. It's a very positive outcome. Again, if we were just focused on ancillary services, we would have seen a significant -- probably around 20% lower revenue performance in that market.

Thank you, Alicja. Quite a complex picture. We're engaged in multiple types of revenue activities in individual markets. But I think it's worthwhile then bringing it back to actually what does that mean? Follow the cash? How are we actually doing in terms of revenue per grid. And I think it's really interesting you look at this breakdown, Northern Ireland and Republic of Ireland, Ireland as one energy system, we're averaging for this period just over GBP 17 per megawatt for every hour in operation. It's really significant, a result. As Alicja said, we expected actually the summer in Ireland to be making less than that, given that we're tied to the level of wind generation across the Ireland, and there's more wind generation in winter, obviously. But very strong wind penetration, very strong winds leading to good wind generation, and therefore, leading to our assets. We're carrying out a very valuable service to keep the grid stabilized and therefore, accruing significant revenue. In Britain, about GBP 7.50 per megawatt per hour in operation. We're tracking the market. I think any energy storage player in GB is kind of plus or minus 5%. We're kind of engaged in similar strategies. This is reasonable number. You might recall, obviously, during '20 and '21 -- sorry, '21-'22, GB was a very profitable market. We at the time were wrong on the upside. We thought it would be less revenue. So, these numbers we're seeing here in 2023 are on trend for our projections. Germany, just under GBP 9 per megawatt. We expect to see some pickup in this as we go into the winter months. But then, again, this is on base case. ERCOT, the Texas market, obviously, a standout performer, GBP 40 per megawatt per hour. Put it into context, we have 30 megawatts in operation in ERCOT in Texas. We would've had to have nearly 150 megawatts in operation in GB for similar level of revenue. So, really strong set of return on investment, for sure, given how much money we were making for the individual assets, but characteristic by high temperatures in the summer, aging gas infrastructure, not able to cope with those high temperatures and a high electricity demand. Overall then, GBP 15 -- little over GBP 15 per megawatt for every hour in operation. Portfolio weighted average, really strong results. Nearly 2x what we would be making if we were GB only. So, diversification is not only smoothing out the revenue volatility from individual markets, it's also delivering to us an absolute higher level of revenue. If I look across our peer groups, we'll be making the absolute highest level of revenue, not just on a per megawatt basis, but absolute numbers as well as EBITDA. Next slide, please.

Great. So this slide illustrates the portfolio build-out capacity over time as we move forwards, as we expect to energize, significant projects throughout 2024 to reach more than 800 megawatts by the end of next year. So as you see, the first, we've got 371.5 megawatts total in operation at the moment, which includes that Stony asset, which was energized recently. And Ferrymuir is the next GB asset, which we expect to come online in January next year. We've done all the work on our side in terms of construction. We're actually waiting for the counterparty DNO to finish their works and actually connect the system. And then the 57 megawatt Enderby project, again, in GB scheduled to be energized in June next year. Moving into international markets. So PBSL II is the extension of the Porterstown project in the Republic of Ireland, 60 megawatts there. We expect that to be in operation by June next year. And then the 2 larger U.S. projects, so Big Rock, which is the California project. We acquired the project right at the end in March this year. We already acquired the batteries, and now we're in the process of kicking off the kind of balance upon EPC, and getting that project into construction, with a target energization date of December '24. And again, Dogfish, another project, which we acquired the projects right for in January this year. We're just kicking off the EPC process -- sorry, the construction process now, having looked to EPC procurement options. And again, expect that to be fully commissioned by the end of next year. So if you look at the total 813 megawatts by the end of next -- by the end of 2024, that is all funded through existing cash reserves and/or available debt, which we have. As Alex mentioned, we're yet to draw on those debt facilities in any meaningful way. But we did announce the $60 million project financing at Big Rock, which we will be drawing on for that project. And then, as we need to draw on additional funds, as the remaining cash, we seek to build out these projects as drawn down. And we will do so. So up until the end of 2024, all these projects are fully funded from existing resources. Beyond that, we have projects, again, in 2025 in Texas, which -- there the Dallas & Surrounds Phase 2 projects. And then beyond that, we have additional projects in Middleton, which is the 2026 COD project in GB. And then 19 megawatts in addition in Ireland, which we will look to commission. And we do have the option to look at -- to extend the accordion within our existing facility to fund these build-outs. And also, kind of, as alluded to in the interim report this morning, potentially looking to recycle capital through the kind of existing portfolio, which we can use to invest into potentially more attractive higher growth markets. If we look at the bottom graphs and slides, we see the split by geography in terms of portfolio, that is on a megawatt basis. But if you took it on a megawatt hour basis, whereby we have longer duration systems in ERCOT and CAISO, which satisfy the actual market construct in those areas. That split would be kind of nearer on a per megawatt hour basis, kind of near a 50% across the US. And moving across to the kind of system duration itself, you see that split. We do retain optionality across all of our -- well, across our systems to be able to increase the duration as and when the market opportunity presents itself. At the moment, as you know, you heard from Alicja, largely in GB that's been dominated by ancillary to date, does not require longer duration systems. But at the appropriate time when there is the trading opportunity, we may seek to expand duration in GB assets. We future-proofed in terms of the projects we've acquired. We tried to future-proof those in order to make those extensions as and when required. And then split by stage. On the right-hand side, you'll see that now kind of around one quarter operational by the end of 2024, that will flip such that 3 quarters will be in operation of the total portfolio.

