REG - Atrato Onsite Energy - Final Results for the period ended 30 Sept 2022
29/11/2022 07:00
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RNS Number : 8531H Atrato Onsite Energy PLC 29 November 2022
LEI: 213800IE1PPREDIIZB62
ATRATO ONSITE ENERGY PLC
(the "Group" or the "Company")
RESULTS FOR THE PERIOD ENDED 30 SEPTEMBER 2022
Atrato Onsite Energy plc (LSE: ROOF), the renewables investment trust focusing
on UK commercial onsite energy, today reports its audited results for the
period from incorporation on 16 September 2021 to 30 September 2022 (the
"Period").
Key metrics As at 30 September 2022 (audited) As at 31 March 2022 (unaudited)
Net Asset Value ("NAV") £139.1m £146.1m
NAV per ordinary share 1 (#_ftn1) 92.8 pence 97.4 pence
Ordinary share price (p) 99.5 pence 112.5 pence
Ordinary share price premium to NAV1 7.2% 15.5%
Dividends declared per ordinary share (p) 3.01 pence Nil
Ongoing charges ratio1 1.4% 1.5%
Highlights in the Period
● Raised £150m in the Company's Initial Public Offering ("IPO")
● Deployed £49m into a diversified portfolio of solar photovoltaic ("PV")
systems
○ 91% of revenue contracted under Power Purchase Agreement ("PPA") or subsidy 2
(#_ftn2)
○ 82% of revenue has contracted annual inflation or fixed uplifts2
○ 19 years weighted average unexpired PPA term and assumed asset life
● 3.01 pence dividend declared for the Period, in line with the target set out
at IPO
● Portfolio valuation based on an unlevered discount rate of 6.6%. The rate
reflects the elevated macro-economic volatility and the increase in UK
government bond yields observed at the end of the financial reporting period
● The increase in the discount rate equated to a reduction in the NAV of 6.5
pence per share
● Awarded the LSE Green Economy Mark
● Supporter of the Task Force on Climate Related Financial Disclosures ("TCFD")
● Signatory of the UN Principals for Responsible Investment ("UNPRI")
● The Portfolio has achieved a 6,000t CO(2e) equivalent saving to date
Juliet Davenport, Chair of Atrato Onsite Energy plc commented:
"I am pleased to be reporting the solid progress on our strategy of building
an investment portfolio of onsite clean energy generation systems. During the
Period, the Company invested over £49 million into a diversified portfolio of
solar PV systems, totalling 63MW of generation capacity.
Our business model has stability of income at its core. We have a secure and
growing revenue stream with 91% of revenue contracted under long-term PPA or
subsidy, and 82% receiving contracted inflation or fixed annual uplifts. This
is underpinned by the very long weighted average PPA term of 19 years. There
have been some delays in deployment, driven in the main by external factors,
but we are confident in the proposition delivering going forward.
Our investments support the UK's net zero agenda whilst delivering progressive
dividend income and long-term opportunities for capital growth. We are
encouraged and feel confident in the position we have built for onsite solar
in the UK."
The Company will be holding an in-person presentation for analysts at 08.30am
today at 36 Queen Street, London, EC4R 1BN. There will be a webcast facility
for the presentation. To join the presentation via the webcast please register
using the following link: https://brrmedia.news/Roof_FY
(https://brrmedia.news/Roof_FY)
Further information is available on the Company's website www.atratoroof.com
(http://www.atratoroof.com)
ENQUIRIES
Atrato Partners Limited
Gurpreet Gujral / Francisca Wiggins / Christopher Fearon +44 (0)20 3790 8087
Alvarium Securities Limited
Mark Thompson +44 (0)20 7016 6711
Eddie Nissen +44 (0)20 7016 6713
Oliver Kenyon +44 (0)20 7016 6704
Kaso Legg Communications atrato@kl-communications.com (mailto:atrato@kl-communications.com)
Charles Gorman +44 (0)20 3995 6673
Millie Steyn +44 (0)20 3995 6671
Notes to Editors
Atrato Onsite Energy plc (LSE: ROOF) is an investment company focused on
onsite clean energy generation, providing new renewable energy capacity with
100% carbon traceability to industrial and commercial counterparties. The
Company focuses on UK commercial rooftop and onsite solar, helping its
corporate clients achieve net zero and reduce their energy bills. It
raised £150 million in a significantly oversubscribed IPO in November
2021. ROOF provides investors with attractive capital growth and secure,
index-linked income, targeting a 5% dividend yield and a total shareholder
return of 8 - 10%((1)). Its shares were admitted to trading on the premium
segment of the Main Market of the London Stock Exchange on 23 November
2021. Atrato Partners Limited is the Company's investment adviser.
(1) The target dividend and target NAV total return set out above are targets
only and are not profit forecasts. There can be no assurance that these
targets can or will be met. These targets have been developed based upon
assumptions with respect to future business decisions and conditions that are
subject to change, including the Company's execution of its investment
objective and strategies, as well as growth in the sector and markets in which
the Company operates. As a result, the Company's actual results may vary from
the targets set out above and those variations may be material. The target
dividend yield reflects the IPO price of 100 pence per ordinary share.
Chair's Statement
Dear Shareholder
I am pleased to present the Company's maiden results for the period from the
Company's incorporation on 16 September 2021 to 30 September 2022.
Since our IPO in November 2021, we have made solid progress on our strategy of
building an investment portfolio of onsite clean energy generation systems.
Our investments support the UK's net zero agenda whilst delivering progressive
dividend income and opportunities for capital growth.
During the Period, the Company invested £49 million into a diversified
portfolio of solar PV systems, totalling 63MW of generation capacity. These
assets are all commercialised through private wire connections secured under
long term PPAs.
Our business model has stability of income at its core. We have a secure and
growing revenue stream with 91% of revenue contracted under long-term PPA or
subsidy, and 82% receiving contracted inflation or fixed annual uplifts. This
is underpinned by the very long weighted average PPA term of 19 years.
Dividends
In May 2022, the Board of Directors ("the Board") declared a maiden quarterly
dividend of 1.76 pence per ordinary share in respect of the period IPO to 31
March 2022. This was followed by a further dividend of 1.25 pence per ordinary
share for the quarter ended 30 June 2022 and 1.26 pence per ordinary share for
the quarter ended 30 September 2022, declared on 11(th) November 2022. This
annualised dividend of 5 pence per ordinary share for the Period ending 30
September 2022 is in line with our IPO target.
Outlook
The security of energy supply has become one of the critical social and
political issues of our time. Extraordinary highs in energy prices have
necessitated unprecedented intervention by the UK Government to protect both
businesses and consumers from these extreme cost increases.
The current crisis in the energy market heightens the interest of companies to
transition to an independent private wire supply of clean energy, providing
long term price certainty at an affordable cost. In the corporate boardroom,
renewable energy systems have moved from being a 'net zero' agenda item to now
being an economic necessity.
Set against this, several factors have slowed the pace of companies committing
to long term PPAs. This includes the significant volatility in wholesale
prices, which increased by 587% to its peak before subsequently falling by 58%
by the end of the financial period, and other factors such as the Company's
own cost of capital, together with regulatory uncertainty. Corporate decision
making has been slow, particularly since the financial period end, and this
has in turn slowed our initial pace of deployment. We appreciate that this
means the IPO proceeds will not be fully deployed as originally planned.
However, there are encouraging signs of stability. Energy and financial
markets have calmed in recent weeks and our customers are looking to
accelerate their decision making with respect to long term commitments to
renewable energy PPAs. This means the remaining capital can now be invested
factoring in the higher cost of capital environment.
We recently revised our deployment timeline to CY Q2 2023. We also published
an increase in our selected near-term pipeline from £86m to £100m and the
overall pipeline of opportunities to over £360m.
We have also been focused on building our brand with an ambition to be the
renewables partner of choice for both corporates and landlords. In our first
year we have demonstrated an ability to execute private solar PV projects with
some of the largest companies in the world. This has allowed us to broaden our
footprint into new sectors and develop new customer relationships. Atrato
Onsite Energy is rapidly becoming a prominent player in the UK renewables
sector.
We are encouraged and feel confident in the position we have built for onsite
solar in the UK. The Company's strategy sits neatly at the confluence of two
major global macroeconomic investment thematics. That is, structurally higher
energy prices and commitments by corporates and governments to reach net zero.
The investment case underpinning these two long-term themes continues to
strengthen and hence we believe the Company is well positioned for the future.
Juliet Davenport
Chair
28 November 2022
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 Period.
Overview
The Company's first Period of operations has seen the energy sector thrown
into the limelight. Record highs in power prices have galvanised businesses to
search for solutions to their rising costs.
The Company's goal is to advance its clients' sustainability targets by
decarbonising their energy supply whilst also delivering material energy cost
savings. The current climate has reinforced our belief that the right
financial choice is also inextricably bound to the responsible environmental
choice. This produces a virtuous circle that will increasingly drive our
investment opportunities.
World Leaders recently gathered once again for the COP27 Summit in Sharm
El-Sheikh, Egypt, to restate and possibly define their commitments to the 1.5
degree temperature rise target. This is despite a new United Nations report
that states current commitments will achieve a 2.8 degree rise in temperature.
This re-iterates how important investment vehicles such as Atrato Onsite
Energy are to decarbonising the UK economy and the immediate need to invest in
decarbonising all aspects of the UK economy.
The Company has deployed £49 million into high quality onsite solar projects
whilst also growing our pipeline of opportunities to more than £360m. Over
90% of revenue is contracted under long-term PPA or subsidy, and 82% has
contracted annual inflation or fixed uplifts. In addition, the Portfolio has a
very long weighted average unexpired PPA term of 19 years.
The Company acknowledges that it has not achieved the IPO target of fully
deploying the equity within twelve months. The pace of deployment at the start
of the year was slower than anticipated because of specific findings in the
due diligence process on certain transactions. The Company delayed closing
until contractual remedies were put in place to protect our exposure. We then
experienced one of the most turbulent energy markets in history. The
volatility and uncertainty in energy markets caused many of our customers to
pause their own decision-making processes to avoid locking in to PPAs at the
top of the market. The more recent outlook for energy markets is one of
relative stability and the level of government support now appears to be a
known quantity. We have consequently experienced an acceleration in the
decision making of our clients and are confident that our equity deployment
will be complete by Q2 of 2023.
The Investment Adviser has significantly invested in their renewables team,
which now totals nine dedicated professionals, hiring the right skills and
experience to expedite the execution of the pipeline. They have hired resource
across engineering, sustainability, project delivery, business development and
financial analysis.
At the end of the Period, three projects originated by the team were
undergoing installation and are expected to be commissioned in the coming
months. This will add over 22MW to our operational portfolio. During the
Period we also completed two strategic transactions. First, the purchase of a
6MW project on the rooftop of a Marks and Spencer distribution warehouse in
the East Midlands. Second, the acquisition of a portfolio of 32 projects at
sites across the UK occupied by Amazon, Tesco and Anglian Water.
The Company enters its second year with a strong pipeline of well progressed
and diversified projects in which to invest the remainder of the IPO proceeds.
The current market backdrop has made our offering even more compelling,
promising both stable and affordable clean energy for our clients. We fully
expect the Company to become the leading dedicated investor in the UK
renewables sector in 2023.
Portfolio
As at 30 September 2022, the Company's £49 million investment portfolio at
cost comprised 37 individual projects with a total capacity of 62.6MW.
The Portfolio was weighted towards operating assets with 64% invested in
operating assets and 36% invested in installation assets. The remaining
capital committed to completion of the installation assets is expected to be
£1.4 million. The Portfolio now spans 19 counties, ensuring geographic
diversification, split across eight off-takers across multiple industries.
