REG - Atrato Onsite Energy - Annual Results for the year ended 30 Sept 2023
11/01/2024 07:15
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RNS Number : 3785Z Atrato Onsite Energy PLC 11 January 2024
LEI: 213800IE1PPREDIIZB62
ATRATO ONSITE ENERGY PLC
(the "Company")
ANNUAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023
DELIVERING STRONG, GROWING AND SUSTAINABLE LONG-TERM INCOME
Atrato Onsite Energy plc (LSE: ROOF), the investment company focusing on clean
energy generation, reports its audited results for the year ended 30 September
2023.
Key metrics As at 30 September 2023 (audited) As at 30 September 2022 (audited) Change in Year
Gross Asset Value ("GAV") £138.1m £139.1m -0.7%
Net Asset Value ("NAV") £138.1m £139.1m -0.7%
NAV per share 1 (#_ftn1) 92.0 pence 92.8 pence -0.9%
Dividends per share 5.0 pence 3.01 pence n/a
NAV total return (%) 4.6% (4.2)% n/a
Annual generation (GWh) 36.3 28.8 +25.9%
Tonnes of CO(2) avoided 7,627 6,000 +27.1%
Ongoing charges ratio1 1.8% 1.4% n/a
Grown to become the leading commercial and industrial solar platform in the
UK
· £72 million investment in the Year, increasing to £149 million post
balance sheet 2 (#_ftn2)
· Increased capacity from 62MW to 147MW at year end and 182MW post
balance sheet
· Completing several milestone projects(5)
o 28MW installation for Britvic under innovative sleeved Power Purchase
Agreement ("PPA") 3 (#_ftn3)
o 20MW installation for Nissan - the UK's largest private wire solar
installation
o Energised our 19th Tesco store plus new framework agreement on 70 further
sites
o Acquired 34MW operational private wire solar portfolio (the "ASG portfolio")
· Increased our dividend target for FY24 to 5.5 pence per ordinary
share an increase of 10%
o 12-month forward looking dividend cover in excess of 1.3x 4 (#_ftn4)
High quality portfolio with highly contracted index-linked long income 5
(#_ftn5)
· 93% of revenue is contracted generating the lowest sensitivity to
merchant prices in the sector
· 11-year average unexpired contract revenue term, longest in the
sector
· 92% is subject to annual inflation or fixed uplifts, of which:
o 47% benefits from annual uncapped RPI or CPI uplifts
· Weighted average remaining asset life of 23 years
· 79% of the portfolio fully operational and 21% under installation
o Energisation of remaining installation assets expected by March 2024
o c. 173GWh expected annual green energy generation once fully operational
Portfolio financial performance
· £15m gain from Installation assets revaluation generated, equivalent
to 10 pence per share
· Portfolio valued at £99.3 million as at 30 September 2023,
reflecting an unlevered weighted average discount rate of 7.4% (September
2022: 6.6%)
· Overall 0.8 pence decrease in NAV per share to 92.0 pence (September
2022: 92.8 pence)
· 7.7 pence decrease in NAV driven by a 80bps increase in portfolio
discount rate
· 5.0 pence dividend declared for the year
Strong balance sheet
· Gearing of 29.1% as at 10 January 2024 (0% as at balance sheet
date) 6 (#_ftn6)
· £30.0 million Revolving Credit Facility ("RCF") signed at a margin
of 1.3% over SONIA, one of the lowest in the sector
· Post balance sheet:
o First £17 million drawdown of the RCF, to fund new acquisitions
o £47.1 million of term debt, acquired as part of the ASG Portfolio
o Further £20 million of available liquidity via RCF accordion 7 (#_ftn7)
· As at 10 January 2024:
o 3.2% weighted average cost of debt
o 72.9% of drawn debt fixed
Committed to being a sustainability leader 8 (#_ftn8)
· Forecast 173GWh annual clean energy generation, equivalent to: 9
(#_ftn9)
o 37,000 tonnes of carbon avoided 10 (#_ftn10)
o 64,000 homes powered by clean energy 11 (#_ftn11)
· Voluntarily published both
o Greenhouse gas ("GHG") emissions inventory figures covering Scope 1, 2 and
3 emissions
o TCFD compliant Annual Report and Accounts
· Supporting the responsible investment commitments made by our
Investment Adviser as a signatory of the Net Zero Asset Managers Initiative
(NZAM) and United Nations Principles for Responsible Investment (UNPRI).
Juliet Davenport, Chair of Atrato Onsite Energy plc:
"This has been a transformational year for the Company. We have assembled a
highly diversified solar portfolio, offering one of the most secure income
profiles in the UK listed renewables sector.
We are now the partner of choice for some of the largest blue-chip
corporations in the UK to help them deliver on their net zero targets. This
has been a driving force behind our significant pipeline.
We are delighted that our origination and installation strategy has continued
to bear fruit, delivering significant valuation upside for shareholders."
Results presentation
There will be a presentation for sell side analysts at 8.30 a.m. today. Please
contact Kaso Legg Communications for details.
The presentation will be simulcast online with Q&A function for anybody
wishing to join. The webcast can be accessed here
https://brrmedia.news/ROOF_FYR23 (https://brrmedia.news/ROOF_FYR23)
The results presentation will be available in the Investor Centre section of
the Company's website.
Further information is available on the Company's website
www.atratorenewables.com
ENQUIRIES
Atrato Partners +44 (0)77 959 75560
Gurpreet Gujral
Christopher Fearon
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Mark Young
Rajpal Padam
Madison Kominski
Kaso Legg Communications Limited atrato@kl-communications.com
Charles Gorman +44 (0)20 3995 6673
Charlotte Francis
Notes to Editors
Atrato Onsite Energy plc (LSE: ROOF) is an investment company focused on clean
energy generation with 100% carbon traceability. The Company specialises in UK
solar, helping its clients achieve net zero and reduce their energy bills.
The Company aims to provide investors with attractive capital growth and long
dated, index-linked income, targeting a 5% dividend yield and a NAV total
return of 8 - 10%.
Atrato Partners Limited is the Company's Investment Adviser.
Further information is available on the Company's website
www.atratorenewables.com
STRATEGIC REPORT
Chair's Statement
Dear Shareholder,
On behalf of the Board, I am pleased to present the Company's audited full
year results for the 12 months ended 30 September 2023.
Portfolio update
The Company has experienced significant growth during the period in which we
have committed more than £149 million into clean energy solar assets
generating an additional 120MW of solar PV capacity and increasing our GAV
today to £215 million 12 (#_ftn12) .
We are the UK's leading commercial and industrial solar platform in the UK.
Our corporate access gives us an unrivalled level of insight and engagement
with some of the largest UK corporates as they increasingly look to secure
independent sources of clean renewable electricity and advance their net zero
targets.
A good example of this insight was the origination of a highly innovative PPA
with Britvic on a 28MW ground mounted solar project in Wellingborough,
Northamptonshire. This £28 million project will generate 33GWh of clean
energy per annum energising 75% of Britvic's production operations in Great
Britain. This is contracted under a unique 10-year PPA which provides energy
on a pay as they generate basis but is supplied to Britvic at a consistent
level throughout the year. This novel structure is evidence of our ability to
provide innovative and flexible solutions to corporates.
Another example is the growth of our front-of-the-meter strategy. In March
2023, shareholders approved an investment policy amendment to capture the
growth of opportunities in front-of-the-meter assets commercialised through
long-term sleeved PPA's. This is an exciting development and we expect this to
provide an increasingly important source of pipeline going forwards, allowing
us to decarbonise corporate customers at significant scale.
The Company also continued its strong track record of successfully managing
installation assets through to full operational status. The 20MW Nissan
project was energised in early October and is now fully operational. London
Road (28MW) was energised in December 2023, in-line with expectations.
Mobilisation at Skeeby solar farm (55MW) commenced in mid-August and
installation remains on track, with energisation scheduled for the end of
March 2024.
We are also pleased to announce the energisation of our private wire solar
project for Tesco in Thetford (0.4MW) which was energised in the first week of
October. We are delighted that that we have furthered our Tesco relationship,
with Thetford representing our 19(th) operational private wire solar system
and the first project under the new Tesco framework agreement. The Company
will continue to target new framework agreements which enable us to
efficiently roll out solar systems across large real estate portfolios.
The successful completion of our installation assets, to PPA signing or
energisation, generated over £15 million of revaluation gains which was
equivalent to 10 pence per ordinary share. 79% percent of our portfolio is now
fully operational.
Sustainability update
The Company continues to place sustainability at the forefront of everything
that it does and expects to save 37,000 tonnes of carbon emissions each year
for its customers. I am delighted to report that we have voluntarily published
our first, fully TCFD compliant annual report within these accounts. The
Company has also supported the Investment Adviser in fulfilling its
responsible investment commitments, which includes reporting to the UN
Principles for Responsible Investment (PRI) (with the Investment Adviser's
first report submitted in September 2023) and using the Net Zero Asset
Managers initiative (NZAM) as a framework to support investing aligned with
net zero emissions by 2050 or sooner. The Company's sustainability metrics and
targets have now been published within the sustainability and TCFD sections of
this report.
Financial update
Our focus on commercial and industrial solar projects provides a truly
differentiated strategy. Our highly contracted corporate income profile with
an average duration of 11 years, of which 92% is subject to annual inflation
or fixed uplifts, is one of the longest in the sector and one of the least
sensitive to the wholesale electricity price, which is forecast to decline
over the medium term.
This supports our objective to provide shareholders with a long-term
sustainable dividend growth. I am very pleased to announce that in line with
the progressive dividend policy set out at IPO, the Board has increased the
target dividend from 5 pence to 5.5 pence per Ordinary Share for FY24, an
increase of 10%. The highly contracted nature of our portfolio means the
Company's 12-month forward-looking dividend cover is expected to be in excess
of 1.3x.
As noted above, the Company's installation approach continues to deliver value
for shareholders. The progress on our installation assets contributed to an
increase in the NAV by 10.0 pence per share, achieving the Company's objective
set out an IPO to deliver valuation gains to shareholders from low risk
installation assets.
Overall NAV per share declined 0.8 pence, driven by a 7.7 pence per share
decrease as result of increasing the valuation discount rate to 7.4% from 6.6%
(March 2023: 6.2%) as well as dividends paid of 5.0 pence per share which was
11.9 pence of net income and revaluation gains.
Portfolio performance
For the second consecutive year, portfolio performance exceeded expectations
during the year due to higher than expected levels of irradiation. Our
operational assets produced 36.3GWh, 0.7% above budget.
Outlook
The macro environment remains challenging, however the renewables sector
continues to benefit from strong tailwinds, namely energy security and net
zero targets both at the corporate and government levels. The Company is
experiencing very strong demand and has a strong potential pipeline of
value-accretive opportunities totalling £410m.
The Company now has a best-in-class reputation for delivering flexible solar
solutions, evidenced both by the increasing number of new customer enquiries
and feedback from its existing customers. As a business, we feel very well
positioned to play a key role in supporting the UK's path to net zero in the
years to come.
Growth strategy
It is our ambition to grow the Company in order to further achieve its
investment objective and in the short term the Company has access to a £20
million accordion which will be used to fund near-term commitments and
pipeline. The Investment Adviser is monitoring opportunities to recycle
capital from operational assets into installation assets which provide greater
opportunities for capital growth. The Company is also working with its
advisers to identify potential strategic investors who could provide capital
to the Company through a variety of different structures.
Juliet Davenport
Chair
10 January 2024
Investment Adviser's Report
Atrato Partners Limited is the Investment Adviser to Atrato Onsite Energy plc
and is pleased to report on the operations of the Company for the year.
The Investment Adviser is responsible for the sourcing and acquisition of
assets as well as the day-to-day management of the Company's investment
portfolio. Further details can be found on the Investment Adviser's website at
www.atratogroup.com (http://www.atratogroup.com) .
Overview 13 (#_ftn13)
The Company has a highly compelling offering to its corporate clients,
providing energy security, reduced energy costs and an accelerated net zero
transition.
During the year, the Company benefitted from both its strong pipeline and
available capital, committing over £72 million into developing and acquiring
86MW of solar PV projects. Post balance sheet, a further acquisition was made
with a gross value of £77 million taking total investments made to date to
£198 million. These investments were made at the top end of the Company's
returns expectations and have increased the fund's expected pro forma dividend
cover to in excess of 1.3x.
The benefits of the Company's origination and installation strategy have been
clearly highlighted during the year, with the yield re-rate on new assets
contributing 10.0 pence to the NAV per share. This is a result of a reduction
in the risk premium applied to installation assets as they meet key milestones
such as PPA signing or energisation. The Company also demonstrated its ability
to acquire operational projects at attractive levels.
As the Company has grown over the past two years, so has its reputation for
providing flexible and economical clean energy solutions to its corporate
clients. The Company now receives a significant number of corporate enquiries
per month and is the leading commercial and industrial solar platform in the
UK.
The investment strategy remains consistent, targeting a balance of
installation assets which provide the opportunity for NAV growth through
project de-risking and operational assets that provide immediate income for
shareholders.
Our unique focus on commercial and industrial solar projects provides a truly
differentiated renewables investment strategy which generates a highly
contracted corporate income profile with an average duration of 11 years, of
which 92% is subject to annual inflation or fixed uplifts, which is one of the
longest in the sector and one of the least sensitive to the wholesale
electricity price.
As illustrated below this provides a truly differentiated long term income
profile to our peer group which typically hedges exposure to volatile
wholesale energy prices via the use of forward price fixing contracts,
typically for three-year periods, or acquiring assets which benefit from
longer term legacy government subsidies.
Unlike our peer group our portfolio will continue to provide up to 80%
contracted income over the next 10 years supporting our objective to provide
shareholders with a long-term sustainable dividend growth.
Table: +10 year forecast revenue split vs solar listed peer group
10 years forecast revenue split
Atrato Onsite Energy
Renewables peer group
Merchant
Contracted
Highlights in the year and post balance sheet
Acquisition of Skeeby solar farm (55MW)
· Increased site capacity from 50MW to 55MW
· New 3-year utility PPA signed with OVO Energy
· Energisation on track and anticipated in March 2024
Acquisition of London Road (28MW)
· Innovative 10-year corporate PPA signed with Britvic Soft Drinks for
100% off-take
· Successfully energised in December 2023
Acquisition of the ASG Portfolio (34MW)
· 12-years of UK government backed income via 100% uncapped RPI FiT
revenue
· Operational asset with significant and immediate cash generation
· Asset acquired with attractive historic low fixed rate project
finance (2% cost of debt)
Signed £30 million revolving credit facility with NatWest
· Secured, interest-only facility
· 3-year initial term and 1 year extension option at a margin of 1.3%
over SONIA
· £20 million uncommitted accordion
Team update
During the year, a further two hires were made into the renewable energy team.
Tim Roebuck joined the Atrato Group in November 2022 as Senior Commercial
Manager, with a focus on engaging corporates to explore solar PV clean energy
solutions, driving pipeline growth. Gabriele Giuliani joined the Atrato Group
in March 2023 as Project Manager to support the development of the Company's
renewable energy investment strategy and manage the advancement of Atrato
Onsite Energy's pipeline projects.
Post balance sheet, a further hire was made to support the team in transaction
execution, further increasing our ability to serve our corporate clients at
speed.
Portfolio
As at 30 September 2023, £121 million had been committed or deployed into UK
solar technology across 40 projects with a combined capacity of 147MW. Post
balance sheet, this has increased to 41 projects with a capacity of 182MW,
across 11 off-takers. Once operational, these assets are anticipated to
generate 173GWh clean energy per annum, avoiding the equivalent of 37,000
tonnes of carbon emissions or powering 64,000 homes. At the year end, the
Company's portfolio was weighted toward installation phase assets representing
69% of the portfolio, with operational, cash generating assets making up the
remaining 31%. As at the date of this announcement, the Company's portfolio is
79% operational assets.
A highly contracted and growing income stream remains core to the Company's
investment approach. As at the date of this announcement, 93% of annual
revenue was contracted under PPAs or subsidies with 92% of revenue subject to
inflation of fixed uplifts; notably, 47% of revenue receives uncapped annual
RPI or CPI uplifts. The weighted average remaining asset life and unexpired
contracted revenue term of the portfolio are 23 years and 11 years
respectively.
Portfolio summary as at 30 September 2023
Off-taker Location Sector Capacity (MW) Status Remaining contracted term (years) Revenue type
Amazon UK Services Ltd. Essex Distribution 3.1 Operational 17.0 PPA
Amazon UK Services Ltd. Leicestershire Distribution 2.2 Operational 18.2 PPA
Amazon UK Services Ltd. Fife Distribution 1.6 Operational 17.3 PPA
Amazon UK Services Ltd. Warwickshire Distribution 1.6 Operational 17.1 PPA
Amazon UK Services Ltd. Cheshire Distribution 1.5 Operational 17.3 PPA
Amazon UK Services Ltd. Luton Distribution 1.5 Operational 17.4 PPA
Amazon UK Services Ltd. Northamptonshire Distribution 0.6 Operational 16.3 PPA
Anglian Water Services Limited Cambridgeshire Utility 11.7 Operational 22.0 PPA
Anglian Water Services Limited Essex Utility 0.9 Operational 21.0 PPA/ FiT
Anglian Water Services Limited Northamptonshire Utility 0.6 Operational 20.6 PPA/ FiT
Anglian Water Services Limited Essex Utility 0.5 Operational 19.8 PPA/ FiT
Anglian Water Services Limited Cambridgeshire Utility 0.2 Operational 20.1 PPA/ FiT
Anglian Water Services Limited Lincolnshire Utility 0.2 Operational 20.6 PPA/ FiT
Anglian Water Services Limited Cambridgeshire Utility 0.2 Operational 20.1 PPA/ FiT
Britvic Soft Drinks Limited Northamptonshire Food and beverage 28.4 Installation 10.0 PPA
Gardner Group Limited Derbyshire Manufacturing 1.3 Operational 24.0 PPA
Huntapac Produce Limited Lancashire Food production 1.3 Installation 15.0 PPA
Marks & Spencer Plc Leicestershire Grocery 6.1 Operational 11.5 PPA / ROC
Nissan Motor Manufacturing UK Limited County Durham Manufacturing 20 Installation 20.0 PPA
Ovo Energy Limited North Yorkshire Utility 55.5 Installation 2.8 PPA
Recipharm HC Ltd Cheshire Pharmaceuticals 1 Operational 24.5 PPA
Tesco Stores Limited Greater Manchester Grocery 0.7 Operational 16.8 PPA
Tesco Stores Limited Lincolnshire Grocery 0.6 Operational 18.3 PPA
Tesco Stores Limited North Yorkshire Grocery 0.5 Operational 18.3 PPA
Tesco Stores Limited Greater London Grocery 0.5 Operational 16.8 PPA
Tesco Stores Limited Norfolk Grocery 0.4 Installation 20.0 PPA
Tesco Stores Limited Nottinghamshire Grocery 0.7 Operational 18.2 PPA
Tesco Stores Limited Lincolnshire Grocery 0.5 Operational 16.5 PPA
Tesco Stores Limited Kent Grocery 0.4 Operational 16.5 PPA
Tesco Stores Limited Suffolk Grocery 0.4 Operational 16.7 PPA
Tesco Stores Limited Essex Grocery 0.4 Operational 16.3 PPA
Tesco Stores Limited Kent Grocery 0.3 Operational 16.3 PPA
Tesco stores Limited Somerset Grocery 0.3 Operational 16.6 PPA
Tesco Stores Limited Wiltshire Grocery 0.3 Operational 16.4 PPA
Tesco Stores Limited Kent Grocery 0.3 Operational 16.8 PPA
Tesco Stores Limited Kent Grocery 0.3 Operational 17.7 PPA
Tesco Stores Limited Essex Grocery 0.3 Operational 16.2 PPA
Tesco Stores Limited Greater Manchester Grocery 0.2 Operational 16.6 PPA
Tesco Stores Limited Kent Grocery 0.1 Operational 16.2 PPA
Tesco Stores Limited Essex Grocery 0.1 Operational 16.3 PPA
Total 147.2 10.9 average 14 (#_ftn14)
Portfolio performance
The portfolio of operational assets performed slightly above expectations. In
the year ended 30 September 2023, the portfolio generated 36,292MWh (September
2022: 28,817 MWh) of clean energy. The underlying operating portfolio
generated revenues of £3.9 million (September 2022: £2.9 million) for the
Company.
Net production variance vs. expected (GWh) from the operating portfolio
Actual Budget GWh above % above
(GWh) (GWh) expectation expectation
Year ended 30 September 2023
Total 36.292 36.028 0.264 0.7%
Period to 30 September 2022
Total 28.817 27.887 0.930 3.3%
Portfolio Valuation
The valuation of the portfolio as at 30 September 2023 was £99.3 million,
with movement during the year detailed in the table below.
Valuation of the Company's Portfolio is performed on a semi-annual basis at 31
March and 30 September. The Investment Adviser is responsible for advising the
Board in determining the valuation of the Portfolio and, when required,
carrying out the fair market valuation of the Company's investments.
£ million
Portfolio valuation as at 30 September 2022 47.1
Portfolio acquisition cost 46.8
Investment distributions (0.7)
Capitalised interest 2.4
Portfolio Fair value movement 3.7
Portfolio valuation as at 30 September 2023 99.3
A discounted cash flow "DCF" valuation methodology is applied to determine the
fair value of each investment which is customary for valuing privately owned
renewable energy assets and considered consistent with the requirements of
compliance with International Financial Reporting Standard ("IFRS") 9 and IFRS
13.
Using the DCF methodology, the fair value is derived from the present value of
each investment's expected future cash flows, using reasonable assumptions and
forecasts for revenues and operating costs and an appropriate discount rate.
Assumptions impacting the valuation include discount rates, annual energy
production, merchant power prices, various operating expenses and associated
annual escalation rates. These are often tied to inflation, including asset
management, balance of plant, land leases, insurance, and relevant taxes. The
discount rate applied on the post-tax levered project cash flows is the
weighted average discount rate and the valuation is benchmarked against
comparable market multiples. Asset life on the current portfolio is assumed to
be the length of the PPA and lease term as the assets are handed over to the
off-taker at the end of this term, with no extension options included in the
contracts, except for the investments in front-of-the-meter assets where the
asset life is expected to be 30-40 years.
Discount rate for valuation
Higher discount rates have been observed across the UK renewables sector as a
result of the higher interest rate environment. The valuation of the portfolio
as at 30 September 2023 reflects an underlying weighted average post-tax
discount rate of 7.4%, representing a 80 basis points increase in the year
(September 2022: 6.6%).
The increase in the discount rate was partially offset by the addition of new
assets.
The Company's future pipeline will be underwritten based on this increased
discount rate until such time it is re-evaluated and adjusted. As a result,
both the Investment Adviser and the Board expect future projects to deliver
higher unlevered returns.
Portfolio Valuation Sensitivities
The figure below shows the impact on the portfolio valuation of changes to the
key input assumptions ("Sensitivities"). The Sensitivities are based on the
portfolio as at 30 September 2023. For each sensitivity illustrated, it is
assumed that potential changes occur independently with no effect on any other
assumption. The low sensitivity to changes in merchant power prices reflects
the long-term contracted revenues in the Company's portfolio. Similarly, the
moderate impacts due to variations in operational expenses reflects the
majority of the Company's assets having fixed price, long-term operating
expenses including operations and maintenance ("O&M"), property leases and
payments in lieu of taxes.
Key financials and NAV
The NAV as at 30 September 2023 was announced on 4 December 2023 as 92.0 pence
per share. The NAV reflects the valuation of the Company's portfolio and
incorporates the ongoing running costs and dividend distributions.
At IPO on 23 November 2021, the Company raised gross issue proceeds of £150.0
million by issuing 150,000,000 shares. As set out in the table below, the
Company's NAV as at 30 September 2023 was £138.1 million or 92.0 pence per
share. The Company has paid out £14 million in dividends to investors since
IPO.
NAV Bridge for the year from 30 September 2022 to 30 September 2023
Movement in Net Asset Value from 30 September 2022 to 30 September 2023 £ million Pence per share
NAV as at 30 September 2022 £139.1 92.8
Asset revaluation £15.0 10.0
Operational movements £4.5 3.0
Net cash generated minus fund cost £1.0 0.6
Inflation (£1.1) (0.8)
Power Prices (£1.3) (0.9)
Discount rate assumption (£11.6) (7.7)
Dividends paid £(7.5) (5.0)
NAV as at 30 September 2023 £138.1 92.0
Asset revaluations: Includes the value increase associated with projects
progressing as they met specific key project milestones. The latter was
predominantly driven by progress on Skeeby solar farm and Britvic's London
Road project. This assumes that all other variables are held equal.
Operational movements: Includes adjustments to individual assets for new
contract pricing, the inclusion of REGOs in the valuation on projects where
the Company benefits from REGOs and an update to the expected commercial
operations date of installation projects where these have changed.
Net cash generated minus fund costs: Represents the net cash inflow of the
Company's revenues and operating costs.
Inflation assumption: Reflects the impact of the updated inflation curves. The
Company uses market forecast curves for CPI and RPI.
Power prices: Reflects the movement on the portfolio since September 2022 due
to updated power price curves. The Company has one of the lowest sensitivities
to power prices in the sector. Its high levels of contracted revenue limit its
exposure to power price volatility and hence a 10% reduction in power prices
would only have a 4.6% impact on the Company's NAV as at 30 September 2023.
Discount rate assumption: Represents the impact on the fair value from changes
to the discount rate due to movements in interest rates, transactional process
observed in the sector and the macro-economic environment.
Dividends paid: Dividends of £7.5 million (5.0 pence per share) were paid
during the year in respect of the period to 30 June 2023.
The assumptions set out in this section remain subject to continual review by
the Board and the Investment Adviser.
The Company's total gain before tax for the year was £6.4 million (revenue
profit of £2.7 million and capital gain of £3.7 million) and earnings per
share, based on distributions received from the Company's unconsolidated
subsidiary, Atrato Onsite Energy Holdco Limited ("Holdco") (which indirectly
holds the Company's assets through underlying subsidiaries), were 4.29 pence
per share (revenue of 1.82 pence and capital of 2.47 pence).
Financing
Following the commitment of the IPO proceeds, the Company signed a RCF with
NatWest Bank. The £30 million secured facility has an initial term of three
years with a one-year extension option, and includes a £20 million
uncommitted accordion option that can be exercised at any point during the
initial 3-year term. The facility is priced at a highly attractive margin of
1.3% over SONIA. The RCF will allow the Company to continue to execute on its
pipeline of opportunities in the near term.
The Investment Adviser continuously monitors the debt and equity markets on
behalf of the Company. Equity markets have remained closed to new issuance for
most of the Investment Trust universe over the year. However, the debt markets
have remained open with banks very keen to lend to the renewables sector as
reflected by the attractive margin achieved on the RCF. The Company will
require further equity capital to maintain its strong growth trajectory and
hence the Investment Adviser and the Board are considering all options for
future growth including but not limited to equity raises, convertibles, and
joint ventures.