Yes. I think, just a few comments on that, right? So really interesting tipping point here. 371 megawatts today, 11 months, which is not a long time in the world of infrastructure assets in construction funded, progressing well. Ferry is disappointing. The asset is built, and we are waiting for Scottish power, but we are in active conversations with them on a near daily basis to hold this January timing that they've given us. But really strong set of portfolio assets coming on stream here over the course of 2024, including of course, our Big Rock asset in California, a really important asset for the overall portfolio. So, a step change in the portfolio makeup, but continuing to build out our diversification. We're continuing to build out to a really strong level of operational portfolio. Ben?

On this slide, we're giving a high-level view of the frameworks we use to record and report the company's ESG performance. In the sense there, you'll see SFDR. This is a European framework, which the company adopted back in 2022. The framework's looking at -- the framework is aiming at reducing greenwashing and improving transparency to investors. So that's a framework we voluntarily adopted. And you'll see a reporting for that included in the company's Annual Report and included in the company's ESG Report, which comes out on an annual basis. TCFD in the top left, that is a U.K. framework, which looks at climate-related opportunities and risks. An interesting framework, which is quite forward-looking. They expose different scenarios, and how that could affect the company and its operations. PRI on the top right, that's a new framework for the company. As its name indicates, looks at responsible investing. And the company completed its first filing for that during the reporting period, so in September 2023. On the left-hand side, the metrics there, they are the key sustainably -- key sustainability indicator metrics, which the fund has chosen. 3,500 tonnes of CO2 avoided, and that's during the previous fiscal year. And that's based off a operational portfolio of 291 megawatts. As the portfolio grows, we will expect those sustainability metrics to increase as well. And bottom left-hand corner, Fair Cobalt Alliance. This is an interesting organization that the company again joined during reporting periods, and is part of our engagement along the supply chain -- along the company supply chain. Although GSF doesn't directly source cobalt, its suppliers obviously do and joining this initiative, working to improve conditions in the mines and working with the local communities where the conflict minerals are sourced.

Thank you. So in conclusion, we have a strong portfolio in construction, which we're very happy with the progress. Of course, the grid operators remain under pressure in terms of switching on not just energy storage assets, but solar wind, data centers, housing estates, hospitals. So, we appreciate the difficulties they have, but we are working very closely with them around holding to the dates in our projections, but a step change in the operational portfolio from 371 to 820 over the next 11 months. And we believe we are the cost leader in terms of megawatts fully installed. When we look at published data, our assets seem to be at the right level in terms of costs. We have our own internal procurement group, which is active in the market with a range of different suppliers to maintain that cost advantage that we bring to our projects. And of course, we have the best-in-class revenue generation. Against the GB-only strategy, we're making 2x the revenue that we would have. We're well positioned in 5 very important markets; GB, Ireland, Germany, Texas and California. And we believe that revenue generation maximization will continue as we look out into 2024. Overall, the firm continues to deliver against its targets. We continue to build out the portfolio. We continue to optimize the revenue opportunity in our portfolio, and we're engaged across the entire value chain to deliver value to our investors. I think we have time now for some questions, which came through.

Perfect. Alex, John, Alicja, Ben, if I may just jump back in there. And thank you very much, indeed, for your presentation this morning. [Operator Instructions] I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor Dashboard. Ben, obviously, we did receive a number of pre-submitted questions ahead of today's event. And as you can see there in the Q&A tab, we've also received a number of questions throughout your presentation this morning as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And Ben, if I may hand over to you now just to chair the Q&A session with the team, and then I'll pick up from you at the end. Thank you.

Absolutely. Thank you very much. So the first question we've had in -- would be, you have done well minimizing gearing expenses. What is the policy going forward and do you have a facility in place?