Portfolio summary as at 30 September 2022
Off-taker Location Sector Capacity (MWp) Status Remaining term
Nissan Motor Manufacturing UK Limited County Durham Manufacturing 20.0 Installation 19.9
Anglian Water Services Limited Cambridgeshire Utility 11.7 Operational 22.9
Marks & Spencer Plc Leicestershire Grocery 6.1 Operational 12.2
Amazon UK Services Ltd. Essex Distribution 3.1 Operational 17.9
Amazon UK Services Ltd. Leicestershire Distribution 2.2 Operational 19.1
Amazon UK Services Ltd. Fife Distribution 1.6 Operational 18.2
Amazon UK Services Ltd. Warwickshire Distribution 1.6 Operational 18.0
Amazon UK Services Ltd. Cheshire Distribution 1.5 Operational 18.2
Amazon UK Services Ltd. Luton Distribution 1.5 Operational 18.3
Gardner Group Limited Derbyshire Manufacturing 1.3 Installation 25.2
Recipharm HC Ltd Cheshire Pharmaceuticals 1.0 Installation 25.2
Vale of Mowbray North Yorkshire Food production 1.0 Operational 24.3
Anglian Water Services Limited Essex Utility 0.9 Operational 21.9
Tesco Stores Limited Greater Manchester Grocery 0.7 Operational 17.8
Tesco Stores Limited Nottinghamshire Grocery 0.7 Operational 19.1
Anglian Water Services Limited Northamptonshire Utility 0.6 Operational 21.5
Tesco Stores Limited Lincolnshire Grocery 0.6 Operational 19.2
Amazon UK Services Ltd. Northamptonshire Distribution 0.6 Operational 17.2
Tesco Stores Limited North Yorkshire Grocery 0.5 Operational 19.3
Tesco Stores Limited Greater London Grocery 0.5 Operational 17.7
Anglian Water Services Limited Essex Utility 0.5 Operational 20.8
Tesco Stores Limited Lincolnshire Grocery 0.5 Operational 17.4
Tesco Stores Limited Kent Grocery 0.4 Operational 17.4
Tesco Stores Limited Suffolk Grocery 0.4 Operational 17.6
Tesco Stores Limited Essex Grocery 0.4 Operational 17.2
Tesco Stores Limited Kent Grocery 0.3 Operational 17.3
Tesco stores Limited Somerset Grocery 0.3 Operational 17.5
Tesco Stores Limited Wiltshire Grocery 0.3 Operational 17.3
Tesco Stores Limited Kent Grocery 0.3 Operational 17.7
Tesco Stores Limited Kent Grocery 0.3 Operational 18.7
Tesco Stores Limited Essex Grocery 0.3 Operational 17.1
Anglian Water Services Limited Cambridgeshire Utility 0.2 Operational 21.0
Anglian Water Services Limited Lincolnshire Utility 0.2 Operational 21.5
Anglian Water Services Limited Cambridgeshire Utility 0.2 Operational 21.0
Tesco Stores Limited Greater Manchester Grocery 0.2 Operational 17.5
Tesco Stores Limited Kent Grocery 0.1 Operational 17.1
Tesco Stores Limited Essex Grocery 0.1 Operational 17.2
Total 62.6 19.0 average
Portfolio performance
The Portfolio of operational assets has performed above expectations. In the
Period ended 30 September 2022, the Portfolio generated 28,816 GWh of clean
energy. The underlying operating portfolio generated revenues of £2.9 million
for the Company.
Net production variance vs. expected (GWh) for the Period to 30 September
2022, from the operating portfolio
Actual Budget GWh above % above
(GWh) (GWh) expectation expectation
Total 28,816.65 27,886.69 929.96 3.33
A key objective of the Company's investment strategy is to produce a stable
and resilient cash flow through investment in renewable energy assets that
benefit from a high degree of contracted revenues.
Acquisitions and investments timeline
Portfolio Valuation
The valuation of the Portfolio as at 30 September 2022 was £47m. The table
below shows a breakdown of the portfolio valuation during the period.
£m
Portfolio valuation as at 16 September 2021 -
Portfolio acquisition cost 48.3
Capitalised acquisition costs 0.6
Portfolio Fair value movement (1.8)
Portfolio valuation as at 30 September 2022 47.1
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.
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.
Weighted average discount rate for valuation
The valuation of the Portfolio at 30 September 2022 reflects an underlying
blended weighted average post-tax discount rate of 6.6%. The reduction in the
Portfolio valuation is due to the increase in the discount rate as at 30
September 2022 valuation date.
Elevated macro-economic volatility, higher inflation expectations and UK
political uncertainty drove both a rapid and a significant increase in
long-term UK government bond yields as at 30 September 2022. Given the scale
of the movements, the Investment Adviser and the Board have valued the
portfolio based on a weighted average unlevered discount rate of 6.6%. This is
based on a spread over the 10-year UK gilt yield, which rose substantially at
the financial period end.
This discount rate is higher than the average unlevered discount rates
observed in the UK renewables market pre-September 2022. The increase in the
discount rate equated to a reduction in the NAV of 6.5 pence per share.
The Company's future pipeline will be underwritten based on this increased
discount rate. As a result, the Company expects to deliver a higher unlevered
return on future projects.
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 2022. 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
Company's assets having a majority of fixed price, long-term operating
expenses including operations and maintenance ("O&M"), property leases and
payments in lieu of taxes.
Key financials and NAV
NAV as at 30 September 2022 was announced on 31 October 2022 as 92.8 pence per
share. The NAV reflects the valuation of the Company's portfolio and
incorporates the costs associated with the IPO, 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 2022 was £139 million, predominantly
reflecting the movement in the valuation of investments and dividends paid.
NAV Bridge from IPO to 30 September 2022
Movement in Net Asset Value from IPO to 30 September 2022 £m Pence per share
NAV following IPO £147.1 98.1
Dividends paid £(4.5) (3.0)
Rerate on yield £5.0 3.3
Operating cash flow £2.8 1.9
Increase in unlevered discount rate £(9.7) (6.5)
Net operating expenses £(1.6) (1.0)
NAV as at 30 September 2022 £139.1 92.8
Dividends paid: Dividends of £4.5 million (3.01 pence per share) were paid
during the Period in respect of the period to 30 June 2022. In addition, after
the Period end, the Company declared a further dividend of 1.26 pence per
share in respect of the quarter ended 30 September 2022. Furthermore, the
annualised dividend is 50% cash covered by the current Portfolio.
Rerate on yield: Represents the difference between the invested capital and
the discounted future cash flows for development sites prior to reflecting an
increase in discount rates resulting from risk-free rate increases at year
end. This would have resulted in a NAV increase of £5.0 million, since the
IPO on 23 November 2021 ("IPO"), but has been offset by an increase in the
discount rate, detailed below.
Operating cash flow: Represents the net cashflows generated by each project.
Increase in unlevered discount rate: Represents the impact on the fair value
from changes to the discount rate due to recent movements in the risk-free
rate. Elevated macro-economic volatility, higher inflation expectations and UK
political uncertainty over recent weeks has led to an increase in long-term UK
government bond yields.
Net operating expenses: Represents the net movement in Company administration
expenses.
The assumptions set out in this section remain subject to continuous review by
the Investment Adviser and the Board.
The Company's total loss before tax for the Period was £(3.4) million
(revenue loss of £1.2m and capital loss of £2.2m) 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 (2.7) pence per share
(revenue of (0.92) pence and capital of (1.75) pence). As at 30 September
2022, of the 37 total assets, 34 were in operation and three were in
installation and scheduled to become operational during Q4 2022 and Q1 2023.
Financing
The Company has not sought any external financing in the Period as its
immediate priority is the investment of the IPO proceeds. However, the Company
engages regularly with debt providers to maintain up-to-date assumptions about
the prospects and pricing of secured senior debt against appropriate parts of
its portfolio in future, in line with its stated investment policy. The
Investment Adviser constantly monitors the appropriate source, whether debt or
equity, and the timing of such funding required to execute on the pipeline of
acquisition opportunities secured by the Company.
Dividends
In May 2022, in line with the timeframe set out in the IPO, the Board declared
a maiden quarterly dividend of 1.76 pence per share in respect of the period
from IPO to 31 March 2022. This was followed by further dividends of
1.25 pence per share for the quarter ended 30 June 2022, and in November 2022
a further 1.26 pence per Share for the quarter ended 30 September 2022.
As a result, on an annualised basis, the Company achieved its 5 pence per
share IPO target for the dividend in respect of the initial period to 30
September 2022. Aligned with the target set out at IPO, the Company will
target an annualized dividend target of 5 pence per ordinary share for the
financial period ending 30 September 2023.
Annual General Meeting
We look forward to welcoming Shareholders in the Company ("Shareholders") to
the Company's Annual General Meeting ("AGM") to be held in March 2023. More
details will be provided via a RNS announcement in due course.
Post balance sheet events
Portfolio management
The Company has a PPA with Vale of Mowbray Limited ("Vale of Mowbray") under
which the Company supplies behind-the-meter ("BTM") green energy generated
through its rooftop solar installation. This asset is the smallest project in
the Company's Portfolio and represents less than 0.6% of the Company's NAV.
Vale of Mowbray entered voluntary administration the day before the Period
end. The Company has confirmed with the administrators that it will continue
to sell energy to the site during the administration process, with any excess
sold to the grid under an existing spill PPA at a premium of 84% above the
Vale of Mowbray's contractual PPA price. When the site is vacated, all energy
generated by the Company's solar installation will be sold to the grid under
the higher spill PPA price.
The Company does not expect any material adverse consequences because of this
administration, illustrating the value of the credit protections that the
Company typically benefits from in its contracts.
Recent government legislation
A multitude of factors has driven UK wholesale electricity prices to historic
highs. Daily prices reached almost £600/MWh in August 2022. For August as a
whole, the average auction price exceeded £370/MWh, compared to £107/MWh
last year and £37/MWh in August 2020.
This triggered new UK legislation that provided financial support for
businesses struggling with higher energy costs.
The Electricity Generator Levy
As part of the Autumn Statement, the UK Government outlined an Electricity
Generator Levy ("the Levy"). The Levy is a temporary windfall tax of 45% that
will be applied to wholesale market revenues above £75/MWh
on UK low-carbon electricity generation. The Levy will be applied from 1
January 2023 until 31 March 2028.
The Company's focus on long-term highly contracted solar PV systems results in
a low sensitivity to wholesale power prices. Based on the current portfolio
and pipeline, the Levy is not expected to impact the Company's target returns
or net asset value.
Pipeline
At the time of the interim results, the Company published a selected pipeline
of near-term projects to be completed by September 2022 (worth £39m), and a
further batch of projects that were due to be completed by December 2022
(worth £86m, the "December Selected Pipeline"). The initial target was met in
September with the Company successfully committing a total of £49m, amassing
a portfolio with a total capacity of 63MWp.
The December Selected Pipeline remains broadly intact. However, the recent
market backdrop of economic and political instability has led, in some cases
the Company and, in other cases the off-taker, to delay the decision to
execute on those deals. The Company has revised its deployment timeline and
now expects to have 100% of IPO proceeds committed by CY Q2 2023. The
Investment Adviser has also increased its selected near-term pipeline from
£86m to £100m, out of a total pipeline of over £360m.
We have two opportunities in our pipeline that are under exclusivity totalling
>£40m of capital value, including a c.30MW ground mounted installation.
Advanced discussions are currently ongoing with several corporates to enter
into a long term sleeved or "virtual" PPA on this asset. Investment in these
systems can deliver attractive returns with a comparable risk profile where
the sponsoring corporate undertakes to pay for the energy generated via a
long-term off-take agreement.
We have observed an increase in corporates seeking to achieve scale in
renewable energy generation through increased investment in ground mounted
installations. In many cases, like our Nissan and Anglian Water assets, these
are behind the meter installations. However, corporates are also sponsoring
new front of meter developments through long term PPAs as an option to advance
net zero targets.
Sustainability
During the reporting period, the Company has 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.
We have identified our key sustainability related priorities based on an
in-depth materiality assessment which highlighted six key elements. These
cover the mitigation of environmental impact and social risks within the solar
industry, high standards of governance and reporting frameworks, engagement
with tenants and responsible citizenship and support for communities. These
are covered in more detail in the Sustainability section on pages 21 to 23.
Outlook
The Company finds itself in a position of significant competitive strength
given the amount of undeployed 'dry powder' capital on its balance sheet,
especially at this point in the cycle when many in the industry are capital
constrained. We are currently able to achieve materially higher unlevered
returns on new projects.
The Company now expects to have committed 100% of the £150m IPO proceeds in
Q2 2023. Once all capital is deployed, the portfolio will provide an estimated
50,000 tonnes of carbon emissions savings per annum.
Our Market
Power prices
A confluence of factors including the war in Ukraine, weather, market
structures and demand patterns has driven wholesale electricity prices during
the Period to historic highs in Great Britain, with daily prices on the N2EX
day ahead auction reaching almost £600/MWh in August 2022. For the month, the
average auction price topped £370/MWh, an increase from £107/MWh in the same
month of 2021 and a ten-fold increase from August 2020.
Bloomberg baseload forward winter 1-year prices
Such dramatic increases in the wholesale electricity price naturally impact
consumers, both at home and in business, and the Government is introducing a
raft of measures to provide support and protect against rocketing energy
costs. In September 2022, a temporary price cap for businesses was announced,
limiting the unit price paid to £211/MWh for electricity and removing green
levies from the bills of non-domestic clients. This price cap will be in force
for six months from October 2022, with expectations of some continued targeted
support for vulnerable sectors thereafter.
The capped unit price is in line with the monthly average grid import price at
the time of the Company's IPO in November 2021. As the PPA price for onsite
generation is typically lower than this, the Government support measures
therefore support the case for businesses to commit to onsite solutions.
Indeed, the relatively short-term nature of the support and continued
uncertainty from March 2023 are expected to highlight to businesses the
advantages of taking control of their energy costs by securing long term price
certainty such as that which can be delivered through onsite PPAs. The
commercial case for onsite PPAs is further underpinned by predictions of
sustained high prices. Analysis from some market forecasters suggest that
wholesale electricity prices will remain above the pre-2021 historic average
until at least the end of this decade.