Investment policy amendment
In March 2023, shareholders approved an investment policy amendment to capture
the growth of opportunities in front-of-the-meter assets available to be
commercialised through long-term PPA's. This is an exciting renewables market
development that provides the Company with an additional way to help its
clients decarbonise at scale.
In September 2023, the Company made a non-material amendment to the Investment
Policy to define the term 'PPA' and to clarify the 'contract counterparty' is
the entity primarily responsible for payment of the main revenue derived from
the relevant 'PPAs'.
The Company also amended the policy to clarify the 'contract counterparty' is
the entity primarily responsible for payment of the main revenue derived from
the relevant 'PPAs', instead of the entity paying for the use and benefit of
the clean energy assets. The full investment policy is outlined on pages 19 to
23 of this report.
The Company's investment objective remains to support the net zero agenda
whilst delivering capital growth and progressive dividend income to its
shareholders; integrate ESG best practice with a focus on investing in new
renewable energy capacity and onsite clean energy solutions; and target long-
term secure income with limited exposure to wholesale power prices.
Dividends
During the year the Board declared four quarterly dividends totalling 5 pence
per share.
As a result, the Company achieved its 5 pence per share IPO target for the
dividend in respect of the year to 30 September 2023. After the year end, the
Company declared a further dividend of 1.26 pence per share in respect of the
quarter ended 30 September 2023. The annualised dividend is 15.3% cash covered
by the current portfolio, after fund costs.
The Company will target an annualised dividend target of 5.5 pence per share
for the financial year ending 30 September 2024, an increase of 10% from the
prior year.
Annual General Meeting
We look forward to welcoming shareholders to the Company's Annual General
Meeting ("AGM") to be held on 6 March 2024. The full AGM notice accompanies
this report and can be viewed on the Company's website at
www.atratorenewables.com
Post balance sheet events
ASG Portfolio Acquisition
The Company acquired a fully operational private wire portfolio (ASG
Portfolio) with a total value of £77.3 million. The portfolio comprises 34MW
of solar PV systems situated on residential rooftops across the United Kingdom
and benefits from revenue streams pursuant to the government's Feed in Tariff
(FIT) scheme, which have a 12-year unexpired term with annual, uncapped,
uplifts, linked to the retail price index (RPI) and payable directly to the
Company by the respective utility companies. The contracts have minimal
exposure to wholesale power prices - a key focus for the Company which
continues to have the lowest portfolio sensitivity in the sector.
The ASG portfolio has generated 291GWh of renewable energy to date, avoiding
around 55,000 tonnes of CO(2) emissions for our customers since installation.
It is expected that it will generate an additional c. 390GWh over its
remaining life, equating to a further carbon emission saving of around 75,000
tonnes.
Energisation of installation assets
We are pleased to announce that our 20MW Nissan project in Sunderland was
energised on 9 October 2023. The ground mounted private wire project is
expected to generate c. 20% of the power needed for the Sunderland plant and
has been commercialised through a 20-year, 100% take-or-pay PPA agreement.
Works completed on Tesco, Thetford (0.4MW), in the first week of October,
representing the Company's 19(th) Tesco private wire asset and the first
system delivered under our new Tesco framework agreement. The system is fully
operational and supplying clean energy directly to the Tesco supermarket.
Similarly, construction works on our private-wire system to Huntapac (1.3MW)
also completed in the first week of October. The system is now live,
generating and supplying clean electricity to Huntapac.
Pipeline
The Company has a significant pipeline of behind-the-meter and
front-of-the-meter solar assets that continues to grow. At the time of the
interim results in March 2023, the Company announced an extensive pipeline of
420MW (over £340 million). Since then, the pipeline has grown to 485MW at a
value of over £400 million.
60MW of the pipeline relate to operational assets, while the remaining 425MW
relates to new installation projects. From this total pipeline, the Investment
Adviser has a near-term pipeline and if progressed, these projects along with
other future pipeline opportunities are expected to be funded by the remaining
liquidity available under the Company's RCF accordion option.
The Company continues to experience very strong demand from its corporate
clients for long-term renewable energy PPAs.
Sustainability
During the year, the Company continued to develop its sustainability strategy,
with a focus on defining the Company's investment impact. This includes
environmental, social and governance risk management, as well as quantifying
positive and negative impacts from its investment activities. These actions
are designed to ensure that investments are made having assessed all aspects
of risks and opportunities to preserve and grow capital for the long term.
This year marks the first year the Company has published its full Greenhouse
Gas Emissions (including Scope 1, 2 and 3) inventory and disclosed against all
11 TCFD recommendations (see TCFD Report section on page 33. The Company is
proud to have retained the London Stock Exchange' (LSE) Green Economy Mark
since IPO in 2021. The Company is also pleased to have strengthened its ESG
policies with the publication of standalone Environment and Biodiversity
Policies.
The Company is guided by four core ESG Principles, linked to the United
Nations (UN) Sustainable Development Goals (SDGs), which focus the Company's
ESG activities:
Principle 1 Principle 2 Principle 3 Principle 4
Climate/Net Zero Environment Social Governance
Support the attainment of the UK emissions targets through the creation of Facilitate the efficient and considered use of finite resources Bring value to the communities in which we are active Deliver the Company's investment objective through a robust governance
new sustainable energy resource framework that recognises its ethical responsibilities to all stakeholders
UN SDG 7: Affordable and Clean Energy UN SDG 15: Life on Land UN SDG 8: Decent work and economic growth UN SDG 5: Gender Equality
UN SDG 13: Climate Action UN SDG 12: Responsible production and consumption
The Company's ESG Principles and approach to Sustainability, including ESG
policies, standards and reporting metrics, are covered in more detail in the
Sustainability Report section on pages 27 to 43.
The Company's approach to sustainability is underpinned by the Board's
commitment to good stewardship and long-term value creation for our
stakeholders. Our aim is to continue to enhance and refine our sustainability
strategy and reporting. These actions are designed to ensure that
investments are made having assessed all aspects of risks and opportunities to
preserve and grow capital for the long term.
Outlook
The Company is on a strong growth trajectory, and will continue to utilise its
RCF with NatWest, by taking a selective approach to source the most attractive
opportunities from its extensive pipeline. The UK renewables sector is
experiencing favourable tailwinds from the combination of the increased focus
on energy security and the global drive towards Net Zero. The Company finds
itself at the right place and the right time to help its corporate clients
decarbonise at scale.
Looking forward, limited exposure to power price volatility, strong covenant
off-take and inflation-linkage across a large proportion of the portfolio
should deliver both stable and growing cash flows for shareholders.
Investment Policy
The Company will seek to achieve its investment objective by investing in
behind-the-meter (private wire network) solar photovoltaic generation systems
and associated infrastructure (Onsite Solar Assets) (for example, solar
photovoltaic generation systems located on rooftops). Each such system will be
commercialised through one or more power purchase agreements and/or other
revenue agreements associated with the system with a Contract Counterparty in
relation to the Onsite Solar Asset. Any surplus electricity production will
typically be sold by the Company to the public power grid. The Company may
also make investments in solar photovoltaic generation systems and associated
infrastructure which are not located on the site of a Contract Counterparty or
connected to a Contract Counterparty via a private wire network, provided that
such systems are commercialised through arrangements which, in respect of
initial contract length and unit price certainty, are materially similar to
those PPAs through which an Onsite Solar Asset may be commercialised
(Long-Term Grid Assets).
The Company may also make investments in Other Clean Energy Technologies up to
a maximum of 30 per cent. of the Company's Gross Asset Value (calculated at
the time of investment).
Origination of new asset opportunities will be a key component of the
Company's investment strategy. The Company therefore intends as part of its
strategy alongside the holding of Operational Assets to pursue investment
opportunities in Installation Assets and some Pre-Installation Assets. It is
anticipated that the installation phase of an Onsite Solar Asset's lifecycle
will generally be a period of less than 4 months such that there is expected
to be a high turnover of such Installation Assets that will become Operational
Assets to be held by the Company. As the Company's portfolio grows it is
expected that the majority of the Company's underlying investments will be
represented by Operational Assets, notwithstanding that additional
Installation Assets and Pre-Installation Assets may be acquired.
For the purposes of the Company's investment policy:
Clean Energy Assets means Onsite Solar Assets, Long-Term Grid Assets and
other assets which qualify as Other Clean Energy Technologies;
Contract Counterparty means the entity which is primarily responsible for
payment of the main revenue derived from the relevant PPAs associated with
Clean Energy Assets. Contract Counterparties will be non-domestic entities for
example occupiers of industrial and commercial properties;
Installation Assets means Clean Energy Assets which have in place the
required suite of material agreements to carry out the asset installation,
including, as applicable, the property rights, permissions and revenue
arrangements, but which have not yet become Operational Assets;
Other Clean Energy Technologies means infrastructure assets which facilitate
the reduction of greenhouse gas emissions and which typically derive the
majority of their revenues through agreements with non-domestic customers.
Examples include but are not limited to electric vehicle charging
infrastructure, onsite energy storage and any energy generation asset (whether
or not connected to a public power grid) other than an Onsite Solar Asset or
Long-Term Grid Asset which does not emit carbon dioxide to the atmosphere at
the point of generation but excluding nuclear energy;
Operational Assets means Clean Energy Assets which have been installed,
commissioned and which are capable of generating revenues;
PPA means any power purchase agreement and/or any revenue agreement
associated with the Clean Energy Asset between two or more parties whether or
not such agreements are actually described on their face as a 'power purchase
agreement', 'PPA' or by some other name, description or title; and
Pre-Installation Assets means Clean Energy Assets which have not yet been
sufficiently progressed to be regarded as an Installation Asset.
The Company will invest in Clean Energy Assets predominantly located in the UK
and the Republic of Ireland. Subject to the investment restrictions set out
below, the Company may also make investments in Clean Energy Assets located in
other OECD countries.
Assets may be held in special purpose vehicles (SPVs) into which the Company
will invest via equity and/or shareholder loans.
The Company will typically seek sole ownership of such SPVs but may acquire a
mix of controlling and non-controlling interests in Clean Energy Assets and
may use a range of instruments in pursuit of its investment objective,
including but not limited to equity, mezzanine or debt instruments.
In circumstances where the Company does not hold a controlling interest in the
relevant investments, the Company will seek to secure its rights through
contractual and other arrangements to, inter alia, ensure that the Clean
Energy Asset is operated and managed in a manner that is consistent with the
Company's investment policy and that the Company has appropriate access to
information rights to enable it to comply with its continuing obligations
under the Listing Rules, the Disclosure Guidance and Transparency Rules and UK
MAR.
The Company may also agree to forward fund by way of secured loans the
pre-installation and/or installation costs of Clean Energy Assets where it
retains the right (but not the obligation) to acquire the relevant plant once
operational. Such forward funding shall be subject to the investment
restrictions below and will only be undertaken where supported by appropriate
security (which may include financial instruments as well as asset-backed
guarantees). Forward funding of any Pre-Installation Assets shall count
towards the limit on investment in Pre-Installation Assets.
Whilst the Company does not typically expect to provide forward funding, the
right to do so, subject to the above limitations, enables the Company to
retain flexibility in the event of changes in the asset pipeline over time.
Investment restrictions
In order to spread its investment risk, the Company has adopted the following
investment restrictions: · the proportion of the Company's Gross Asset Value
attributable to an investment(s) associated with a single Contract
Counterparty shall not, at the time of investment, exceed 30 per cent. of the
Company's Gross Asset Value;
· once the Net Initial Proceeds have been fully deployed, the proportion of
the Company's Gross Asset Value attributable to investments associated with
the Company's five largest Contract Counterparties (by the value of revenues
derived from those Contract Counterparties) shall not exceed 75 per cent. of
the Company's Gross Asset Value at the time of investment;
· no investment by the Company in any Clean Energy Asset shall, at the time
of investment, exceed 25 per cent. Of the Company's Gross Asset Value;
· the Company's five largest investments in separate Clean Energy Assets
shall not, at the time of investment, exceed 60 per cent. of the Company's
Gross Asset Value;
· the Company's investments in Clean Energy Assets located in OECD countries
other than the UK and the Republic of Ireland shall not, at the time of
investment, exceed 15 per cent. of the Company's Gross Asset Value;
· the Company's investments in Pre-Installation Assets shall not, at the time
of investment, exceed 15 per cent. of the Company's Gross Asset Value; and
· forward funding shall not, at the time such arrangements are entered into,
exceed in aggregate 20 per cent. of the Company's Gross Asset Value. The
Company will also ensure diversity in its third-party installation, operations
and maintenance contractors and diversification will also be achieved by
assets being located across various geographical locations within the UK and
the Republic of Ireland. In addition to the investment restrictions set out
above, the Company will also comply with the following investment restrictions
for so long as they remain requirements of the Financial Conduct Authority:
· neither the Company nor any of its subsidiaries will conduct any trading
activity which is significant in the context of the Group as a whole;
· the Company will, at all times, invest and manage its assets in a way which
is consistent with its objective of spreading investment risk and in
accordance with its published investment policy; and
· not more than 10 per cent. of the Company's Gross Asset Value, at the time
of investment, will be invested in other closed-ended investment funds which
are listed on the Official List. For the purposes of the Company's investment
policy and the investment restrictions set out above, the Company's Gross
Asset Value will take into account any borrowings to be incurred by the Group
in respect of amounts committed for investment but not yet incurred. The
investment limits set out above apply only at the time of investment and the
Company will not be required to dispose of any asset or to rebalance the
portfolio of Clean Energy Assets as a result of a change in the respective
valuations of its assets. The investment limits set out above will apply to
the Group as a whole on a look-through basis, such that where assets are held
through SPVs or other intermediate holding entities, the Company will look
through the holding vehicle/SPV to the underlying assets when applying the
investment limits.
Gearing policy
The Company may, in pursuit of its investment objective, make use of medium
and long-term external debt (including at the SPV level) of up to 40 per cent.
of the Company's Gross Asset Value immediately following drawdown of the
financing and assessed on a look-through basis. In addition, the Company
and/or its subsidiaries may make use of short-term debt (being typically for a
term of no more than 12 months), such as revolving credit facilities, to
assist with the acquisition of suitable opportunities as and when they become
available. Such short-term debt 50 shall not exceed 20 per cent. of the
Company's Gross Asset Value immediately following drawdown of the financing
and assessed on a look-through basis.
Hedging policy
The Company may enter into hedging arrangements in respect of interest rates
and/or power prices. The Company will not undertake any speculative hedging
transactions and hedging transactions shall be limited to those which are
necessary or desirable for the purposes of efficiently managing the Company's
investments and protecting or enhancing returns therefrom. The Company may
make use of currency hedging where investments are made in currencies other
than pounds Sterling with the objective of reducing the Company's exposure to
fluctuations in exchange rates. Cash management policy The Company may in its
absolute discretion decide to hold cash on deposit and may invest in cash
equivalent instruments, which may include short-term investments in money
market type funds and tradeable debt securities (Cash and Cash Equivalents).
There is no restriction on the amount of Cash and Cash Equivalents that the
Company may hold.
Changes to and compliance with the investment policy
The Company will at all times invest and manage its assets in accordance with
its published investment policy. Material changes to the Company's investment
policy may only be made in accordance with the prior approval of the
Shareholders by way of ordinary resolution and the prior approval of the FCA
in accordance with the Listing Rules. Non-material changes to the investment
policy must be approved by the Board, taking into account advice from the AIFM
and the Investment Adviser where appropriate. In the event of a breach of the
investment policy, including the investment restrictions set out above, the
AIFM shall inform the Board upon becoming aware of such breach and if the
Board considers the breach to be material, notification will be made to a
Regulatory Information Service
Our Market
Power prices
During the financial year, UK wholesale electricity prices saw a normalisation
following the peak that occurred in the second half of 2022, when the average
daily price on the N2EX day ahead auction was £128/MWh. The fall in wholesale
energy prices was driven by the decline in natural gas prices, albeit they are
still trading above the long-term average. For the month of September 2023,
there was a 69% decrease in the average auction price to £83/MWh, when
compared with £271/MWh for the same month in the prior year.
Bloomberg baseload forward winter 1-year prices September 2021 to September
2023
With energy prices rising at a significant pace in August 2022, the Government
announced a £211/MWh price cap for businesses (the Energy Bill Relief Scheme)
from 1(st) October 2022 for their price of electricity. The price cap was
introduced by the Government for the six months to March 2023, to support
businesses struggling with their energy bills. This intervention restored some
stability in the energy price market, giving households and businesses more
certainty around their energy bills. Following the end of the price cap, the
Government introduced a more targeted scheme in April 2023 to continue to
support businesses with their energy costs which will run until March 2024.
The Energy Bills Discount Scheme targets its support of businesses that are
more vulnerable to rising energy prices, due to their energy intensive
operations, and does so through a discount on the wholesale element of
business energy bills, when it reaches a certain threshold (over £302/MWh).
The investment opportunity
The Company provides customers with fully funded, affordable clean energy via
a PPA. PPAs can be an attractive route for corporates to achieve
sustainability goals whilst enhancing long term energy security and typically
reducing electricity costs. Once fully operational the portfolio will generate
173GWh of clean electricity per annum and supply to 11 corporates across the
UK.
Over the past year the Company developed an innovative "sleeved" PPA with
Britvic. Sleeved PPAs provide direct agreements between generators and
business consumers for grid connected (front-of-the-meter), offsite renewable
energy generation. They can be structured with many of the same attractive
fundamentals as behind-the-meter solar opportunities, namely: strong covenant
off-takers, fixed price tariffs, 100% contracted off-take, and index-linked
income. The Company secured a 10-year, CPI linked off-take agreement with
Britvic to supply 100% of the energy generated on its 28MW London Road site.
The Investment Adviser is seeing increased corporate demand for large scale
clean energy generation via sleeved PPAs as corporates look to reach
renewables commitments and achieve net zero across their operations and supply
chains.
Our portfolio
As at 30 September 2023
Number of renewable energy assets Off-takers supplied Portfolio generating capacity
40 10 147MW
Clean electricity generated since IPO Tonnes of CO(2e) avoided Weighted average unexpired contracted term
65GWh 13,627 11 years
Portfolio Off-takers Status
Weighted by invested capital
Case Studies
Tesco
Type Private wire PPA
PPA length 20 years
Size 0.4MW
Status Commissioned in October 2023
The Company has continued to develop its strong relationship with Tesco over
the last 12 months and now has 19 operational private wire solar systems on
Tesco supermarkets. The most recent highlight was the completion of a 0.4MW
system at a Tesco supermarket site in Thetford, Norfolk. The installation
commenced in July and was completed in September 2023 and is now supplying the
supermarket with on-site clean electricity. The Thetford site is the first
installation under the new framework agreement between the Company and Tesco.
There are a further 69 identified Tesco sites which the Company has under
exclusivity as part of its strategic framework agreement with Tesco.
Tesco said: ""We are really pleased to be working alongside Atrato Onsite
Energy to boost our onsite renewable energy generation at supermarkets across
the UK, moving us further towards our target to be carbon neutral in our own
operations by 2035".
Britvic
Type Sleeved PPA
PPA length 10 years
Size 28MW
Status Energised in December 2023
In July 2023 the Company agreed a PPA with Britvic for the off-take of energy
at its site in Northamptonshire. The Company's new solar installation in
Northamptonshire will generate energy exclusively for Britvic. It will have a
total capacity of 28MW and will be capable of generating 33.3GWh of clean
energy per annum, the equivalent of powering 11,500 homes or planting 260,000
trees. The electricity generated will be enough to power 75% of Britvic's
current operations in Great Britain, including its Beckton and Leeds
factories, which can produce 2,000 recyclable bottles per minute for a
portfolio of iconic brands including Tango, Pepsi and Robinsons. Britvic has
committed to achieving net zero carbon emissions by 2050 and has led the
industry as the first UK soft drinks company to have a 1.5°C target verified
by the Science Based Targets initiative. Britvic has demonstrated its
commitment to this goal, having reduced its direct carbon emissions by 34%
since 2017 and generated 57% of its energy needs from renewable sources in
2022, up from 28% in 2018.
Nissan
Type Private wire PPA
PPA length 20 years
Size 20MW
Status Commissioned in October 2023
Our 20MW ground mounted solar PV system for Nissan Motor Manufacturing UK
Limited ("Nissan") was energised in October, becoming one of the largest
private wire installations in the UK. The Nissan site can generate 19.2GWh of
clean energy per year, the equivalent of powering 7,000 homes or planting
170,000 trees. This clean energy will be used to power up to 20% of the
Sunderland site, which is the centre of manufacturing operations for Nissan in
the UK. Over 6,000 employees work on the 89 acres 362,000m(2) campus that is
set to become Nissan's flagship electric vehicle ("EV") hub, combining
renewable energy, EVs and battery production into a single ecosystem. The
Company's solar PV system forms part of 'Ambition 2030' - Nissan's carbon
neutrality target.
Sustainability Report
Introduction
Since IPO, sustainability related priorities have been identified as key to
delivering value for the Company's stakeholders. As long-term investors, the
Company is fully committed to integrating sustainable practices into its
operations and expects that its business partners should do the same. During
the reporting year, the Company has continued to develop its sustainability
strategy and identify opportunities to enhance its sustainability performance.
The Company is proud to have retained the London Stock Exchange's (LSE) Green
Economy Mark 15 (#_ftn15) since IPO in 2021. This Sustainability Report
provides an overview of our approach to sustainability and the progress we
have made. The Company remains committed to further development of our
sustainability strategy and positive impact as it continues to integrate ESG
best practice and contribute towards a net zero carbon future.
ESG Principles and Approach
The Company's activities align with the UN Sustainable Development Goals (SDG)
Agenda 2030, and we have identified the following key SDGs as the most
relevant to the Company:
· SDG 7 (Affordable & Clean Energy)
· SDG 12 (Responsible Consumption & Production)
· SDG 13 (Climate Action)
The primary Sustainable Development Goals aligned to the Company's ESG
Principles
SDG 7 Ensuring a well-established energy system that supports all business
activities of the Company's clients as well as forming part of the energy
transition to renewable energy remains our focus. The Company can accelerate
the transition to an affordable, reliable and sustainable energy system by
Affordable and Clean Energy investing in solar energy projects.
SDG 12 The Company is committed to a best practice approach to asset procurement,
maintenance, decommissioning and component recycling. The Company has
developed specific policies to ensure responsible investment practices,
including in relation to modern slavery and human trafficking.
Responsible Consumption & Production
SDG 13 Through clean energy asset investments, the Company's portfolio is directly
contributing to a net zero carbon future and the attainment of the UK's net
zero target. The Company evaluates and reports on its climate-related risks
and opportunities and its greenhouse gas emissions profile.
Climate Action
In order to focus the Company's ESG activities and maximise the value
delivered in the context of its investment objectives, the Company has
identified four ESG principles (the ESG Principles) linked to the UN SDGs,
that it believes are specifically relevant to its activities. The four
principles are:
1. Support the attainment of the UK emissions targets through the
creation of new sustainable energy resource;
2. Facilitate the efficient and considered use of finite resources;
3. Bring value to the communities in which we are active;
4. Deliver the Company's investment objective through a robust
governance framework that recognises its ethical responsibilities to all
stakeholders.
The Company is aware that its ability to manage ESG risks and opportunities is
fundamental to the delivery of long-term sustainable returns for its investors
and that its activities and its method of delivery have the potential to
impact on a broad range of stakeholders. This includes recognising a
sustainability responsibility beyond just climate-related considerations but
to all material ESG issues. It therefore intends to ensure that ESG
considerations, underpinned by the four ESG Principles, are reflected in all
stages of the asset lifecycle and throughout all of its areas of operation.
Building on the four ESG Principles, and SDG alignment, the Company has
committed to the following priority activities for FY24:
The Company looks forward to reporting on progress with these activities in
the next reporting cycle.
Overview of ESG Approach:
Principle 1 Principle 2 Principle 3 Principle 4
Climate/Net Zero Environment Social Governance
Support the attainment of the UK emissions targets through the creation of Facilitate the efficient and considered use of finite resources Bring value to the communities in which we are active Deliver the Company's investment objective through a robust governance
new sustainable energy resource framework that recognises its ethical responsibilities to all stakeholders
ESG Principle 1: Net Zero/Climate
Emissions
To ensure a robust and comprehensive understanding of the Company's greenhouse
gas emissions (GHG) profile, the Company has engaged third party
sustainability consultants, Anthesis, to assist in the preparation and
analysis of the Company's GHG Inventory. In relation to the Streamlined Energy
and Carbon Reporting (SECR) requirements 16 (#_ftn16) , the Company is
considered to be a "low energy user" (<40,000KWh) and therefore falls below
the threshold to include an energy and carbon report. However, the Company has
chosen to voluntarily disclose its GHG emissions (calculated using the GHG
Protocol standard). In terms of data quality, 97% of emissions are based on
actual data.
Following the operational control approach of the GHG Protocol, the Company
must include the emissions of the Holdco and SPVs in its inventory as they are
100% wholly owned subsidiaries of the parent company. However, as the Company,
the Holdco and SPVs are investment entities, the SPVs are classed as
investments of the Holdco and the Holdco is classed as an investment of the
Company.
The Company's GHG Inventory Organisational Boundary is explained below:
Scope 3 (indirect emissions occurring within the Company's value chain)
accounts for 100% of the Company's emissions profile, totalling 41,364 tCO2e.
The largest proportion of emissions comes from investments with 41,136 tCO2e.
There are three material sources of emissions from the Company's investments:
capital goods, purchased goods and services, and waste. Emissions from capital
goods make up 77% of the Company's total carbon footprint for FY23. The source
of these emissions is the embodied carbon from the purchase of new solar
photovoltaic ("solar PV") modules.
The following table provides a summary of the Company's FY23 GHG Inventory:
Scope Category FY23 (tCO(2)e) FY23 % of Total
Scope 3 1. Purchased goods and services 226 0.5%
5. Business Travel 1 0%
15. Investments 41,136 99.5%
15a. Purchased goods and services 8,640 21%
15b. Capital Goods 32,046 77.5%
15c. Waste 451 1%
Total Scope 3 Emissions 41,364 100%
The following figure shows the Company's Scope 3 emissions breakdown:
The Company does not currently purchase offsets and instead focuses on
deploying more capital into renewable energy generation.
Net Zero and Science Based Targets
In accordance with the Company's investment objectives, the Company invests in
renewables infrastructure projects which generate clean energy and contribute
directly to the UK's net zero transition.
The Science Based Target Initiative (SBTi) has not yet published guidance for
the renewables sector. In the absence of available sector guidance, the
Company is currently engaging with SBTi and external consultants to identify
the most applicable guidance or methodology for the Company to use to show net
zero alignment given the Company's renewable asset base. The Company's key
climate-related target is to continue to provide 100% of electricity
generation finance for only renewable electricity through 2030. 17 (#_ftn17)
Climate
The Company has voluntarily reported against the TCFD recommendations, as a
framework to effectively disclose the Company's climate-related risks and
opportunities. See the TCFD report below on page 33. Details of the Company's
climate-related targets are also included in the TCFD report on page 33.
