160MW Portfolio Acquisition
£30m Commitment from Irish Sovereign Wealth Investor
05 June 2019
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION TO BE CONTAINED IN THE PROSPECTUS.
Subject to approval by the Financial Conduct Authority, a prospectus setting out further details of the Issue and the Placing Programme is expected to be published by the Company in due course (the "Prospectus"). A copy of the Prospectus will be available, once published, on the Company website at: http://www.gsenergystoragefund.com.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 and was authorised for release by Alex O'Cinneide.
PLEASE SEE THE IMPORTANT NOTICE CONTAINED WITHIN THIS ANNOUNCEMENT.
The Board of Gore Street Energy Storage Fund (ticker: GSF), is pleased to announce that the Company has entered into agreements to acquire a controlling interest in a 160 MW portfolio of projects ("Projects") in Northern Ireland and the Republic of Ireland (the "Acquisitions"). To fund the Projects and further pipeline, the Company also announces a proposed issue by way of an institutional placing, offer for subscription and intermediaries offer to raise up to £50m (the "Issue") and a subsequent placing programme of new Ordinary Shares and/or C Shares (the "Placing Programme"), conditional on shareholder approval and the publication of a prospectus. £31m has already been committed for investment in the Company, subject to the satisfaction of certain conditions. Of this £31m, £6m will be invested as part of the Issue and a further £25m is to be invested following the Issue by the National Treasury Management Agency ("NTMA") (as controller and manager of the Ireland Strategic Investment Fund ("ISIF")).
The Company has entered into an agreement with the NTMA for up to a £30m investment in the Company. £5m will be invested as part of the Issue (the "Initial NTMA Subscription"), and up to £25m may be drawn down upon certain criteria being met. NTMA's subscription is conditional on, amongst other things, a minimum fundraise of £15m in the Issue (excluding the £5m Initial NTMA Subscription). NTMA's investment is the result of a competitive review of specialist managers and demonstrates support for the quality perceived in the Company's investment adviser, Gore Street Capital Limited (the "Adviser").
The new Ordinary Shares to be issued as part of the Issue (including the Initial NTMA Subscription) will not be issued at a price below the latest published NAV per share (ex-dividend).
The proceeds of the Issue and investment from NTMA will be primarily used to construct and purchase the 160MW portfolio of energy storage assets in Ireland.
- Acquisition of a controlling interest in a 160MW portfolio of energy storage assets:
- two projects of 50MW each located in Northern Ireland ("NI Projects") and a further two projects of 30 MW each located in the Republic of Ireland ("RI Projects")
- estimated total funding requirement of approximately £77m for project construction, acquisition and CAPEX
- investment by way of shareholder loans carrying 10% interest, stepping down to 8% or 9% upon commissioning of Projects with 51% of any excess profits due to the Company
- the aggregate return from these new investments in Ireland has the potential to be significantly higher than the unlevered target returns of 10-12% (before fees and expenses) from Gore Street's portfolio on full investment noted in the Company's IPO prospectus in May 2018. Once operational these returns are expected to contribute significantly to the income received by the Company
- additional option to purchase a further 190MW portfolio of energy storage projects in Ireland, bringing the total transaction to 350MW
- this will be one of the largest energy storage acquisitions in Europe and one of the largest deals of its kind globally in 2019 to date
- investment into projects developed by, and joint venture partner with, Low Carbon, a developer with a strong track record in battery storage and diverse renewable infrastructure technologies
- Conditional commitment by NTMA to cornerstone up to £30m of investment into the Company:
- ISIF is a sovereign development fund controlled by the NTMA with a statutory mandate to invest on a commercial basis to support economic activity in Ireland
- NTMA subscription follows a competitive review of specialist managers and demonstrates confidence in the quality and deliverability of the Adviser
- £5m subscribed as part of the Issue with the remainder of up to £25m less certain expenses ("Additional NTMA Commitment") to fund 40% of the acquisition and construction costs of battery electricity storage facility projects located in Ireland which meet certain criteria ("Eligible Projects"), with the balance of such costs being funded by GSF (or by other investment vehicles which are controlled by, or have appointed as their investment adviser, the Adviser)
- the ISIF investment is conditional, amongst other things, upon raising a minimum of £15m in the Issue (excluding the Initial NTMA Subscription); NEC Energy Solutions Inc., a substantial shareholder of the Company, has indicated an intention to subscribe £1m pursuant to the Issue
- The Issue, the Placing Programme, the Initial NTMA Subscription and the Additional NTMA Commitment are subject to the publication by the Company of a prospectus and conditional upon shareholder approval at a general meeting of the Company currently expected to be held in July 2019.