The investment opportunity
Elevated grid power prices are an important factor for businesses in
evaluating alternative supply options, with 77% of businesses surveyed in the
nPower 2022 Business Energy Tracker reporting that energy costs were seen as
the top business risk. Sustainability and net zero measures remained an
important consideration for most businesses surveyed, but an overwhelming
majority of more than 90% had concerns about the costs of funding the energy
transition and so a PPA solution may be attractive to those evaluating the
potential for onsite generation. This is supported by research from the CBI in
August 2022, which reported that 30% of firms consider that energy price rises
were likely to negatively impact current or planned investment in net zero
measures. For these businesses, a fully funded PPA solution for onsite
generation could provide an attractive route to attain sustainability goals
whilst also reducing costs. Corporate PPAs, which provide direct agreements
between generators and business consumers for grid connected, offsite assets,
are also garnering more attention as an option for aiding price certainty
whilst simultaneously achieving corporate sustainability targets.
Inflation in power prices and the economy more generally is feeding through
into increases in equipment and labour costs for delivery of projects,
resulting in some rises in the PPA rate which we need to achieve for new
installations. However, these rises are outstripped by the increases in the
grid import prices described above, ensuring that the economic rationale for
clients is preserved.
We expect that the backdrop of elevated and volatile wholesale electricity
prices should prove favourable for the Company's investment proposition,
driving corporates to focus on alternative solutions such as onsite generation
and thus facilitating the realisation of the potential market.
Our Portfolio
We provide below further details of our Portfolio in case studies of
individual projects which have either been acquired or developed during the
period.
As at 30 September 2022
Number of renewable energy assets Off-takers supplied Portfolio generating capacity(3)
37 8 62.6MW
Clean electricity generated since IPO Tonnes of CO(2e) avoided Weighted average unexpired PPA term
28,817GWh 6,000 19 years
Portfolio Off-takers Status
Case Studies
Nissan
Type Ground mount solar PV
PPA length 20 years
Size 20MWp
Status Commissioning expected Jan 2023
A 20MW ground mount solar PV system for Nissan Motor Manufacturing UK Limited
("Nissan"). The installation is located at Nissan's Sunderland manufacturing
plant which is the subject of a £1bn investment plan to transform the site
into an electric vehicle hub, including the UK's first large scale battery
factory.
Nissan's Sunderland plant forms the centrepiece of NissanEV360, a £1bn
electric vehicle hub which aims to create a sustainable blueprint for vehicle
manufacturing by incorporating electric vehicles, renewable energy and battery
production. In 2021 Nissan became the first Japanese carmaker to join the
United Nations backed Race to Zero campaign which accelerates the company's
full electrification and carbon neutrality goals.
Marks & Spencer
Type Rooftop solar PV
PPA length 12 years
Size 6MWp
Status Operational
A 6MWp rooftop solar PV system for Marks & Spencer plc ("M&S") located
in Leicestershire. The system benefits from Renewables Obligation Certificates
(ROCs) at a rate of 1.6 ROCs per megawatt hour of generation. The system is
operational and immediately income producing for the Company. At the time of
completion, it was the largest rooftop solar array in the UK and was expected
to lower M&S's carbon footprint by 48,000 tonnes over 20 years.
M&S intends to become a net zero business by 2035 and net zero across
their entire value chain by 2040. They have joined the UN's Race to Zero
campaign and have aligned their targets with the Paris Climate Agreement to
limit global warming.
Sonne Solar Portfolio
Type Ground mount and rooftop solar PV
PPA length 20 year average remaining
Size 33MWp
Status Operational
A 33MW mixed ground mount and rooftop portfolio of operational
behind-the-meter solar PV systems. The portfolio, held within Sonne Solar
Limited, consists of assets at 32 sites in England and Scotland which are
occupied by Amazon, Tesco or Anglian Water. Electricity from the assets is
sold to the relevant site occupier under a long-term PPA, with excess
generation being exported to the grid. The sites were commissioned between
2018 and 2022, and several of the earlier sites also benefit from
government-backed feed-in-tariffs linked to RPI. Sonne Solar Limited is the
counterparty to a framework agreement with a FTSE 100 business through which
it has access to a development pipeline of 33 further behind-the-meter sites
in the UK.
This is one of the largest operational behind-the-meter portfolios in the UK
and generates an annual CO(2e) saving of c. 6,500t relative to grid
imports. The deal provided an accelerated route to scale for the Company's
portfolio, delivering immediate revenues and securing relationships with key
off-takers.
Sustainability Report
Introduction
During the reporting period, the Company has continued to develop its
sustainability strategy.
As part of the implementation of this strategy the Investment Adviser has
recruited a Head of Sustainability, Christoph Scaife. Christoph took up this
role in February 2022 and will take the lead in further developing and
implementing the Company's sustainability strategy with the Company's
investment team.
A key element of the Company's ESG strategy focuses 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.
Since IPO, sustainability related priorities have been identified as key to
delivering value for the Company's stakeholders. These were based on an
in-depth materiality assessment which highlighted six key elements as detailed
below:
Market supply chain developments
In May 2021 the University of Hallam, Sheffield, published a report that was
widely regarded as the tipping point to exposing forced labour practices in
the Xinjiang Uyghur Autonomous Region ("XUAR") of China, and in particular
within the solar sector. Over the past two years various reports have emerged
and investigation have been launched, however, the true scale of forced labour
practices is still not fully understood. Investigations are not comprehensive
enough and the degree to which these practices occur varies. Investors and
project developers are required to evaluate and mitigate this risk through
their own procurement practices until such a time as the industry has fully
addressed these issues. Dame Sara Thornton DBE QPM has stated in December
2021:
"Forced labour is a global problem, hidden in farms, factories, mines, and
construction sites around the world. No sector is immune from exploitation and
no business can afford to be complacent. Audits can help unearth the
indicators of forced labour as defined by the International Labour
Organization (ILO). Tracking these indicators is important for building a
nuanced picture of risks in the workplace.
However, audits alone are not sufficient for addressing forced labour risk or
finding modern slavery. They should be part of a wider portfolio of
engagement, including worker voice tools, to deepen understanding of the
complex commercial ecosystems in which businesses operate. Admitting that all
businesses are at risk is an important development as this sector matures. The
next steps should be the identification and remediation of victims. Ultimately
all stakeholders - businesses, government, investors, NGOs and society -
should work collaboratively to prevent forced labour from entering supply
chains in the first place. These are not easy steps for any organisation, but
those businesses that show leadership will be rewarded by more resilient
business models and competitive advantage as scrutiny from investors,
consumers, legislators and NGOs intensifies in this space."
As the Company is an active participant in the sector, procuring and
installing solar panels that will most likely have originated in China,
whether through the extraction of raw materials, manufacturing of silicon
ingots or the assembly of photovoltaic panels, the risk of the Company's
supply chain having forced labour is material. The Company's investment
adviser has recognised this risk and has developed various mitigation measures
to address these. Whilst the ability to fully exclude the companies that have
exposure to forced labour practices remains challenging, the Company does have
control over its own procurement processes. The Investment Adviser has
developed a set of criteria for ensuring that panels and equipment are not
procured from any supplier associated with forced labour. Ensuring its own
supply chain is considered "clean" is the first step to ensuring that
shareholders in the Company are protected from this social risk Additionally,
increasing demand for ethically produced panels contributes to the industry
incentive that good operational and labour practices are rewarded.
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 will be reviewed semi-annually and
signed off by a Company Director in collaboration with the Investment
Adviser's Head of Sustainability, on behalf of the Company's Board. The
Board's obligations and commitments relating to equipment procurement are
documented in the 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. This situation
has been exacerbated in the last two years by a lack of access attributable to
the coronavirus pandemic. 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, these 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.
The Improvement List ("Improvement List") is a list whereby the Company
acquires a project that already has panels installed/purchased where the
manufacturer has not met the Supplier Criteria, and/or the origin and
manufacture of the panels have not been adequately documented. The Improvement
List is an identification process for steps that need to be taken and is not
an investment exclusion list. The Improvement List requires a retrospective
approach with those assets to bring them into alignment with best procurement
practices.
Where an asset has been added to the Improvement List, the Investment Advisor
will:
a) Determine the manufacturer of the panels installed, on a best-efforts basis
and obtain the certificates of origin or details of raw material sources,
processing and manufacturing.
b) Determine if the panels manufacturer has exposure to the Xinjian province, and
/ or no evidence provided that the panels have been procured through a
segregated supply chain that excludes the Xinjiang province.
c) Request certificates of origin for any post transactions panels that are
procured, in accordance with the Supplier Criteria, and link these to the
original screening and investment paper.
d) Clearly communicate to the Investment Committee, Board and Head of
Sustainability what actions are still required to satisfy compliance criteria,
and seek to agree an improvement plan,
e) Develop an improvement plan, which should be signed off by the Head of
Sustainability and registered in the Panels Compliance register.
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
As this is the first year of operation with investments being completed in the
latter part of the reporting period, noting that the Company did not emit
emissions that have exceeded 40,000kWh during the year and is not required to
disclose carbon emissions related to its operations. It should be noted that
the Investment Adviser will be publishing its full carbon related emissions at
the end of the reporting year where the emissions associated with the fund and
operations for 2022 will be reported.
Corporate Social Responsibility
The Company has made a commitment to donate one per cent of its profits to
charitable causes through an independent foundation. 2022 is the first year of
operations for the Company, and no profit has been achieved in this operating
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 and the development of a
diverse and stable workforce.
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. Steve Windsor, Principal, and the Head
of Human Resources mentor through STEM Learning. 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
The Board considers that in conducting the business of the Company over the
course of the year ended 30 September 2022, they have acted to promote the
long-term success of the Company for the benefit of Shareholders, whilst
having regard to the matters set out in section 172(1)(a-f) of the Companies
Act 2006 ("the Act").
Details of our key stakeholders and how the Board engages with them can be
found on pages 27 to 29.
Other disclosures relating to our consideration of the matters set out in
s172(1)(a-f) of the Act have been noted as follows:
s172 Factor Our approach Relevant disclosures
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 Our Key Stakeholder relationships on pages 27 to 29.
such strategic discussions involve careful considerations of the longer-term
consequences of any decisions and their implications on Shareholders and other Board activities during the year on pages 38 and 41.
stakeholders and the risk to the longer-term success of the business. Any
recommendation is supported by detailed cash flow projections based on various
scenarios, which include availability of funding; borrowing; as well as the
wider economic conditions and market performance.
B The interests of the Company's employees The Company does not have any employees because of its external management Our Key stakeholders on pages 27 to 29.
structure.
The Board's main working relationship is with the Investment Adviser.
Consequently, the Directors have regard to the interests of the individuals Culture on page 39.
who are responsible for delivery of the investment advisory services to the
Company to the extent that they can do so. Secondary to the Investment
Adviser, the consider the interests of individuals in other service providers
to the Company.
C The need to foster the Company's business relationships with suppliers, The Board believes that building effective business relationships with Our Key stakeholders on pages 27 to 29.
customers and others suppliers, customers and other key counterparties is crucial to preserving
long-term shareholder value. Excluding the Investment Adviser, at the
corporate level, these stakeholders include the Administrator and Company
Secretary, Corporate Broker, Legal Counsel, public relations agency and the
Auditor and tax advisers. At the operational level, this includes asset-level
counterparties, local communities and debt providers.
D The impact of the Company's operations on the community and the environment As an owner of assets located in communities across the UK, we aim to ensure Our Key stakeholders on pages 27 to 29.
that our solar assets provide safe and comfortable environments and contribute
to the reduction of fossil fuels.
The impact on the community is covered in the Company's Sustainability section Details of the ESG policy and strategy are included on pages 21 to 23.
of this Report.
The Board's approach to sustainability is explained on pages 21 to 23.
E The desirability of the Company maintaining a reputation for high standards of The Board is mindful that the ability of the Company to continue to conduct Chair's letter on corporate governance on pages 51 and 53.
business conduct its investment business and to finance its activities depends in part on the
reputation of the Board, the Investment Adviser and Investment Advisory Team. Principal risks and uncertainties on pages 30 to 34.
The risk of falling short of the high standards expected and thereby risking Our culture on page 39.
business reputation is included in the Audit and Risk 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 51 and 53.
oversees investor relations initiatives to ensure that views and opinions of
Shareholders can be considered when setting strategy. Our Key stakeholders on pages 27 to 29.
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 manage
and foster the relationships with our clients, supply chain, key partners and
advisers.
Investor engagement
The Company's shareholders are an incredibly 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 brokers 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 will be held as a physical meeting in London and will be attended
by all the board. The meeting details will be announced by RNS and open to all
Shareholders.
● Because the Company had no formal analyst coverage in March 2022, there was no
FY22 interim results presentation to analysts. The Company's broker arranged a
roadshow for institutional shareholders.
● 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.
● Our website contains comprehensive information about our business, regulatory
news and press releases alongside information about our 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 meetings with prospective and new
investors.
Topics discussed
● Financial performance of the Company and disclosures contained within the
interim report
● The impact on the Company because of Vale of Mowbray administration.