Yes. I take that. So, yes, as kind of we alluded to in the earlier slides, this year, we've upsized our kind of RCF at the corporate level, which has gone from GBP 25 million up to GBP 50 million facility. That remains undrawn as it stands. But we've added that additional flexibility to be able to use as we move forwards, should the pricing and the opportunity present itself from a build-up perspective. We also added the project level financing at Big Rock, so that's a $60 million U.S. facility. That can be drawn for the purpose of building out, constructing the California asset itself. And we will seek to draw that down as we progress through the construction process over the next 12 months. Now, in terms of taking those 2 together, if they were all fully drawn, that would constitute around $99 million to $100 million of fully drawn debt on a sterling basis, which is effectively around 15% of GAV, which is still relatively conservative level when we look at kind of leverage levels across the board. We do have, as mentioned, the opportunity to exercise an accordion on our kind of RCF basis, up to a maximum of 30% of GAV, should we choose to be able to potentially fund those projects beyond 2024. But obviously, we'll assess that in the context of capital optimization as we move through 2024. That could involve, as we mentioned, some capital recycling across some of our projects to reinvest in other markets. So obviously, given prevailing pricing and debt costs, we are cognizant of those, but we believe in conservative level of gearing going forwards.

Thank you very much. The next question is around geographical split. So, what is the geographical split of the portfolio and would you consider reallocation of capital to higher profitability markets such as the U.S.?

Yes. So, we have an investment policy. 40% of the portfolio needs to be GB and Ireland, and we're obviously well over that. That's the kind of line 60% then rest of world, which is Mainland Europe and America for us at this point. For sure, we are in a very good position and that we're active in the 5 different energy systems. So, we can turn on or turn off capital allocation to each of those different jurisdictions as we want. We are in the business of delivering returns to our investors. So if we saw good prices for assets in, for instance, GB, where we wanted to recycle that capital into the Irish market or California market or the ERCOT market, we absolutely do that. So, that kind of portfolio optimization is an activity that we're consistently engaged in.

Thank you very much. The next one. Please explain hourly income in a simple way? Is it 12 hours or 24 hours? And does it include weekends?

So generally, the revenues really are optimized across a 24-hour window. We don't really have markets in which we operate with long-term hedges or forwards. So generally, the way we think about optimization, the way our partners also execute optimization is that predictions are being made about day-ahead spreads, and that sets out the opportunity cost of bidding for ancillary services in most markets. Generally, on day-ahead markets, you also procure ancillary services. It's set up in that way. For example, in ERCOT, it's set up in that way also in Germany. So, effectively, our prediction and view about the spreads allows them to also realize ancillary services prices. So generally, if we do not clear in a wholesale market, then we would effectively move to ancillary service that would have been secured as an alternative. Generally, over a 24-hour period, I would say that we hold state of charge at the position where batteries are ready to deliver ancillary services. So it could be changing across 24-hours depending on the level of energy throughput that the service requires. But throughout the day, we would generally slowly manage that state of charge and top up. So generally, we don't execute a strategy where we charge up where the prices are low during the night and discharge during the day in high prices, because that would effectively mean that the battery has not been utilized in between those 2 arbitrage events. We would generally manage state of charge slowly in ancillary services during the day and the discharge in the high peak hours. That's probably kind of a simplified view of 24-hours. Between those day and night, positions of day and night relative prices, we would always have ancillary services provided in between, so that batteries are never really sitting idle.

Yes. I mean, I think another -- thank you, Alicja. Another way to think about that is the -- whether we're discharging or not discharging, it depends on what the service we're in, right? So the number on the RNS saying how much we're making hourly income, that is for every hour in that quarter. That's the average revenue we have in that quarter. But how the battery is operated across that quarter depends on its different types of services. So in grid balancing, our assets are 50% full of electricity, so they can be a consumer generator, and the grid operator will ping our assets second by second, to be honest, for which we will charge them an hourly rate for the length of the contract. So overall, the number you see here in the RNS about how many hours, what our average revenue per hour is, that is the amount of hours available in that quarter.

Thank you very much. We have one more question here on commercial. And so that is, as the market becomes more saturated, will trading become a greater component of income? How is the company adding to its strategy to tackle the effects of market saturation?

Yes. So, I would say, among our list of peers, we are carrying out the most level of trading, that is in the German market and the Irish market. We're very actively involved in wholesale trading, not so much the GB market, that is yet is not profitable market for trading, though we are well set up to avail trading revenues when and if that becomes available to us. But we're very active already, trading in Ireland and in Germany and very successful for us. So, an active manager against the wholesale trading markets and generating revenue right now.