2024 Priority Activity - Net Zero Transition and addressing climate risks: The
Company is committed to continuing to analyse its greenhouse gas (GHG)
emissions profile, prepare a GHG inventory annually and voluntarily report on
its Scope 1, 2 and 3 emissions. The Company will utilise the results of the
GHG inventory to assess available emissions reductions opportunities. The
Company will continue to engage with the SBTi to identify the most applicable
methodology for the Company to use to show net zero alignment given the
Company's renewable asset base. The Company is also committed to ongoing
annual TCFD reporting, as a framework to effectively disclose the Company's
climate-related risks and opportunities.
ESG Principle 2: Environment
Resource efficiency
Water usage and waste is minimal in the direct operations of the Company and
the Investment Adviser. 18 (#_ftn18) The Company is committed to eliminating
unnecessary consumption and minimising waste within the portfolio. Over the
next year, the Company will review its data collection processes in relation
to collection of waste related data. This is driven by a focus on improving
the amount of actual data recorded from the operational waste related to the
installation and maintenance of the solar PV assets at the sites owned by the
SPVs. This will further improve understanding of the Company's waste profile,
and support measures to reduce the quantity of waste going to landfill in
favour of recycling or recovery, and ultimately reduce emissions from waste
(which form part of the Company's Scope 3 emissions).
The Company's focus on onsite energy generation, and its rooftop solar assets
in particular, generally support renewable energy generation without competing
with alternative land use such as green or public spaces, food production or
housing. The amount of MW that the Company has on rooftops is equivalent to
144 acres of land, if these solar rooftops were ground mounted. 19 (#_ftn19)
End of life
The Company's expectation is that onsite solar assets will typically be
transferred to the contract counterparty at expiry of the PPA term or upon
implementation of any buy-out provisions. However, there may be opportunities
for entering into a replacement PPA, including where the site is suitable for
re-powering with updated equipment. In the event that the Company is
required to decommission a site this would be carried out in accordance with
the prevailing industry best practice, including with respect to the recycling
of equipment and materials.
Environmental fines
The Company did not receive any environmental fines or penalties during the
year (September 2022: nil).
Biodiversity
The Company acknowledges that society, business, and finance depend on
nature's assets and the services they provide. The Company supports the aim of
the Taskforce on Nature-related Financial Disclosures (TNFD) to provide a
framework for organisations to report and act on evolving nature- related
risks. The Company is committed to further understanding and evaluating the
nature-related dependencies, impacts, risks and opportunities (including in
relation to biodiversity) relevant to the Company and looks forward to
reporting on this in due course.
2024 Priority Activity - Enhancing biodiversity: The Company is committed to
exploring on site nature-related opportunities on the ground mounted solar
sites. For example, through pre-construction ecological assessments and where
possible, initiatives to obtain site-specific ecological management and
biodiversity enhancement plans.
ESG Principle 3: Social
Local employment
The development and building of solar projects creates direct employment
opportunities and the Company encourages its EPC contractors to use local
sub-contractors (for services such as fencing works, landscaping and civil
works) where possible.
Charitable giving
The Company has made a commitment to donate one per cent of the previous
year's profits to charitable causes through an independent foundation. 2023 is
the second year of operations for the Company, and no profit was achieved in
the prior year.
See the Corporate Social Responsibility overview on page 43 for information on
the Investment Adviser's charitable giving and volunteering.
Responsible supply chain
The Company is committed to trade ethically, source responsibly and avoid
modern slavery or human trafficking in its supply chains or in any part of its
business. See the Supply Chain Sustainability overview on page 42 to 43 for
more details.
2024 Priority Activity - Strengthening sustainability in the supply chain: The
Company is committed to ensuring that it trades ethically, sources responsibly
and that there is no modern slavery or human trafficking in its supply chains
or in any part of its business. As part of this commitment the Company will
continue to engage with industry bodies, NGOs, and other stakeholders on
responsible procurement initiatives with a focus on continual improvement.
This includes undertaking an annual review of the Company's Modern Slavery
Statement.
ESG Principle 4: Governance
Responsible business
The Company believes that responsible business practices and strong ethics in
governance are key to long-term success and value creation. The Company is
committed to upholding strong ethics and integrity in governance including by
managing conflicts of interest and maintaining clear and up to date governance
and ESG policies. A summary of the Company's ESG Policies and Standards is
provided on the following page 33. The Company's Investment Adviser is a
signatory to both PRIPRI Reporting Framework and NZAM, and the Company is
committed to ongoing retention of the LSE's Green Economy Mark
Diversity, Equity, and Inclusion
The Company does not have any direct employees because of its external
management structure and only has non-executive Directors on the Board.
However, the Company receives professional services from a number of different
providers, principal among them being the Investment Adviser. The Investment
Adviser supports equal opportunities regardless of age, race, gender or
personal beliefs and preferences, both in their recruitment and when managing
existing employees. The Company's Diversity Policy (published on its website)
sets out the approach to diversity on the Board of the Company. The Board
supports the FTSE Women Leaders Review and its voluntary target for FTSE 350
boards to have a minimum of 40% of women on boards. The Board of the Company
currently has 67% women representation. The Company also supports the Parker
Review's recommendations to increase ethnic and cultural diversity on boards,
the development of a pipeline of candidates, the planning for succession
through mentoring and sponsoring, and enhancing transparency and disclosure to
record and track progress against the objectives.
Training
The Company's Investment Adviser is committed to providing all of the
Investment Adviser's staff with ESG training to improve their understanding of
ESG-related risks and opportunities. In FY23 100% of the Investment Adviser's
staff undertook this training. As part of the Company's commitment to
enhancing sustainability performance, training requirements relating to
Company's Board and the Investment Adviser will be reviewed over the coming
year.
2024 Priority Activity - Upholding responsible investment commitments: The
Company will continue to support the work of its Investment Adviser to report
against the PRI Reporting Framework and the NZAM signatory commitments,
including the commitment to achieve net zero alignment by 2050 or sooner. As
part of the Company's commitment to responsible business practices and
enhancing sustainability performance, training requirements relating to
Company's Board and the Investment Adviser will be reviewed over the coming
year.
ESG Reporting Metrics Table
We acknowledge that the IPO proceeds are now fully committed, and the
portfolio is expected to be fully operational in early 2024. Therefore, we
have revised our ESG reporting metrics to better capture the operating
environment that we are in. Going forwards we will capture the following
metrics which we feel are the most relevant for benchmarking and measuring
progress against the Company's four ESG Principles.
ESG Principle ESG Reporting Metrics FY23 Result
Principle 1: (a) Total renewable generation capacity created (GWh) 36.3
Climate Change/Net Zero Transition
(b) Equivalent number of homes powered by renewable energy 64,000
(c) Avoided greenhouse gas emissions (tCO2e) 7,627
(d) Average carbon payback (years) Research has shown that the average carbon payback period for solar panels is
1-4 years. 20 (#_ftn20) The Company is exploring how it can calculate this
metric specifically for the assets within its portfolio through further
analysis of the embodied carbon of its solar panels.
(e) Investment Adviser (IA) carbon footprint The GHG Inventory for the IA is currently being prepared by Anthesis and will
be reported on in the next ARA.
(f) Scope 1 carbon emissions (tCO2e) nil
(g) Scope 2 carbon emissions (tCO2e) nil
(h) Scope 3 carbon emissions (tCO2e) 41,364
Principle 2: Environment (a) The amount of MW that the Company has on Rooftops and how many acres is 144 acres
this equivalent to, if these rooftops were on the ground 21 (#_ftn21)
Principle 3: (a) The number of local contractors/technicians we have used in all of our Regional breakdown
projects by region
Social North: 6
Wales and Midlands: 34
East: 18
South West: 40
South East: 15
Scotland: 2
Multi-region: 2
(b) Confirmation of application of at least 1 per cent. of the Company's cash The Company did not generate a cash profit during the previous FY therefore no
profit for the previous FY and at least 3 per cent of the IA's cash profit for financial contribution to charitable causes was made.
the previous FY (as they relate to its activities under the IA Agreement) to
charitable causes via (once established) an independent foundation
(c) Hours committed to education schemes around sustainable energy 16 hours
Principle 4: Governance (a) Reporting against UN PRI framework by the IA ✓ The IA's first PRI Report was submitted in September 2023.
(b) Confirmation of award and retention of LSE's Green Economy Mark ✓ Retained since the Company IPO in 2021.
(c) Confirmation of status as TCFD supporter ✓ First TCFD report included in this ARA.
The Company recognises that as the portfolio continues to grow and the
sustainability regulatory and reporting landscape further evolves, further ESG
data collection and data quality improvements will be needed. The Company is
committed to ongoing engagement with its stakeholders to allow improved ESG
metrics and targets reporting and assessment of our ESG performance.
ESG Policies and Standards
The Company's approach to sustainability is governed using a comprehensive
framework of policies and standards. Policies are updated on a regular basis
to ensure they remain up to date with the latest approaches to sustainability
management and performance improvement.
Policy Location
Modern Slavery Statement Available on the Company's website
Module Procurement Policy Available on the Company's website
Anti-Bribery Policy Available on the Company's website
Anti-Tax Evasion Policy Available on the Company's website
Conflicts of Interest Policy Available on the Company's website
Board Tenure Policy Available on the Company's website
Diversity Policy Available on the Company's website
ESG Policy Available on the Company's website
Investment Policy Available on the Company's website
Environment Policy Available on the Company's website
Biodiversity Policy Available on the Company's website
Supply Chain Human Rights Policy Available on the Company's website
As further ESG policies are developed these will be published on the
Investment Adviser's website or that of the Company's as appropriate, once
available.
ESG Monitoring and Reporting
The Company is committed to measuring and evaluating its sustainability
performance and maximising the value delivered in the context of its
investment objectives. The Company will annually report against TCFD reporting
requirements (with the Company's first TCFD report included below) as well as
disclosing the emissions of its own operations and where possible, those of
its advisors. In addition, the Company's Investment Adviser, as a signatory to
PRI, will continue to report annually against the PRI reporting framework.
Emerging sustainability-related regulation and reporting requirements are
monitored by the Company's Investment Adviser. The Company is aware that
nature loss and biodiversity have emerged as a key focus within the broader
sustainability landscape and that regulatory and reporting requirements are
evolving rapidly as a result. The Company is preparing for the introduction of
mandatory Biodiversity Net Gain Assessments (BNG) (as part of future planning
permissions) and is monitoring the voluntary uptake of the recently launched
final recommendations of the Taskforce on Nature-related Financial Disclosures
(TNFD).
More broadly, the Company aims to continue to enhance reporting and engagement
with stakeholders on its sustainability performance and targets.
TCFD report
Introduction
The Company is dedicated to mitigating climate-related risks and maximising
the potential for climate-related opportunities. The Company's primary
business activity is to invest in solar PV systems, demonstrating its
commitment to the climate transition. The Company assesses the risks that
climate change poses to its business activities at various stages, including
pre-investment and during the operation of assets.
The Company is supported by the Investment Adviser who, as a signatory of PRI
and NZAM, is committed to assisting the Company in achieving its
sustainability and climate goals to combat the climate crisis.
This disclosure represents the Company's first reporting in line with TCFD,
consistent with the four pillars and 11 recommendations. The Company
anticipates that this disclosure will improve over time as management of
climate-related issues continues to be embedded across the business. Planned
improvements for the metrics and targets disclosure include engaging the
supply chain to provide more accurate data, whereas plans to conduct a
quantitative scenario analysis in future will enhance the quality of the
strategy disclosure.
The Company has prepared this disclosure using a consistent principle of
materiality as applied elsewhere in the annual report. Stakeholders of the
Company and the Investment Adviser have been consulted on the materiality of
climate issues. The climate information that stakeholders deem to be
important, or that stakeholders use to make decisions, is considered material.
Governance
Describe how the board exercises oversight of climate-related risks and
opportunities:
The Board and AIFM, are responsible for the investment decisions of the
Company and for overseeing the services delivered by the Investment Adviser to
ensure that climate-related priorities are incorporated into the investment
strategy. The Company's business plan naturally considers climate-related
issues by investing exclusively in low-carbon technologies. Climate risks are
considered when planning future developments, as extreme weather events can
cause installation delays, which can impact revenue. The Company considers
climate opportunities when making growth plans because the business model is
directly affected by emerging climate legislation. For example, the
introduction of carbon price legislation or an increase in carbon prices could
lead to higher demand for solar PV.
Climate-related matters are a standing agenda item as part of the Investment
Advisers' report to the Board at quarterly meetings. The Board requires the
Investment Adviser to report against ESG metrics (see the Metrics and Targets
section for more details) at each quarterly Board meeting and to highlight how
each metric may be impacted by investment decisions. Following the 2023
reporting process, the Board will consider the potential cost implications of
the climate scenario analysis results and updating risk management policies.
The two Board committees include the Audit Committee and Management Engagement
Committee. Whilst the Investment Adviser and AIFM have joint responsibility
for the maintaining Company's risk register and internal controls, this is
subject to the supervision and oversight of the Board. The Audit Committee has
responsibility for reviewing such processes on an annual basis to ensure that
climate-related risks are effectively identified and managed. The Audit
Committee also receives updates on climate-related risks and opportunities
from the Investment Adviser when needed. Climate-related issues do not fall
under the remit of the Management Engagement Committee. The Company's
governance structure is presented on page 62.
Describe management's role in assessing and managing climate-related risks and
opportunities:
The Investment Adviser is responsible for delivering the climate risk strategy
on behalf of the Company and for advising the Board on matters related to
climate risk. Steve Windsor, Principal and Sustainability Champion at the
Investment Adviser, is responsible for oversight, monitoring, and management
of climate-related risks and opportunities. The Investment Adviser's Head of
Sustainability, Isabelle Smith, is responsible for the operational delivery of
climate-related risk measures and leads the provision of climate risk advice
to the Company. The Head of Sustainability reports to the Chief Operations
Officer of the Investment Adviser.
The Head of Sustainability is a standing attendee of the Investment Adviser's
Investment Committee, assuming responsibility for delivering the Company's
sustainability strategy. The role involves preparing climate-related
disclosures and reports, embedding ESG and climate-related policies into the
business, monitoring climate issues, and implementing changes that will either
improve the Company's resilience to climate-related risks or allow it to take
advantage of climate-related opportunities. The Head of Sustainability will
communicate progress against climate-related metrics to the Board on a
quarterly basis, as outlined in the Company's ESG policy
(https://atratoroof.com/storage/2022/07/Atrato-Onsite-Energy-PLC-ESG-Policy.pdf)
.
Identification of assets' climate-related risks and opportunities already
forms part of the Investment Adviser's investment process during the due
diligence phase. Potential issues are raised by investment teams with the Head
of Sustainability. The Company plans to enhance this process to ensure that
the key climate-related risks and opportunities identified through scenario
analysis (see the Strategy section) are included in the asset-level risk
analysis.
Strategy
Describe the climate-related risks and opportunities the organisation has
identified over the short, medium, and long term:
An initial screening was conducted to define likely material climate-related
issues and suitable time horizons over which to assess their potential. Table
1 and Table 2 show the initial list of risks and opportunities identified in
the screening, which are aligned to the climate-related risks and
opportunities suggested by the TCFD. Risk and opportunity types were assigned
a preliminary rating (Lower, Moderate or Higher) based on stakeholder
consultations, a review of peer organisations, and the judgment of the
Investment Adviser. This was followed by a more detailed review and scenario
analysis of the three most material risks and opportunities, as shown in Table
3.
For preliminary ratings, a Material Time Horizon was also defined according to
the time horizon over which each risk/opportunity is expected to first
materialise. The short-, medium-, and long-term time horizons were defined
according to the Company's operational milestones and aligned to the
assessment of specific risks and opportunities. The short-term time horizon
(2023-2025) covers the period up to the completion of in-progress deals and
projects under construction (up to 12 months). It also covers the scheduled
continuation vote for the Company in November 2024. The medium-term horizon
(2026-2035) is defined relative to the mid-term of power purchase agreements
("PPAs") within the existing portfolio of off-takers. The average length of
term remaining within the current portfolio (as of September 2023) is c. 17
years. The long-term time horizon (2036-2050) has also been set relative to
the length of existing PPAs, to extend beyond the longest-term PPA within the
Company portfolio.
Table 1: Preliminary ratings of all risks identified in the climate risk and
opportunity screening
Category Risk Type Description Preliminary Ratings Material Time Horizon
Financial Impact Probability
Transition 1. Policy and legal: Change in government energy policy A change in government subsidies or taxation could lead to an increase in Higher Moderate Medium
costs or reduction in revenues.
2. Technology: Less competitive renewable energy technology Developments in renewable energy technology could reduce the competitiveness Lower Moderate Long
of the Company's assets leading to impairment and/or a reduction in revenue.
Physical 3. Acute: Extreme rainfall Disruption to the installation and maintenance of assets can delay the Moderate Moderate Short
commencement of PPAs, causing reduced cash-flow and additional labour costs.
4. Chronic: Extreme heat Components within solar arrays, such as inverters and transformers, can be Lower Moderate Long
susceptible to failure in extreme heat. They require greater levels of
maintenance, which can increase operational costs.
Table 2: Preliminary ratings of all opportunities identified in the climate
risk and opportunity screening
Category Opportunity Type Description Preliminary Ratings Material Time Horizon
Financial Impact Probability
Transition 1. Markets: Increased customer demand for low-carbon energy Increased demand and diversification of customer base as more companies Moderate Moderate Medium
require low carbon technologies to meet their net zero targets. This could
lead to increased revenues for the Company.
2. Markets: Additional government subsidies Government subsidies or tax relief for renewable energy could lead to lower Lower Moderate Medium
operating and/or capital costs for the Company.
3. Products and services: Technological advantage Advancements in solar technology could improve the Company's market Lower Moderate Medium
performance relative to other forms of renewable energy, which could increase
revenues.
4. Products and services: Advantage of ESG efforts and commitments A position as a supplier of renewable energy with strong ESG principles, Moderate Higher Medium
policies and commitments, can make the Company more attractive to customers,
thereby increasing revenue.
The three most material risks and opportunities were evaluated through
forward-looking qualitative scenario analysis. The results of this analysis
are shown in Table 3. Further details relating to the methodology behind the
scenario analysis can be found in Appendix A.
Table 3: Results from scenario analysis for most material risks
Risk / Opportunity Type Scenario Financial Impact Probability Overall rating by time horizon
Short (2023-25) Medium (2026-2035) Long (2036-2050)
Transition risk: Policy and legal: Change in government policy Preliminary Rating Higher Moderate Moderate Moderate Moderate
<2(o)C Higher Lower Moderate Higher Lower
>4(o)C Higher Moderate Lower Higher Higher
Physical risk: Extreme rainfall (acute) Preliminary Rating Moderate Moderate Lower Moderate Higher
<2(o)C Moderate Moderate Lower Moderate Moderate
>4(o)C Moderate Moderate Lower Moderate Higher
Transition opportunity: Products and services: Advantage of ESG efforts and Preliminary Rating Moderate Higher Moderate Moderate Lower
commitments
<2(o)C Moderate Higher Higher Lower Lower
>4(o)C Moderate Lower Lower Lower Lower
Describe the impact of climate-related risks and opportunities on the
organisation's businesses, strategy, and financial planning:
The UK aims to achieve net zero emissions by 2050 and has an interim target to
decarbonise the electricity sector by 2035, which is expected to require a
five-fold increase in solar generation 22 (#_ftn22) . The Company's operating
model facilitates the UK's climate goals through the provision of additional
solar capacity. Climate-related opportunities have direct implications for
increasing the Company's revenue through an anticipated growth in the scale of
the commercial PPA market. Most climate-related risks are seen as a function
of the overarching opportunity presented by the transition to net zero and are
most likely to materialise in relation to Company revenue streams and the
speed or scale with which revenue growth is achieved.
The Company's exposure to physical climate-related risks is relatively limited
compared to transitional risks and opportunities. Chronic risks, such as heat
and water stress, have little to no impact on Company operations. Some acute
physical risks result in disruption to the operational capability of the
Company's solar assets, impacting revenue. The Company is responsible for the
installation of solar modules at site, as well as ongoing maintenance over the
term of the PPA. The Company oversees installation of both roof and ground
mounted arrays, though the majority of the existing portfolio's installed
capacity (c. 80%) is ground mounted. Exposure of assets to extreme weather can
limit their operational capability, warranting repairs, as well as causing
delays during the installation stage for new assets. This was observed most
recently in 2022, when extreme rainfall during installation rendered sites
unsafe for contractors to access and resulted in waterlogged cable trenches.
Standing water, coupled with freezing overnight temperatures, caused delays to
installation and also resulted in additional labour costs. It is likely that
more frequent and intense weather events (most notably extreme wind and
rainfall) will result in the requirement for additional maintenance of assets
and necessitate repairs to site infrastructure as well as leading to larger
risks during installation of assets in future. The Company has identified
financial indicators to measure the extent of these impacts and will report on
these in 2024.
The Company procures solar assets on a rolling basis from third party
suppliers, before transferring the assets out of Company ownership at the
expiry of the PPA. Winning competitive PPA tenders is critical to the
Company's commercial success, and the Company's reputation plays a significant
role in winning such tenders. As commercial off-takers are already motivated
by their own ESG targets and goals, the Company's ESG performance may be
subject to greater scrutiny, which will extend into its supply chain. The
Company's policies and commitments around modern slavery and supply chain due
diligence and procuring solar modules with traceability reports at a premium
from third party suppliers acts as a positive market differentiator in this
way. Traceable modules are of certified origin and uphold proper labour
standards during raw material extraction and module manufacturing. As the
market for commercial PPA grows, this reputational positioning is likely to
create further opportunities. Additionally, the Company anticipates that over
time, access to the most competitive rates of finance and capital will be
increasingly contingent on ESG performance and transparency, which is
categorised as a reputational risk for TCFD purposes.
Risks and opportunities related to climate policy and legislation are likely
to impact the Company's financial planning. Within its investment strategy,
the Company retains the capability to add a broader range of energy-related
products beyond solar modules to its portfolio, such as electric vehicle
charging infrastructure and battery energy storage systems. This flexibility
increases the potential scope for technological opportunities and mitigates
technological risks. Procuring modules on a rolling basis further mitigates
this risk.
Potential market changes arising from the Government's Review of Electricity
Market Arrangements (REMA), 23 (#_ftn23) such as locational pricing and
specific support for PPA markets, could influence the future pricing of
solar-generated electricity and may affect the Company's investment strategy.
Locational pricing may motivate a stronger investment focus on specific
regions of the UK and depreciate the returns of existing PPA contracts in less
favourable locations. This impact is mitigated by the diversity in site
geography among existing assets. Existing PPA terms mitigate the impact of
these market-led changes in legislation with longer term, fixed-price
structures that safeguards the Company in the event of changes in legislation.
Describe the resilience of the organisation's strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario:
For this reporting period, a qualitative scenario analysis was completed for
the risks and opportunities described in Table 3. These were assessed under
the defined short-, medium- and long-term time horizons under two future
scenarios. The first is a high emissions scenario, commensurate with current
policies and the IPCC's Representative Concentration Pathway (RCP) 8.5, which
is consistent with >4(o)C of warming. The second is a low emissions
scenario, commensurate with 2050 Net Zero targets and the IPCC's RCP2.6, which
is consistent with <2(o)C of warming. The Company plans to improve its
assessment of climate-related risks and opportunities by undertaking further
qualitative scenario analysis in 2024. The Company intends to apply
quantitative scenario analysis in future to factor in the financial impacts of
the material risks and opportunities. Quantitative financial analysis was not
completed in 2023, as the financial costs of managing the material risks
require further research and access to more granular data. The Company plans
to undertake such research and implement data quality improvements over the
next 12 months to facilitate the enhanced analysis.
Extreme Rainfall
Research has indicated that extreme weather events can extend the length of
construction projects by up to 21% in the UK, 24 (#_ftn24) whilst flood
damage caused by extreme rainfall regularly exceeds hundreds of millions of
pounds each year. 25 (#_ftn25) The Company has already experienced delays to
installations caused by extreme weather, particularly during winter months
when the impacts of extreme rainfall are compounded with lower temperatures.
The risk of extreme rainfall at existing portfolio sites is similar in the
short- and medium-term for both scenarios. Over the long-term horizon, extreme
rainfall is expected to increase by about 9% within the low-emissions scenario
across the Company's sites, whilst the increase in extreme rainfall is over
12% over the long-term horizon in the high emissions scenario. These increases
in likelihood are broadly representative of future changes across the UK as a
whole over the same timescale, which is representative of the Company's
portfolio being geographically spread across the country. The analysis
suggests an increased likelihood of disruption to maintenance operations (at
existing sites) as well as an increased likelihood that installations at new
ground mounted sites across the UK will be disrupted by extreme rainfall in
the long-term.
Alongside the analysis of existing sites, an assessment was conducted of UK
areas likely to experience the most extreme rainfall in future years. This
information can be used to assess the medium and long-term risk for future
sites, particularly for future ground mounted sites. In response to disruption
delaying commercial operation dates, the Company has taken measures on more
recent installations to mitigate adverse weather impacts. Mitigating actions
include prioritising the installation of solar arrays at the boundary of a
site according to potential exposure to extreme rainfall and high winds. This,
combined with measures to protect the depth of cabling trenches, provides
greater protection for arrays installed on the interior of the site.
Ultimately this may result in the Company making additional capital investment
provisions; the extent of which will be further explored and estimated over
the next 12 months.
Policy and Legal
The unstable policy landscape within the energy sector poses a material risk
to the Company. The increased uncertainty can impede off-takers' willingness
to enter into longer term contracts. Policy instability can also affect
national energy prices, affecting the commercial case and payback period of
renewables when comparing against other options in the market. Analysis of
this risk is intended to represent a range of potential policy interventions
that may influence the Company's competitiveness within the wider energy
market. The use of instruments such as windfall taxation, subsidies, and
capital allowances may have a material bearing on the performance of the
Company in future years.
Carbon price projections within the energy supply sector have been used as a
proxy to estimate the probability of future policy changes that affect the
Company's ability to remain competitive on the energy market. Higher carbon
prices reflect a higher likelihood of a policy environment conducive to solar
assets being an attractive option for PPA off-takers. In the low-emissions
scenario, carbon prices increase into the medium- and long-term, whilst in the
high-emissions scenario the carbon price is low across all time horizons.
Policy and legal risk is assessed to be higher over the medium and long-term,
particularly in the high-emissions scenario. This represents the time horizon
over which the Company will seek PPA contract renewal and/or new off-taker
contracts and suggests that the Company could be operating in a more
challenging policy environment at that time.