● 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.
● Positive feedback using 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 21 to 23.
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 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
H&S 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 3(rd) party technical
advisors, to assess construction quality and verify construction is in line
with contractual timelines.
Topics discussed
● Issues on sites, particularly related to timelines and safety on site.
● New PPA projects on the horizon, contractors' ability to deliver such sites,
and potential PPA pricing.
● Design issues pre-construction, to ensure that the solar PV plants are in line
with our specifications.
● Topics related to commissioning, acceptance and handover documentation.
How did we respond?
● We provide PPA prices to EPC contractors for projects that meet our investment
criteria.
● We provide PPA prices to EPC contractors for projects that meet our investment
criteria.
● We translate contractor's reports to report 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 overlooks 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.
Whilst the Company has no employees, other than the Directors, 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 will 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 after year end and have performed a
detailed review of the Investment Adviser's performance.
● The Independent Directors will seek to 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 will also engage with the Investment Adviser through the annual
strategy day in addition to informal meetings as and when required.
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?
● Inclusion of a section on activities undertaken pursuant to the delegated
authorities within the quarterly Investment Advisers report.
● Establishment of 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 IA, 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 held between the Investment Adviser and the asset manager to
understand current and future needs. Any potential opportunities or risks
facing the Company are fed back to the Board to inform future strategy. The
Investment Adviser will visit sites on a periodic basis and feedback on
material issues reported back 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
period.
● 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 will be 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 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, Alvarium Securities, 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 Committees are 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 during the year for key suppliers engaged during the year.
● Relationship management.
How did we respond?
● There is 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, where the
supplier performance and fees are reviewed 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 will be arranged in order to
discuss the ongoing relationship with the company, these will be 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 known regions where these
practices are known to be happening. The policy has been developed with the
UK's Modern Slavery Act 2015 as set out below and is reviewed annually.
Suppliers are reviewed at least semi-annually to ensure that procurement
procedures are up to date.
Supplier payment policies
Neither the Company nor any of its subsidiary undertakings exceeds the
thresholds for reporting payment practices and performance.
The following voluntary disclosures relate to the Company:
● the Company does not have standard or maximum payment terms but seeks to
settle supplier invoices in accordance with pre-agreed terms.
● invoices may be submitted electronically but as the volume of payments is
relatively low, the Company does not operate electronic tracking for
suppliers.
● the Company does not offer supply chain finance.
● there are no arrangements for participation on supplier lists and no charges
for being on such a list.
● the Company is not a member of a payment code of conduct.
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://atratoroof.com/regulatory-documents/.
Risks and Risk Management
The Board and JTC Global AIFM Solutions Limited, the Company's Alternative
Investment Fund Manager (the "AIFM"), together have joint overall
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.
To ensure that risks are recognised and appropriately managed, the Board has
agreed a formal risk management framework. This framework sets out the
mechanisms through which the Board identifies, evaluates and monitors its
principal risks and the effectiveness of the controls in place to mitigate
them.
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 period. 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 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.
This risk map shows our assessment of each area of principal risk after
mitigation:
1. Deployment of capital and pipeline
2. Performance of third-party service providers
3. Investment performance and measurement
4. Changes in cost of finance
5. Project counterparty risk
6. Power Price risk
7. Operational, climate and ESG risk
8. Economic and regulatory conditions, locally and
globally
9. ITC tax status and changes in tax legislation
10. Local and global political risk and impact of pandemics
Principal Risks
Risk category Potential impact Mitigation
1. Deployment of capital and pipeline The Company's intention is to deploy the capital raised into Clean Energy The Investment Adviser has multiple routes to source assets allowing us to
Assets. However, there is a risk that the pipeline of opportunities does not benefit from off market transactions through: (i) an extensive network of
Probability: Moderate crystalise or that the Company is uncompetitive and fails to secure the assets contacts providing access to operational assets and development opportunities,
that meet the investment objectives in a timely manner to provide the target (ii) a developed network of EPC contractors with their own dedicated sales
Impact: High return to the investors. teams to source new opportunities, and (iii) contacts with material landlords.
The Investment Adviser has identified a pipeline of opportunities with an
Delays in deployment will impact returns. estimated investment value of is 2.4 times the capital raised. Delays in
capital deployment have been a result of a turbulent market, however several
exclusivity agreements have been secured in relation to this pipeline.
The Company will engage with reputable and knowledgeable service providers to
provide due diligence and appropriate contractual protection for liabilities
is sought.
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 Contractual performance is measured through performance metrics and fee
to perform services that are integral to the operation of the Company, and on structures are established to align the incentive of the service providers of
Probability: Low non-executive directors to oversee the performance of these service providers the Company. This is achieved by contract fees linked to shares and the
and the Company. Company's NAV. The Board regularly reviews the appropriateness of these
Impact: High service providers and their performance.
3. Investment performance and measurement Investment valuation and decisions are based on financial projections and The Investment Adviser bases assumptions on industry data and reputable solar
assumptions captured in a financial model. These assumptions may change from irradiance databases. The P50 irradiance scenario is used as a base case and
Probability: Moderate to time to time and the actual performance may vary significantly from the sensitivity to changes in irradiation are assessed. Assumptions are updated
assumptions. and benchmarked frequently and the model itself is regularly reviewed.
Impact: High
Assumptions are reliant on various factors, including environmental
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 financing in future 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.
The Company currently has no debt. 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 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 monitored during the period of
Service providers are engaged to install, operate and manage Clean Energy contract performance.
Assets. If these providers fail to perform or have financial difficulties, the
financial performance and 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.
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.
If market rates are very low, users may not be willing to enter into an
agreement for supply from the Company.
7. Operational, climate and ESG risk The Company's indirect subsidiaries owns assets on third party property and When conducting due diligence on potential investments, the Investment Adviser
assumes 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 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.
Insurances may not cover specific risks and changes in environmental laws may Energy generation is based on P50 forecasts which are deemed appropriate for
have an impact on the Company's activities. long-term assets.
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
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 will engage 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. is monitoring 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 and rates and assess their impact on the investment
portfolio.
Tax legislation is subject to change in both the UK and any other jurisdiction
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 uncertainty around Brexit continues to cause significant The Investment Adviser will monitor industry and national news to ensure that
volatility in financial markets and may necessitate further changes to the any proposed changes are anticipated, and appropriate mitigations are taken.
regulatory environment.
Probability: Low
Impact: Moderate The ongoing conflict in Ukraine has led to higher power prices, leading to
energy price caps for domestic and commercial users. This may reduce appetite The price cap for commercial users is set at a rate which is significantly
for PPAs in the near term. above typical PPA rates, and is only in force until March 2023, meaning that
long-term PPAs can still be attractive.
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
failures. Additionally, energy demand at certain sites may be reduced.
Asset performance can be monitored remotely and regular contact with the
service providers is maintained to ensure ongoing service.
Assets, where practicable, benefit from the ability to export excess
generation to the grid.
Emerging Risks
The Directors have identified the following emerging risks:
Power prices - impact on customers
With the ending of the strict Covid-19 lockdowns and the associated reduction
in economic activity that drove down power prices, wholesale electricity and
gas prices have rebounded extremely strongly. Existing high prices at the
start of 2022 were then pushed even higher by Russia's invasion of Ukraine and
the sanctions on Russian fossil fuels that followed.
The Company's exposure to wholesale power prices is limited, although these
prices have an overall impact on our clients' price sensitivity in PPA
negotiations, and uncertainty around regulatory interventions for commercial
energy bills can cause customers to delay decisions around long-term PPAs.
Brexit - legal and regulatory risk
On 31 January 2020, the UK ceased to be a member of the European Union,
entering a limited transition period until 31 December 2020. 100% of the
Portfolio is located in the UK and none of the existing assets have
experienced legal or regulatory issues stemming from Brexit. Regulation
changes as a fall out of Brexit continue to be monitored including the impact
on the availability of resources, prices and taxation.
Power prices - impact on generators
In the recent Autumn Statement, the UK Government announced its plans to
recover, and limit perceived excess profits from generators whose cost of
generation is not linked to the price of gas.
The Electricity Generator Levy ("the Levy") is a temporary windfall tax of 45%
that will be applied to wholesale market revenues above £75/MWh on UK
low-carbon electricity generation. The Levy will be applied from 1 January
2023 until 31 March 2028. The Company's focus on long-term highly contracted
solar PV systems results in a low sensitivity to wholesale power prices. Based
on the current portfolio and pipeline, the Levy is not expected to impact the
Company's target returns or net asset value.
Debt financing covenants
The Company's primary intention is to deploy the capital raised in the IPO and
then review the markets for additional funding, potentially through debt
financing. This finance will contain covenants, which if breached will lead to
forced sale of assets or 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.
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 period
ended 30 September 2022. 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 29 November 2023,
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 Board has also assessed the prospects of
the Company over a longer period than the going concern review and has a
reasonable expectation that the Company will be able to continue in business
over the five-year period examined in that assessment.
The Company generated a net cash outflow from operating activities in the
period of £5.0million, with its cash balances at 30 September 2022 totalling
£69million and fixed deposits greater than three months, at inception, of
£20million. The Company had £1.4m in capital commitments as at the balance
sheet date. 98% of contractual income for the period has been collected in
full.
All clients credit risk is assessed at engagement with an annual review to
highlight any risk arising subsequent to engagement. During the year Vale of
Mowbray entered into administration resulting in generation being exported the
grid under the spill agreement.
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
period. 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 2027, 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 30 to 32 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, inflation and operating cost increases 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 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 are 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 Power Purchase
Agreement ("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.
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 17. 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
Market outlook on pages 20. Disclosures in relation to environmental and
social issues have been included within the ESG section on pages 21 to 23.
Employee diversity disclosures have not been included as the Directors' do not
consider these to be relevant to 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 IPO, an annualised dividend of five pence per
share has been declared out of NAV, while the deployment of capital has
secured a portfolio yield of 7.7%. 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. With the deployment of a third of the capital raised, the
fully operational portfolio will provide 50% cover of dividend target in
future years before funding operating expenses of the Company. While long
term dividend cover will be the ratio of net cash flows generated from the
investments and all costs incurred by the Company to the dividend paid in the
period. This 50% dividend cover reflects the portion of a 5 pence per share
dividend, covered by the cash generated by the existing portfolio once fully
commissioned.
● 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 Period was 1.38% against a target of 1.5%.
● 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 7.2% premium as
at 30 September 2022.
The Board of Directors
Juliet Davenport
Chair
Relevant Skills and experience:
· Over 23 years' experience
· Founded Good Energy Group plc
· NED Connected Kerb, Ombudsman Services and The Crown Estate
· Juliet has had various appointments with academic organisations and
think tanks focusing on sustainability and innovation, including the Bath
University, Bristol University, University of Wales, Grantham Institute at
Imperial College and London School of Economics, and the Smith School of
Enterprise and the Environment at the University of Oxford.
Career Highlights
· In 1998, Juliet founded the AIM-listed company Good Energy plc, a 100%
renewable energy utility specialising in decentralised small-scale renewables.
· In her role as CEO she oversaw its growth to a £130 million turnover
business, including developing over 100MW of renewable assets and supporting a
portfolio of over 100,000 small scale roof top solar sites. Juliet stepped
down as CEO in 2021, moving to a non-executive board director role for 12
months.
· Juliet has a wealth of non-executive and advisory experience. She
serves on the board of the Crown Estate and supports its integration of
sustainability across the organisation together with the development of
renewables on Crown property and more recently has been appointed as the
President of the Energy Institute.
Marlene Wood
Chair of Audit Committee
Relevant Skills and experience:
· Chartered accountant with extensive experience in investment trust
governance
· Held senior board positions across a broad range of both private and
public companies
· Non-executive director and chair of the audit committee for RM
Infrastructure Income PLC, Home REIT PLC and formerly chair of the audit
committee for GCP Student Living PLC
Career Highlights
· Formerly Deputy Chair and Finance Committee Chair for the Scottish
Funding Council for Further and Higher Education
· She spent 20 years with the Miller Group, a major UK property business,
predominantly as finance director for Miller Developments, the property
development and investment arm, and latterly as group accounting and treasury
director.
Faye Goss
Chair of Management Engagement Committee
Relevant Skills and experience:
· Extensive experience as a property lawyer and senior business adviser
· General Counsel for Lendlease Europe
· Spent over 11 years at Tesco PLC where she led Tesco's group property
legal function with responsibility across its international and domestic
property portfolio and responsibilities included oversight of elements of
Tesco's carbon reduction commitments such as the roll-out of solar panels
across the estate and the associated offtake arrangements.
Career Highlights
· Faye trained as a real estate solicitor and worked for both CMS and
Brian Cave Leighton Paisner LLP (previously Berwin Leighton Paisner LLP).
· Prior to leaving Tesco, Faye held the role of Group Corporate and
Property Legal Director with accountability encompassing legal oversight of
group finance, M&A and group procurement.