Alex O'Cinneide, CEO of Gore Street Capital, the Company's investment adviser, commented:
"Gore Street is delighted to have been chosen for NTMA's investment commitment following a competitive review of funds focused on the energy storage asset class and this represents a transformational development for Gore Street. NTMA is one of Europe's major renewable infrastructure investors and this represents a strong endorsement of our investment strategy and a clear commitment to a rapidly growing renewables sector by a highly active sovereign development vehicle. We intend to take advantage of the large and diverse array of opportunities that we see in our pipeline in the UK, Ireland and internationally.
The investment in the Irish projects will represent one of Europe's largest energy storage acquisitions and one of the largest of its kind this year globally. Ireland's energy storage market is at a critical point in time, with significant investment opportunities rapidly arising, driven in no small part by the ambitious target of 40% renewable energy provision by 2020 set recently by the Irish State. The anticipated returns delivered by the acquisition portfolio have the potential to be significantly greater than those targeted by the Company in its IPO prospectus. Gore Street is well positioned to take advantage of these opportunities in the country for the benefit of stakeholders and shareholders and this transaction further supports the Adviser's intention to grow the fund significantly over time."
For further information:
|Gore Street Capital Limited|
|Alex O'Cinneide||Tel: +44 (0) 20 3826 0290|
|Stockdale Securities Limited|
|Daniel Harris (Corporate Finance)
Henry Willcocks / Fiona Conroy (Corporate Broking)
|Tel: +44 (0) 20 7601 6000|
|Charles Ryland / Steph Watson / Henry Wilson||Tel: +44 (0) 20 7466 5000|
|JTC (UK) Limited, Company Secretary||Tel: +44 (0) 20 7409 0181|
At IPO, the Company set out its strategy to target investment into energy storage projects primarily in the UK but additionally looking at projects outside the UK with the aim of delivering its stated target aggregate unlevered return from its portfolio of 10-12% (before fees and expenses) once fully invested.
In addition to the two seed projects acquired at IPO, the Company has acquired a further two projects, expected to be commissioned in Q4 2019 taking the aggregate investment in projects to 29 MW (27.06 MW proportionate to the Company's ownership) and representing investment of just over 50% of funds raised at IPO.
Total current pipeline available to Gore Street is in excess of 500MW in the UK, the Republic of Ireland and continental Europe.
Irish Project Acquisitions
The Company has entered into agreements to acquire 51% of the special purpose vehicles that own a 160 MW portfolio of projects in Northern Ireland and the Republic of Ireland from renewable energy investment company, Low Carbon, which will retain the remaining 49%. All project development fees, expenses and CAPEX will be funded by GSF into the Projects by way of priority shareholder loans carrying a 10% coupon, which steps down to 8% or 9% upon successful commencement of operations with excess profits then split 51:49% with Low Carbon once the shareholder loans are fully repaid.
The NI Projects comprise a 50MW project in each of Drumkee, County Tyrone and Mullavilly, County Armagh, Northern Ireland and the RI Projects comprise a 30MW project in each of Portersdown, County Kildare and Kilmannock, Country Wexford, Republic of Ireland. Subject as below, these Projects are anticipated to be operational by 2021.
The aggregate funding for the Projects is estimated to be approximately £77m which will be provided by the Company. The Acquisitions have the benefit of planning permissions, options in relation to land rights and grid connection offer (or application in process). The Projects remain subject to negotiation of EPC including design and delivery of battery systems, although multiple proposals have been received. The Company has already committed £9.1m to the Projects.
