London Stock Exchange-listed Gore Street Energy Storage Fund (GSF) has entered into an agreement to sell its investment tax credits (ITCs) for the Big Rock energy storage project in California, US.
In January, GSF completed energisation of the 200MW/400MWh battery energy storage system (BESS).
This transaction marks the final sale of the Company’s US ITC entitlements, following the earlier sale and receipt of the 75MW/75MWh Dogfish BESS ITCs.
These transactions have a combined consideration of US$84 million net of insurance costs.
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Under the agreement, Big Rock’s proceeds will be released in stages. GSF is scheduled to receive 50% of Big Rock’s ITC shortly, with another 25% anticipated by this Fall, and the final amount expected by the end of the year.
The initial stage will decrease the drawn amount on the Big Rock debt facility from US$66 million to US$44 million and fund reserves to cover project build-out costs. This will help lower the Company’s gearing ratio and reduce related borrowing costs.
GSF expects to distribute a further 3 pence (US$0.04) per share once the proceeds from the sale of the Big Rock ITCs become available for distribution, which is expected to be in H2 2025.
The Gore Street ITC sale appears to use ‘transferability’, a new way of selling tax credits introduced by the IRA in 2022.
This provision enables businesses to sell all or part of an eligible tax credit to an unrelated taxpayer in exchange for cash.
Transferability offers a faster and simpler alternative to traditional tax equity, but it is slightly less profitable because it does not provide the tax benefits of depreciation, which require taking equity in a project as in the conventional method.
The Budget Reconciliation Bill initially discussed removing transferability, but the final version only prohibits selling to a specified foreign entity (SFE).
Alex O’Cinneide, CEO of Gore Street Investment Management, said of the agreement: “The US$84 million we have secured through these tax credit transfer agreements is a substantial capital inflow, particularly in a market where access to equity remains constrained. Our shareholders will directly benefit from this significant inflow through the payment of special dividends.”