The Investment Adviser
The Atrato Group is an alternatives investment management platform founded by
Ben Green and Steve Windsor in 2016. The Group has £2.2bn under advisement
as at 30 September with over 50 employees, headquartered in London. Atrato
Capital Limited, an Atrato Group company is the investment adviser to
Supermarket Income REIT, a FTSE 250 company. Atrato Partners Limited, an
Atrato Group company, is the Investment Adviser to Atrato Onsite Energy.
Ben Green
Principal
Ben is a principal at Atrato and is responsible for leading the development
and execution of the firm's long-term strategy. Ben is a member of the Atrato
Group Leadership Team and a member of the firm's Investment Committee.
Relevant skills and experience:
· Over 20 years' experience structuring and executing real estate
transactions
· Completed more than £3.5 billion of sale and leaseback transactions,
with major occupiers including Tesco, Barclays and the BBC
· Expert in executing transactions for grocery real estate and real
estate corporate finance
· Qualified Lawyer
Career Highlights:
· Co-founded Atrato and led the IPO of Supermarket Income REIT and
Atrato Onsite Energy plc
· Managing Director Lloyds Bank Commercial Banking, where he ran the
team providing corporate finance services to corporates, infrastructure and
real estate clients
· Managing Director and Head of European Structured Finance at Goldman
Sachs from 2007 to 2013
· Director Barclays Capital
Steve Windsor
Principal
Steve is a principal at Atrato and is responsible for leading the development
and execution of the firm's long-term strategy. Steve is a member of the
Atrato Group Leadership Team and a member of the firm's Investment
Committee.
Relevant skills and experience:
· Over 20 years' experience specialising in finance and risk
management
· Expert in capital markets, risk management and financing
· Highly experienced in senior management positions
Career Highlights:
· Co-founded Atrato and led the IPO of Supermarket Income REIT and
Atrato Onsite Energy plc
· Partner and Head of EMEA Debt Capital Markets and Risk Solutions at
Goldman Sachs
· Held various roles across both Trading and Banking divisions at
Goldman Sachs from 2000 to 2016
· Member of Goldman Sachs Investment Banking Risk Committee
· Advised numerous FTSE 100 firms on managing risk and financing their
business
Steven Noble
Chief Investment Officer
Steven is the Chief Investment Officer and responsible for overseeing all
investments for the Group. Steven is a member of the Atrato Group Leadership
Team and a member of the firm's Investment Committee.
Relevant skills and experience:
· Over 20 years' experience specialising in finance, risk management
and real estate
· Extensive supermarket property transaction experience
· Specialist in corporate finance, with a primary focus on commercial
real estate
· Chartered Financial Analyst and Chartered Accountant
Career Highlights:
· Co-founded Atrato and led the IPO of Supermarket Income REIT
· Transacted over 30 supermarket property transactions, growing
Supermarket Income REIT's portfolio to £1.2 billion
· Senior Manager at Lloyds Bank in Corporate Finance
Natalie Markham
Chief Financial Officer, Director of Holdco and member of the Investment
Committee
Natalie is the Chief Financial Officer for the Atrato Group and is responsible
for the management of its finance and investor relations functions. Natalie is
a member of the Atrato Group leadership team and Chair of the Investment
Committee.
Relevant skills and experience:
· Over 20 years' experience in finance, specialising in real estate
investment funds
· Experienced in senior management positions and financial management
positions of real estate investment companies
· Assisting with the sustainability strategy with the Atrato COO
· Qualified Chartered Accountant and Fellow of the Chartered Institute
of Accountants
Career Highlights:
· European CFO of Macquarie Global Property Advisors, member of MGPA
European Management Team and Director of the MGPA European advisory business
· Manager RSM Robson Rhodes, audit and assurance
Lara Townsend
COO, MD Origination, Director of Holdco and member of the Investment Committee
Lara is the Chief Operating Officer for the Atrato Group and is responsible
for corporate development and the group's operations. Lara is a member of the
Atrato Group leadership team and the Investment Committee.
Relevant skills and experience:
· More than 20 years' experience of infrastructure and asset finance
· Responsible for the establishment and integration of the Atrato
Group's sustainability strategy alongside the CFO
· Manages the team's compliance and legal function
Career Highlights:
· Previously a Director within Lloyds Bank's capital markets division,
where she focused on the provision of funding for real estate and
infrastructure projects.
· Lara studied Economics and Business Studies at the University of
Edinburgh.
Gurpreet Gujral CFA,
Managing Director, Renewable Energy
Gurpreet is the co-fund manager of Atrato Onsite Energy plc and is responsible
for leading the Renewable Energy investment strategy for the Atrato Group.
Relevant skills and experience:
· Over 15 years of renewable energy experience
· Specialist knowledge of the development and commercialisation of
rooftop solar PV on industrial and commercial sites
· Worked across the full spectrum of renewable energy
· Masters in Sustainable Urban Development
Career Highlights:
· 7 years with the Macquarie Group in the Green Investment Group (GIG)
and in the equities business as the lead renewable energy analyst
· Coordinated and structured the sale of infrastructure assets
including a fibre-to-the-home network connected to one million building units
in Spain
· Responsible for the sale of a £300 million industrial and commercial
energy meter portfolio to a leading infrastructure investor in the UK
Francisca Wiggins
Director, Renewable Energy
Francisca is the co-fund manager of Atrato Onsite Energy plc and is
responsible for commercial negotiations with our PPA off-takers and
EPC/O&M counterparties.
Relevant skills and experience:
· More than 10 years' experience in project development in the
renewable energy sector
· Particular focus on new technologies
· Extensive transaction experience in development and acquisition of
energy assets
· Masters in Mechanical Engineering with Renewable Energy.
Career Highlights:
· Instrumental in the financing and build of the world's largest tidal
stream energy array, MeyGen
· Commercial Director for an AIM listed renewable energy project
developer
Gustaf Schuler
Technical Director, Renewable Energy
Gus is the Technical Director in the renewable energy team, responsible for
all technical aspects of a system's design, installation and operations.
Relevant skills and experience:
· Over 10 years' experience in the energy industry
· Primary focus on renewables and solar PV's
· Masters in Renewable Energy and Sustainability
· Diploma in Electrical Engineering
Career Highlights:
· Senior Delivery Manager at Cero Generation where he managed the
development and construction of c. 80MWp of BHM C&I solar projects and has
vast experience in advising lenders, investors and developers in PV projects
Jon Ashford
Head of Engineering, Renewable Energy
John is the Head of Engineering in the renewable energy team, and works
closely with Gustaf to ensure the technical aspects of the system operate to
the standard that is expected.
Relevant skills and experience:
· Over 25 years' experience in the property sector, focusing on
operations and engineering
· 9 years as the Head of Engineering, Energy and Sustainability at
Sainsbury's
· Responsible for carbon reduction planning and the application of
renewable energy across the Sainsbury's portfolio
· 7 years at Tesco, latterly as the Head of Engineering and Energy
Career Highlights:
· Director of Operations at Engenie UK, an electric vehicle rapid
charging start-up
· Owner, Director and Company Secretary for Sustainable Design
Solutions
· Head of Engineering and Energy at Tesco Property Services
Brett Pieterse
Finance Director, Renewable Energy
Brett is the Finance Director for Atrato Onsite Energy plc, responsible for
finance, tax and operations.
Relevant skills and experience:
· Over 20 years' experience in finance and Infrastructure investment
· 5 years as Finance Director at Vercity, an award-winning
infrastructure and real estate project leadership group
· Chartered Accountant and member of the South African Institute of
Chartered Accountants
Career Highlights:
· Established the financial framework for investing and managing
renewable energy projects at Vercity and John Laing
· Over 10 years at John Laing, latterly as Divisional Finance Director
responsible for asset management, renewable energy and primary investments.
Leadership and Purpose
Role of the Board
The Board has a duty to promote the long-term sustainable success of the
Company for its Shareholders. The Board is responsible for the overall
leadership of the Company, setting its values and standards, including
approval of the Company's strategic aims and objectives and oversight of its
operations.
The Board currently comprises the Chair and two independent Non-Executive
Directors and is supported by Apex Limited who act as the Company Secretary.
Juliet Davenport is the Chair of the Company and is responsible for leading
the Board and for setting the tone in respect of the Company's purpose, values
and culture. As part of her role in leading the Board, she ensures that the
Board provides constructive input into the development of strategy,
understands the views of the Company's key stakeholders and provides
appropriate oversight, challenge and support.
The Board fulfils the responsibilities typically undertaken by a nomination
committee and a remuneration committee. The Company has not appointed a senior
independent director. Accordingly, the Audit Committee Chair, in combination
with the other Directors, fulfils the duties of the senior independent
director, acting as a sounding board for the Chair and acting as an
intermediary for other Directors, as applicable.
The Board is well balanced and possesses a sufficient breadth of skills,
variety of backgrounds, relevant experience and knowledge to ensure it
functions effectively and promotes the long-term sustainable success of the
Company. All Directors have access to the advice and services of External
Counsel and the Company Secretary, who are responsible to the Chair on matters
of corporate governance. Further details of each Director's experience can be
found in the biographies on page 35.
The Directors consider the evaluation of the Board, its Committees and members
to be an important aspect of corporate governance and as such the Board has a
formal policy to evaluate its own performance annually. The Chair leads the
assessment which covers:
● The performance of the Board and its committees, including how the Directors
work together as a whole;
● The balance of skills, experience, independence and knowledge of the
Directors; and
● Individual performance, particularly considering whether each Director
continues to make an effective contribution. The assessment involves the
completion of anonymous questionnaires followed by a discussion with all
Directors, as a group and individually.
Following the completion of this years' evaluation process during October
2022, the Chair held one to one discussions with the Board members to consider
the feedback on the performance of the individuals and of the Chair.
The results of the evaluation process were presented to and discussed by the
Board and it was concluded that the Board was functioning effectively. An
externally run evaluation will be undertaken during the next financial year
and every three years thereafter.
The Board will regularly consider the balance of skills, experience, diversity
and independence of the Board, as well as the strategy and likely future
developments in order to assess the current composition of the Board and its
suitability, or likely needed changes, in the longer term. In the coming year
the Board will consider and formulate succession plans. The Company does not
have any employees, other than the Board. In respect of appointments to the
Board, we consider that each candidate should be appointed on merit to make
sure that the best candidate for the role is appointed every time. The Board
supports diversity and inclusion at Board level and encourage candidates from
all educational backgrounds and walks of life. What is important is
professional achievement and the ability to be a successful Director based on
the individual's skill set and experience. Qualifications are considered when
necessary to ensure compliance with regulation such as in relation to
appointments to the Audit Committee.
The Board supports the recommendations set out in the Hampton-Alexander Review
on gender diversity and the Parker Review on ethnic diversity and recognise
the value and importance of cognitive diversity in the boardroom. As at the
date of this report the Board consisted of all female members. The Board
recognises that diversity extends beyond gender and will continue to drive and
oversee our progress in these areas.
How we operate
The Company's business model and strategy were established at the time of the
IPO in October 2021. The business seeks 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 Company will seek to
achieve its investment objective by investing in Onsite Solar Assets.
To facilitate timely execution of the business strategy the Board and the AIFM
have delegated certain pre-agreed authorities to the Board of its wholly owned
subsidiary Atrato Onsite Energy Holdco Limited, whose directors are provided
by the Investment Adviser. The Investment Adviser will adopt a formalised
review process, incorporating ESG factors at all stages of the asset
lifecycle, and the delegated authorities to be granted by the Company and the
AIFM to the Holdco Board are conditional upon adherence to this review
process.
The Investment Adviser will conduct a review of its approach to delivery of
the investment strategy on a half-yearly basis. Any resulting revisions to the
investment strategy are subject to agreement by the Board and the AIFM, at
which time the Board and the AIFM will also either confirm or amend any
delegated authorities granted to the Holdco Board.
The sustainability of returns is absolutely fundamental to the Company's
strategy, as summarised in the outline of the Company's business model on
pages 4 to 5 and on the Company's website: www.atratoroof.com, and the
Company's investment strategy is described in the Strategic Report on pages 1
to 34.
The Company has an outsourced operating model. JTC Global AIFM Solutions
Limited has been appointed by the Company, pursuant to the AIFM Agreement, to
be the Company's Alternative Investment Fund Manager, under which it is
responsible for overall portfolio management and compliance with the Company's
investment policy, ensuring compliance with the requirements of the
Alternative Investment Fund Manager Directive ('AIFMD') that apply to the
Company and undertaking risk management. The AIFM has delegated certain
services in relation to the Company and its Portfolio, which include advising
in relation to financing and asset management opportunities to the Investment
Adviser. The Investment Adviser advises the Company and the AIFM on the
acquisition of its investment portfolio and on the development, management and
disposal of clean energy assets in its portfolio pursuant to the Investment
Advisory Agreement.