Ireland represents a highly attractive market for Gore Street, as a major renewable energy producer with a stated need for energy storage technology for the single grid that serves both the Republic and Northern Ireland.Â
Both NI and RI Projects are expected to derive revenues from the Irish "DS3" or "Delivering a Secure Sustainable Electricity System" Programme operated in both NI and RI as well as the Irish Capacity Remuneration Mechanism and wholesale revenues (the latter, after the expiry of the DS3 contracts). Following grid connection, GSF will be entitled to participate in the DS3 programme either under the volume uncapped contracts or the volume capped contracts. The volume uncapped contracts, which offer attractive payments set by regulatory authorities, are expected presently to expire in April 2023 (unless the contract is terminated earlier with 12 months' notice), although may be extended beyond this date. The strong returns referenced above are critically dependent on timely grid connection and also if total annual DS3 spend exceeds or is expected to exceed the annual DS3 budget cap of €235m which may have a negative impact, inter alia, on contractual payments and scalars but has the potential to be higher if contracts extend beyond 2023. The volume capped contracts offer 6-year fixed price contracts through competitive auction to be held in the summer of 2019. In respect of the RI projects, in the event the Company fails to secure contracts in the DS3 volume capped contract auction, the Company is entitled to withdraw from the RI projects or otherwise acquire successful contracts from other developers or participate in uncapped contracts.
Gore Street has the additional option to purchase a further 190MW portfolio of six projects in Ireland.Â
Low Carbon invests into both renewable energy developers and projects across a range of renewable energy technologies including solar, wind, waste to energy, energy efficiency and energy storage. Low Carbon has a strong track-record in battery storage. Through a joint venture Low Carbon owns and operates one of the UK's largest portfolios of utility-scale, enhanced frequency response battery storage sites. With a combined capacity of 50MW, the portfolio supports grid flexibility and increases reliance on low-carbon forms of electricity generation.
Investment by NTMA
The Adviser has been in discussions with the NTMA to facilitate both an investment by NTMA in the Company under the Issue and a subsequent investment in the Company pursuant to a subscription agreement entered into between the Company and NTMA dated 4 June 2019 (the "Subscription Agreement").
Pursuant to the Subscription Agreement, the Initial NTMA Subscription is conditional on, inter alia, the Company raising a minimum of £15m in aggregate pursuant to the Issue (£9m of which is subscribed by investors that are not public bodies, authorities or undertakings, as that term is defined in the Subscription Agreement), excluding the Initial NTMA Subscription.
In addition, pursuant to the Subscription Agreement, conditional on, inter alia, Shareholder approval, following the Initial NTMA Subscription, when the Adviser sources an Eligible Project, NTMA will subscribe for additional Ordinary Shares for an aggregate subscription price equal to 40 per cent. of the acquisition and construction costs of the relevant Eligible Project (each an "Additional Share Subscription"). The remaining 60 per cent. of the costs of the Eligible Project will be funded by the Company (or, in certain circumstances, by other investment vehicles which are controlled by, or have appointed as their investment adviser, the Adviser).
Subject to the satisfaction of certain conditions, NTMA has agreed to commit £25m to fund Additional Share Subscriptions (less its costs incurred in connection with the Subscription Agreement and the investment management agreement it has entered into with the Adviser in connection with the Additional NTMA Commitment).
Prior to completion of an investment in an Eligible Project, and subject to the satisfaction of certain conditions, the Company will issue a notice to NTMA to subscribe for such number of new Ordinary Shares (at a price per share equal to the lower of: (i) the mid-market price of the Company's Ordinary Shares at the time of the Additional Share Subscription; and (ii) the last published Net Asset Value per Ordinary Share at the time of the Additional Share Subscription; plus a premium of 0.2 per cent.) as is equal to 40 per cent. of the acquisition and construction costs of the Eligible Project. Where the mid-market share price is less than the last published Net Asset Value per Ordinary Share at the time an Additional Share Subscription is due to be made, shareholders' consent will be sought (in accordance with the Listing Rules) for the Company to issue Ordinary Shares to NTMA at a discount to the prevailing Net Asset Value per Ordinary Share without first offering such shares pro rata to existing holders of Ordinary Shares.
NTMA has also entered into a lock-up and orderly market deed with the Company and Shore Capital Stockbrokers Limited dated 4 June 2019 pursuant to which NTMA has agreed, amongst other things, that, subject to certain exceptions, it will not dispose of any interest in any Ordinary Shares acquired by it under the Issue for a period of 12 months.
The Issue and the Placing Programme
The Company intends to issue new Ordinary Shares up to a value of £50m pursuant to the Issue (including pursuant to the Initial NTMA Subscription) at a price that will be no lower than the latest published NAV per share (ex-dividend) and subsequently issue up to 100m new Ordinary Shares and/or C Shares pursuant to the Placing Programme.
