Saba Capital has stepped up its campaign against Gore Street Energy Storage Fund, calling on shareholders to support proposals to wind up the £244m investment trust and demanding greater transparency around the recent sale of two Irish battery storage assets, according to a report by QuotedData.
The US activist hedge fund, which owns about 17% of Gore Street Energy Storage, said the disposal of the Kilmarnock and Mucklagh projects to GS EU, a fund managed by Gore Street Investment Management, had failed to address concerns over how the assets were valued and sold.
In an open letter ahead of the investment trust’s 16 September annual general meeting, Saba urged the board to disclose the transaction price and provide details of the auction process conducted by adviser Alexa Capital.
Saba argued that shareholders should not be expected to accept the board’s assurances that the sale price was at least equal to the assets’ most recently published net asset values.
The hedge fund also challenged the relevance of the reported NAV comparison, pointing out that Gore Street has been reducing the carrying values of assets across its portfolio. Group NAV fell by about 15% in the latest quarter, according to Saba.
Saba said it had approached the Gore Street board privately twice this year without receiving what it regarded as a satisfactory response.
Its first proposal called for the trust to conduct a search for a new investment manager. A subsequent letter criticised the board’s recovery plan, unveiled in March, which envisaged selling assets and using the proceeds to invest in existing battery storage projects in an effort to increase revenues and support a targeted dividend of 7p per share.
Saba argued that the strategy would not be sufficient to close Gore Street’s substantial discount to NAV.
According to the activist, Gore Street’s NAV has fallen 27% over the past year, while its shares still trade at a discount of about 35% to the reduced NAV. Saba also highlighted dividend coverage of just 0.28 times by operational earnings.
The hedge fund said these figures represented the track record shareholders were being asked to endorse by rejecting its wind-up proposals.
Saba has also rejected Gore Street’s warning that its proposed liquidation could result in a damaging “fire sale” of assets.
Instead, it argued that approval of its resolutions would leave the board responsible for determining the appropriate timetable for returning capital to investors.