The Management Engagement Committee keeps the appropriateness of the
Investment Adviser's appointment under review. In doing so the Committee
considers the past investment performance of the Company and the capability
and resources of the Investment Adviser to deliver satisfactory investment
performance in the future. It also reviews the fees payable to the Investment
Adviser, together with the standard of services provided by key service
providers to the Company, including the AIFM, Company secretary, registrar and
broker.
Conflicts of interest
All the Directors are considered by the Board to be independent of the AIFM
and of the Investment Adviser. As such they are considered to be free from any
business or other relationships that could interfere with the exercise of
their judgements.
Each Director has a duty to avoid a situation in which he or she has a direct
or indirect interest that may conflict with the interests of the Company. The
Board may authorise any potential conflicts, where appropriate, in accordance
with the Articles of Association. Where a potential conflict of interest
arises, a Director will declare their interest at the relevant Board meeting
and not participate in the decision making in respect of the relevant
business.
Culture
The culture and ethos of the Company are integral to its success. The Board
promotes open dialogue and frequent, honest and open communication between the
Investment Adviser and other key advisors to the Company. Whilst the Company
has no employees, the Board pays close attention to culture of the Investment
Adviser and its employees and believes that its forward thinking and
entrepreneurial approach, combined with its rigour and discipline, is the
right fit for delivering our strategy and purpose.
The Board believes that its positive engagement and working relationship with
the Investment Adviser helps the business achieve its objectives by creating
an open and collaborative culture, whilst allowing for constructive challenge.
The Non-Executive Directors speak regularly with members of the Investment
Adviser outside of Board meetings to discuss various key issues relating to
Company matters. The Company's success is based upon the effective
implementation of its strategy by the Investment Adviser and third-party
providers under the leadership of the Board. The Board's culture provides a
forum for constructive and robust debate, and the Board believes that this
will be fundamental to the success of the Company.
Investment Advisory Agreement
In reviewing the terms of the Investment Advisory Agreement (material terms of
which are summarised in note 6 to the financial statements) and the fee
arrangements within it, the Board has considered the extent to which the
outcome for Shareholders and management is consistent with the provisions of
the Code. Specifically:
● Clarity and transparency are achieved by way of the structure of the
Investment Advisory Agreement which compensates the Investment Adviser through
the advisory fee to cover all overheads and running costs relating to the
Company and which provides strong shareholder alignment through the payment of
the Semi-annual fees, which are to be used to purchase further shares in the
Company, at the Boards discretion.
● The structure of and rationale behind the Investment Adviser's fees are
explained in note 6 to the financial statements and are designed to be simple
and not to require subjectivity in their calculation.
● Given the simple arithmetic underlying the fee calculations, the range of
potential outcomes is straightforward to calculate and not subject to
discretion.
While the Code recommends oversight of the level of reward to individual team
members, this is not appropriate in the case of an externally managed
structure where the Independent Directors do not control the workforce.
The Board has sought and received confirmation from the Investment Adviser
that it complies with all governance requirements relevant to it. Such
confirmation will be sought at least annually.
The Board's attendance in 2021/2022
All Directors are expected to devote sufficient time to the Company's affairs
to fulfil their duties as Directors and to attend all scheduled meetings of
the Board and of the Committees on which they serve. Where Directors are
unable to attend a meeting, they will provide their comments on the Board
papers received in advance of the meeting to the Chair, who will share such
input with the rest of the Board and the AIFM.
Attendance at scheduled Board and Committee meetings during the year was as
follows:
Quarterly Board meetings Audit Committee Management Engagement Committee
4 Scheduled meetings 3 Scheduled meetings 0 Scheduled meetings
100% attendance 100% attendance n/a
Juliet Davenport 100% attendance 100% attendance n/a
Marlene Wood 100% attendance 100% attendance n/a
Faye Goss 100% attendance 100% attendance n/a
The first scheduled meeting of the Management Engagement Committee was held
post year end on 10th November 2022.
Key Board Statements
Statement of Compliance
The Board has considered the Principles and Provisions of the AIC Code of
Corporate Governance (February 2019) ('AIC Code') and that these provide the
most appropriate framework for the Company's governance and reporting to
Shareholders.
The AIC Code addresses the Principles and Provisions set out in the UK
Corporate Governance Code (July 2018) (the 'UK Code'), as well as setting out
additional Provisions on issues that are of specific relevance to the Company.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting Council,
provides more relevant information to Shareholders.
The Company has complied with the Principles and Provisions of the AIC Code
throughout the year, except for the three provisions set out below:
• The role of the chief executive
• Executive directors' remuneration
• The need for an internal audit function
The Board considers that these provisions are not relevant, being an
externally managed investment company. All the Company's day-to-day management
and administrative functions are outsourced to third parties. As a result, the
Company has no executive directors, employees or internal operations. The
Company has therefore not reported further in respect of these provisions.
The Company does not have an internal audit function. The need for this is
reviewed annually by the Audit Committee. Due to the relative lack of
complexity and the outsourcing of the majority of the day to-day operational
functions, the Audit Committee continues to be satisfied that there is no
requirement for such a function.
A copy of the AIC Code can be obtained via the AIC's website, www.theaic.co.uk
(http://www.theaic.co.uk) . It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make them
relevant to investment companies.
This Corporate Governance Statement forms part of the Directors' Report.
AIC Code Principle Evidence of compliance /
explanation of departure from the AIC Code
A A successful company is led by an effective board, whose role is to promote Section 172(1) Statement on pages 26.
the long-term sustainable success of the Company, generating value for
Shareholders and contributing to wider society.
Leadership and Purpose on pages 38 to 41.
Strategic report on pages 1 to 34.
B The Board should establish the Company's purpose, values and strategy, and Strategic report on pages 1 to 34.
satisfy itself that these and its culture are aligned. All Directors must act
with integrity, lead by example and promote the desired culture.
Leadership and Purpose on pages 38 to 41.
C The Board should ensure that the necessary resources are in place for the Our Principal Risks on pages 31 to 32.
Company to meet its objectives and measure performance against them. The Board
should also establish a framework of prudent and effective controls, which
enable risk to be assessed and managed.
Audit Committee report on pages 45 to 47.
Directors' report on pages 51 to 53.
D For the Company to meet its responsibilities to Shareholders and stakeholders, Section 172(1) Statement on page 26.
the Board should ensure effective engagement with, and encourage participation
from, these parties.
Our Key stakeholders on pages 27 to 29.
F The Chair leads the Board and is responsible for its overall effectiveness in Board activities during the year on page 41.
directing the Company. They should demonstrate objective judgement throughout
their tenure and promote a culture of openness and debate. In addition, the
Chair facilitates constructive board relations and the effective contribution
of all Non-Executive Directors, and ensures that Directors receive accurate,
timely and clear information.
G The Board should consist of an appropriate combination of directors (and, in Leadership and Purpose on pages 38 to 41.
particular, independent Non-Executive Directors) such that no one individual
or small group of individuals dominates the Board's decision making
H Non-Executive Directors should have sufficient time to meet their Board Leadership and Purpose on pages 38 to 41.
responsibilities. They should provide constructive challenge, strategic
guidance, offer specialist advice and hold third party service providers to
account
Management Engagement Committee report on page 44.
I The Board, supported by the Company Secretary, should ensure that it has the Board Activities during the year on page 41.
policies, processes, information, time and resources it needs in order to
function effectively and efficiently. Leadership and Purpose on pages 38 to 41.
J Appointments to the Board should be subject to a formal, rigorous and Leadership and Purpose on pages 38 to 41.
transparent procedure, and an effective succession plan should be maintained.
Both appointments and succession plans should be based on merit and objective
criteria and, within this context, should promote diversity of gender, social
and ethnic backgrounds, cognitive and personal strengths.
K The Board and its committees should have a combination of skills, experience Board of Directors Biographies on page 35.
and knowledge. Consideration should be given to the length of service of the
Board as a whole and membership regularly refreshed.
Leadership and Purpose on pages 38 to 41.
L Annual evaluation of the Board should consider its composition, diversity and Leadership and Purpose on pages 38 to 41.
how effectively members work together to achieve objectives. Individual
evaluation should demonstrate whether each Director continues to contribute
effectively.
M The Board should establish formal and transparent policies and procedures to Audit Committee report on pages 45 to 47.
ensure the independence and effectiveness of external audit functions and
satisfy itself on the integrity of financial and narrative statements
N The Board should present a fair, balanced and understandable assessment of the Audit Committee report on pages 45 to 47.
Company's position and prospects.
O The Board should establish procedures to manage risk, oversee the internal Audit Committee report on pages 45 to 47.
control framework, and determine the nature and extent of the principal risks
the Company is willing to take in order to achieve its long-term strategic
objectives
Alternative Investment Fund Manager's report on pages 55 to 56.
P Remuneration policies and practices should be designed to support strategy and Directors Remuneration report on pages 48 to 50.
promote long-term sustainable success.
Q A formal and transparent procedure for developing a remuneration policy should Directors Remuneration report on pages 48 to 50.
be established. No Director should be involved in deciding their own
remuneration outcome.
R Directors should exercise independent judgement and discretion when Directors Remuneration report on pages 48 to 50.
authorising remuneration outcomes, taking account of company and individual
performance, and wider circumstances.
Key Board Statements continued
Requirement Board statement Where to find further information
Going concern basis The Board is of the opinion that the going concern basis adopted in the Further details are set out on page 33 of the Strategic Report.
preparation of the Annual Report is appropriate.
Viability Statement The Board is of the opinion that the viability statement made in the Annual Further details are set out on page 34 of the Strategic Report.
Report is appropriate.
Annual review of systems of risk management and internal control A continuing process for identifying, evaluating and managing the risks the Further details are set out in the Audit Committee Report on page 47 of this
Company faces has been established and the Board has reviewed the Governance Report
effectiveness of the internal control systems.
Robust assessment of the Company's emerging and principal risks to the The Audit and Risk Committee and the Board undertake a full risk review Further details can be found in Our Principal Risks on pages 31 to 34 of the
business model, future performance, solvency and liquidity of the Company. annually where all the emerging, principal risks and uncertainties facing the Strategic Report.
Company and the Portfolio are considered.
Fair, balanced and understandable The Directors confirm that to the best of their knowledge the Annual Report Further details of the fair, balanced and understandable statement can be
and Accounts taken as a whole is fair, balanced and understandable and found in the Audit Committee Report on page 46.
provides the information necessary for Shareholders to assess the Company's
position, performance, business model and strategy.
Appointment of the Investment Adviser The Directors consider the continuing appointment of the Investment Adviser on Further details are set out in Note 6 to the Financial Statements.
the terms agreed in the Investment Advisory Agreement dated 1 November 2021 to
be in the best interests of the Company.
s172 The Directors have considered the requirements of s172 when making strategic Section 172 Statement on pages 26.
decisions.
Management Engagement Committee Report
Dear Shareholders,
I am pleased to present the first Management Engagement Committee Report of
the Company for the period ended 30 September 2022. The Management Engagement
Committee's role is to monitor and evaluate performance of the Investment
Adviser and the AIFM and to review the basis for the fees charged by the
Investment Adviser.
The Committee shall ensure that processes have been put in place to review the
Company's risk management and internal control systems designed to safeguard
Shareholders' investment and the company's assets.
The Committee shall also monitor and evaluate other service key service
providers (such as the company secretary, registrar and broker) to ensure
their continued competitiveness and effectiveness.
How the Committee operates
The Management Engagement Committee Terms of Reference are available on the
Company's website and on request from the Company's registered office.
All three board members are committee members.
All the Committee members served for the full period. The Committee believes
that its members have the right balance of skills and experience to be able to
function effectively.
This report covers the Company's first operating period of less than 12 months
and in recognition of the short reporting period no Committee meeting was
held. The inaugural meeting was held post year end, on 10 November 2022.
Activities during the period
As set out above the Committee did not meet in the period to 30 September 2022
and held its first meeting post year end.
The business of the first meeting was to review feedback on key service
providers, including the Investment Adviser, AIFM, Broker and Company
Secretary. The meeting was attended in part by the AIFM and Investment
Adviser, however both parties were asked to leave for the Committee to have a
closed session to discuss their performance.
The Committee has scheduled face to face meetings with representatives of key
service providers to be held prior to the publication of the Interim results
to 31 March 2023. These meetings will include feedback on supplier
questionnaires completed by the service providers.
As a result of the Management Engagement Committee ("the MEC") meeting held on
10(th) November 2022, the MEC confirmed the ongoing appointment of the
Investment Adviser, AIFM and the other key service providers, given
satisfactory performance for the Period ended 30 September 2022.
Committee effectiveness
I believe that the quality of discussion and level of challenge by the
Committee with the Investment Adviser, the AIFM, the broker and Company
secretary, ensures the Committee can perform its role effectively.
Faye Goss
Management Engagement Committee Chair
28 November 2022
Audit Committee Report
Dear Shareholders,
I am pleased to present the first Audit Committee Report of the Company for
the period ended 30 September 2022. The Audit Committee's role is to oversee
the Company's financial reporting process, including the risk management and
internal financial controls in place within the AIFM and the Investment
Adviser, the valuation of the asset portfolio, the Company's compliance with
accepted accounting standards and other regulatory requirements as well as the
activities of the Company's Auditor.