The Issue, the Placing Programme, the Initial NTMA Subscription and the Additional NTMA Commitment are subject to, amongst other things, the approval of Shareholders at a general meeting ("General Meeting") anticipated to be held in July 2019 and the publication by the Company of a prospectus. A further announcement in connection with the publication of the prospectus and the notice convening the General Meeting will be released in due course.
Amendment to Investment Policy
To facilitate the pursuit of opportunities in the Republic of Ireland and overseas, the Company will, at the General Meeting, propose a resolution to amend the current investment policy to clarify that the Company may invest a greater percentage of its assets (40 per cent. of gross asset value calculated at the time of investment) into project opportunities outside the UK and the Republic of Ireland but that the majority of its assets will be invested into projects within the UK and the Republic of Ireland.
The Legal Entity Identifier of the Company is 213800GPUNVGG81G4O21.
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.
For more information please visit our website at: www.gsenergystoragefund.com
About The Ireland Strategic Investment Fund (ISIF)
The Ireland Strategic Investment Fund, managed and controlled by the National Treasury Management Agency (NTMA), is a sovereign development fund with a specific statutory mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland. The fund has a long investment time horizon and therefore can act as a permanent or patient source of long-term capital. It has flexibility up and down the capital structure and can therefore meet changing capital needs and gaps in the marketplace. The fund seeks to invest in transactions where it can make a difference, where its characteristics can enable commercial investment transactions with positive economic impact and make it an attractive "investor of choice" for company and project sponsors and advisors.
About Low Carbon (LC)
Low Carbon is a privately-owned investment company committed to the development and operation of renewable energy power production at scale. Low Carbon invests into both renewable energy developers and projects across a range of renewable energy technologies including solar, wind, waste to energy, energy storage and energy efficiency. Low Carbon has a proven track record in the development, construction, financing and management of renewable energy assets. For the UK alone, Low Carbon has funded more than 320MW of solar PV and 50MW of battery storage. Low Carbon remains involved in the projects for the long term with a dedicated asset management team that manages assets on balance sheet and for third parties (unlisted and listed).
This announcement has been issued by, and is the sole responsibility of, Gore Street Energy Storage Fund plc (the "Company").
This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for shares in any jurisdiction in which such an offer or solicitation is unlawful.
This announcement does not constitute, or form part of, an offer to sell or the solicitation of an offer to purchase or subscribe for any Company securities in any of Australia, Canada, the Republic of South Africa, Japan or the United States. The new Ordinary Shares and/or C Shares in the capital of the Company have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act") or under any securities laws of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, resold, renounced, or otherwise transferred, directly or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.
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This announcement does not constitute a recommendation concerning the Issue or the Placing Programme. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each Shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.
Stockdale Securities Limited ("Stockdale"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and for no-one else in relation to the Issue, the Placing Programme or any Admission and the other arrangements referred to in this announcement.Â Stockdale will not regard any other person (whether or not a recipient of this announcement) as its client in relation to the Issue, the Placing Programme or any Admission and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing any advice in relation to the Issue, the Placing Programme or any Admission, the contents of this announcement or any transaction or arrangement referred to herein. Apart from the responsibilities and liabilities, if any, which may be imposed on Stockdale by the FSMA or the regulatory regime established thereunder, Stockdale does not make any representation express or implied in relation to, nor accepts any responsibility whatsoever for, the contents of this announcement or any other statement made or purported to be made by it or on its behalf in connection with the Company, the Ordinary Shares, the C Shares, the Issue, the Placing Programme or any Admission. Stockdale accordingly, to the fullest extent permissible by law, disclaims all and any responsibility or liability whether arising in tort, contract or otherwise which it might have in respect of this announcement or any other statement.
Cautionary statement regarding forward-looking statements
This announcement contains forward-looking statements that involve substantial risks and uncertainties and actual results and developments may differ materially from those expressed or implied by these statements by a variety of factors. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology. These forward-looking statements speak only as at the date of this announcement. Except as required by applicable law or regulation, none of the Company, its agents, employees or advisers undertakes any obligation to update or revise any forward-looking or other statements, whether as a result of new information, future developments or otherwise and none of the Company, Stockdale, the Adviser or their respective directors, officers, employees, agents, affiliates and advisers, or any other party undertakes or is under any duty to update this announcement or to correct any inaccuracies in any such information which may become apparent or to provide you with any additional information. To the fullest extent permissible by law, such persons disclaim all and any responsibility or liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this announcement.