Thank you. This one, I think we did touch on briefly in the presentation. But last week the ESO announced the launch of their Open Balancing Platform using Bulk Dispatch optimizers to enhance the use of energy storage in the balancing mechanism. Have you noticed any difference for the use of your assets? And do you think this or other plan changes in 2024 will have a material impact on GSF?

So it's been only 2 days. I must admit this is too short horizon to be kind of making strong statements about change the revenue just yet. We know that, that there has been a material amount of instructions, about 2,500 instructions just in one day as of the position as of 13th of December. So, it has had a material impact on number of effectively calls upon batteries. I would only say that this is material in that sense that it shows National Grid commitment to lower the cost of balancing to consumers. So, batteries are inherently more efficient to dispatch. They are not like [ GAS speakers ] that require to sit and run, to be able to then be ramped up or ramped down. So, I expect that the batteries will be called upon more and more now that it requires -- it's much less manual as a dispatch. It'll really, really be dependent on the prevailing prices in the market and of course, the number of congestion that might happen in the GB system that will require local generation. But as fundamentally as renewable generation increases and we're not usually able to keep up with the pace of transmission buildouts to manage congestion, I do expect that batteries will play a big role in management of that congestion through balancing and using batteries is just the natural, the most cheapest way to do it. And National Grid has a regulatory obligation to minimize the costs to consumers.

Thank you. And one more on revenues in GB. So what products are available to U.K. best assets to provide fixed revenues?

Yes. I mean, I'll quickly take that. It's always been available, the capacity market contract, right? So that is about between 10% and 15% of revenue. And for all of our assets, we have those multi-year long-term contracts and index linked. So, that always exists. There is also other products coming into market, where we could partner with utilities to give a fixed rate return over our assets for a period of time. So there's more maturity in the market construct, which, I think Gore Street's always been at the leading edge of this. We can see different ways of fixing a more variable. It's all about what the cost of fixing is versus the variable upside. And so we're expanding that at all times. But the UK market -- the GB market, U.K. market has always had a capacity market construct and we are successfully in those contracts.

Thank you. And one more would be on the Inflation Reduction Act. Did GSF enter Texas and California due to the Inflation Reduction Act? And is there a possibility that this act could be repealed next year?

Yes. I don't know if I'm qualified to quote on whether the act could be repealed next year. I think it would be very difficult to repeal. You have to go through Congress and need a filibuster, I believe. And so we don't view this as a very, very high risk in terms of it being repealed, especially given when our assets are actually being coming into operation, when we should receive cash back under the Inflation Reduction Act. That said, we are expecting tens of millions of dollars back in terms of CapEx being switched on. But it's not quite as simple as that. If the Inflation Reduction Act wasn't there, less assets would get built and therefore, our existing assets of the incumbent would generate more revenue because there would be a scarcity. Now, that revenue would be over a longer period of time than the cash influx in 2024, 2025, for instance. But it's a complex picture, right? You're incentivizing market to build, right? So more assets are getting built to compete with our assets. And if you don't incentivize that asset -- that market, less assets get built. Therefore, our assets should accrue more revenue. Overall though, we hope and we don't believe this is a high risk.

Thank you. Take a few more. So one question here. You stated Stony was energized. Is it in commercial operations yet, or just switched on and in testing?

So, I can confirm that Stony as of December is now trading. So it is in commercial operation.

Great. Thank you very much. If I hand back over to Jake.

Perfect. Ben, Alex, John, Alicja, thank you very much indeed for addressing all of those questions that came in from investors this morning. And of course, we will be able to give you back all of the questions that were submitted today, as well as any others that do come through immediately after the presentation has ended just for you to review it and then add any additional responses, of course, where it's appropriate to do so. And we'll publish all those responses out on the platform. But Alex, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that'd be great.

Yes. Thank you. Again, we believe a strong period, a period that shows the value of diversification. A period that shows the value of tight control of the assets in terms of revenue optimization. And for sure, energy storage remains this critical asset of our energy transition. And we can see that in all the markets that we're operating in. One of the components of energy storage though, it is more or less a merchant asset class and therefore, our ability to lower volatility versus having, for instance, a GB-only strategy, I think is very important and one should be able to see that now in these figures. It's the first quarter return dividend cover positive. So, we're very pleased about that, especially off the back of not actually operational capacity increase. But on that basis, we have a significant operational capacity increase over the next 11 months, and we're very focused on bringing those assets on time and on budget. And I want to thank all our investors again.

Alex, that's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of management team of Gore Street Energy Storage Fund plc, we would like to thank you for attending today's presentation. That now concludes today's session. So, good morning to you all.