The multi-decade duration of PPAs reduces the Company's exposure to market
volatility arising from policy and legal changes. To monitor new policy
developments and the impact these may have on the Company, horizon scanning of
emerging regulations is undertaken annually. Following the completion of the
scenario analysis conducted for this report, a historic consensus was reached
at COP28 in Dubai to transition away from all fossil fuels to enable the world
to reach net zero by 2050. 26 (#_ftn26) In addition, the Global Renewables
and Energy Efficiency Pledge, aiming to triple worldwide installed renewable
energy generation capacity by 2030, was endorsed by the United Kingdom and
more than 100 other countries at COP28. 27 (#_ftn27) Both of these examples
highlight the increasing international efforts to accelerate the clean energy
transition and the evolving international policy and legal landscape in
relation to renewable energy. The Company will continue to monitor such
international efforts and the resulting impact on domestic policy.
Products and Services
A positive reputation with customers provides the Company with an opportunity
to improve its competitive position and maximise its growth in the PPA market.
The Company's alignment between its own ESG practices with those of potential
off-takers represents a market differentiator that can create commercial
opportunities for increased revenue.
National scenarios for solar technology investment were used as a proxy to
gauge the future probability of increased competition within the solar PPA
market. 28 (#_ftn28) In the low emissions scenario, it is anticipated that
investment into renewables will peak in the short-medium term, in turn scaling
up the off-taker market. In a high emissions scenario, where emissions
reductions and ESG garner less interest in the private sector, investment is
relatively low across future time horizons. This implies a potential
opportunity that is strongest in the medium term as more commercial off-takers
seek long-term PPA arrangements. This also overlaps with the Company's
developing reputation as they mature through future rounds of fundraising
beyond the short-term continuation vote.
The Company maintains a positive reputation with customers via its ethical
supply chain practices. For example, the Module Procurement Policy requires
newly acquired solar PV systems to be ethically sourced and for module
suppliers to meet certain criteria. The Company's aim to source low-emitting
solar PV modules will also attract customers with targets to reduce emissions
in their supply chains.
Risk Management
Describe the organisation's processes for identifying and assessing
climate-related risks:
The Company identifies and evaluates its principal risks, including
climate-related risks, using a matrix where each risk is rated on a scale of
rare, low, moderate, or high. The risks are assessed at every quarterly risk
review, as well as on an ad hoc basis when significant risks arise. In 2022,
extreme rain was included under the category of "Operational, climate, and ESG
risks", whilst policy and legal risk was included under "Economic and
regulatory conditions, locally and globally". Both risks were rated as
moderate impact and moderate probability. Details of the risk matrix and risk
management process can be found on page 48.
Existing and emerging climate-related regulations are considered as part of
the risk management process. In 2022, the impact of higher energy prices and
energy-related legislation in the UK were noted as emerging risks and the
increased irradiation due to climate change leading to higher yields (termed
the "brightening effect") as an emerging opportunity.
Prior to the purchase of every asset, the Investment Adviser undertakes due
diligence on behalf of the Company, where climate-related risks and
opportunities are identified and assessed. The outcomes of the assessment are
recorded in the Investment Committee papers. The due diligence process
includes a review of asset exposure to climate-related impacts, an estimate of
avoided greenhouse gas emissions, and consideration of asset maintenance and
decommissioning. The assessment of exposure to physical risks (for example,
flooding due to extreme rainfall or damage from extreme wind) allows the
Company to understand the magnitude of these risks at each site.
Describe the organisation's processes for managing climate-related risks:
As part of the Company's risk management, climate-related risks are mitigated
through the due diligence process. The outcomes of the due diligence process
inform the design and construction of the assets to ensure they mitigate
against any identified climate-related risks. To facilitate ongoing monitoring
of risks, weather stations are installed on larger projects to collect data on
climate-related issues such as irradiation, wind speed, wind direction, and
temperature.
In some instances, risks are transferred to third parties. Specific
contractors, for example, operations and maintenance ("O&M") contractors,
are responsible for oversight of the assets and associated risks. In addition,
insurance is in place for significant climate-related incidents, transferring
the financial risk from the Company to the insurer.
Climate-related risks and opportunities are prioritised using the risk matrix
in the same way as non-climate risks. The results of the scenario analysis,
which provide an assessment of the materiality of each risk and opportunity,
will be incorporated into the risk management process in the next financial
year to further aid the prioritisation of these risks.
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation's overall risk
management:
Climate-related risks are incorporated into the Company's risk matrix. As part
of the due diligence process undertaken for all assets pre-investment,
transitional and physical climate risks are identified and assessed alongside
other risk types. They are also considered in the standard ongoing monitoring
of risks throughout each asset's lifecycle. The Investment Adviser is
responsible for monitoring all risks and intends to discuss them with the
Board at quarterly meetings, where the Board considers the controls and
mitigations in place for material risks, both non-climate and climate.
Metrics and Targets
Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with its strategy and risk management process:
The metrics used to monitor climate-related performance, along with the
baseline progress for this first year of reporting, are provided in Table 4.
The metrics align with the Company's ESG principle to support the attainment
of the UK emissions targets through the creation of new sustainable energy
resources (more information on the ESG principles can be found in the Investor
Prospectus
(https://atratoroof.com/storage/2022/07/Atrato-Onsite-Energy-PLC-Prospectus-web-ready-version-inc.-disclaimer.pdf)
).
There were no significant events that impacted the metrics and targets in the
reporting period. Metrics and targets are not currently linked to remuneration
policies for the Investment Adviser or other personnel. This will be
considered by the Company over the next 12 months, along with the potential
for some of the metrics to be developed into specific targets.
Table 4: Climate-related Metrics
Metric Baseline Progress (as of September 2023) 29 (#_ftn29)
1 Avoided emissions (tCO2e) 37,000
2 New renewable energy generation capacity (GWh) 143
3 Amount of capital deployed towards renewable energy (£M) 121
4 Equivalent number of homes powered by renewable energy 64,000
Disclose Scope 1, Scope 2 and, if appropriate Scope 3 greenhouse gas (GHG)
emissions and the related risks:
The Company completed its first full Scope 1, 2 & 3 GHG inventory in 2023
based on FY23 (1 October 2022 - 30 September 2023) data. The GHG inventory was
calculated in line with the GHG Protocol Guidance, including all relevant
scopes and categories. The Company defines its organisational boundary using
the operational control approach. The Company does not have any Scope 1 &
2 emissions, rather all emissions are included in Scope 3. As expected, due to
the Company's status as an investment entity, the majority of emissions come
from its direct investment in Atrato Onsite Energy Holdco Limited and indirect
investment in various Special Purpose Vehicles ("SPVs"). Within the Scope 3
Investments category, the largest source of emissions arises from the
procurement of solar panels by the SPVs.
The 2023 UK Government Conversion Factors were the main source for emission
factors. For emissions relating to the solar panels, EcoInvent 3.7 emission
factors were used. Purchased goods and services and some business travel were
calculated using spend, whereas the rest of the inventory was calculated using
activity data. Some of the emissions were estimated to fill missing data gaps.
The Company plans to continue iteratively improving its data collection
process each year to reduce the amount of estimated data. A summary of the GHG
inventory is provided in Table 5.
FY23 represented a normal year of business for the Company. The FY23 GHG
inventory improved upon the Company's initial measure of its emissions
relating to the procurement of its solar panels in 2022. As per best practice,
carbon offsets are not included in the Company's emissions reporting.
Currently, the Company does not purchase offsets and instead focuses on
employing more capital into renewable energy generation.
Table 5: Greenhouse Gas Emissions
Scope and Category Description FY23 Emissions 30 (#_ftn30) (tCO(2)e) FY22 Emissions (tCO(2)e)
Scope 1 The Company does not have any Scope 1 emissions. 0 0
Scope 2 (location-based) The Company does not have any Scope 2 emissions. 0 0
Scope 2 (market-based) 0 0
Scope 3 This includes emissions relating to the Company's purchased goods and services 41,364 14,751 31 (#_ftn31)
and business travel, plus the emissions relating to the Company's investment
in solar panels and the waste generated during installation and maintenance.
Total Scope 1, 2 & 3 Emissions (location-based) 41,364 14,751
There was a significant increase in total emissions in FY23 compared with
FY22. This is due to an increase in the number of emissions categories
included in the analysis (in FY22 only the measurement of the solar panels was
in scope), and because there was an increase in the number of solar assets
purchased. Since FY23 is the first year where a full GHG inventory has been
completed, it will be used as the baseline year for future comparisons.
Table 6: Other Metrics
Other Metrics FY23 FY22
Carbon footprint of investments (Scope 1 & 2 tCO2e/£M invested) 0 0
Carbon intensity of investments (Scope 1 & 2 tCO2e/£M revenue) 0 0
Exposure to carbon-related assets (% of portfolio) 0% 0%
Describe the targets used by the organisation to manage climate-related risks
and opportunities and performance against targets:
The targets used to manage performance against climate risks and opportunities
are included in Table 7. The Company's strategic and financial goals are
inextricably linked to climate change due to the core business model of
financing renewable energy projects. For example, targets 1 and 2, which
relate to earning revenue by only providing finance to clean energy projects,
represents both financial and climate-related opportunities for the business.
The provision of additional renewable energy will enable the Company to meet
increasing demand for renewables from its customers as they aim to reach their
own net zero targets, whilst also creating revenue growth for the Company.
Table 7: Climate-related Targets
Target Baseline Progress (as of September 2023) 32 (#_ftn32)
1 Continue to provide 100% of electricity generation finance for only renewable 100%
electricity through 2030 33 (#_ftn33)
2 100% of revenue to come from the financing of low-carbon products 100%
3 100% of Investment Adviser staff to receive training on climate risks and In progress.
opportunities by Q2 2024
In 2024, the Company will continue to build on the qualitative scenario
analysis conducted in 2023 to gain further understanding of the actual and
potential impacts of climate-related risks and opportunities on the Company.
The Company will use the outcomes of this analysis to ensure the most
appropriate targets and metrics are utilised to manage its climate-related
risks and opportunities.
Appendix
Appendix A: Methodology notes for scenario analysis
The qualitative scenario analysis described in this report is underpinned by
the following standard formula for risk:
Risk = Probability x Impact
This approach is considered best practice and is consistent with approaches
taken in major financial risk, climate risk and transitional planning
frameworks. This approach also considers ROOF-specific inputs as part of its
impact scoring, going beyond generic climate modelling which inform likelihood
scores.
For scenario analysis ratings, probability and impact are each scored on a
scale of 1-5 and are multiplied together to give an overall risk rating on a
scale of 1-25 for each time horizon. Risk scores between 1 and 5 are deemed
"Lower", 6-12 are deemed "Moderate" and 13-25 are deemed "Higher". The ratings
given in Table 2 above are based on a weighted average across sites within the
portfolio, based on the proportional capacity relative to the total installed
capacity.
Probability
A 1-5 probability score has been assigned for each risk type. This score
represents the likelihood of the risk occurring at a given location, or within
a specific timeframe or future scenario. Probability scores are based on
generic climate scenario data. Within data published by the IPCC Atlas
(https://interactive-atlas.ipcc.ch/regional-information#eyJ0eXBlIjoiQVRMQVMiLCJjb21tb25zIjp7ImxhdCI6OTc3MiwibG5nIjo0MDA2OTIsInpvb20iOjQsInByb2oiOiJFUFNHOjU0MDMwIiwibW9kZSI6ImNvbXBsZXRlX2F0bGFzIn0sInByaW1hcnkiOnsic2NlbmFyaW8iOiJzc3A1ODUiLCJwZXJpb2QiOiIyIiwic2Vhc29uIjoieWVhciIsImRhdGFzZXQiOiJDTUlQNiIsInZhcmlhYmx)
and Network for Greening the Financial System (NGFS Scenarios Database
(https://data.ene.iiasa.ac.at/ngfs/) ), proxies have been identified for each
risk type. Raw values are converted to a continuous score between 1-5 for each
risk type, as described below.
Risk/opportunity Type IPCC or NGFS sub-data set Raw Unit Justification
Extreme rainfall (acute) Maximum 5-day precipitation (Rx5day, IPCC Atlas mm of rain The data selected measures the anticipated changes in the frequency of acute
(https://interactive-atlas.ipcc.ch/regional-information#eyJ0eXBlIjoiQVRMQVMiLCJjb21tb25zIjp7ImxhdCI6OTc3MiwibG5nIjo0MDA2OTIsInpvb20iOjQsInByb2oiOiJFUFNHOjU0MDMwIiwibW9kZSI6ImNvbXBsZXRlX2F0bGFzIn0sInByaW1hcnkiOnsic2NlbmFyaW8iOiJzc3A1ODUiLCJwZXJpb2QiOiIyIiwic2Vhc29uIjoieWVhciIsImRhdGFzZXQiOiJDTUlQNiIsInZhcmlhYmx) rainfall events (i.e. five-day downpours) which make it more likely that sites
) will be impacted by waterlogging. Locations analysed include existing sites
but also consider UK-wide trends in how extreme rainfall may change across all
other local authority regions. This allows management to consider the
likelihood of disruption at future investment locations and also at existing
sites, as these may still require maintenance and upkeep.
Legal & policy NGFS: Energy supply sector carbon pricing up to 2050 USD/tCO(2) The data selected is intended to represent the likelihood of policies and
taxes that will discourage the transition to net zero. Carbon pricing in the
energy supply sector is a good proxy for the strength of government
intervention; the higher the carbon price it is assumed that the response to
decarbonising power is stronger and installing renewables becomes easier/more
attractive, through more favourable policies such as taxes, grants, levies and
allowances.
Products & services NGFS: EU solar investment to 2050 bnUSD/year Investment in solar generation acts as a data proxy for the level of
commercial market demand and the subsequent growth in the number of 'ESG
mature' off-takers in the market nationally. It assumes that the volume of
more 'ESG mature' off-takers will change in line with national renewables
capacity. Greater 'ESG maturity' refers to off-taking organisations that are
more sensitive to their suppliers' ESG activities, and whose purchasing
activities are more easily influenced by good ESG performance; something ROOF
view as a strength and differentiator against their competition.
Impact
Impact scores assess the Company's sensitivity and/or vulnerability to risks
and opportunities based on current or historic company-specific data and
insight. Similar to Probability, a 1-5 risk score is assigned to each
indicator. There are several considerations made when choosing these
indicators:
· Impact pathway: a defined financial statement line item that can be
expected to be materially affected by a risk/opportunity e.g., revenue, cost
of sales, operating costs, assets, cash etc. A risk/opportunity may have
multiple impact pathways, but the scope of this analysis has limited
consideration to the most material pathway.
· Impact indicator: multiple impact indicators can combine to give an
overall impact score and can represent a combination of the Company's own
data. Where more than one impact indicator has been used in this analysis for
a given risk/opportunity, the final impact score has been defined according to
an equal weighting between the two. Future analysis may define additional
impact indicators with different weightings given towards the impact score.
· Financial materiality alignment: where possible, the higher impact
scores (i.e. a 5) have been aligned to the most financially material outcomes.
In some cases this has been adapted according to proxies e.g. the capacity of
individual sites.
The table below describes the impact scores used in the scenario analysis:
Risk/ Opportunity Type Impact Indicator Justification
Extreme rainfall (acute) Generating capacity at each site Waterlogging of ground mounted sites results in delays to installation and
delays activation date beyond which arrays can begin generating power. The
larger the site, the larger the financial exposure, as income is directly
linked to generating capacity.
Legal & Policy Proportion of portfolio transferred from balance sheet The proportion of the existing portfolio that has been transferred out of
ownership within a given time horizon. Higher scores indicate that the
proportional value of assets transferred out of ROOF control is more
financially material, and therefore the relevance of capital allowances and
impact on net profit will be greater. Site capacity has been adopted as a
proxy for asset value.
Legal & Policy Remaining lease term The timing of the lease term is critical in understanding when the potential
impact will be realised. Impact scores have therefore been assigned to each
site, to reflect the fact that the impact will vary depending on time horizon.
Whilst it is unlikely an asset would be transferred before the end of its
lease term, this indicator has been assigned a rating of 3 as ROOF would, in
theory, have the option to reach an agreement to do this if they felt it was
commercially in their interest and there was mutual benefit to the new owner
recipient or transferee.
Tax deferrals are not considered for this exercise and it is assumed that
profit is impacted in the year of lease term end.
Products & Services ESG maturity of target client Details on future client / client sectors were not available at the time of
constructing the model; so it was not possible to assign different ESG
maturity and/or financial materiality ratings. These indicators will serve as
a template by which can look to weight impact in future, i.e. if a sector is
perceived to be more sensitive to ESG requirements than other sectors; this
could be assigned a 4 or a 5. A rating of 3 has been assigned in the interim.
The model has taken ROOF's current client portfolio book as an illustrative
example for rating the future client portfolio.
The implications of assigning a 3 rating will be that all clients are assumed
to be equal in impact, with overall variance in risk being driven by the
probability score.
Limitations of this analysis:
- Site capacity was used as a proxy for materiality throughout the
analysis.
- Alignment of Company time horizons with climate modelling
timescales warranted the use of historic precipitation data for short term
probability scoring.
Supply Chain Sustainability
Following the 2021 publication of the Sheffield Hallam University Report on
Uyghur Forced Labour and Global Solar Supply Chains, there has been increasing
focus on supply chain transparency in the solar industry. The United States
has since enacted the Uyghur Forced Labor Prevention Act
(https://www.congress.gov/bill/117th-congress/house-bill/6256/text) which aims
to ensure that goods made with forced labour in the Xinjiang Uyghur Autonomous
Region ("XUAR") of the People's Republic of China do not enter the United
States market. The European Union is also working towards an EU ban on
products made with forced labour with proposed regulation at draft stage.
Industry initiatives have also been launched, such as Solar Energy UK's
Responsible Sourcing Steering Group and the Solar Stewardship Initiative (SSI)
developed by Solar Energy UK and SolarPower Europe. The Company is proud to be
a member of Solar Energy UK. The Investment Adviser's Head of Sustainability
is a member of the Solar Energy UK's Responsible Sourcing Steering Group.
The Company is committed to trade ethically, source responsibly and avoid
modern slavery or human trafficking in its supply chains or in any part of its
business. The Company's approach reflects its commitment to acting ethically
and with integrity in all business relationships. Building on this commitment,
the Company's Investment Adviser works collaboratively with its business
partners and seeks to ensure that their suppliers share the Company's values
and comply with relevant legislation.
The Company's commitment is guided by the principles in the Modern Slavery Act
2015 within the UK and associated global initiatives such as the UN Guiding
Principles on Business and Human Rights, the UN Global Compact, and the OECD
Due Diligence Guidance for Responsible Business Conduct. The Company's
approach to ethical business is governed using a comprehensive framework of
policies and standards including the Company's Modern Slavery and Human
Trafficking Statement and Module Procurement Policy. It is acknowledged
however that beyond the suppliers that the Company and the Investment Adviser
deal with directly, there is a complex and extensive supply chain where there
are no direct contractual relationships. As a result, there will be
limitations to what can be achieved in practice. However, the Company will
continue to identify opportunities to further reduce the risk of human
trafficking and modern slavery, increase transparency in the Company's
operations and supply chain and respond effectively to new risks as they are
identified. As part of this, the Company will continue to engage with industry
led initiatives on human rights and the prevention of modern slavery. This
includes participating in relevant industry associations such as Solar Energy
UK and engaging with the SSI - particularly as it develops its planned Supply
Chain Traceability Standard, due to launch in late 2024. The Company's
policies, standards and processes will continue to evolve in this area as
industry progress is made.
The Company acknowledges training as an important aspect of risk management.
As part of the Company's commitment to mitigate risks as far as possible and
further develop its due diligence mechanisms, training requirements relating
to Company's Board and the Investment Adviser will be reviewed over the coming
year.
Procurement policy
The Investment Adviser has developed a procurement policy that attempts to
mitigate the exposure to forced labour issues that are present in the solar PV
industry. The Module Procurement Policy is reviewed semi-annually. The Board's
obligations and commitments relating to equipment procurement are documented
in the Company's Modern Slavery and Human Trafficking statement and are
included in the Company's prospectus dated 1 November 2021 (Part 4 ESG and
Sustainability).
Application of the Supplier Criteria
The availability of independent and corroborated information regarding modern
slavery in the Chinese region of Xinjiang and the involvement (whether
directly or indirectly) of individual manufacturers is limited. However, the
supplier criteria ("Supplier Criteria") is updated to reflect industry best
practice as it evolves with the improving availability of standardised and
audited information. Suppliers are excluded if they are unable to meet our
Supplier Criteria, which include:
The Module Procurement Policy was approved by the Company's Board of Directors
in June 2022 and the Investment Adviser is responsible for maintaining the
Module Procurement Policy. Please see the Module Procurement Policy, available
on the Company's website, for more information.
Contractual commitments
In all contracts which relate to the procurement of modules, the Investment
Adviser will require the inclusion of a commitment from its counterparty to
the eradication of all forms of forced labour in the supply chain for those
modules.
As part of the Company's supplier selection process for possible installers
and operators, due diligence activities will also consider local procurement
content as well as equal opportunities. The Company believes that its
investments should benefit local stakeholders at every level including
opportunities to work in developing local infrastructure. The Investment
Adviser will track local content involvement as transactions are developed.
Carbon emissions
The Company is considered to be a "low energy user" (<40,000KWh) and
therefore falls below the threshold required to make a Streamlined Energy and
Carbon Reporting (SECR) disclosure. However, the Company has voluntarily
reported its greenhouse gas emissions within its TCFD report.
Corporate Social Responsibility
The Company has made a commitment to donate one per cent of the previous
year's cash profits to charitable causes through an independent foundation.
2023 is the second year of operations for the Company, a cash profit was not
achieved in the prior year.
The Investment Adviser is establishing The Atrato Foundation (the
"Foundation") as a UK charity. The Investment Adviser will develop a selection
policy to evaluate charities that help in the growth and acceptance of
sustainable energy generation.
The Foundation will support charities promoting education, training and
personal development with respect to skills relevant to the clean energy
sector. It will also support the Board's agenda of diversity, equal
opportunity and social mobility. It will achieve this by working with the
Investment Adviser to provide training and education.
The Investment Adviser has also committed to make donations to the Foundation
of 3% of profits. The minimum funding level for donation is set at £5,000.
In addition, employees at the Investment Adviser currently volunteer on
several charitable initiatives including mentoring young people in schools and
select students through IntoUniversity. STEM and IntoUniversity are aimed at
supporting students from underprivileged and diverse backgrounds into work and
higher/further education.
Board developments and activities as per Section 172(1) Statement
Section 172 of the Companies Act 2006 (the "Act") requires the Board to act in
the way that it considers would most likely promote the success of the Company
for the benefit of its members as a whole, whilst having regard to the matters
set out in section 172(1)(a-f). The Board believes that over the course of the
year ended 30 September 2023, it has taken into consideration the interests of
all stakeholders in its decision-making and its report on how the Directors
have discharged their duty under section 172 is set out below.
Details of the Company's key stakeholders and how the Board engages with them
can be found on pages 45 to 47.
s172 Factor Our approach Evidence of compliance
A. The likely consequences of any decision in the long term The Board has regard to its wider obligations under Section 172 of the Act. As Key stakeholder relationships on pages 45 to 47.
such, strategic discussions involve careful consideration of the longer-term
consequences of any decisions and their implications on shareholders and other Board activities during the year on page 44.
stakeholders, as well as the risk to the longer-term success of the Company.
Any recommendation is supported by detailed cash flow projections based on a
range of scenarios to stress test against varying levels of funding
availability and borrowing strength, as well as a range of wider economic and
market conditions.
B. The interests of the Company's employees The Company does not have any employees because of its external management Key stakeholders on pages 45 to 47.
structure.
Culture on page 61.
The Company receives professional services from a number of different
providers, principal among them being the Investment Adviser. Through regular
engagement with the Investment Adviser in its regular quarterly meetings and
otherwise, as required, the Board aims to gain a rounded and balanced
understanding of the impact of its decisions on the Company's stakeholders.
The Directors also have regard to the interests of the individuals who are
responsible for delivery of the investment advisory services to the Company to
the extent that they can. The interests of individuals in other service
providers to the Company are also considered.
C. The need to foster the Company's business relationships with suppliers, The Board believes that building effective business relationships with Key stakeholders on pages 45 to 47.
customers and others suppliers, customers and other key counterparties is crucial to preserving
long-term shareholder value. In addition to the Investment Adviser, the
Company Secretary, the Broker, the external legal counsel, its public
relations agency, the Auditor and the tax advisers, the Company fosters its
business relationships at the operational level with various asset-level
counterparties, local communities and the Company's debt providers.
D. The impact of the Company's operations on the community and the environment The Board receives regular reports from the Investment Adviser on the safety Key stakeholders on pages 45 to 47.
performance of the Company's asset-level counterparties to help ensure the
safety and comfort of communities situated in the vicinity of Company assets.
The Board also recognises the important role the Company's solar assets play
in the transition to the use of cleaner energy and the reduction in society's ESG policy and strategy on pages 27 to 43.
reliance on fossil fuels.
The Board's approach to sustainability on page 2.
The impact on the community is covered in the sustainability section of this
Report.
E. The desirability of the Company maintaining a reputation for high standards The Board is mindful that the ability of the Company to continue to carry out Chair's letter on corporate governance on pages 55 to 61.
of business conduct its investment business and to finance its activities depends heavily on the
Company maintaining high standards of conduct in its engagement with its Principal risks and uncertainties on pages 48 to 54.
stakeholders and, in part, on the reputation of the Board, the Investment
Adviser and the investment advisory team. Culture on page 61.
The reputational risk of falling short of the high standards expected is
included in the Audit Committee's review of the Company's risk register, which
is conducted at least annually.
F. The need to act fairly as between members of the Company The Board recognises the importance of treating all members fairly and, Chair's letter on corporate governance on pages 55 to 61.
accordingly, works with the investor relations function of the Investment
Adviser to engage with shareholders in order that their views can be Key stakeholders on pages 45 to 47.
considered when shaping the Company's strategy.
Our Key Stakeholder Relationships
Building strong relationships with our key stakeholders is a critical element
to our success. The Board recognises that the foundation underpinning
effective corporate governance is determined on how it aligns the strategic
decisions of the Company with the views of its various stakeholders. We aim to
build long lasting relationships with all our key stakeholders based on
professionalism and integrity.
The Board regularly consults with the Investment Adviser, who in turn manages
and fosters the relationships with our clients, supply chain, key partners and
advisers.
Investor engagement
The Company's shareholders are an important stakeholder group and the ultimate
owners of the business. To deliver our strategy, it is vital that shareholders
continue to understand and support the Company's performance, investment
thesis as well as the wider market in which we operate. The Board oversees the
Investment Adviser's formal investor relations programme which is supported by
the Company's broker and public relations consultants, providing shareholders
with frequent business updates as well as facilitating regular meetings both
in person and on-line. The Board aims to be open with shareholders and
available to them, subject to compliance with relevant securities laws.
How did we engage?
· The 2023 AGM was held as a physical meeting in London and was
attended by all the board. The meeting details were announced by RNS and open
to all shareholders.