How the Committee operates
The Audit Committee Terms of Reference are available on the Company's website
and on request from the Company's registered office.
All three board members are committee members. Having regard to the number of
Directors of the Company and in line with recommended best practice that the
audit committee should comprise the Chair and at least two other directors,
all Directors are members of the audit committee. However, in accordance
with the terms of reference of the audit committee the Chair of the Board may
be a member of the Committee but may not act as the Committee's Chair.
All the Committee members served for the full period. The Committee believes
that its members have the right balance of skills and experience within the
renewable energy sector to be able to function effectively. The Board
considers that I have recent and relevant financial expertise to chair the
Audit Committee. Further details of each Director's experience can be found in
the biographies on page 35.
During the year the Audit Committee held three formal meetings following the
Company's corporate calendar, which ensures that the meetings are aligned to
the Company's financial reporting timetable. The Company Secretary and I
ensure that the meetings are of sufficient length to allow the Committee to
consider all important matters and the Committee is satisfied that it receives
full information in a timely manner to allow it to fulfil its obligations.
Members of the Investment Adviser and the Company's Auditor were invited to
attend the Committee meetings. Apex Limited as Company Secretary acts as
secretary to the Committee.
As the Committee's Chair, I have had regular communications with the Auditor
and senior members of the Investment Adviser. In addition, the Committee has
discussions throughout the year outside of the formal Committee meetings.
Activities during the period
Relationship with the Auditor
The Committee has primary responsibility for managing the relationship with
the Auditor, including assessing their performance, effectiveness and
independence annually and recommending to the Board their reappointment or
removal.
BDO LLP ("BDO") issued an intention to act letter at the time of the IPO and
were subsequently appointed as the Company's Auditor during April 2022 and we
are recommending that they be re-appointed at the forthcoming AGM. Under the
Company's interpretation of the transitional arrangements for mandatory audit
rotation, the Company will be required to put the external audit out for
tender in the financial year ended 30 September 2032.
Eran Wieder continues to remain as audit lead and, in line with the policy on
lead partner rotation, he is expected to rotate off the audit ahead of the
2027 audit.
The Committee has met with the key members of the audit team over the course
of the year and BDO has formally confirmed its independence as part of the
reporting process. As Chair of the Committee, I regularly speak with the
external audit lead without the Investment Adviser present to ascertain if
there are any concerns, to discuss the audit reports and to ensure that the
Auditor has received the support and information requested from management.
There have been no concerns identified to date.
Effectiveness and independence
We meet with the Auditor and the Investment Adviser before the preparation of
each of the Annual and Interim results, to plan and discuss the scope of the
audit or review as appropriate, and challenge where necessary to ensure its
rigour. At these meetings the Auditor prepares a detailed audit or review plan
which is discussed and questioned by us and the Investment Adviser to ensure
that all areas of the business are adequately reviewed and that the
materiality thresholds are set at the appropriate level, which varies
depending on the matter in question. We also discuss with the Auditor its
views over significant risk areas and why it considers these to be risk areas.
The Audit Committee, where appropriate, continues to challenge and seek
comfort from the Auditor over those areas which drive audit quality. The
timescale for the delivery of the audit or review is also set at these
meetings. We meet with the Auditor again just prior to the conclusion of the
audit or review to consider, challenge and evaluate findings in depth.
We have considered the objectivity and effectiveness of the Auditor and we
consider that the audit team assigned to the Company by BDO has the necessary
experience, qualifications and understanding of the business to enable it to
produce a detailed, high-quality, in-depth audit and permits the team to
scrutinise and challenge the Company's financial procedures and significant
judgements. We ask the Auditor to explain the key audit risks and how these
have been addressed. We also considered BDO's internal quality control
procedures and transparency report and found them to be sufficient. Overall,
the Committee is satisfied that the audit process is transparent and of good
quality and that the Auditor has met the agreed audit plan.
Audit and non-audit fees
We continue to believe that, in some circumstances, the external Auditor's
understanding of the Company's business can be beneficial in improving the
efficiency and effectiveness of advisory work. For this reason, we will
continue to engage BDO as reporting accountants on the Company's issues of
equity and debt capital in the normal course of the Company's business. Other
reputable firms have been engaged during the year to assist with financial and
tax due diligence on corporate acquisitions as well as general tax compliance
advice.
The Non-Audit Services Policy requires approval by the Committee above a
certain threshold before the external Auditor is engaged to provide any
permitted non-audit services. The Company engaged BDO to audit the initial
accounts, which is considered to be a non-audit services.
In addition to ensuring compliance with the Company's policy in respect of
non-audit services, the Committee also receives confirmation from BDO that it
remains independent and has maintained internal safeguards to ensure its
objectivity.
Financial reporting and significant judgements
We monitor the integrity of the financial information published in the Interim
and Annual Reports and any other formal announcement relating to financial
performance. We consider whether suitable and appropriate estimates and
judgements have been made in respect of areas which could have a material
impact on the financial statements.
A variety of financial information and reports were prepared by the Investment
Adviser and provided to the Board and to the Committee over the course of the
year. These included budgets, periodic re-forecasting following acquisitions
or corporate activity, an updated risk register and general compliance.
All financial information was fully reviewed and debated both at Committee and
Board level across a number of meetings. The Investment Adviser and the
Auditor update us on changes to accounting policies, legislation and best
practice and areas of significant judgement by the Investment Adviser. They
pay particular attention to transactions which they deem important due to size
or complexity.
The significant issue considered by the Committee in respect of the period
ended 30 September 2022, which contained a significant degree of estimation
uncertainty, is set out in the table below.
Significant issue How the issue was addressed
Valuation of portfolio
The Investment Adviser is responsible pursuant to the Investment Advisory The Audit Committee met with the Investment Adviser and external auditor in
Agreement for the preparation of the valuation of the Company's assets, on a October to review the valuation included within the year-end financial
bi-annual basis. The Company's Portfolio value as at 30 September 2022 was statements. This review included the valuation process undertaken, changes in
£139.1 million. market conditions, recent transactions in the market and how these impacted
our Portfolio and reference to the discount rates used by our peer group. The
The valuation of the Company's portfolio is a key determinant of the Company's Committee challenged the assumptions used and verified the external evidence
net asset value as well as directly impacting the fee payable to the used for the valuation process to ensure a robust valuation had taken place.
Investment Adviser.
The Auditor, BDO, reviewed the underlying assumptions using its renewable
The nature of the valuation process is inherently subjective due to the energy experts and provided the Audit Committee with a summary of its work as
assumptions made in determining market comparable discount rates and estimated part of its report on the half-year and year-end results.
generation levels.
As a result of these reviews, the Committee concluded that the valuation had
been carried out appropriately. The Board approved the valuation in October
2022 for the year-end financial statements.
Internal audit function
The Company does not have an internal audit function. The need for this is
reviewed annually by the Committee. Due to the relative lack of complexity and
the outsourcing of the majority of the day to-day operational functions, the
Committee continues to be satisfied that there is no requirement for such a
function.
Fair, balanced and understandable financial statements
The production and audit of the Company's Annual Report is a comprehensive
process, requiring input from a number of contributors. To reach a conclusion
on whether the Annual Report is fair, balanced and understandable, as required
under the AIC Code, the Board has requested that the Committee advise on
whether it considers that the Annual Report fulfils these requirements. In
outlining our advice, we have considered the following:
● The comprehensive documentation that outlines the controls in place to produce
the Annual Report, including the verification processes to confirm the factual
content.
● The detailed reviews undertaken at various stages of the production process by
the Investment Adviser, AIFM, Company Secretary, Financial Advisers, Auditor
and the Committee, which are intended to ensure consistency and overall
balance.
● Controls enforced by the Investment Adviser, Company Secretary and other
third-party service providers, to ensure complete and accurate financial
records and security of the Company's assets.
● The satisfactory ISAE 3402 control report produced by the JTC (UK) Limited,
who are engaged to undertake payment processing for the Company, for the year
ended 30 March 2022. This report has been reviewed and reported upon by their
external auditor, to verify the effectiveness of their internal controls over
cash management.
● The Investment Adviser have a highly experienced team who have a strong
proficiency in producing financial statements.
As a result of the work performed, we have concluded and reported to the Board
that the Annual Report for the period ended 30 September 2022, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company's performance, business model
and strategy.
Risk management and internal controls
The Board oversees the Company's risk management and internal controls and
determines the Company's risk appetite. The Board has, however, delegated
responsibility for review of the risk management methodology and the
effectiveness of internal controls to the Audit Committee. The Company's
system of internal controls includes financial, operational and compliance
controls and risk management. Policies and procedures, including clearly
defined levels of delegated authority, have been communicated throughout the
Company.
Internal controls are implemented by the Investment Adviser in respect of the
key operational and financial processes of the business. These policies are
designed to ensure the accuracy and reliability of financial reporting and
govern the preparation of the financial statements.
At the time of the IPO, a Board Memorandum was prepared that documented the
financial position and prospects procedures (FPPP) of the Company. This
Memorandum was independently reviewed by an external accountancy firm and no
major deficiencies were identified, which provided the Committee with
additional comfort that the Company's system of internal controls remained fit
for purpose and robust.
Post period end, I also performed a review and walk through of the key systems
and controls in place at the Investment Adviser which I found to be suitable
for a Company of our size and complexity. I will conduct this review on at
least an annual basis going forward.
Risk register
During the year, the Audit Committee reviewed the Company's risk register,
which is maintained by the AIFM in conjunction with the Investment Adviser and
is subject to the supervision and oversight of the Committee. A summary of the
risk register is also reviewed at least annually by the Board.
We have reviewed and approved all statements included in the Annual Report
concerning internal controls and risk management taking into consideration the
review of the risk register and our assessment of the Company's internal
controls and knowledge of the business.
We have also reviewed the adequacy of the Company's arrangements for any
relevant party to raise concerns, in confidence, about possible wrongdoing in
financial reporting, regulatory or other relevant matters and the procedures
of both the Company's AIFM and Investment Adviser for detecting fraud and
preventing bribery. We consider that they are appropriate.
Committee effectiveness
I believe that the quality of discussion and level of challenge by the
Committee with the Investment Adviser and the external audit teams, together
with the timeliness and quality of papers received by the Committee, ensures
the Committee is able to perform its role effectively.
The Board undertakes an annual evaluation of its composition and that of its
committees taking into account the requirements of the AIC Code. This takes
the form of a written assessment of the effectiveness of the Board using a
formal evaluation questionnaire. The Directors also undertake a formal
evaluation of the performance of the chair. If appropriate, recommendations
are made to refresh the composition of the Board and its committees. The first
evaluation was undertaken during November 2022. The evaluation process
concluded that the Committee was operating effectively and had the appropriate
balance of skills and experience.
Signed on behalf of the Audit Committee on 28 November 2022.
Marlene Wood
Audit Committee Chair
28 November 2022
Directors' Remuneration Report
Annual Statement
The Board comprises only independent non-executive Directors. The Company has
no executive Directors or employees. For these reasons, it is not considered
necessary to have a separate Remuneration Committee. The full Board determines
the level of Directors' fees.
Full details of the Company's policy with regards to Directors' fees and fees
paid during the period ended 30 September 2022 are shown below
Directors' remuneration policy
The Board considers the level of Directors' fees at least annually. Reviews of
Directors' fees take place in each financial year with any changes being
applicable from the start of the next financial year. The remuneration of the
Directors was benchmarked at the time of the Company's listing in November
2021. The Directors' remuneration has remained unchanged.
Remuneration Policy
The Company's policy is to determine the level of Directors' fixed annual fees
in accordance with its Articles of Association.
When setting the level of Directors' fees, the Company will have due regard to
the experience of the board as a whole, the time commitment required, the
responsibilities of the role and to be fair and comparable to non-executive
directors of similar companies.
Furthermore, the level of remuneration should be sufficient to attract and
retain the Directors needed to oversee the Company properly and to reflect its
specific circumstances. The Company may also periodically choose to benchmark
Directors' fees with an independent review, to ensure they remain fair and
reasonable.
Directors' fees are reviewed annually and will be adjusted from time to time,
as may be determined by the board under the Articles of Association and this
policy. In terms of the Company's Articles of Association, the aggregate
remuneration of all the directors shall not exceed £500,000 per annum but
this may be changed by way of ordinary resolution.
The Directors are also entitled to be paid their reasonable expenses incurred
in undertaking their duties.
Additional Directors' fees may be paid by the Company where Directors are
involved in duties beyond those normally expected as part of the Directors'
appointment. In such instances, where additional remuneration is paid, the
Board will provide details of the events, duties and responsibilities that
gave rise to any additional directors' fees in the Company's annual report.
No element of the Directors' remuneration is performance related, nor does any
director have any entitled to pensions, share options or any long terms
incentive plans from the Company. Directors' fees are payable in cash, monthly
in arrears.
