Strategy and Capital Allocation Plan

30 July 2025

Gore Street Energy Storage Fund plc

(the "Company" or "GSF")

Strategy and Capital Allocation Plan

Conclusion of Independent Review and Strategic Pathway to Enhanced Shareholder Value

The Board of Gore Street Energy Storage Fund has completed the Company's previously announced independent strategy review and, together with the Investment Manager, announces its capital allocation plan and other steps to enhance shareholder value.

The plan has four principal elements:

1.   Sale or co-investment for the Company's c.495 MW of pre-construction assets to confirm valuation and free up capital.

2.   Increase key GB and Irish assets' duration to capture additional value and revenues, to be funded from cash on hand, debt from existing loan facilities and proceeds from the sale of pre-construction assets.

3.  Increase revenues through proprietary and proven revenue optimisation models, which are driving outperformance against industry benchmarks, while assessing and implementing, where appropriate, emerging tolling and floor price arrangements to further reduce revenue volatility.

4.    Further cost reductions in addition to the fee reductions previously announced. The Investment Manager will focus on operating and financing cost reductions, including seeking to reduce borrowing costs as the portfolio reaches maturity and financial stability.

The initiatives in augmentation, monetisation, revenue generation, and cost reduction are expected to add significant value to the Company's portfolio, reinforcing the dividend and underpinned by an asset base that continues to appreciate.

Independent Review Complete

Following seven years of the Company's operations, the Board commissioned an independent review by Alexa Capital LLP, a specialist in clean energy and climate transition investments, to review the proposed strategy that had been set out by the Board and Investment Manager. The review's conclusions supported the Board's confidence in:

(i) the NAV for the portfolio is in line with market valuations, underpinned by its scale and geographic diversity;

(ii) there is private buyer market appetite for battery energy storage, and confidence that the Fund's portfolio of pre-construction projects is well-positioned for value realisation;

(iii) increasing the duration of selected assets results in material increases in revenue to enhance investment returns;

(iv) the market need and investor appetite for storage assets continues to grow; and,

(v) there are an increasing number of potentially attractive revenue hedging products that may further reduce revenue volatility.

Based on the review, the Board and the Investment Manager have set out the following steps and plans through to 2027.

1.    Sale or Co-investment of Pre-Construction Assets

The Company holds a c.495 MW portfolio of pre-construction assets with near-term grid connection rights across GB, Ireland, and Texas, representing c.8% of the Company's NAV as at 31 March 2025.

With land, planning permissions and grid connection rights secured, coupled with preliminary works completed and procurement well-advanced, these are valuable assets.  This is particularly the case in an environment in which firm grid connection rights and dates are increasingly challenging to secure, which means values should hold, and potentially increase as their grid connection dates become closer.

The Board has resolved to realise this embedded value through a structured sale or partnership programme.

Accordingly, the Company will pursue the following pathways to maximise shareholder value:

·      Selective asset sales with the expectation to realise value at or above carrying value.

·      Co-investment partnerships with strategic or financial investors to share development upside and enable the Company to unlock additional operational cashflow.

·      Accretive capital structures, including the potential use of non-recourse project financing.

·      Ongoing review of floor price and tolling arrangements, enabling asset build-out to be financed on a standalone basis with non-recourse project finance.

The programme, which will start immediately, will be executed in tranches. The Company has already solicited interest from multiple counterparties and is in active negotiations regarding potential transactions for its GB and Irish pre-construction assets. Due to the commercial sensitivity of these ongoing negotiations, the market will be updated in due course.

The pre-construction portfolio is summarised below:

The Board believes that realising value from these assets will support shareholder value creation by:

·      Unlocking capital for redeployment into higher-return opportunities, with increased duration of identified existing assets as a priority.

·      Support distributions of dividends to shareholders by enhancing the operational performance of existing assets.

·      Narrow the share price discount to NAV by demonstrating disciplined capital allocation and value realisation.

This strategy is fully aligned with the Company's objective to maximise shareholder value and reflects the Board's commitment to proactive portfolio management in response to market conditions.

2. Increased Duration of Selected Assets

The Investment Manager has continuously tracked the economics of changes in BESS duration, from 30 minutes to one hour to 2 hours across each of its markets. Over the last 18-24 months, there has been a significant reduction in both battery and overall capex costs. This has coincided with changes in the electricity trading and ancillary service markets in the UK, whereby 2-hour duration systems are expected to capture a 37% increase in revenue over 1-hour systems.  The premium for longer duration was reaffirmed by the independent Alexa Capital report.

This trend materially enhances project economics, increasing the return profile and therefore presents a clear path to value enhancement through increased revenues and free cashflow. As such, the Company will now embark on increasing the duration of selected GB assets as described below.

The following projects have been identified for increased duration based on (i) ability to expand within existing planning permissions, (ii) substantially completed equipment procurement and (iii) project layout and design which allows for short construction cycles, retaining instead of replacing existing battery cells and the ability upgrade container by container, leaving the assets largely operational during the upgrade with less than 50 days (equivalent) of lost revenue per project.

Phase 1 (2025 - 2026)

·      Stony (79.9 MW) and Ferrymuir (49.9 MW) will be upgraded from 1-hour to 2-hour systems.

·      These sites were selected for their modular design, enabling shorter upgrade times with minimal disruption to revenue, with fewer than 50 days (equivalent) downtime.

·      Total capex: £18-22 million, funded from existing capital reserves. 

·      Expected deployment: 2026. 