· The Company's broker arranged a roadshow for institutional
shareholders following the FY 23 interim results
· The Board approves all resolutions and related documentation to be
put to shareholders at the AGM, together with circulars, prospectuses, listing
particulars and regulatory announcements concerning the Company.
· The Company's website contains comprehensive information about its
business, regulatory news and press releases alongside information about its
approach to ESG issues.
· The formal investor relations programme is designed to promote
engagement with major investors, generally defined as those holding more than
approximately 1% of the shares in the Company. Major investors are offered
meetings after each results announcement or other significant announcements.
The Investment Adviser also held multiple virtual and in person meetings with
prospective investors.
Topics discussed
· Financial performance of the Company and disclosures contained within
the interim report
· Share price performance and pathway to reducing the discount to NAV
· Macroeconomic themes including the impact of inflation, merchant
power prices and government decisions in relation to energy prices.
How did we respond?
· Investor feedback has helped shape our disclosures, with additional
supplementary information provided in these annual results.
· Feedback suggest that the use of virtual meetings has improved
accessibility to our international and regional based Shareholders. We
anticipate that on-line engagement will continue to play an important part in
engagement with our shareholders in addition to helping to reduce associated
carbon emissions in line with our sustainability strategy. Further details on
our sustainability strategy can be found on pages 27 to 43.
EPC contractors
We recognise the importance of EPC contractors to our business, not only to
develop and build the solar projects for us and our clients, but also to
recognise us as an experienced partner to fund their projects and to deliver a
constant stream of pipeline work for us. We currently have a strong
relationship with selected EPC contractors, and regularly interact with them
during the design and installation process of a project. Our EPC contractors
on site are currently performing in line with our expectations. No major
health and safety incidents have been reported at the time of writing this
report.
How did we engage?
· Regular meetings held with EPC contractors to discuss development
pipeline and performance on current projects in construction.
· We carried out site visits, both internally and using third party
technical advisors, to assess construction quality and verify construction is
in line with contractual timelines.
Topics discussed
· Issues on sites, particularly those related to safety on site and
timelines.
· New PPA projects on the horizon, contractors' ability to deliver such
sites, and potential PPA pricing.
· Design issues pre-construction, to ensure that solar PV plants are in
line with our specifications.
· Topics related to commissioning, acceptance and handover
documentation.
How did we respond?
· We provided PPA prices to EPC contractors for projects that met our
investment criteria.
· We translated contractor's reports and provided them to the
off-takers as required under the PPA.
· We manage the EPC contractors to ensure that projects are built on
time and budget, and that all acceptance criteria are being met.
Operations and maintenance contractors
The Company recognises the importance of the operations and maintenance
contractors to ensure the ongoing operation of the projects. The relationship
with these providers is managed via the asset manager who has regular
interaction with the providers to ensure the ongoing performance of the sites.
The Investment Adviser oversees this interaction and is regularly updated on
performance and health and safety related situations.
The Investment Adviser
The Board's main working relationship is with the Investment Adviser. The
Investment Adviser brings a depth of experience in the renewable energy
sector. This gives the Company a competitive advantage through its knowledge,
specialist focus and network of industry contacts. The Investment Adviser has
a crucial role in the performance and long-term success of the Company. The
Board has a diverse skillset and is experienced across a range of disciplines
both in the listed and private sectors. As such they are well placed to work
with the Investment Adviser and engage efficiently with them. Full details of
the Board's experience is available on page 55.
Whilst the Company has no employees, the Board has regard to the interests of
the individuals who are responsible for delivery of investment advisory
services to the Company to the extent that they are able to do so. The Board
does not have direct responsibility for any employees.
The Board and the Investment Adviser maintain a positive and transparent
relationship to ensure alignment of values and business objectives.
How did we engage?
· The Board engages with the Investment Adviser at a minimum on a
quarterly basis which follows the Company corporate calendar. In addition to
the scheduled quarterly meetings, the Board also have separate unscheduled
Board meetings to approve recommendations for all acquisitions, approval of
asset management opportunities, and appointment of advisers.
· The Management Engagement Committee met during the year and has
performed a detailed review of the Investment Adviser's performance.
· The Directors obtain and assess feedback from investors, advisers and
other market participants, where appropriate, in order to monitor standards of
conduct, including the conduct and reputation of the Investment Adviser and
the reputation of the business.
· The Board also engages with the Investment Adviser through the annual
strategy day in addition to informal meetings as and when required. For the
2023 strategy day the Investment Adviser took the board on a site visit of the
London Road project as well as presenting an in depth presentation on fund
performance, macro backdrop and future strategy.
Topics discussed
· The process for operating the delegated authorities and related
controls at the Investment Adviser.
· Deployment speed and pipeline updates.
How did we respond?
· Included a section on activities undertaken pursuant to the delegated
authorities within the quarterly Investment Advisers report.
· Established monthly meetings to update the Board on the pipeline and
deployment progress.
Asset Manager
We recognise that the success of the Company relies on the continued success
of the asset manager, appointed by Holdco and managed by the Investment
Adviser, to provide financial and technical services on the projects. The
asset manager relies on the quality of the operations and maintenance
contractors to succeed. Therefore, we place particular emphasis on having a
strong relationship with the asset manager to better understand the challenges
and opportunities facing their business.
How did we engage?
Regular meetings between the Investment Adviser and the asset manager are held
to understand current and future needs. Any potential opportunities or risks
facing the Company are fed back to the Board to help inform future strategy.
The Investment Adviser visits sites on a periodic basis and feeds back on
material issues to the Board.
Topics discussed
· Issues on sites, particularly in connection with the asset managers
ability to monitor the meters and operation and maintenance contractors
remotely.
· Performance of the solar assets and their generation during the
relevant year.
· Performance of the operations and maintenance service providers.
· Financial issues that have arisen on any of the assets in the
portfolio.
How did we respond?
· The asset manager's monitoring software is connected to all sites.
· Monthly and quarterly reports provided by the asset manager are
reviewed and discussed at informal weekly meetings with the Investment Adviser
and the formal quarterly Board meetings.
Our Suppliers
The Company's key suppliers include professional firms such as accounting and
law firms and transaction counterparties, which can vary in size and
sophistication.
Whilst most engagements are subject to a tender process to ensure the Company
continues to obtain value for money, we aim to partner with suppliers who
share our values and ethos and work to secure the best people with an
established track record and, where possible, retain key partners on
successive transactions and workstreams.
Where material counterparties are new to the business, checks, including anti
money laundering checks, are conducted prior to transacting any business to
ensure that no reputational or legal issues would arise from engaging with
that counterparty. The Company also reviews the compliance of all material
counterparties with relevant laws and regulations such as the Criminal
Finances Act 2017.
The Company and its subsidiary entities have a policy of paying suppliers in
accordance with pre agreed terms as reported in the Supplier Payment Policies:
How did we engage?
· Key suppliers such as our Company's corporate broker Stifel are
invited to attend the quarterly Board meetings in order for the Board to be
kept informed of the current market within which we operate.
· The Board and its Committees were able to speak with accounting and
law firms on an informal or one to one basis to discuss specific issues
relating to the Company.
Topics discussed
· Service levels and annual performance.
· Fees charged by key suppliers engaged during the year.
· Relationship management.
How did we respond?
· There was direct engagement between the Investment Adviser and the
Board in respect of suppliers engaged during the year. Feedback has continued
to be positive on all our key supplier arrangements.
· The Board has established a Management Engagement Committee, which
reviews the supplier performance and fees on an annual basis to ensure that
the Company continues to obtain best value for money on services procured.
· Face to face meetings with key service providers are arranged in
order to discuss the ongoing relationship with the Company - these are held
without the Investment Adviser present.
· The Company has implemented a procurement policy, which aims to
eliminate the practices of modern slavery in the supply chain of module
suppliers. Our procurement policy states that the purchasing of panels should
include a guarantee that the raw materials and manufacturing will exclude any
forced labour and should be procured outside of the regions where these
practices are known to be happening. The policy, which has been developed in
line with the UK's Modern Slavery Act 2015, is set out below and is reviewed
annually. Suppliers are reviewed at least semi-annually to ensure that
procurement procedures are up to date and align with the Company's procurement
policy.
Supplier payment policies
The Company and its subsidiary undertakings seek to always pay suppliers
within the pre-agreed credit terms.
Modern slavery and human trafficking policy
The Company is committed to maintaining the highest standards of ethical
behaviour and expects the same of its business partners. Slavery and human
trafficking are entirely incompatible with the Company's business ethics. We
believe that every effort should be made to eliminate slavery and human
trafficking in the Company's supply chain. The Board has considered and
approved our Modern Slavery Statement, which demonstrates our commitment to
seeking to ensure that there is no slavery, forced labour or human trafficking
within any part of our business or suppliers. A copy of our Modern Slavery
Statement is available at https://atratorenewables.com/regulatory-documents/.
Our Key Stakeholder Relationships
Some examples of how the Board has considered stakeholder interests and s.172
matters in its decision making during the period are set out below.
Decision Stakeholders Board rationale and considerations Impact
New RCF agreement Shareholders The facility was important as it provided additional liquidity to acquire Proceeds were used to acquire further assets and grow the Company.
pipeline assets. The Board also carefully weighed the risks associated with
the entry into the facility against the longer-term consequences of not being
able to fund pipeline acquisitions which would have implications for
shareholders as their preference is to grow the fund to a level that is
considered scaled.
E-Comms adoption Shareholders E-Comms was adopted in light of the benefits which would flow from the Not yet fully implemented.
corresponding reduced paper usage. The Board also considered the fact that
Communities this change in practices would reduce expenses incurred by the Company.
Investment Policy amendment Shareholders The change to the policy was adopted on 10 March 2023 and was considered Britvic's 28MW 'London Road' project was acquired which - enables the Company
appropriate as it enabled the Company to offer a wider spectrum of solar to decarbonise at scale.
solutions to better position the Company within the changing market backdrop
and this was expected to increase returns to shareholders in the long term.
Risk Management
The Board has ultimate responsibility for the Company's risk management and
internal controls, with the Audit Committee reviewing the effectiveness of the
Board's risk management processes on its behalf. The Investment Policy sets
out the level of risk that the Company is willing to take and the constraints
that the Board determines that the Investment Adviser must adhere to on behalf
of the Company. The AIFM also undertakes risk management subject to the
overall policies, supervision and review of the Board.
The Board and the AIFM recognise that effective risk management is key to the
Company's success. Risk management ensures a defined approach to decision
making that seeks to decrease the uncertainty surrounding anticipated
outcomes, balanced against the objective of creating value for Shareholders.
The Board determines the level of risk it will accept in achieving its
business objectives, and this has not changed throughout the year. We have no
appetite for risk in relation to regulatory compliance or the health, safety
and welfare of our contractors, service providers and the wider community in
which we work. We continue to have a moderate appetite for risk in relation to
activities which drive revenues and increase financial returns for our
investors.
There are a number of potential risks and uncertainties which could have a
material impact on the Company's performance over the forthcoming financial
year and could cause actual results to differ materially from expected and
historical results.
The risk management process includes the Board's identification, consideration
and assessment of those emerging risks which may impact the Company. Emerging
risks are specifically covered in the risk framework, with assessments made
both during the regular quarterly risk review and as potentially significant
risks arise. The quarterly assessment includes input from the Investment
Adviser and review of information by the AIFM, prior to consideration by the
Audit Committee.
The Board, through delegation to the Audit Committee, has undertaken a robust
assessment and review of the emerging and principal risks facing the Company,
together with a review of any new risks which may have arisen during the year,
including those that would threaten its business model, future performance,
solvency or liquidity. These risks are formalised within the Company's risk
matrix, which is regularly reviewed by the Audit Committee.
During the year under review, the Directors have not identified, nor been
advised of, any failings or weaknesses which they have determined to be of a
material nature. The principal risks and uncertainties which the Company faces
are set out below.
Information about the Company's internal control and risk management
procedures are detailed in the report from the Audit Committee on pages 68 to
71. The principal financial risks and the Company's policies for managing
these risks, and the policy and practice with regard to the financial
instruments, are summarised in Note 19 to the financial statements.
The matrix below illustrates our assessment of the impact and the probability
of the principal risks identified after the application of mitigating
measures. The rationale for the perceived increases and decreases in the risks
identified is contained in the commentary for each risk category. A new risk
relating to the share price discount and continuation of the Company has been
added this year.
This risk map shows our assessment of each area of principal risk after
mitigation:
Change since prior year
1 Deployment of capital and pipeline Reduced
2 Performance of third-party service providers No change
3 Investment performance and measurement No change
4 Changes in cost of finance No change
5 Project counterparty risk No change
6 Power Price risk No change
7 Operational risk No change
8 Economic and regulatory conditions, locally and globally No change
9 ITC tax status and changes in tax legislation No change
10 Local and global political risk and impact of pandemics No change
11 Continuation of the company and share price New risk - increased
Principal Risks
Risk category Potential impact Mitigation
1. Ability to fund pipeline In line with the majority of the listed renewables market, the Company is During the year the Company entered into an £30 million RCF which was a
trading at a material discount to NAV and is therefore restricted in its further £20 million accordion option, providing significant debt capacity. In
Probability: Low ability to raise capital via a public placing. The Investment Adviser has a addition to the public market fundraising, there are a number of other options
significant pipeline in excess of £400 million that requires funding. There available to it that it will consider with its broker.
Impact: High is a risk that the Company is uncompetitive and fails to secure the assets
that meet the investment objectives in a timely manner to provide the target Once the portfolio is fully operational the Company will be generating
return to the investors. significant free cash flow which can be used to fund further projects.
Delays in deployment will impact returns. The Company will consider all available fund options across equity and debt
products. It will also investigate joint ventures as an alternative to raising
equity via equity capital markets.
There is a risk that due diligence carried out on acquisition of or investment
in any Clean Energy Asset is insufficient and does not reveal all the facts
that are relevant to the opportunity, leading to the Company overpaying.
2. Performance of third-party service providers The Company has no employees and is reliant on third party services providers The Company will engage with reputable and knowledgeable service providers to
to perform services, particularly the Investment Adviser & AIFM, their provide due diligence and appropriate contractual protection for liabilities
Probability: Low systems, reputation and any conflicts of interest between their clients. The is sought.
achievement of the Company's investment objective depends heavily upon the
Impact: High experience and expertise of the Investment Adviser's team. The Board has established a Management Engagement Committee to keep the
performance of the Investment Adviser under continual review. The AIFM and the
There is no certainty that the Company could find a replacement Investment Investment Adviser have robust processes and systems in place including, but
Adviser in the event of resignation of the Investment Adviser or termination not limited to, a conflicts of interest policy and register and a business
of the Investment Advisory Agreement. Operational risks which disrupt the continuity plan, which was tested during the pandemic and all staff were able
Investment Adviser's & the AIFM's business could impact their systems and to work remotely without loss of function or data. Systems are tested and
their ability to provide services to the Company. frequently backed up.
The Company's performance can be affected by the reputation of the Investment
Adviser. The Investment Adviser and AIFM provide services to other clients
which could be in direct competition with the Company. Contractual limitations
on the liability of and indemnification in favour of the Investment Advisor
means that the Company may have no recourse to recover losses from the IA.
3. Investment performance and measurement Investment valuation and decisions are based on financial projections, The Investment Adviser bases assumptions on industry data and reputable solar
judgements and assumptions captured in a financial model. These assumptions irradiance databases. The P50 irradiance scenario is used as a base case and
Probability: Moderate may change from to time to time and the actual performance may vary sensitivity to changes in irradiation are assessed. Assumptions are updated
significantly from the assumptions. and benchmarked frequently and the model itself is regularly reviewed. The
Impact: High
Investment Adviser is engaging a third party specialist to review and update
Assumptions are reliant on various factors, including environmental the model functionality.
conditions, which are not guaranteed. Historical trends are only an indication
of future conditions.
The financial model may contain errors that will impact the forecast returns.
4. Changes in cost of finance The discount rates used in the valuation represents the Investment Adviser's The discounts rates are reviewed on a regular basis and updated, where
and the Board's assessment of the rate of return in the market for assets with appropriate, to reflect changes in the market and in project risk
similar characteristics and risk profile. Increased underlying interest rates characteristics.
or expectations of prolonged high inflation may lead to increased discount
Probability: High rates being applied by the market and a consequential decrease in the
portfolio value.
Impact: Moderate
The Company's use of debt may also be affected by changes in the cost and
availability of finance. While the use of borrowings should enhance the total
return on the ordinary shares, it is possible that borrowing costs will exceed
income and therefore returns will be negatively impacted.
Any future debt would be subject to the 40% cap set out in the investment
policy. The Company will enter interest rate caps and swaps where appropriate
to mitigate the risk of interest rate rises.
5. Project delivery & counterparty risk Each revenue generation agreement is subject to the credit worthiness of the The portfolio of off-takers is diversified to alleviate concentration risk.
counterparty and in the event of non-payment or insolvency of the off-taker, Credit assessments are conducted prior to and during the PPA term to identify
the revenue will be lost and there is no guarantee that an alternative user is default risk. Each property is assessed for suitability for alternative
found. occupiers and the availability of an export connection to the grid to allow
Probability: Moderate
for sale of generation via the public grid to a licensed supplier.
Impact: Low
Service providers are subject to credit assessments and appropriate security
is sought where advance payments are required. Performance levels are
stipulated in the contracts and performance is regularly monitored and
Service providers are engaged to install, operate and manage Clean Energy reported on, by the Investment Advisors asset management team, during the
Assets. If these providers fail to perform, experience significant delays or period of contract performance.
have financial difficulties, the financial performance, including ability to
pay dividends & the NAV valuation, together with the reputation of the
Company could be adversely affected.
6. Power price risk Investments in Clean Energy Assets may have exposure to power prices. Where The Company's strategy is to seek to enter long term fixed price PPAs for at
the counterparty does not use all the electricity generated the rate at which least 80% of the energy generated from its Onsite Solar Assets. Any excess
Probability: Moderate the excess can be sold will be determined by market prices, which may be lower generation is exported to the grid under shorter term arrangements. The
than the contracted rates. sensitivity of the NAV to a change in wholesale power prices is monitored by
Impact: Low
the Investment Adviser and the impact of any new asset on the portfolio
sensitivity is reported during the investment approval process.
OFGEM regulates energy markets. A change of UK government or OFGEM's direction
and regulations could lead to unfavourable energy or grid policies and
potentially reduce merchant power prices. The Investment Adviser has a data analytics resource to assist with analysing
information for reporting to the AIFM and the Board and the Board will
respond/take action as appropriate.
If market rates are very low, users may not be willing to enter into an
agreement for supply from the Company.
The Company is well positioned to both monitor the political landscape as well
as engage in consultations and contribute to policy making. As the operating
portfolio grows, this ability to engage and contribute will grow in
significance
Third party wholesale power price forecasts are monitored by the Investment
Adviser relative to the prices available under PPAs for Onsite Solar Assets to
confirm that PPAs remain attractive.
7. Operational risk The Company's indirect subsidiaries own assets on third party property and When conducting due diligence on potential investments, the Investment Adviser
assume obligations under the contracts and could be liable for considers the potential impact of asset failures and provides for appropriate
Probability: Moderate non-performance. In some instances, parent company guarantees are required in contractual and insurance protections. Security around assets is reviewed
respect of a portfolio company's obligations under its contracts. regularly and assets are inspected regularly for damage or for signs of decay.
Impact: Moderate
Assets can fail due to technical faults, lifespan and theft of components and Technical due diligence is undertaken prior to acquisition or development of
there is a risk of an absence of direct connection to the grid. Where a an asset to identify risks and appropriate mitigating measures. Installation
connection exists, there is a risk the connection fails. contracts include taking over provisions and defects liability periods, and
major equipment is supplied with long-term warranties.
Clean Energy Assets can cause environmental hazards and nuisance.
Environmental surveys are undertaken, where appropriate.
In addition, assets profitability is dependent upon weather conditions over
which the Company has no control.
Energy generation is based on P50 forecasts which are deemed appropriate for
long-term assets.
Insurances may not cover specific risks and changes in environmental laws may
have an impact on the Company's activities.
Insurance brokers advise on appropriate insurance coverage.
8. Economic and regulatory conditions, locally and globally The Company and its portfolio may be materially affected by conditions in the The Investment Adviser will continually monitor the macro environment and
global financial markets and economic conditions, including inflation and ensure that it adopts appropriate mitigating strategies, including hedging,
deflation, business and consumer confidence, currency exchange rates and entering long term contracts and linking pricing to inflation.
controls, trade barriers and commodity prices. These factors are outside the
Probability: Moderate Company's control and may affect the valuation of its investments.
Impact: Moderate
Brexit continues to cause financial and regulatory uncertainty, both in the
short and longer term. This could cause volatility in the energy and financial
markets and impact supply chains and increase costs.
There is a risk of loss of supply licence or similar exemptions. Any
government subsidies and incentives to which the portfolio is entitled may
reduce over time. Regulations around renewable energy may change without
significant notice, invalidating the operating model of the Company. Network
charges are subject to change.
The Investment Adviser engages with industry specialists to ensure it is up to
date with any potential changes and will where possible feed into
consultations.
9. ITC tax status and changes in tax legislation The Company may breach the conditions of an Investment Trust leading to it The Investment Adviser has engaged specialist tax advisers for compliance and
being subject to UK tax on gains. monitors and regularly reports to the board on compliance with the Investment
Trust Company conditions referencing the tax structuring advice received at
IPO.
Probability: Low
Impact: High
The Investment Adviser with the appointed tax adviser monitor potential
changes in tax legislation, including rates, and assess their impact on the
Tax legislation is subject to change in both the UK and any other jurisdiction Company and its investment portfolio.
in which the Company invests. There is a risk that corporation or other tax
rates may increase as governments seek to finance deficits arising from,
amongst other things, the consequences of the COVID-19 pandemic.
10. Local and global political risk and impact of pandemics The ongoing instability caused by conflicts in both Ukraine and the middle The Investment Adviser will monitor industry and national news to ensure that
east together with the threat from China in relation to Taiwan continue to any proposed changes are anticipated, and appropriate mitigations are taken.
cause significant volatility in energy and financial markets.
Probability: Low
Impact: Moderate A pandemic, like COVID-19, could create operational challenges for the assets
incurring failures, as service providers may not be able to attend to the Asset performance can be monitored remotely and regular contact with the
failures. Energy demand at certain sites may be reduced. A pandemic could also service providers is maintained to ensure ongoing service.
disrupt supply chains, delaying installation assets.
Assets, where practicable, benefit from the ability to export excess
generation to the grid.
11. Continuation of the Company and share price If the Company does not have a NAV of greater than or equal to £250m on the The Company has one more year to raise additional capital to prevent this
third anniversary of admission (23 November 2024) The Board will propose a provision being triggered. The Board and its Investment Adviser are optimistic
discontinuation resolution at the AGM. This resolution requires 75% or more that the total NAV will be greater than £250m by the third anniversary, but
shareholder votes. will monitor the situation at each Board meeting. The Investment Adviser is
Probability: Moderate
proactively looking at ways to increase the NAV.
Impact: Moderate
If the Company's shares continue to trade at a discount to NAV it will not be
possible to issue additional shares to raise equity funding. The ability to raise additional equity requires the Company's shares to be
trading at a premium, which is in large part dependent on market conditions
and sentiment.
The Investment Adviser and the Broker will monitor the discount regularly and
inform the Board if shares are trading at a significant discount. The
Directors may repurchase shares if they have traded at more than a 10%
discount during any 12 month rolling period starting on the date 18 months
from Initial Admission.
Emerging Risks
The Directors have identified the following emerging risks:
Debt financing covenants
During the year the Company took on debt financing, through the use of its RCF
and the acquisition of a ASG portfolio, post balance sheet date, which
contained existing project finance. This finance contains covenants, which
if breached will lead to forced sale of assets or require significant cash
injections. The Board, through the AIFM and Investment Adviser will monitor
compliance with covenants to ensure sufficient headroom and provide early
warning of any issues that may arise.
Share price discount and discontinuation vote
The Company's shares have been trading at a discount to NAV which restricts
the ability to issue new shares and therefore access additional equity. The
Company has an active pipeline which requires funding. The Investment Adviser
and the Board continue to monitor the share price and work closely with the
broker to assess financing opportunities.
Going concern
In light of the current macroeconomic backdrop, the Directors have continued
to place significant focus on the appropriateness of adopting the going
concern basis in preparing the Company's financial statements for the year
ended 30 September 2023. In assessing the going concern basis of accounting
the Directors have had regard to the guidance issued by the Financial
Reporting Council.
The Board regularly monitors the Company's ability to continue as a going
concern. Included in the information reviewed at quarterly Board meetings are
summaries of the Company's liquidity position, cash flow forecasts, scenarios
and sensitivities, operational and market impact, and the financial strength
of its customers. Based on this information, the Directors are satisfied that
the Company is able to continue in business for the foreseeable future, being
a period of at least twelve months from the date of approval of the financial
statements, and therefore have adopted the going concern basis in the
preparation of these financial statements.
In light of the Company's current position and principal risks, the Board has
assessed the prospects of the Company for the period to 10 January 2025,
reviewing the Company's liquidity position, and the financial strength of its
counterparties, together with forecasts of the Company's future performance
under various scenarios. The Board has concluded there is a reasonable
expectation that the Company will be able to continue in operation and meet
its liabilities over that period.
The Company generated a net cash outflow from operating activities in the year
of £3.1 million, with its cash balances at 30 September 2023 totalling £37.9
million. The Company had £26.3 million in capital commitments as at the
balance sheet date. Contractual income for the year has been collected in
full. The Company's subsidiary, Holdco, secured a RCF of £30 million in
September 2023, which benefits from an accordion of £20 million. As at 30
September 2023, the facility was unutilised. Since balance sheet date £25
million of the RCF has been allocated to post balance sheet events.
All clients credit risk is assessed at engagement with an annual review to
highlight any risk arising post engagement.
As a result, the Directors believe that the Company is well placed to manage
its financing and other business risks and will remain viable, continuing to
operate and meeting its liabilities as they fall due over the assessment year.
The Directors are therefore of the opinion that the going concern basis
adopted in the preparation of the financial statements is appropriate.
Viability Statement
The Board has assessed the prospects of the Company over the five years from
the balance sheet date to 30 September 2028, which is the period covered by
the Company's longer term financial projections. The Board considers five
years to be an appropriate forecast period, although the Company's contractual
income extends beyond five years, since the availability of most finance and
market uncertainty reduces the overall reliability of forecast performance
over a longer period.
The assumptions underpinning these forecast cash flows were sensitised to
explore the resilience of the Company to the potential impact of the Company's
significant risks, or a combination of those risks. The principal risks on
pages 49 to 52 summarise those matters that could prevent the Company from
delivering on its strategy. A number of these principal risks, because of
their nature or potential impact, could also threaten the Company's ability to
continue in business in its current form if they were to occur. The Directors
paid particular attention to the risk of a deterioration in economic outlook
which could impact solar assets, including taxes on power generation
companies, which would have a negative impact on valuations. In assessing the
resilience of the Company, consideration was given to operations, the
geographical diversification and availability of alternative service providers
who could take over existing contracts or provide additional services to
ensure business continuity.
The sensitivities performed were designed to be severe but plausible; and to
take full account of the availability of mitigating actions that could be
taken to avoid or reduce the impact or occurrence of the underlying risks.
Based on the sensitivity results on the Portfolio, a combination of generation
(60% of capability), inflation 100bps higher, interest rates 100bps higher
than Sonia and operating cost increases of 20% were applied to assess the
Company's resilience. The outcome of these results supported the Company's
resilience. In addition, the Board considered the strength of services
providers and the availability of alternative options to replace
underperforming providers.
The Board considers the resilience of projected liquidity, as well as
compliance with the Investment Trust Company ("ITC") rules, under a range of
RPI and valuation assumptions.
The principal risks and the key assumptions that were relevant to this
assessment are as follows:
Risk Assumption
Inflation risk The increase in inflationary costs is managed by capping the inflation
applicable to main supplier contracts in line with inflation caps applied to
PPA revenues.
Liquidity risk The Company continues to generate sufficient cash to cover its costs while
retaining the ability to make distributions.
Off-taker risk Off-takers comply with their obligations over the term of the PPA and no key
off-taker suffers an insolvency event over the term of the review.
Based on the work performed, the Board has a reasonable expectation that the
Company will be able to continue in business over the five-year period of its
assessment.
Not withstanding the analysis assessed above, the Company's Prospectus
included a Discontinuation Resolution at the annual general meeting following
the third anniversary of admission to the London Stock Exchange. This
resolution is effective should the Company's Net Asset Value not be £250
million or above. The Directors have considered this in their assessment and
recognise the risk and have assessed there to be sufficient appetite for the
continuation of the fund at this time.
Other disclosures
Disclosures in relation to the Company's business model and strategy have been
included within the Investment Adviser's report on pages 10 to 23. Disclosures
in relation to the main industry trends and factors that are likely to affect
the future performance and position of the business have been included within
"Our Market" on page 26. Disclosures in relation to environmental and social
issues have been included within the ESG section on pages 27 to 43.
Employees, human rights, social and community issues
The Board recognises the requirement under Companies Act 2006 to detail
information about human rights, employees and community issues, including
information about any policies it has in relation to these matters and the
effectiveness of these policies. As the Company has no employees, all the
Directors are non-executive and it has outsourced all its functions to third
party service providers these requirements technically do not apply, and the
Company has therefore not reported further in respect of these provisions.
Despite this, both the Board and the Investment Adviser will remain vigilant
of any social and community issues and human rights concerns. Details of the
Company's anti-corruption and anti-bribery policies are detailed on page 33.
An assessment of the effectiveness of these policies is not made within this
report.
The Company has implemented a procurement policy, developed in line with the
UK's Modern Slavery Act 2015 and detailed on page 43.
Diversity
As at 30 September 2023, the Board comprised two female and one male
Directors. See pages 59 and 60 for further details of the Board's diversity
policy and compliance with the recommended diversity targets.
As the Company has no employees, there is nothing further to report in respect
of gender representation within the Company.
Key Performance Indicators (KPIs)
The Company's Board of Directors meets regularly and at each meeting reviews
performance against a number of key performance indicators, which include:
· Portfolio yield - the Company's objective is to seek to provide
Shareholders with an attractive level of distributions with modest capital
growth over the long term. In alignment with the target at the time of the
Company's IPO, an annualised dividend of five pence per share (2022: five
pence per share) has been declared, while the deployment of capital has
secured a portfolio yield of 9%. The Portfolio yield is the average yield of
the next five years for the existing portfolio, where the yield is net cash
generated in each year from the Portfolio over the cost of investment.
· Dividend cover forecast - dividends form a key component of the total
return to Shareholders. As at 30 September 2023, dividend cover of operational
projects was 0.15x (2022: 1.04x). Once the portfolio is fully operational in
March 2024, dividend cover is expected to be in excess of 1.3x (2022: 0.5x).
· Ongoing charges ratio - the expenses of managing the Company are
carefully monitored by the Board. The standard performance measure of these is
the ongoing charges ratio ("OCR"), which is calculated by dividing the sum of
such expenses over the course of the year by the average NAV over the year.
This ratio provides a guide to the effect on this performance of annual
operating costs. The Company's OCR for the year was 1.8% (2022: 1.4%) against
a target of 1.5%. The increase in OCR was principally driven by the lower
average NAV in 2023 (£138.6 million) compared to 2022 (£143.0 million).
· Premium / discount of share price to NAV per share - The Board
monitors the price of the Company shares in relation to their NAV and the
premium / discount at which the shares trade. The level of discount or premium
is mostly a function of investor sentiment and demand for the shares, over
which the Board may have limited influence. The share price stood at a 22.2%
discount (2022: 7.2% premium) as at 30 September 2023.
· Environmental KPIs - these are included as part of the Sustainability
Report, on page 32.
Approval
This Strategic Report has been approved by the Board and signed on its behalf
by:
Duncan Neale
Director
10 January 2024
Extracts from the Directors' Report
Results and dividends
The results for the year ended 30 September 2023 are set out in the financial
statements on pages 88 to 91. It is the policy of the Board to declare and pay
dividends as quarterly interim dividends.
In respect of the financial year ended 30 September 2023, the Company has
declared interim dividends amounting to an aggregate of 5.0 pence per share.
The following dividends were declared during the year and subsequently:
Date declared Amount per share (pence) Payment date
26 January 2023 1.26 24 February 2023
19 April 2023 1.23 26 May 2023
27 July 2023 1.25 25 August 2023
22 November 2023 1.26 18 December 2023
Share capital structure
As at 30 September 2023, and at the date of this report, the Company's issued
share capital consisted of 150,000,000 ordinary shares of £0.01 each nominal
value, all fully paid. At general meetings of the Company, ordinary
shareholders are entitled to one vote on a show of hands and, on a poll, to
one vote for every ordinary share held. At 30 September 2023, and at the date
of this report, the total voting rights in the Company were 150,000,000.
No shares were issued or bought back by the Company during the year.
Further details of the share capital are summarised in note 14 of the
financial statements.
For and on behalf of the Board
Duncan Neale
Director
10 January 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with UK adopted international accounting
standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors are required to prepare the
Company financial statements in accordance with UK adopted international
accounting standards. Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss for the
Company for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with UK adopted
international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business; and
· prepare a Directors' report, a Strategic report and Directors'
Remuneration Report which comply with the requirements of the Companies Act
2006 (the "Act").
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Act. They
are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for ensuring that the Annual Report and
Accounts, taken as a whole, are fair, balanced, and understandable and provide
the information necessary for shareholders to assess the Company's position
and performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
The Directors have delegated the hosting and maintenance of the Company's
website content to Squibble Design and its materials are published on
www.atratorenewables.com.
Directors' responsibilities pursuant to DTR4
The Directors confirm that, to the best of their knowledge:
· the financial statements, which have been prepared in accordance with
the applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Company.
· the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
· they consider the Annual Report and Accounts, taken as a whole, are
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Approval
This Directors' responsibilities statement was approved by the Board of
Directors.
Juliet Davenport
Chair
10 January 2024
Alternative Investment Fund Manager's Report
Background
The Alternative Investment Fund Manager's Directive (the "AIFMD") came into
force on 22 July 2013. The objective of the AIFMD was to ensure a common
regulatory regime for funds marketed in or into the EU which are not regulated
under the UCITS regime. This was primarily for investors' protection and also
to enable European regulators to obtain adequate information in relation to
funds being marketed in or into the EU to assist their monitoring and control
of systemic risk issues.
JTC Global AIFM Solutions Limited (the "AIFM") is a non-EU Alternative
Investment Fund Manager (a "Non-EU AIFM"), the Company is a non-EU Alternative
Investment Fund (a "Non-EU AIF") and the Company is currently marketed only
into the UK. Although the AIFM is a non-EU AIFM, so the depositary rules in
Article 21 of the AIFMD do not apply, the transparency requirements of
Articles 22 (Annual report) and 23 (Disclosure to investors) of the AIFMD do
apply to the AIFM and therefore to the Company. In compliance with those
articles, the following information is provided to the Company's shareholders
by the AIFM.
1. Material Changes in the Disclosures to Investors
During the financial year under review, there were no material changes to the
information required to be made available to investors before they invest in
the Company under Article 23 of the AIFMD from that information set out in the
Company's prospectus dated 1 November, 2021, save as disclosed below and in
certain sections of the annual financial report, those being the Chair's
Statement, Investment Adviser's Report, the sections headed "Our Market",
"Sustainability" and "Our Principal Risks" and the Directors' Report.
2. Risks and Risk Management Policy
The current principal risks facing the Company and the main features of the
risk management systems employed by AIFM, the Investment Adviser and the
Company to manage those risks are set out in the section headed "Our Principal
Risks", the Directors' Report, the Audit Committee Report and in the notes to
the financial statements.
3. Leverage and borrowing
The Company is entitled to employ leverage in accordance with its investment
policy and as set out in the Company's prospectus. As at the balance sheet
date, the Company had not drawn down any debt. There were no changes in the
Company's borrowing powers and policies.
4. Environmental, Social and Governance ("ESG") Issues
Because the AIFM is a non-EU AIFM and the Company is not marketed into the
EEA, the AIFM is not required to comply with Regulation (EU) 2019/2099 on
Sustainability-Related Disclosures in the Financial Services Sector (the
"SFDR") in respect of the Company.
As a member of the JTC group of Companies, the AIFM's ultimate beneficial
owner and controlling party is JTC Plc, a Jersey-incorporated company whose
shares have been admitted to the Official List of the UK's Financial Conduct
Authority and to trading on the London Stock Exchange's Main Market for Listed
Securities (mnemonic JTC LN, LEI 213800DVUG4KLF2ASK33). In the conduct of
its own affairs, the AIFM is committed to best practice in relation to ESG
matters and has therefore adopted JTC Plc's ESG framework, which can be viewed
online at https://www.jtcgroup.com/esg/. JTC Plc's sustainability report can
also be viewed online at
https://www.jtcgroup.com/wp-content/uploads/2023/AR/sustainability_jtcAR22_230418.pdf.
As at the date of this report, JTC Plc is a signatory of the U.N. Principles
for Responsible Investment. The JTC group is also carbon neutral, works to
support the achievement of ten of the U.N.'s Sustainable Development Goals and
reports under TCFD and under the SASB framework.
The AIFM and Atrato Partners Limited ("Atrato") as the Company's alternative
investment fund manager and investment adviser respectively do consider ESG
matters in their respective capacities, as explained in the Company's
prospectus dated 1 November, 2021, a copy of which can be found at
https://jtcglobalaifmsolutions.com/clients/atrato-onsite-energy-plc/.
Since the publication of those documents, the AIFM, Atrato and the Company
have continued to enhance their collective approach to ESG matters and
detailed reporting on (a) enhancements made to each party's policies,
procedures and operational practices and (b) our collective future intentions
and aspirations is included in the Investment Adviser's Report, Sustainability
Report, the Section 172 (1) Statement and the section entitled "Our Key
Stakeholder Relationships."
The AIFM also has a comprehensive risk matrix (the "Matrix"), which is used to
identify, monitor and manage material risks to which the Company is exposed,
including ESG and sustainability risks, the latter being an environmental,
social or governance event or condition that, if it occurred, could cause an
actual or a potential material negative impact on the value of an
investment. We also consider sustainability factors, those being
environmental, social and employee matters, respect for human rights,
anti-corruption and anti-bribery matters.
The AIFM is cognisant of the announcement published by H.M. Treasury in the UK
of its intention to make mandatory by 2025 disclosures aligned with the
recommendations of the Task Force on Climate-Related Disclosures, with a
significant proportion of disclosures mandatory by 2023. The AIFM also notes
the roadmap and interim report of the UK's Joint Government-Regulator TCFD
Taskforce published by H.M. Treasury on 9 November, 2020. The AIFM continues
to monitor developments and intends to comply with the UK's regime to the
extent either mandatory or desirable as a matter of best practice.
5. Remuneration of the AIFM's Directors and Employees
During the financial year under review, no separate remuneration was paid by
the AIFM to two of its executive directors, Graham Taylor and Kobus Cronje,
because they were both employees of the JTC group of companies, of which the
AIFM forms part. The third executive director, Matthew Tostevin, is paid a
fixed fee of £10,000 for acting as a director. Mr Tostevin is paid
additional remuneration on a time spent basis for services rendered to the
AIFM and its clients. Other than the directors, the AIFM has no employees.
The Company has no agreement to pay any carried interest to the AIFM. During
the year under review, the AIFM paid £10,000 in fixed fees and £52,203.29 in
variable remuneration to Mr Tostevin.
6. Remuneration of the AIFM Payable by the Company
The AIFM was during the year under review paid a fee of 0.04% per annum of the
net asset value of the Company, subject to a minimum of £50,000 per annum,
such fee being payable quarterly in arrears. Other significant non-routine
work may be agreed between the AIFM and the Company and charged for on a
time-spent basis. The total fees paid to the AIFM during the year under
review were £55,873.
JTC Global AIFM Solutions Limited
Alternative Investment Fund Manager
10 January 2024
Statement of Comprehensive Income
Year ended 30 September 2023
Year Ended 30 September 2023 Year Ended 30 September 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Movement in fair value of investments 4 - 3,705 3,705
- (1,850) (1,850)
Investment Income 5 3,919 - 3,919 483 - 483
Bank interest 5 1,366 - 1,366 298 - 298
Total net income 5,285 3,705 8,990 781 (1,850) (1,069)
Investment advisory fees 6 (1,444) - (1,444) (1,285) - (1,285)
Other expenses 7 (1,115) - (1,115) (684) (401) (1,085)
Profit/(loss) before taxation 2,726 3,705 6,431 (1,188) (2,251) (3,439)
Taxation 9 - - - - - -
Profit/(loss) and total comprehensive income for the year 2,726 3,705 6,431 (1,188) (2,251) (3,439)
Earnings per share (pence) - basic and diluted 8 1.82p 2.47p 4.29p (0.92p) (1.75p) (2.67p)
The "total" column of the Statement of Comprehensive Income is the profit and
loss account of the Company prepared in accordance with the requirements of
the Act and in accordance with international accounting standards adopted by
the UK. The supplementary revenue return and capital columns have been
prepared in accordance with the Association of Investment Companies Statement
of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
Profit/(loss) on ordinary activities after taxation is also the total
comprehensive income for the year.
The accompanying Notes on pages 92 to 112 are an integral part of these
financial statements.
Statement of Financial Position
As at 30 September 2023 As at 30 September 2022
Notes £'000 £'000
Non-current assets
Investments at fair value through profit or loss 4 99,289 47,105
Current assets
Fixed deposits 10 - 20,000
Cash and cash equivalents 11 37,867 69,361
Other receivables and prepayments 12 1,549 3,215
39,416 92,576
Current liabilities
Trade and other payables 13 (648) (555)
Net current assets 38,768 92,021
Net assets 138,057 139,126
Capital and reserves
Share capital 14 1,500 1,500
Capital reduction reserve 16 133,691 141,065
Revenue and capital reserve 2,866 (3,439)
Total Shareholders' funds 138,057 139,126
Net assets per share (pence) 17 92.0 92.8
Approved and authorised by the Board of Directors for issue and signed on its
behalf by:
Duncan Neale
Director
10 January 2024
Atrato Onsite Energy Plc was incorporated in England and Wales with registered
number 13624999.
The accompanying Notes on pages 92 to 112 are an integral part of these
financial statements.
Statement of Changes in Equity
Year ended 30 September 2023
Capital
Share Share reduction Capital Revenue
capital premium reserve Reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
As at 1 October 2022 1,500 - 141,065 (2,251) (1,188) 139,126
Profit and total comprehensive income for the year - - - 3,705 2,726 6,431
Dividend distribution 15 - - (7,374) - (126) (7,500)
Closing equity as at 30 September 2023 1,500 - 133,691 1,454 1,412 138,057
Period from Incorporation on 16 September 2021 to 30 September 2022
Capital
Share Share reduction Capital Revenue
capital premium reserve Reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Opening equity as at
16 September 2021 - - - - - -
Transactions with
Shareholders
Shares issued at IPO 14 1,500 148,500 - - - 150,000
Share issue costs - (2,920) - - - (2,920)
Transfer to capital reduction reserve 14 - (145,580) 145,580 - - -
Dividend distribution 15 - - (4,515) - - (4,515)
Total transactions with Shareholders 1,500 - 141,065 - - 142,565
Loss and total comprehensive income for the period - - - (2,251) (1,188) (3,439)
Closing equity as at 30 September 2022 1,500 - 141,065 (2,251) (1,188) 139,126
The Company's distributable reserves consist of the capital reduction reserve,
capital reserve attributable to realised gains and revenue reserve. Total
distributable reserves as of 30 September 2023 were £136.6 million (2022:
£137.6 million).
The Company may use its distributable reserves to fund dividends, redemptions
of shares and share buy backs.
The accompanying notes on pages 92 to 112 are an integral part of these
financial statements.
Statement of Cash Flows
As at 30 September Restated*
As at 30 September
2023 2022
Notes £'000 £'000
Operating activities
Profit/(loss) on ordinary activities before taxation 6,431 (3,439)
Adjustment for unrealised losses arising on the revaluation of investments at (3,705) 1,850
the year ending
Interest income (5,285) (781)
Decrease / (increase) in other receivables and prepayments* 110 (650)
Increase in trade and other payables 93 555
Net cash flow used in operating activities (2,356) (2,465)
Investing activities
Purchase of investments 4 (46,887) (48,955)
Repayment of shareholder loans 670 -
Decrease / (increase) in fixed deposit 20,000 (20,000)
Working capital financing* 1,073 (2,565)
Increase in interest receivable - 614
Interest income received 3,506 167
Net cash flow used in investing (21,638) (70,739)
Financing activities
Proceeds of share issues 14 - 150,000
Share issue costs - (2,920)
Dividends paid 15 (7,500) (4,515)
Net cash flow from financing (7,500) 142,565
Decrease / (increase) in cash (31,494) 69,361
Cash and cash equivalents at start of the year 69,361 -
Cash and cash equivalents at end of the year 37,867 69,361
As at 30 September As at 30 September
2023 2022
£'000 £'000
Cash and cash equivalents
Cash at bank 37,867 49,361
Fixed deposits with original maturity less than 3 months - 20,000
Total cash and cash equivalents at end of the year 37,867 69,361
* The Company has assessed that prior year classification of £2,565,000
relating to Working Capital finance given to its subsidiary, within increase
in other receivables and prepayments in the operating cash flow section should
have been classified as investing cash flows. The prior year cash flow
statement has been adjusted to reduce the increase in other receivables and
prepayments to £650,000 from £3,215,000.
The accompanying Notes on pages 92 to 112 are an integral part of these
financial statements.
Notes to the Financial Statements
For the year ended 30 September 2023
1. General Information
Atrato Onsite Energy Plc is a closed-ended investment company domiciled and
incorporated in the United Kingdom on 16 September 2021 with registered number
13624999. The registered office of the Company is at 6th Floor 125 London
Wall, London, United Kingdom, EC2Y 5AS. Its share capital is denominated in
Pounds Sterling (GBP) and currently consists of one class of ordinary shares.
The shares are publicly traded on the London Stock Exchange under a premium
listing. The Directors intend, at all times, to conduct the affairs of the
Company so as to enable it to qualify as an investment trust for the purposes
of section 1158 of the Corporation Tax Act 2010, as amended.
The financial statements of the Company are for the year ended 30 September
2023 and have been prepared on the basis of the accounting policies set out
below.
At the Company's IPO, 150,000,000 shares were admitted to the premium segment
of the LSE on 23 November 2021, upon raising gross proceeds of £150.0
million.
The Company's investment objective is to: support the net zero agenda whilst
delivering capital growth and progressive dividend income to its shareholders;
integrate ESG best practice with a focus on investing in new renewable energy
capacity and onsite clean energy solutions; and target long-term secure income
with limited exposure to wholesale power prices.
The financial statements comprise only the results of the Company, as its
investment in Atrato Onsite Energy Holdco Limited (Holdco) is included at fair
value through profit or loss as detailed in the significant accounting
policies below. The Company and its subsidiary invest in a diversified
portfolio of onsite energy assets generally on the rooftops of UK commercial
buildings, which benefit from long-term growing income streams with limited
exposure to wholesale power prices.
Atrato Partners Limited provides investment advisory services and JTC Global
AIFM Solution Limited as the AIFM provides investment management services to
the Company, each under the terms of the agreement between it and the Company.
2. Basis of Preparation
The financial statements, which aim to give a true and fair view, have been
prepared in accordance with UK adopted International Accounting Standards and
the applicable legal requirements of the Companies Act 2006.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice ("SORP") "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued by the Association of Investment Companies in
April 2022 where the SORP is not inconsistent with IFRS.
The financial statements are prepared on the historical cost basis, except for
the revaluation of certain financial instruments at Fair Value through Profit
and Loss ("FVTPL"). The principal accounting policies adopted are set out
below. These policies have been consistently applied throughout the year ended
30 September 2023
The financial statements are prepared on the going concern basis.
The currency of the primary economic environment in which the Company operates
and where its investments are located (the functional currency) is Pounds
Sterling. The financial statements are presented in Pounds Sterling and
rounded to the nearest thousand.
Estimates and underlying assumptions are reviewed regularly on an on-going
basis. Revisions to accounting estimates are recognised in the year in which
the estimates are revised and in any future years affected. The significant
estimates, judgments or assumptions for the year are set out below under
"Critical accounting judgements, estimates and assumptions".
The comparatives shown in these financial statements refer to the period ended
30 September 2022.
Basis of consolidation
The Company has adopted the amendments to IFRS 10, which states that
investment entities should measure all of their subsidiaries that are
themselves investment entities at fair value.
The Company owns 100% of its subsidiary, HoldCo. The Company invests in
special purpose vehicles through its investment in HoldCo. The Company and
HoldCo meet the definition of an investment entity as described by IFRS 10.
Under IFRS 10 investment entities measure subsidiaries at fair value rather
than being consolidated on a line-by-line basis, meaning HoldCo's cash, debt
and working capital balances are included in the fair value of the investment
rather than in the Company's current assets. HoldCo has one investor, which is
the Company, who has outsourced some investor related services to a third
party relating to the operational and financial management of the underlying
Special Purpose Vehicles ("SPV"). However, in substance, HoldCo is investing
the funds of the investors of the Company on its behalf and is effectively
performing investing activity on behalf of many unrelated beneficiary
investors.
Characteristics of an investment entity
Under the definition of an investment entity, the Company should satisfy all
three of the following tests:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management services;
b) the Company commits to its investors that its business purpose is
to invest funds solely for returns from capital appreciation, investment
income, or both (including having an exit strategy for investments); and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
In assessing whether the Company meets the definition of an investment entity
set out in IFRS 10, the Directors note that:
a) the Company has multiple investors and obtains funds from a diverse
group of shareholders who would otherwise not have access individually to
investing in renewable energy and infrastructure assets;
b) the Company's purpose is to invest funds for both investment income
and capital appreciation. HoldCo and SPVs will have indefinite lives. However,
the underlying assets do not have unlimited life and have minimal residual
value at the end of that life, meaning they will not be held indefinitely. The
Company intends to hold the renewable assets on a long-term basis to achieve
its investment objectives and hand the assets over to the lessor at the end of
the PPA; and
c) the Company measures and evaluates the performance of all of its
investments on a fair value basis which is the most relevant for investors in
the Company. Management uses fair value information as a primary
measurement to evaluate the performance of all of the investments and in
decision making.
The Directors are of the opinion that the Company meets all the typical
characteristics of an investment entity and therefore meets the definition set
out in IFRS 10.
The Directors agree that investment entity accounting treatment reflects the
Company's activities as an investment trust.
The Directors have considered the potential impact on the income statement and
the statement of financial position were Holdco to be consolidated and
assessed the changes not to be significant to the net asset value and loss for
the year. The Directors believe the treatment outlined above provides the most
relevant information to investors.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Company, which considered the adequacy of the
Company's resources, the impacts of climate change and the continued unrest in
Ukraine.
In reaching their conclusion, the Directors considered the Company's cash flow
forecasts, cash position, income and expense flows. The Company's net assets
at 30 September 2023 were £138.1 million. As at 30 September 2023, the
Company held £37.8 million in cash. The Company continues to meet its
day-to-day liquidity needs through its cash resources. The total ongoing
expenses for the year ended 30 September 2023 was £2.6 million, which
represented approximately 1.8% of average net assets during the year. At the
date of approval of this Annual Report, based on the aggregate of investments
and cash held, the Company had substantial cover for its operating expenses.
The major cash outflows of the Company are the costs relating to the
acquisition of new investments and the payment of dividends. The Directors
review finance reporting at the quarterly Board meeting, which includes
reporting related fund investment limits. The Directors are confident that the
Company has sufficient cash balances and access to equity and debt markets, in
order to fund commitments to acquisitions detailed in note 22 to the financial
statements, should they become payable. The Company has provided an initial
£125 million loan facility, of which £64 million (2022: £48.4 million) had
been drawn by 30 September 2023, to its immediate subsidiary repayable on 31
December 2028. The facility has been provided out of the £150 million raised
in the initial public offering. As at 30 September 2023, the Company had
capital commitments of £25.8 million (2022: £1.4 million). A RCF for £30
million with an accordion to increase the facility to £50 million, has been
secured by Holdco. This facility provides additional capacity for the Company
to invest in new opportunities and meet the Company's commitments.
In light of the macro-economic situation brought about by the Russian invasion
of Ukraine and the potential invasion of Taiwan, the Directors have fully
considered each of the Company's investments and the sourcing of supplies. The
Directors do not foresee any immediate material risk to the Company's
investment portfolio and income from underlying SPVs. A prolonged and deep
market decline could lead to falling values in the underlying investments or
interruptions to cashflow, however the Company currently has sufficient
liquidity available to meet its future obligations. The Directors are also
satisfied that the Company would continue to remain viable under downside
scenarios, including increasing inflation scenarios.
Underlying SPV revenues are derived primarily from the sale of electricity by
project companies through PPAs in place with creditworthy corporations. Most
of these PPAs are contracted over a long period with a weighted average
remaining term as at 30 September 2023 of 11 years (September 2022: 19 years).
The decrease is due to the three year term on the 55MW site in North
Yorkshire.
During the year end up to the date of this report, there has been no
significant impact on revenue and cash flows of the SPVs. The SPVs have
contractual operating and maintenance agreements in place with appropriately
qualified service providers. Therefore, the Directors and the Investment
Adviser do not anticipate a material threat to SPV revenues.
The market and operational risks and financial impact as a result of the
ongoing conflict in the Ukraine, were discussed by the Board, with updates on
operational resilience received from the Investment Adviser and other key
service providers. The Investment Adviser actively monitors risks with the
potential to impact the Company's investments through its recurring engagement
with service providers including operators, installation contractors, and
project asset managers. The Board was satisfied that the Company's key service
providers have the ability to continue to operate.