Phase 2 (2026 - 2027)

·      Enderby (57 MW) is expected to be augmented once its first 12 months of operations are completed.

·      Mullavilly (50 MW) and Drumkee (50 MW) are expected to be augmented following the conclusion of the DS3 revenue programme in Ireland and in line with the requirements and opportunities presented in the Irish grid.

·      Expected deployment: 2026 -2027. 

3. Driving Revenue Optimisation and Stability

Since last Autumn, GSET, a bespoke BESS trading platform within the Investment Manager which uses a proprietary AI-driven trading and forecasting model, has gradually been taking over the trading functions of much of the GB portfolio from third-party providers. These external providers faced numerous conflicts on how each asset in their managed and owned portfolios approached the markets. This shift was supported by strong evidence at the time last year when the Board made the decision to proceed with this approach, and has since been reaffirmed through actual performance. The beneficial results have exceeded expectations, with the portion of the GB assets under GSET management during the 2025 financial year achieving revenue 11% higher than the GB Modo benchmark. 

The Company will continue to migrate more of its trading to the GSET platform over the next two years, which is expected to lead to a further increase in distributable cashflow and dividend cover.

Over the last 18 months, new hedging products have emerged that offer longer-term revenue stability, which was further emphasised in the independent Alexa Capital report. Increased revenue certainty enables projects to smooth out revenue cycles and can allow for increased leverage at lower interest rates, with capital freed up for expansion or returned to shareholders.  It is well established in all infrastructure markets that assets with longer-contracted revenue streams are valued more highly than those exposed to market risk. As part of its strategic plan, the Company will further explore and, where value-accretive, enter into such longer-term contracts.

4. Cost Reductions

In addition to maximising revenue, the Company is also focused on reducing costs, particularly now that all assets have been operationalised and the portfolio has reached a steady state. The Company is now pursuing a broader cost reduction strategy and is engaging with lenders to reflect the lower risk profile of the Company.

As part of this strategy, the Company has already negotiated a reduction in the Investment Manager's fees. The Investment Manager and the Board continue to review all areas of expenditure to enhance operational efficiency and maximise shareholder value.

The Investment Manager is pursuing the optimisation of the cost and structure of borrowings across existing debt facilities. This includes the potential refinancing of the Big Rock construction loan into longer-term project finance, appropriately sized against the 12-year contracted resource adequacy revenue stream in place. Such refinancing is expected to lower financing costs and release capital for redeployment, as well as further support sustainable dividends.

Additionally, the Investment Manager is advancing its proprietary platform to drive cost efficiencies across key technical functions, including asset management, commercial functions and optimisation. By integrating directly with assets via API, the need for additional hardware on the assets for optimisation is expected to reduce. Greater visibility over the state-of-charge of the asset is expected, which could unlock more complex trading strategies. Through this software, the lifetime of the batteries can be extended by better tracking of their state of health and by pre-empting failures therefore underpinning the long-term value of the portfolio.

Patrick Cox, the Chair of the Company, commented:

"On behalf of the Board, I am pleased to present the strategy for the portfolio, which has been reviewed by an independent advisor, Alexa Capital.

The realisation of the pre-construction assets will feed into the second augmentation phase. The first phase, ending in 2026, will focus on the Company's larger assets in GB, Stony and Ferrymuir, given their modular design. Post Phase 1 augmentation, 62% of the operational GB portfolio will be 2-hour duration systems. We are also exploring ways to take advantage of maturing markets for contracted revenues, to provide downside protection for cashflow and dividends while preserving upside opportunities for shareholders with our increasingly strategic energy storage asset class.

This strategy update follows a series of actions your Board has taken to ensure alignment with the interests of shareholders, including the reduction in management fees, and our intent to continue to declare sustainable dividends during this bridging year for the Company and towards driving share value appreciation."  

Alex O'Cinneide, the CEO of the Investment Manager, commented:

"The last 18-months have been a pivotal and successful time for the Company, with significant de-risking of the portfolio, by operationalising assets across three grids, a testament to the vertical integration of BESS at the Investment Manager and the diversification strategy. The outcomes of the independent review are consistent with our guidance to date. Our view of augmentation has remained consistent, sizing the market opportunity and the expected capex, to maximise returns for shareholders.

Market dynamics now present an opportunity to maximise returns for shareholders through incremental augmentation of the existing portfolio, supported by the realisation of value from the c.495 MW of pre-construction assets currently owned by the Company. As part of our active management approach, we are uniquely positioned to drive operational performance by leveraging asset data across multiple functions, thereby improving revenue strategies and reducing costs. This programme of work will add significant value to the portfolio and support a fully covered and sustainable dividend to our investors."

For further information:  

Gore Street Investment Management                                                  

Alex O'Cinneide / Paula Travesso / Ben Paulden                                                               

Email: [email protected]                                                                                            Tel: +44 (0) 20 3826 0290

Shore Capital (Joint Corporate Broker) 

Anita Ghanekar / Sophie Collins  (Corporate Advisory)                                                   Tel: +44 (0) 20 7408 4090

Fiona Conroy (Corporate Broking)

J.P. Morgan Cazenove (Joint Corporate Broker)

William Simmonds / Jérémie Birnbaum (Corporate Finance)                                         Tel: +44 (0) 20 3493 8000

Burson Buchanan (Media Enquiries)      

Charles Ryland / Henry Wilson / Nick Croysdill                                                               Tel: +44 (0) 20 7466 5000

Email: [email protected]    

https://www.gsenergystoragefund.com