Over the past year inflation slowed and started to decrease, however slower
than forecasts expected. Having considered the impact of inflation, the Board
do not anticipate a material adverse effect on the portfolio.
The Company's ability to continue as a going concern has been assessed by the
Directors for a year from the date these financial statements were authorised
for issue.
Critical accounting judgements, estimates and assumptions
Preparation of the financial statements requires management to make judgments,
estimates and assumptions that affect the application of accounting policies
and the reported amount of assets, liabilities, income and expenses.
Estimates, by their nature, are based on judgment and available information;
hence actual results may differ from these judgments, estimates and
assumptions. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying value of assets and liabilities
are those used to determine the fair value of the investments as disclosed in
note 4 to the financial statements.
Key sources of estimation uncertainty: investments at fair value through
profit or loss
The Company's investments in unquoted investments are valued by reference to
valuation techniques approved by the Directors and in accordance with the
International Private Equity and Venture Capital Valuation Guidelines.
The Company's investment in Holdco has been made through equity and loans,
providing Holdco with funds to invest in the Portfolio through equity and
loans. The Company used discounted cash flow ("DCF") models to determine the
fair value of the underlying assets in HoldCo. The value of HoldCo not
apportioned to the investment in the underlying entities includes any working
capital not accounted for in the DCF models, such as cash or entity level
payables and receivables. The fair value of each asset is derived by
projecting the future cash flows of an asset, based on a range of operating
assumptions for revenues and expenses, and discounting those future cash flows
to the present with a discount rate appropriately calibrated to the risk
profile of the asset and market dynamics. The key estimates and assumptions
used within the DCF include the discount rates, annual energy production,
future power prices and various operating expenses and associated annual
escalation rates often tied to inflation, including operations and
maintenance, asset management, land leases and insurance. A change in the key
valuation assumptions would lead to a corresponding change in the fair value
of the investments as described in note 4 to the financial statements. The
Company's investments at fair value are not traded in active markets.
The estimates and assumptions are those used to determine the fair value of
the investments as disclosed in note 4 to the financial statements. As noted
above, the Board has concluded that the Company meets the definition of an
investments entity as defined in IFRS10. This conclusion involved a degree of
judgement and assessment as to whether the Company meets the criteria outlined
in the accounting standards.
As disclosed in note 21, the Company provided parent company guarantees to
some investments from which the expected economic or cash outflows are
expected to be £nil.
Segmental reporting
The Board is of the opinion that the Company is engaged in a single segment of
business, being investment in renewable energy infrastructure assets to
generate investment returns whilst preserving capital. The financial
information used by the Board to manage the Company presents the business as a
single segment.
All the Company's income is generated within the UK.
All the Company's non-current assets are located in the UK.
Adoption of new and revised standards
The Company has adopted all the applicable and effective IFRSs since
incorporation. The relevant new and amended standards and interpretations that
are issued, but not yet effective, up to the date of issuance of the Company's
financial statements, are disclosed below. These standards are not expected to
have a material impact on the entity in future reporting periods and on
foreseeable future transactions.
− Amendments to IAS 1: Classification of Liabilities as Current or
Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to
specify the requirements for classifying liabilities as current or
non-current. The amendments are effective for annual reporting periods
beginning on or after 1 January 2024.
- New standard not yet adopted: IFRS 17 Insurance Contracts
IFRS 17 is applicable for annual periods beginning on or after 1 January 2023.
The Directors do not expect that the adoption of the standard will have a
material impact on the Company's reported results.
3. Significant accounting policies
a) Statement of compliance
The financial statements have been prepared in accordance with UK-adopted
International Accounting Standards ("IAS").
The principal accounting policies of the Company are set out below.
IFRS 9 Classification of Financial Assets and Financial Liabilities
Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised in the Company's
Statement of Financial Position when the Company becomes a party to the
contractual provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at FVTPL are
recognised immediately in profit or loss.
The Company holds both a debt instrument and a controlling interest in equity
shares in Holdco. The Company measures the fair value of its investments in
Holdco on an aggregate basis as this is how the instruments are managed,
potentially divested and how the fair value would be maximised.
Classification of investments
Fair value through profit or loss
The Company classifies its investments based on both the Company's business
model for managing those financial assets and the contractual cash flow
characteristics of the financial assets. The portfolio of financial assets is
managed, and performance is evaluated on a fair value basis. The Company is
primarily focused on fair value information and uses that information to
assess the assets' performance to make decisions. The Company has not taken
the option to irrevocably designate any equity securities as fair value
through other comprehensive income. The collection of contractual cash flows
is only incidental to achieving the Company business model's objective.
Consequently, all investments are measured at FVTPL. Once invested, the
Company's indirect investments in SPVs will be designated at FVTPL, as SPVs
are themselves considered to be investment entities and exist only to hold
underlying assets in line with the overarching AIFM agreement, and therefore
will not be consolidated but held at FVTPL in line with IFRS 10.
Financial instruments and equity
Financial assets such as cash at bank, fixed deposits at bank, trade
receivables, loans and other receivables that are non-derivative financial
assets and that have fixed or determinable payments that are not quoted in an
active market are classified as loans and other receivables measured at
amortised cost.
Debts and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all its liabilities. Equity instruments
issued by the Company are recognised at the point proceeds are received, net
of direct issue costs.
Repurchase of the Company's own equity instruments is recognised and deducted
directly in equity. No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Company's own equity instruments.
Recognition, derecognition and measurement
Purchases and sales of investments are recognised on the trade date - the date
on which the Company commits to purchase or sell the investment and the
contract to purchase or sell is wholly unconditional. Financial assets at
FVTPL are initially recognised at fair value. Transaction costs are expensed
as incurred in the Statement of Comprehensive Income. Financial assets are
derecognised when the rights to receive cash flows from the investments have
expired or the Company has transferred substantially all risks and rewards of
ownership. Loans, trade, and other receivables are measured at amortised cost
using the effective interest method, less any impairment. They are included in
current assets, except where maturities are greater than 12 months after the
year end date in which case they are classified as non-current assets.
Subsequent to initial recognition, all financial assets and financial
liabilities at FVTPL are measured at fair value. Gains and losses arising from
changes in the fair value of the 'financial assets or financial liabilities at
FVTPL' category are presented in the Statement of Comprehensive Income.
Income from financial assets at FVTPL is recognised in the Statement of
Comprehensive Income within "income" when the Company's right to receive
payments is established.
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs. Financial liabilities are subsequently
measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
Gains and losses on fair value of investments in the Statement of
Comprehensive Income represent gains or losses that arise from the movement in
the fair value of the Company investment in HoldCo.
Dividends, if any from HoldCo are recognised when the Company's right to
receive payment has been established.
Investment income comprises interest income received from the Company's
subsidiary and interest income on fixed deposits. Interest income from fixed
deposits is recognised in the Statement of Comprehensive Income using the
effective interest method.
b) Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Statement of
Comprehensive Income, all expenses, including investment advisory fees, are
presented in the revenue column of the Statement of Comprehensive Income as
they are directly attributable to the operations of the Company with the
exception of costs incurred in the initial public offering that were not
off-set against the share premium, which have been charged as a capital item
in the Statement of Comprehensive Income.
Details of the Company's fee payments to the Investment Adviser are disclosed
in note 6 to the financial statements.
c) Taxation
Investment trusts which have approval under Section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. Shortly after
listing the Company received approval as an Investment Trust by HMRC.
Taxation on the profit or loss for the year comprises current and deferred
tax. Taxation is recognised in the income statement except to the extent that
it relates to items recognised as direct movements in equity, in which case it
is also recognised as a direct movement in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and
any adjustment to the tax payable in respect of previous years.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled, or the asset is realised. Deferred tax
is charged or credited to the Statement of Comprehensive Income except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
d) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in deposits held at call
with banks and other short-term deposits with original maturities of three
months or less and subject to an insignificant risk of changes in value. This
is measured using the effective interest rate method.
Short-term investments that are not held for the purpose of meeting short-term
cash commitments and restricted accounts are not considered as cash and cash
equivalents. For the purpose of the statement of cash flows, cash and cash
equivalents consist of cash and cash equivalents as defined above.
e) Fixed deposits
Cash that is placed on fixed deposits for longer than three months at the
inception of the deposit is disclosed in fixed deposits. This is measured
using the effective interest rate method.
f) Other receivables and prepayments
Other receivables and prepayments are recognised initially at fair value and
subsequently measured using the effective interest method.
g) Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently measured using the effective interest method.
h) Dividends
Subject to the provisions of company law, the Company may by resolution
declare dividends in accordance with the respective rights of the
shareholders, but no dividend shall exceed the amount recommended by the Board
of Directors. Dividends payable are recognised as distributions in the
financial statements when the Company's obligation to make payment has been
established.
i) Equity
Share capital consists of ordinary shares and is classified as equity.
j) Share premium account
The surplus of net proceeds received from the issuance of new shares over
their par value is credited to this account and the related issue costs are
deducted from this account. This is a non-distributable reserve.
k) Capital reserve
The net profit or loss arising in the Statement of Comprehensive Income during
the year is added to or deducted from this reserve where they are capital in
nature. The realised element of the capital reserve forms part of
distributable reserves and may be distributed.
l) Revenue reserve
The net profit or loss arising in the Statement of Comprehensive Income during
the year is added to or deducted from this reserve where they are revenue in
nature. This is a distributable reserve.
m) Capital reduction reserve
On 28 January 2022, the Company lodged with the Registrar of Companies its
statement of capital and successful court application which permitted the
transfer of £145,579,902 from its share premium account to the capital
reduction reserve (refer to note 4). This is a distributable reserve.
n) Capital management
The Company's capital is represented by the ordinary shares, share premium
account, profit and loss account and capital reduction reserve. The Company is
not subject to any externally imposed capital requirements.
The capital of the Company is managed in accordance with its investment
policy, in pursuit of its investment objective. Capital management activities
may include the allotment of new shares and the buy back or re-issuance of
shares from treasury.
o) Foreign currencies
Items included in the financial statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in which the
Company operates and is the Company's functional currency.
Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated at the
foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the
Statement of Comprehensive Income.
4. Investment held at fair value through profit or loss
The Company owns 100% of its subsidiary Holdco through which the Company has
acquired all its underlying investments in SPVs. As at 30 September 2023, the
cost of the equity investment in Holdco is £33 million, while the debt
investment in Holdco is £64 million.
As at 30 September 2023 As at 30 September 2022
£'000 £'000
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through profit or loss 99,289 47,105
Total investment 99,289 47,105
(b) Movements during the year:
Opening balance of investment 47,105 -
Additions, at cost 46,796 48,955
Capitalised interest 2,392 -
Cost of investment 96,293 48,955
Revaluation of investments to fair value:
Realisation of fair value (709) -
Unrealised movement in fair value of investment 3,705 (1,850)
Fair value of investment 99,289 47,105
(c) Profits or loss on investment in the year:
Unrealised movement in fair value of investment 3,705 (1,850)
Profit / (loss) on investment 3,705 (1,850)
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
30 September 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investment at fair value through profit or loss
Equity investment in Holdco - - 38,147 38,147
Debt investment in Holdco - - 61,142 61,142
Total investment as at 30 September 2023 - - 99,289 99,289
30 September 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investment at fair value through profit or loss
Equity investment in Holdco - - - -
Debt investment in Holdco - - 47,105 47,105
Total investment as at 30 September 2022 - - 47,105 47,105
The financial instruments held at fair value are the instruments held by the
Company in the SPVs indirectly via Holdco, which are fair valued at each
reporting date. The investments have been classified within level 3 as the
investments are not traded and contained certain unobservable inputs. The
Company's investment in Holdco is also considered to be level 3 assets. There
have been no transfers between levels during the year. As the fair value of
the Company's equity and loan investments in Holdco is ultimately determined
by the underlying fair values of the equity and loan investments, made by
Holdco, the Company's sensitivity analysis of reasonably possible alternative
input assumptions is the same as for those investments. Except for the
availability of cash in the relevant entity, there are no restrictions in
relation to the loans.
The movement on the Level 3 unquoted investment during the year is shown
below:
As at As at
30 September 2023 30 September 2022
£'000 £'000
Opening balance 47,105 -
Additions during the Year 49,188 48,955
Realised gain on sale of contract (709) -
Unrealised movement in fair value of investment 3,705 (1,850)
Total investment 99,289 47,105
Valuation methodology
The Company owns 100% of its subsidiary Holdco through which the Company has
acquired all its underlying investments in SPVs. As discussed in Note 2, the
Company meets the definition of an investment entity as described by IFRS 10,
and as such the Company's investment in Holdco is valued at fair value.
Fair value of operating assets is derived using a DCF methodology, which
follows International Private Equity Valuation and Venture Capital Valuation
Guidelines. DCF is deemed the most appropriate methodology when a detailed
projection of future cash flows is possible. The fair value of each asset is
derived by projecting the future cash flows of an asset, based on a range of
operating assumptions for revenues and expenses, and discounting those future
cash flows to the present day with a post-tax discount rate appropriately
calibrated to the risk profile of the asset and market dynamics. Due to the
asset class and available market data over the forecast horizon, a DCF
valuation is typically the basis upon which renewable assets are traded in the
market.
The Company measures the total fair value of Holdco by its net asset value,
which is made up of cash at bank and other receivables (£1.3 million)
(2022:£3.4 million), trade payables and accruals (£1.2 million) (£2022:
£0.3 million) and the aforementioned fair value of the underlying investments
(£187.0m) as derived from the DCF of each asset. As at 30 September 2023,
Holdco net current liability is offset by the fair value of the underlying
investments, resulting in a reduction in the fair value of the Portfolio.
The Directors have satisfied themselves as to the methodology used, the
discount rates and key assumptions applied and the valuation.
Valuation analysis
An analysis of the key assumptions is produced to show the impact on NAV of
changes to key assumptions. For each of the scenarios, it is assumed that
potential changes occur independently of each other with no effect on any
other key assumption, and that the number of investments in the portfolio
remains static throughout the modelled life. Accordingly, the NAV per share
impacts are discussed below.
(i) Discount rates
Post-tax unlevered discount rates applied in the DCF valuation are determined
by the Investments Adviser using a multitude of factors, including post-tax
discount rates disclosed by the Company's peers in the renewable energy
sector, phase at which the project is, credit risk of key counterparties,
exposure to merchant power risk, adjustment due to the portfolio being
unlevered as well as the internal rate of return inherent in the original
purchase price when underwriting the asset. The DCF valuations uses one
post-tax discount rate applied to cash generated by each asset over the
contract term.
The post-tax discount rates used in the DCF valuation of the investments and
forecast cash flows are considered judgemental input through which an increase
or decrease would have a material impact on the fair value of the investments
at FVTPL. As of 30 September 2023, the blended post-tax discount rates applied
to the portfolio ranged from 6.5% to 9.0% with the overall weighted average of
7.4%.
An increase of 50bps and decreases of 50bps and 100bps in the discount rates
would have the following impact on NAV:
Discount Rate +100 bps + 50 bps - 50 bps -100bps
Increase/(decrease) in NAV (£'000) (9,755) (5,070) 5,498 11,477
NAV per share 85.5p 88.7p 95.7p 99.7
NAV per share change (6.5p) (3.4p) 3.7p 7.7p
Change (7.1)% (3.7)% 4.0% 8.3%
(ii) Energy Production
Energy production, as measured in MWh per annum, assumed in the DCF valuations
is based on a P50 energy yield profile, representing a 50% probability that
the energy production estimate will be met or exceeded over time. An
independent engineer has derived this energy yield estimate for each asset by
considering a range of irradiation, weather data, ground-based measurements
and design/site-specific loss factors including module performance, module
mismatch, inverter losses, and transformer losses, among others. The P50
energy yield case includes a 0.5% annual degradation through the entirety of
the useful life. In addition, the P50 energy yield case includes an assumption
of availability, which ranges from 99% to 100%, as determined reasonable by an
independent engineer at the time of underwriting the asset.
Solar assets are subject to variation in energy production over time. An
assumed "P90" level of energy yield (i.e. a level of energy production that is
below the "P50", with a 90% probability of being exceeded) would cause a
decrease in the total portfolio valuation, while an assumed "P10" level of
power output (i.e. a level of energy production that is above the "P50", with
a 10% probability of being achieved) would cause an increase in the total
portfolio valuation.
The application of a P90 and a P10 energy yield case would have the following
impact on NAV:
Energy Production P90 P10
Increase/(decrease) in NAV (£'000) (8,454) 8,138
NAV per share 86.4p 97.5p
NAV per share change (5.6p) 5.4p
Change (6.1)% 5.9%
(iii) Merchant Power Prices
The Company's assets have long term PPAs at fixed or index-linked uplifts and
some incentive contracts with credit worthy energy purchasers. Excess
generation not consumed under the PPA agreement in place sell to the network,
which is 6% of the portfolio based on current market prices for 2024. Thus,
PPA prices are not materially impacted by fluctuations in market prices.
Excess generation that is exported to the network is priced on the solar PV
curtailed capture price forecast, that are derived from the forecast power
price curves provided by an independent third parties. Power price forecasts
are updated quarterly and the prices used ranges from £68/MW to £94/MW over
the next five years, with an average of £77/MW.
An increase or decrease of 10% in the forecast merchant power price curves
would have the following impact on NAV:
Merchant power prices -10% +10%
Increase/(decrease) in NAV (£'000) (5,568) 5,502
NAV per Share 88.3p 95.7p
NAV per Share Change (3.7)p 3.7p
Change (4.0)% 4.0%
(iv) Operating Expenses
Operating expense include operations and maintenance, asset management,
leases, rates, insurance, decommissioning and other costs. Most operating
expenses are contracted with annual escalation as per available market
forecasts of the inflation indices (RPI and CPI, where applicable) and capped
where a cap exists in the contract. As such there is typically little
variation in annual operating expenses, however inflationary pressures in the
short and long-term could affect future operating expenses. Expenses subject
to uncapped inflation has been inflated in the short-term peaking at 6.0%,
reducing to 3.4% by September 2027 and a long-term average of 3.1%.
An increase or decrease of 10% in operating expenses would have the following
impact on NAV:
Operating expenses +10% -10%
Increase/(decrease) in NAV (£'000) (2,658) 2,261
NAV per share 90.3p 93.8p
NAV per share change (1.8)p 1.7p
Change (1.9)% 1.9%
5. Income
For the year ended For the Period ended
30 September 2023 30 September 2022
£'000 £'000
Interest from Holdco 3,919 483
Deposit interest 1,366 298
Total Income 5,285 781
6. Investment advisory fees
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment advisory fees 1,444 - 1,444 1,285 - 1,285
The Investment Advisory Agreement ("IAA") dated 1 November 2021 between the
Company and Atrato Partners Limited as the Investment Adviser and JTC Global
AIFM Solutions Limited as the AIFM, appointed the Investment Adviser to act as
the Company's investment adviser. The AIFM has been appointed pursuant to the
AIFM agreement dated 1 November 2021 between the AIFM and the Company as the
alternative investment fund manager for the purposes of the AIFM Directive.
Accordingly, the AIFM is responsible for providing portfolio management and
risk management services to the Company.
Under the IAA, the Investment Adviser receives a per annum management fee of
0.7125% of the adjusted NAV up to and including £500 million; and 0.5625% of
the adjusted NAV above £500 million, invoiced monthly in arrears. The
Investment Adviser also receives a management fee of 0.2375% of the last
published NAV up to and including £500 million; and 0.1875% of the last
published NAV above £500 million, each invoiced semi-annually in arrears.
With the agreement of the Company, Holdco and the Adviser, this semi-annual
fee shall be applied by the Adviser in acquiring ordinary shares at the
absolute discretion of the Board by any combination of methods as set out in
the IAA.
The Investment Adviser receives an accounting and administration fee of
£50,000 per annum plus 0.02% of the adjusted NAV in excess of £200 million
up to and including £500 million plus 0.015% of adjusted NAV in excess of
£500 million. An accounting and administration fee of £800 per Clean Energy
Asset held by Holdco up to 100 Clean Energy Assets and £650 per Clean Energy
Asset above 100.
No performance fee or asset level fees are payable to the IA under the IAA.
Unless otherwise agreed by the Company and the Investment Adviser, the IAA may
be terminated by the Company or the Investment Adviser on not less than 12
months' notice to the other parties, not to be given prior to the fifth
anniversary of initial admission.
The Company has not issued or the Company's Broker has not purchased the any
shares to settle investment advisory fees in respect of the Period under
review.
The Company policy is not to elect to allocate a portion of the IA fee to
capital.
7. Other Expenses
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Secretary and Administrator fees 209 - 209 111 - 111
Directors' fees 138 - 138 126 - 126
Directors' other employment costs 44 - 44 25 - 25
Brokers' retainer 101 - 101 51 - 51
Auditor's fees
- Fees payable to the Company's auditor for audit services 185 - 185 118 - 118
- Fees payable to the Company's auditor for non-audit related assurance 54 - 54 18 - 18
services
Regulatory and Registrar's fees 62 - 62 38 - 38
Marketing fees 146 - 146 121 - 121
Tax compliance 14 - 14 36 - 36
Other expenses 162 - 162 40 - 40
1,115 - 1,115 684 - 684
Expenses charged to capital
Initial listing costs - - - - 401 401
Total expenses 1,115 - 1,115 684 401 1,085
The Auditor's fee for the statutory audit of the year is £185,340, including
VAT of £30,890 (2022: £117,600, including VAT of £19,600). BDO also
reviewed the Company's interim accounts as at 31 March 2023 for a fee of
£54,000 including VAT of £9,000 (2022: £18,000, including VAT of £3,000).
8. Earnings Per Share
Earnings per share is calculated by dividing the profit attributable to equity
shareholders of the Company by the weighted average number of shares in issue
during the year/period as follows:
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
Profit attributable to the equity holders of the Company (£'000) 2,726 3,705 6,431 (1,188) (2,251) (3,439)
Weighted average number of shares in issue (000) 150,000 150,000 150,000 128,750 128,750 128,750
Earnings per share (pence)- basic and diluted 1.82p 2.47p 4.29p (0.92p) (1.75p) (2.67p)
9. Taxation
(a) Analysis of charge in the year
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
The total unrecognised tax losses at 30 September 2023 available to the
Company are £41,000 (2022: £1,329,000)
(b) Factors affecting total tax charge for the year:
The effective UK corporation tax rate applicable to the Company for the year
is 22.00%. The tax charge differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust company.
The differences are explained below:
Year ended 30 September 2023 Period ended 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit / (loss) on ordinary activities before taxation 2,726 3,705 6,431 (1,188) (2,251) (3,439)
Corporation tax at 22% (2022: 19%) 600 815 1,415 (226) (428) (654)
Effects of:
Profit / (loss) on investments held at fair value not allowable - (815) (815) - 352 352
Expenses not deductible for tax purposes 2 - 2 10 76 86
Utilised losses (283) - (283) - - -
Tax relief from interest distribution (319) - (319) - - -
Unutilised management expenses - - - 216 - 216
Total tax charge - - - - - -
Investment companies which have been approved by the HMRC under section 1158
of the Corporation Tax Act 2010 are exempt from tax on UK capital gains and
capital profits/losses on loan relationships. Due to the Company's status as
an Investment Trust, and the intention to continue meeting the conditions
required to retain approval in the foreseeable future, the Company has not
provided for deferred tax on any capital gains or losses arising on the
revaluation of investments.
The March 2021 Budget announced an increase to the main rate of UK corporation
tax to 25% effective from 1 April 2023. This increase in the standard rate of
corporation tax was enacted on 24 May 2021.
10. Fixed deposits
As at 30 September As at 30 September
2023 2022
£'000 £'000
Fixed deposits - 20,000
Total - 20,000
A fixed deposit for six months was placed on 27(th) June 2022 with HSBC, at a
fixed interest rate of 1.61%, matured on 28(th) December 2022.
11. Cash and cash equivalents
As at 30 September As at 30 September
2023 2022
£'000 £'000
Cash at bank 37,867 49,361
Money market fixed deposits - 20,000
Total 37,867 69,361
In the prior year, cash was placed on a money market fixed deposit for three
months on 2(nd) August 2022 with HSBC, at a fixed interest rate of 1.48%,
maturing on 1(st) November 2022.
The Company has placed surplus cash in an instant access deposit account
earning interest at a floating rate.
12. Other receivables and prepayments
As at 30 September As at 30 September
2023 2022
£'000 £'000
Amounts receivable from related parties 20 1,493 3,049
Other receivables and prepayments 56 166
Total 1,549 3,215
13. Trade and other payables
As at 30 September As at 30 September
2023 2022
£'000 £'000
Accounts payable 102 59
Amounts payable to related parties 20 299 271
Accrued expenses and other taxes 247 225
Total 648 555
14. Share Capital
Year ended 30 September 2023 Period ended 30 September 2022
No. of shares Nominal value of shares (£) No. of shares Nominal value of shares (£)
Allotted, issued and fully paid:
Opening balance 150,000,000 1,500,000 - -
Allotted upon incorporation
Shares of £0.01 each (ordinary shares) - - 1 0.01
Issue of redeemable preference shares - - 50,000 50,000
Allotted/redeemed following admission to LSE
Shares issued - - 149,999,999 1,500,000
Initial redeemable preference shares redeemed - - (50,000) (50,000)
Shares issued for the investment advisory fee
Share issued - - - -
Closing balance 150,000,000 1,500,000 150,000,000 1,500,000
On incorporation the Company issued 1 ordinary share of £0.01, which was
fully paid up, and 50,000 redeemable preference shares of £1 each, which were
paid up to one quarter of their nominal value. Both of these share classes
were issued to Atrato Group Limited. On 23 November 2021 the Board of
Directors resolved to redeem the 50,000 redeemable preference shares.
On 23 November 2021, the Board of Directors approved the proposed placing and
offer for subscription (together the "Placing") of up to 150 million ordinary
shares of £0.01 each in the capital of the Company at a price of £1.00 per
ordinary share. It was intended that the ordinary shares of the Company would
be admitted to trade on the Main Market of the London Stock Exchange.
The consideration received in excess of nominal value of the ordinary shares
issued, being £145,579,902, net of total capitalised issue costs, was
credited to the share premium account.
The share issue costs incurred comprise brokerage costs, third-party adviser
fees and other costs directly attributable to the issuance of shares.
The Company's issued share capital immediately following initial admission
comprised 150,000,000 ordinary shares, and this is the total number of
ordinary shares with voting rights in the Company.
Following a successful application to the High Court and lodgement of the
Company's statement of capital with the Registrar of Companies, the Company
was permitted to reduce the capital of the Company by an amount of
£145,579,902. This was affected on 28 January 2022 by a transfer of that
amount from the share premium account to the capital reduction reserve, which
can be used to fund dividends or other distributions to the Company's
shareholders.
Ordinary shareholders are entitled to all dividends declared by the Company
and to all of the Company's assets after repayment of its borrowings and
ordinary creditors. Ordinary shareholders have the right to vote at meetings
of the Company. All ordinary shares carry equal voting rights.
15. Dividends
(a) Dividends paid in the year
The Company paid the following dividends during the year ended 30 September
2023
Pence per Capital Revenue
reduction
share reserve reserve Total
£'000 £'000 £'000
Quarter ended 30 September 2022 1.26p 1,890 - 1,890
Quarter ended 31 December 2022 1.26p 1,890 - 1,890
Quarter ended 31 March 2023 1.23p 1,845 - 1,845
Quarter ended 30 June 2023 1.25p 1,749 126 1,875
Total 5.00p 7,374 126 7,500
The Company paid the following dividends during the Period ended 30 September
2022:
Pence per share Capital Revenue reserve Total
Reduction reserve
£'000 £'000 £'000
Period ended 31 March 2022 1.76p 2,640 - 2,640
Quarter ended 30 June 2022 1.25p 1,875 - 1,875
Total 3.01p 4,515 - 4,515
(b) Dividends paid and payable
The dividends paid and payable in respect of the financial year are the basis
on which the requirements of s1158-s1159 of the Corporation Tax Act 2010 are
considered.
For the year ended 30 September 2023
Capital
Pence per reduction Revenue
share reserve Reserve Total
£'000 £'000 £'000
Quarter ended 31 December 2022 1.26p 1,890 - 1,890
Quarter ended 31 March 2023 1.23p 1,845 - 1,845
Quarter ended 30 June 2023 1.25p 1,749 126 1,875
Quarter ended 30 September 2023 1.26p 567 1,323 1,890
Total 5.00p 6,051 1,449 7,500
After the year end, the Company declared an interim dividend of 1.26 pence per
share for the period 1 July 2023 to 30 September 2023, to be paid on 16
December 2023 to Shareholders on the register at 25 November 2023.
16. Capital Reduction Reserve
As indicated in the Prospectus, following admission of the Company's shares to
trading on the LSE, the Directors applied to the Court and obtained a
judgement on 28 January 2022 to cancel the amount standing to the credit of
the share premium account of the Company.
During the year, £7.4 million (2022: £4.5 million) of dividends have been
paid out of the reserve, reducing the reserve to £133.7 million (2022:
£141.1 million).
17. Net Assets Per Share
As at 30 September As at 30 September
2023 2022
Total shareholders' equity (£'000) 138,057 139,126
Number of shares in issue ('000) 1,500 1,500
Net asset value per share (pence) 92.0p 92.8p
18. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 30 September 2023.
There have been no transfers of financial instruments between levels of the
fair value hierarchy. There are no non-recurring fair value measurements.
Financial assets at fair value through profit & loss Financial asset at amortised cost Financial liabilities at amortised cost Total
At 30 September 2023 £'000 £'000 £'000 £'000
Non-current assets
Investment at fair value through profit or loss (Level 3) 99,289 - - 99,289
Current assets
Other receivables and prepayments - 1,549 - 1,549
Fixed deposits - - - -
Cash and cash equivalents - 37,867 - 37,867
Total financial assets 99,289 39,416 - 138,705
Current liabilities
Trade and other payables - - (648) (648)
Total financial liabilities - - (648) (648)
Net financial instruments 99,289 39,416 (648) 138,057
Financial assets at fair value through profit & loss Financial asset at amortised cost Financial liabilities at amortised cost Total
At 30 September 2022 £'000 £'000 £'000 £'000
Non-current assets
Investment at fair value through profit or loss (Level 3) 47,105 - - 47,105
Current assets
Other receivables and prepayments - 3,215 - 3,215
Fixed deposits - 20,000 - 20,000
Cash and cash equivalents - 69,361 - 69,361
Total financial assets 47,105 92,576 - 139,681
Current liabilities
Trade and other payables - - (555) (555)
Total financial liabilities - - (555) (555)
Net financial instruments 47,105 92,576 (555) 139,126
The Company's financial assets and liabilities as summarised above are
expected to be realised within 12 months of the reporting date, excluding
those held in FVTPL. The financial assets and financial liabilities measured
at amortised cost's carrying amount is approximated to its fair value which is
classified at level 3 at the fair value hierarchy.
The Level 3 fair value measurements derive from valuation techniques that
include inputs to the asset or liability that are not based on observable
market data (unobservable inputs).
In the tables above, financial instruments are held at carrying value as an
approximation to fair value unless stated otherwise.
Reconciliation of Level 3 fair value measurement of financial assets and
liabilities
An analysis of the movement between opening and closing balances of the
investments at fair value through profit or loss is given in note 4.
The fair value of the investments at fair value through profit or loss
includes the use of Level 3 inputs. Please refer to note 4 for details of the
valuation methodology and sensitivities.
19. Financial Risk Management
The Investment Adviser, AIFM and the Administrator report to the Board on a
quarterly basis and provide information to the Board which allows it to
monitor and manage financial risks relating to the Company's operations. The
Company's activities expose it to a variety of financial risks: credit risk,
liquidity risk, and market risk (including price risk and interest rate risk).
These risks are monitored by the AIFM. Each risk and its management are
summarised below.
a) Credit risk
Credit risk is the risk that financial loss arises from the failure of a
customer or counterparty to meet its obligations under a contract.
The Company's credit risk exposure in relation to cash holdings is minimised
by dealing with financial institutions with investment grade credit ratings.
Exposure in relation to clients, at the project company level will be
mitigated by a combination of due diligence procedures performed at inception
of a PPA, ability to export to the national grid and diversity of
counterparties in the portfolio. While credit risk in relation to contractors
employed is mitigated through due diligence procedures performed at inception,
the length of contract and available alternative parties to assume the
contracts. Where the strength of an asset vendor is insufficient, warranty and
indemnity insurance are purchased. Shareholder loans provided to Holdco and
flowed down to project companies, is secured through the procedures performed
in monitoring the credit risk of PPA counterparties. These procedures work to
mitigate the credit risk that arises due to intercompany lending to the
underlying investments.
As at 30 September 2023 (and 30 September 2022), the Company's exposure is the
cash and cash equivalents and intercompany receivables stated on the Statement
of Financial Position. Appropriate credit checks are required to be made on
all counterparties to the Company. Cash and deposits are held in accounts with
HSBC Bank Plc, which has a credit rating as per Moody's Investor Services of
A1. During the year ended 30 September 2023 (and 30 September 2022), there are
no balances past due or impaired. The receivables are mainly intercompany
balances receivable from Holdco and subsidiaries of Holdco.
b) Liquidity risk
The objective of liquidity management is to ensure that all commitments which
are required to be funded can be met out of readily available and secure
sources of funding.
The Company's approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company's reputation.
The Company's trade and other payables with third parties at the reporting
date are considered operational in nature and are due and payable within 12
months of the reporting date. As at 30 September 2023 (and at 30 September
2022), the Company has financial assets of cash and cash equivalents without
contractual maturity that can meet the current expected financial liabilities.
A RCF of £30 million was secured during the year by Holdco. As at 30
September this facility remained undrawn. The facility is available to be
drawn for three years to 30 September 2026 and can be at the request of the
Borrower.
c) Market risk
Market risk is the risk that changes in market prices, such as interest and
foreign currency rates, will affect the Company's financial performance or the
value of its holdings of financial instruments. The objective is to minimise
market risk through managing and controlling these risks within acceptable
parameters, whilst optimising returns.
The Company uses financial instruments in the ordinary course of business, and
also incurs financial liabilities, to manage market risks. At the year end the
Company did not have any financial instruments which are exposed to market
risk.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument will
fluctuate due to changes in market interest rates.
The Company's interest rate risk on interest bearing financial assets is
limited to interest earned on fixed cash deposits. The Interest Rate Benchmark
Reform - Phase 2 did not have a material impact on the Company's reported
results as the exposure to interest rates is limited to interest earned on
fixed deposits.
The Company's interest and non-interest bearing assets and liabilities as at
30 September 2023 are summarised below:
Year ended 30 September 2023 Period ended 30 September 2022
Interest bearing Non-interest bearing Total Interest bearing Non-interest bearing Total
£'000 £'000 £'000 £'000 £'000 £'000
Assets
Cash and cash equivalents 37,573 294 37,867 40,002 29,359 69,361
Fixed deposits - - - 20,000 - 20,000
Other receivables and prepayments - 1,549 1,549 - 3,215 3,215
Investment at fair value through profit or loss - debt 61,142 - 61,142 47,105 - 47,105
Total assets 98,715 1,843 100,558 107,107 32,574 139,681
Liabilities
Trade and other payables - (648) (648) - (555) (555)
Total liabilities - (648) (648) - (555) (555)
The short-term money market deposits and bank accounts included within cash
and cash equivalents bear interest at low or zero interest rates and therefore
movements in interest rates will not materially affect the Company's income
and as such a sensitivity analysis is not necessary.
Price risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Company will fluctuate. As of 30 September 2023, the
Company held one investment, being its shareholding in and loans provided to
Holdco, which is measured at fair value. The repayment is dependent on the
performance of the underlying renewable energy investments that Holdco holds.
This value varies according to a number of factors, including discount rate,
asset performance, solar irradiation, operating expenses and to a limited
extent forecast power prices. The sensitivity of the investment valuation due
to price risk is shown in note 4.
Currency risk
Currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates. All transactions during
the current year were denominated in GBP, thus no foreign exchange differences
arose.
Capital management
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the return to its shareholders through the
optimisation of the debt and equity balances. The Company is not subject to
any externally imposed capital requirements.
Equity includes all capital and reserves of the Company that are managed as
capital.
20. Related Party Transactions with the Investment Adviser and Directors
Following admission of the ordinary shares (refer to note 14), the Company and
the Directors are not aware of any person who, directly or indirectly, jointly
or severally, exercises or could exercise control over the Company. The
Company does not have an ultimate controlling party.
Details of related parties are set out below.
a) Accounting, secretarial and directors
Atrato Partners Limited has been appointed to act as an administrator for the
Company under the terms of the IAA; more details are set out below under b).
Apex Secretaries LLP is currently the secretary of the Company.
Juliet Davenport, Chair of the Board of Directors of the Company, is paid
director's remuneration of £50,000 per annum (2022: £50,000), Faye Goss is
paid director's remuneration of £37,500 per annum (2022: £37,500) and Duncan
Neale is paid director's remuneration of £37,500 per annum (2022: £nil) with
an additional £5,000 per annum for responsibilities as Audit Committee Chair.
Prior to stepping down from the board, Marlene Wood was paid director's
remuneration of £37,500 (2022: £37,500) with an additional £5,000 per annum
for responsibilities as Audit Committee Chair. Total directors' remuneration
of £137,833 (2022: £125,667) was incurred in respect to the year. Any
expenses incurred by Directors which are related to business are also
reimbursed.
The interests (all of which are or will be beneficial unless otherwise stated)
of the current Directors in the ordinary share capital of the Company as at 30
September 2023 were as follows:
Shares held at 30 September Shares held at 30 September
Director 2023 2022
Juliet Davenport 33,000 20,000
Faye Goss 20,000 20,000
Duncan Neale 2,980 -
Marlene Wood (resigned 23 June 2023) - 20,000
There have been no changes to the above holdings since the year end.
b) Investment Adviser
Fees payable to the Investment Adviser by the Company under the IAA are shown
in the Statement of Comprehensive Income and detailed in note 6.
During the year, investment advisory fees amounted to £1,351,156 (2022:
£1,284,824) with the £253,312 (2022: £257,910) outstanding and payable as
at 30 September 2023.
Details of the direct and indirect interests of the Directors of the
Investment Adviser and their close families in the ordinary shares of one
pence each in the Company at 30 September 2023 were as follows:
· Benedict Luke Green, a director of the Investment Adviser: 694,510
shares (0.46% of issued share capital).
· Steve Peter Windsor, a director of the Investment Adviser: 1,496,381
shares (1.00% of issued share capital).
· Gurpreet Gujral, Fund manager of the Investment Adviser: 92,862
shares (0.06% of issued share capital).
· Natalie Markham, a director of Holdco and SPVs: 18,250 shares (0.01%
of issued share capital)
· Lara Townsend, a director of Holdco and SPVs: 8,664 shares (0.01% of
issued share capital)
c) Acquisitions from related parties
In the prior period, the Company acquired an 100% investment in Atrato Rooftop
Solar 1 Limited directly from Atrato Group Limited for £1. At the time of
acquisition, Atrato Rooftop Solar 1 Limited had entered into one investment,
Vale of Mowbray, a development site. Development of the site commenced prior
to the acquisition and commissioning occurred soon after completion of the
acquisition. Post year-end the client, entered administration resulting in
lower consumption from October by the client and higher export to the national
grid.
d) Amounts receivable from related parties
In the prior year, the Company entered into a loan agreement with Holdco for
£125 million at 7% interest, of which £15.1 million (2022: £48.9 million)
was drawn during the year and the outstanding balance as at year end was £64
million (2022: £48.9 million). Interest outstanding and included in amounts
receivable from related parties at year end was £487,112 (2022: £483,232)
and was received during November 2023. The loan is a repayable on 31 December
2028 and available for drawdown until 31 December 2023. The Company
additionally provided funding to Holdco for working capital and VAT. The
balance outstanding at year end was £1,492,715 (2022: £2,565,305), which was
repaid in November 2023.
21. Unconsolidated Subsidiaries, Associates and Other Entity
The following table shows subsidiaries of the Company. As the Company is
regarded as an Investment Entity as referred to in note 2, these subsidiaries
have not been consolidated in the preparation of the financial statements. The
Company is the ultimate parent undertaking of these entities.
Ownership Country of
Name Interest Investment Category incorporation Registered address
Atrato Onsite Energy Holdco Ltd 100% Holdco subsidiary entity UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Atrato Rooftop Solar 1 Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
EMDC Solar Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Hylton Plantation Solar Farm Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
London Road Energy Centre Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Rooftop Solar 2 Ltd 100% Holding subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Sonne Solar Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Skeeby Solar Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Guarantees provided by the Company in relation to liabilities that may arise
in Hylton Plantation Solar Farm Ltd or Sonne Solar Ltd have been provided in
the table below. The expected economic or cash outflow from the Company is
expected to be nil.
Provider Investment Beneficiary Nature Purpose Amount
£'000
The Company Hylton Nissan Guarantee PPA 10,000
The Company Sonne Solar Tesco Guarantee Framework PPAs 10,000
The Company Sonne Solar Tesco Guarantee PPA 6,000 to 10,000
The Company Sonne - LCY2 Amazon Guarantee PPA 30,000
The Company Sonne - LTN4 Amazon Guarantee PPA 30,000
The Company Sonne - EDI1 Amazon Guarantee PPA 30,000
The Company Sonne -MAN2 Amazon Guarantee PPA 30,000
The Company Sonne -BHX2 Amazon Guarantee PPA 30,000
The Company Sonne -BHX3 Amazon Guarantee PPA 30,000
The Company Sonne -BHX4 Amazon Guarantee PPA 30,000
22. Commitments and Contingencies
As at 30 September 2023 the Company had the following future investment
obligations:
£0.4 million Hylton Plantation Solar Farm Limited, in relation to the Nissan
project in Sunderland. These amounts are capital commitments within the
portfolio to be funded by fund flows from the Company, at the time of the
final milestone payments expected to be by Q2 2024.
£3.8 million London Road Energy Centre Limited, in relation to the London
Road project in Northamptonshire. These amounts are capital commitments within
the portfolio to be funded by fund flows from the Company, at the time of the
final milestone payments expected to be by Q1 2024.
£22.1 million Skeeby Solar Limited, in relation to the Skeeby project in
North Yorkshire. These amounts are capital commitments within the portfolio to
be funded by fund flows from the Company, at the time of the final milestone
payments expected to be by Q2 2024.
On the 24(th) October 2023, the Company completed on the acquisition of a
portfolio of operation assets with a total value of £77.3 million, following
the exchange of contract on 12 September 2023. The portfolio includes over
9,400 residential sites benefiting from the Feed-in-Tariff scheme, which has
11 years remaining. The IA report provides further detail on the transaction
on page 18.
23. Post Balance Sheet Events
On 1(st) September 2023, Holdco secured an RCF of £30 million, which was
undrawn at 30 September 2023. Since then £17 million has been drawn on the
RCF to fund acquisitions.
No other significant events have occurred between 30 September 2023 and the
date when the financial statements were authorised by Board of Directors,
which would require adjustments to, or disclosure in, the Company's accounts.
Alternative Performance Measures
In reporting financial information, the Company presents alternative
performance measures ("APMs") which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. The APMs presented in this report are shown below:
Dividend cover
Cash flow generated by the Company includes net cash flow used in operating
activities, interest on investments and repayments of shareholder loans;
divided by dividend paid within the reporting period.
As at 30 September As at 30 September
2023 2022
Net cash flow used in operating activities a (2,356) (4,863)
Interest income received b 3,506 167
Dividend paid c 7,500 4,515
Dividend cover ((a+b)÷c) 0.15x (1.04x)
Premium/Discount
The amount, expressed as a percentage, by which the share price at 30
September 2023, is greater or less the NAV per share.
As at 30 September As at 30 September
2023 2022
NAV per share (pence) a 92.0 92.8
Share price (pence) b 71.4 99.5
(Discount) / Premium (b÷a)-1 (22.9%) 7.2%
Total return
Total return is a measure of performance that includes both income and capital
returns. It considers capital gains and the assumed reinvestment of dividends
paid out by the Company into its shares on the ex-dividend date. The total
return is shown below, calculated on both a share price and NAV basis.
Year ended 30 September 2023 Period ended 30 September 2022
Share price (pence) NAV (pence) Share price (pence) NAV (pence)
Opening balance A 99.5 92.8 100.0 98.1
Closing at 30 September b 71.4 92.0 99.5 92.8
Dividends paid during the year c 5.0 5.0 3.0 3.0
Adjusted closing (d=b + c) d 76.4 97.0 102.5 95.8
Total return (d÷a)-1 (23.2) % 5.17% 2.5% (2.3) %
Ongoing charges ratio
A measure, expressed as a percentage of average NAV, of the regular, recurring
annual costs of running an investment company.
For the year ended For the period from IPO to
30 September 2023 30 September 2022
Average NAV (£'000) a 138,591 143,037
Ongoing fees* (£'000) b 2,459 1,969
Ongoing charges ratio (b÷a) 1.77% 1.38%
*Ongoing fees from IPO on 23 November 2021 to 30 September 2022. Consisting of
investment management fees and other recurring expenses.
Glossary
Act The Companies Act 2006
AGM or Annual General Meeting A meeting held once a year which shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the Company in which they are invested.
AIC The Association of Investment Companies
AIC Code The AIC Code of Corporate Governance
AIFM Alternative Investment Fund Manager
AIFMD Alternative Investment Fund Managers Directive
BTM Behind the Meter energy generation fed directly to the off-taker and not via
the national grid
COD Commercial Operation Date
Construction phase, in construction or implementation phase In relation to projects, means those projects which are in, or about to
commence the installation.
Company Atrato Onsite Energy Plc
DCF Discounted cash flow
DTR Disclosure Guidance and Transparency Rules
EPC Engineering, procurement and construction obligations in respect of the asset
EPS Earnings per share, calculated as the profit for the period after tax
attributable to members of the parent company divided by the weighted average
number of shares in issue in the period
ESG Environmental, Social and Governance
ESG Risk Assessment Investment Advisers proprietary ESG due diligence risk assessment framework
FCA Financial Conduct Authority
FMV Fair market value
FRC Financial Reporting Council
GHG Greenhouse Gas
GW Unit of power abbreviation for Gigawatt
GWh Unit of energy usage abbreviation for Gigawatt-hour
HMRC His Majesty's Revenue and Customs
Holdco Atrato Onsite Energy Holdco Limited
IAA Investment Advisory Agreement
Investment Adviser The appointed Investment Adviser as per the Investment Advisory Agreement
Portfolio The portfolio of assets in which the Company through Holdco and the underlying
SPVs have invested in solar generation assets.
IPO An initial public offering (IPO) refers to the process of offering shares of a
corporation to the public in a new stock issuance
IFRS International accounting standards in conformity with the requirements of the
Companies Act 2006
ITC Investment Trust Company is a company that obtained HMRC clearance as an
Investment Trust.
MW Unit of power abbreviation for Megawatt
MWh Unit of energy usage abbreviation for Megawatt-hour
NAV Net Asset Value
O&M Operations and Maintenance
OCR Ongoing charges ratio
P10 Annual power production level that is predicted to be exceeded 10% of the time
P50 Annual power production level that is predicted to be exceeded 50% of the time
P75 Annual power production level that is predicted to be exceeded 75% of the time
P90 Annual power production level that is predicted to be exceeded 90% of the time
PPA Power purchase agreement
Shares Ordinary shares of the Company
Solar assets Solar energy assets
Solar PV Solar photovoltaic
SPV Special Purpose Vehicle
TCFD Task Force on Climate-Related Financial Disclosures
UK Code UK Corporation Governance Code
Total Shareholder Return The movement in share price over a period plus dividends declared for the same
period expressed as a percentage of the share price at the start of the
Period
Directors, advisers and Company details
Directors Juliet Davenport (Chair)
Faye Goss (Chair of Management Engagement Committee)
Duncan Neale (Chair of Audit Committee)
Company Secretary Apex Secretaries LLP
6th Floor, 125 London Wall, London, EC2Y 5AS
Registrar Link Market Services Limited
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL
AIFM JTC Global AIFM Solutions Limited
Ground floor, Dorey Court, Admiral Park, St Peter Port, Guernsey, Channel
Islands, GY1 2HT
Investment Adviser Atrato Partners Limited
36 Queen Street, London, EC4R 1BN
Corporate Broker Stifel Nicolaus Europe
150 Cheapside, London, EC2V 6ET
Auditors BDO LLP
55 Baker Street, London, W1U 7EU
Financial PR Advisers KL Communications
40 Queen Street, London, EC4R 1DD
Website www.atratorenewables.com
Registered Office 6(th) Floor, 125 London Wall, London, EC2Y 5AS
Stock exchange ticker and ISIN ROOF
GB00BN497V39
This report will be available on the Company's website.
END
1 (#_ftnref1) The Net Asset Value per ordinary share, ordinary share price
premium to NAV and ongoing charges ratio as alternative performance measure
("APMs"). The APMs within the accounts are defined on pages 111 to 112
2 (#_ftnref2) Gross investment including existing project finance
3 (#_ftnref3) A sleeved PPA is an agreement to buy electricity directly from
a generator via a grid connected intermediary
4 (#_ftnref4) Expected dividend cover once portfolio fully operational
5 (#_ftnref5) Including post balance sheet events
6 (#_ftnref6) Gearing expressed as drawn debt to gross assets
7 (#_ftnref7) Subject to lender's approvals
8 (#_ftnref8) Including post balance sheet events
9 (#_ftnref9) Once fully operational
10 (#_ftnref10) Based on GOV UK publications for scope 1 and 2 emission
conversion factors
11 (#_ftnref11) Based on Ofgem average UK annual household energy
consumption of 2,700kWh
12 (#_ftnref12) Including post balance sheet activity and excludes Vale of
Mowbray investment
13 (#_ftnref13) Including post balance sheet events
14 (#_ftnref14) Weighted average unexpired contracted term; weighted on
invested capital
15 (#_ftnref15) The Green Economy Mark recognises London-listed companies
and funds that derive more than 50% of their revenues from products and
services that are contributing the environmental objectives such as climate
change mitigation and adaptation, waste and pollution reduction, and the
circular economy.
16 (#_ftnref16) The Companies (Directors' Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018 implement the
government's policy on Streamlined Energy and Carbon Reporting (SECR).
17 (#_ftnref17) This target follows best practice and is in alignment with
the latest SBTi guidance
(https://sciencebasedtargets.org/resources/files/Near-Term-Financial-Sector-Science-Based-Targets-Guidance-V2-Consultation-Draft.pdf)
for financial institutions.
18 (#_ftnref18) As the Company does not have an office space or employees to
make waste.
19 (#_ftnref19) Based on 0.2MW per acre
20 (#_ftnref20) Solar Energy UK Briefing, Everything under the Sun, The
Facts About Solar Energy (Mar 2022): Briefing-Fact-Checker-1.pdf
(solarenergyuk.org)
(https://solarenergyuk.org/wp-content/uploads/2022/03/Briefing-Fact-Checker-1.pdf)
21 (#_ftnref21) Based on 0.2MW per acre
22 (#_ftnref22) British Energy Security Strategy 2022:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1069969/british-energy-security-strategy-web-accessible.pdf
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1069969/british-energy-security-strategy-web-accessible.pdf)
23 (#_ftnref23) Review of Electricity Market Arrangements:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1098100/review-electricity-market-arrangements.pdf
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1098100/review-electricity-market-arrangements.pdf)
24 (#_ftnref24) Pablo Ballesteros-Perez (2018). Incorporating the effect of
weather in construction scheduling and management with sine wave curves,
application in the UK
25 (#_ftnref25) Gov.uk: Counting the cost of flooding. 2021
26 (#_ftnref26) COP28 UAE, COP28 delivers historic consensus in Dubai to
accelerate climate action (13 December, 2023).
https://www.cop28.com/en/news/2023/12/COP28-delivers-historic-consensus-in-Dubai-to-accelerate-climate-action.
27 (#_ftnref27) COP28 UAE, COP28 Global Renewables and Energy Efficiency
Pledge,
https://www.cop28.com/en/global-renewables-and-energy-efficiency-pledge
(https://www.cop28.com/en/global-renewables-and-energy-efficiency-pledge) .
28 (#_ftnref28) Further details of the data sources and methodology used for
the scenario analysis can be found in Appendix A.
29 (#_ftnref29) Avoided emissions compared to UK-specific electricity grid
average. As at 30 September 2023, £121 million had been committed or deployed
into UK solar technology across 40 projects with a combined capacity of 147MW.
Post balance sheet, this has increased to 41 projects with a capacity of
182MW, across 11 off-takers. Once operational, these assets are anticipated to
generate 173GWh clean energy per annum, avoiding the equivalent of 37,000
tonnes of carbon emissions or powering 64,000 homes. This is calculated using
the GOV UK conversion factors 2023: UK electricity grid average factor (Scope
2) and transmission and distribution UK electricity factor (Scope 3).
30 (#_ftnref30) The GHG inventory emissions have not been independently
verified or assured.
31 (#_ftnref31) Includes the embodied emissions of the solar panels
purchased in the reporting period only.
32 (#_ftnref32) 2023 is the first year of reporting for most metrics, so no
prior year comparisons have been included in this table. The 2024 Annual
Report will allow for trend analysis and will compare metrics disclosed in
2023.
33 (#_ftnref33) This target follows best practice and is in alignment with
the latest SBTi guidance
(https://sciencebasedtargets.org/resources/files/Near-Term-Financial-Sector-Science-Based-Targets-Guidance-V2-Consultation-Draft.pdf)
for financial institutions.
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