The Directors hold their office in accordance with the Articles of Association
and their appointment letters. The Directors' appointments can be terminated
in accordance with the Articles of Association and without compensation.
The Company is committed to engagement with Shareholders and will seek major
Shareholders' views in advance of making significant changes to its
remuneration policy and how it is implemented. The Board will attend the AGM
to hear the views of Shareholders on remuneration and to answer any questions.
It is the Board's policy that Directors do not have service contracts, but
each new Director is provided with a letter of appointment, and these are
available for inspection at the Company's registered office. Each Director is
appointed for an initial three-year term subject to annual re-election at the
Company's AGM. Directors are typically expected to serve two three-year terms
but may be invited by the Board to serve for an additional period. The
Directors' appointments can be terminated at no notice in accordance with the
terms of the letters of Appointment, without compensation for loss of office.
In determining Remuneration Policy, the Board considers all factors which it
deems necessary, including the Company's strategy and the risk environment in
which it operates, relevant legal and regulatory requirements, the provisions
and recommendations of the Code considered to be relevant, and associated
guidance. In order to obtain reliable, up to date information about
remuneration in other companies of comparable scale and complexity, the
Remuneration Committee may appoint remuneration consultants and commission or
purchase any reports, surveys or information which it deems necessary, at the
expense of the Company but within any budgetary constraints imposed by the
Board.
The Board as a whole, is responsible for appropriately managing Directors'
conflicts of interests. Directors' other interests have been disclosed. No
conflicts have been identified during the year. If a conflict were to be
identified, the Board would take the appropriate steps to resolve and manage
such conflicts appropriately.
The Directors' Remuneration Policy will be tabled for Shareholder approval at
the inaugural AGM in March 2023. The Remuneration Policy is subject to a
binding vote at the 2025 AGM.
Director Date of original appointment Most recent Latest due
date of date of
election re-election
Juliet Davenport 13 October 2021 13 October 2021 16 March 2023
Marlene Wood 13 October 2021 13 October 2021 16 March 2023
Faye Goss 13 October 2021 13 October 2021 16 March 2023
Directors' Fees
The Board considers the level of Directors' fees at least annually. Reviews of
Directors' fees take place in each financial year, with any changes being
applicable from the start of the next financial year. The Board does not
consider that any change in fee levels is required for the year to 30
September 2023.
Annual Report on Remuneration
Directors' emoluments - single total figure table (audited)
The Directors who served during the year received the following emoluments,
all of which was in the form of fees, which are fixed and no discretionary
remuneration. All expenses in relation to travel and accommodation for
meetings are reimbursed.
Period ended Fixed Remuneration
30 September 2022 %
£'000
Juliet Davenport 48 100
Faye Goss 37 100
Marlene Wood 41 100
Total 126 100
Relative importance of spend on pay
The table below sets out, in respect of the period ended 30 September 2022:
a) The remuneration paid to the Directors.
b) The management fee and expenses which have been included to give Shareholders
a greater understanding of the relative importance of spend on pay.
c) Distributions to Shareholders by way of dividend to provide a comparison of
the Shareholders returns against directors' remuneration.
Period ended
30 September 2022
£'000
Directors' fees 126
Management fee and expenses 1,224
Dividends paid 4,515
Directors' fees as a percentage of Period ended
30 September 2022
%
Management fee and expenses 10.29
Dividends paid 2.79
Directors' shareholdings (audited)
The Directors of the Company had the following beneficial interests in the
issued ordinary share capital of the Company as at 30 September 2022 and at
the date of this report:
Directors As at the date As at
30 September 2022
of this report
Juliet Davenport 20,000 20,000
Marlene Wood 20,000 20,000
Faye Goss 20,000 20,000
Total 60,000 60,000
The Company does not oblige the Directors to hold shares in the Company, but
this is encouraged to ensure the appropriate alignment of interests.
Company performance - Total Shareholder Return
The Board is responsible for the Company's investment strategy and
performance, whilst the management of the investment portfolio is delegated to
the AIFM. The AIFM has, in turn, delegated certain services, including but not
limited to advice on acquisitions and financing, to the Investment Adviser.
The graph below compares, for the period from our IPO in November 2021 to 30
September 2022, the total return (assuming all dividends are reinvested) to
ordinary Shareholders compared to the FTSE All-Share Index. This index was
chosen as it is considered an indicative measure of the expected return from
an equity stock. An explanation of the performance of the Company for the
period ended 30 September 2022 is given in the Strategic Report.
It is a company law requirement to compare the performance of the Company's
share price to a single broad equity market index on a total return basis.
However, it should be noted that constituents of the comparative index used
above are larger in size than the Company. The Company does not have a
benchmark index.
Voting at Annual General Meeting
An Ordinary Resolution to approve the Director's Remuneration Report will be
put to Shareholders at the Company's AGM and Shareholders will have the
opportunity to express their views and raise any queries in respect of the
Director's Remuneration Report at this meeting.
This Directors' Remuneration Report is approved on behalf of the Board by:
Juliet Davenport
Chair of the Board
28 November 2022
Directors' Report
The Directors present their report together with the audited financial
statements for the period ended 30 September 2022. The Corporate Governance
Statement pages 35 to 56 forms part of this report.
Principal activities and status
The Company is registered as a UK public limited company under the Companies
Act 2006. It is an Investment Company as defined by Section 833 of the
Companies Act 2006 and has been established as a closed-ended investment
company with an indefinite life. The Company has a single class of shares in
issue which are traded on the Premium List of the London Stock Exchange's Main
Market The Company has been approved as an Investment Trust pursuant to
Sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1
Statutory Instrument 2011/2999 for the purposes of UK taxation.
The Company is a member of the Association of Investment Companies (the
"AIC").
Results and dividends
The results for the Period are set out in the attached financial statements.
It is the policy of the Board to declare and pay dividends as quarterly
interim dividends.
In respect of the 30 September 2022 financial period, the Company has declared
interim dividends amounting to aggregate 4.26 pence per share. The following
dividends were declared during the year and subsequently:
Date declared Amount per share (pence) Payment date
21 April 2022 1.76 27 May 2022
28 July 2022 1.25 26 August 2022
11 November 2022 1.26 16 December 2022
Dividend policy
Subject to market conditions and performance, financial position and outlook,
it is the Directors' intention to pay an attractive level of dividend income
to Shareholders on a quarterly basis.
Directors
The Directors who served throughout the period unless otherwise stated, are
detailed below:
Director Service in the period to 30 September 2022
Juliet Davenport Served throughout the period
Marlene Wood Served throughout the period
Faye Goss Served throughout the period
Biographical details of the current Directors of the Company are shown on page
35.
Powers of Directors
The Board will manage the Company's business and may exercise all the
Company's powers, subject to the Articles, the Companies Act and any
directions given by the Company by special resolution.
The Board's role is to provide entrepreneurial leadership of the Company
within a framework of prudent and effective controls which enables risk to be
assessed and managed. It also sets up the Company's strategic aims, ensuring
that the necessary resources are in place for the Company to meet its
objectives and review investment performance. The Board also sets the
Company's values, standards and culture. Further details on the Board's role
can be found in the Corporate Governance Report on page 38.
Directors' interests
The beneficial interests of the Directors and their closely connected persons
in the ordinary shares of the Company as at 30 September 2022 were as
follows:
Number of shares Percentage of issued share capital
Juliet Davenport 20,000 0.01%
Faye Goss 20,000 0.01%
Marlene Wood 20,000 0.01%
Appointment and replacement of Directors
All Directors were appointed during October 2021. In accordance with the AIC
Corporate Governance Code, all the Directors will retire and those who wish to
continue to serve will offer themselves for election at the forthcoming Annual
General Meeting.
Directors' indemnification and insurance
The Company maintains £15 million of Directors' and Officers' Liability
Insurance cover for the benefit of the Directors, which was in place
throughout the period.
Political contributions
The Company made no political contributions during the period.
Significant shareholdings
The table below shows the interests in shares notified to the Company in
accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules
issued by the Financial Conduct Authority who have a disclosable interest of
3% or more in the ordinary shares of the Company as at 30 September 2022.
Percentage of issued share capital
Number of shares
Close Brothers Asset Management 21,315,375 14.2
Schroder Investment Management 13,893,020 9.3
Liontrust Sustainable Investments 11,396,108 7.6
Sarasin & Partners 9,011,977 6.0
River and Mercantile Asset Management 6,878,000 4.6
Charles Stanley 6,416,858 4.3
Newton Investment Management 5,761,798 3.8
Since the year end, and up to 25 November 2022, the Company has been notified
of the following interests in its ordinary shares in accordance with DTR 5.
The information provided is correct as at the date of notification:
Percentage of issued share capital
Number of shares
Close Asset Management Limited 19,466,585 12.98
Schroders PLC 15,486,714 10.3
Branches outside the UK
The Company has no branches outside the UK.
Financial instruments
The Company's exposure to, and management of, capital risk, market risk and
liquidity risk is set out in note 19 to the Company's financial statements.
Employees
The Company has no employees and therefore no employee share scheme or
policies for the employment of disabled persons or employee engagement.
Greenhouse gas emissions
The Company is considered to be a low energy user due to the fact it has no
Scope 1 or Scope 2 emissions and therefore is not required to make any
disclosures under the Streamlined Energy and Carbon Reporting Framework.
Other disclosures
Disclosures of financial risk management objectives and policies and exposure
to financial risks are included in note 19 to the financial statements.
Details of future developments are included in the Strategic Report.
No additional disclosures are required in accordance with Listing Rule (LR)
9.8.4C R.
Disclosure of information to auditor
All of the Directors have taken all the steps that they ought to have taken to
make themselves aware of any information needed by the auditor for the
purposes of their audit and to establish that the auditor is aware of that
information. The Directors are not aware of any relevant audit information of
which the auditor is unaware.
Auditor
BDO LLP was appointed as auditor by the Directors in April 2022 BDO LLP have
expressed their willingness to continue as auditor for the financial year
ending 30 September 2023. A resolution to appoint BDO LLP as auditor of the
Company will be proposed at the forthcoming AGM.
Share capital structure
As at 30 September 2022, the Company's issued share capital consisted of
150,000,000 ordinary shares of one penny each, all fully paid and listed on
the Premium List of the London Stock Exchange's Main Market. Further details
of the share capital are summarised in note 14 of the financial statements.
Subject to authorisation by Shareholder resolution, the Company may purchase
its own shares in accordance with the Companies Act 2006. The Company has not
repurchased any of its ordinary shares.
There are no restrictions on transfer or limitations on the holding of the
ordinary shares. None of the shares carry any special rights regarding the
control of the Company. There are no known arrangements under which financial
rights are held by a person other than the holder of the shares and no known
agreements on restrictions on share transfers and voting rights.
Post balance sheet events
For details of events since the year-end date, please refer to note 23 of the
financial statements.
Corporate Governance
The Company's statement on corporate governance can be found in the Corporate
Governance Report on pages 35 to 56 of his Annual Report. The Corporate
Governance Report forms part of this directors' report and is incorporated
into it by cross-reference.
Signed by order of the Board on 28 November 2022.
Juliet Davenport
Chair of the Board
28 November 2022
Statement of Directors' Responsibilities in Respect of the Financial Statements
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;
● prepare a Directors' report, a strategic report and directors' remuneration
report which comply with the requirements of 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 provides the information necessary for Shareholders to
assess the Company's performance, business model and strategy.
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 Designand its materials are published on
www.atratoroof.com. Legislation in the United Kingdom governing the
preparation and dissemination of Financial Statements may differ from
legislation in other jurisdictions.
Pursuant TO DTR4
The Directors confirm to the best of their knowledge:
The financial statements 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 and loss of the Company.
The annual report includes a fair review of the development and performance of
the business and the financial position of the Company, together with a
description of the principal risks and uncertainties that they face.
We consider the Annual Report and Accounts, taken as a whole, is 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 and signed on its behalf by:
Juliet Davenport
Chair of the Board
28 November 2022
Alternative Investment Fund Manager's Report
Background
The Alternative Investment Fund Manager's Directive 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 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 and the Company to manage those risks
are set out in the section headed "Our Principal Risks", the Directors' Report
and in note 17 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. However, as at the balance
sheet date and the date of this report, 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").
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 (the "ESG Framework") and a
copy of the ESG Framework can be viewed on the AIFM's website at
https://www.jtcgroup.com/wp-content/themes/jtcgroup/dist/img/review-2019/pdfs/esg.pdf
(https://www.jtcgroup.com/wp-content/themes/jtcgroup/dist/img/review-2019/pdfs/esg.pdf)
. During 2021 JTC achieved its goal of becoming carbon neutral through a
partnership with Carbon Footprint Limited, a leading independent accreditation
firm. Working with Carbon Footprint, JTC makes a demonstrable difference
through a series of carbon offsetting projects, including helping to fund
projects that offset carbon emissions, including a UK tree planting scheme
which also supports emission reductions in the Brazilian rainforest by helping
preserve parts of the forest and supporting local communities there, the
installation and operation of a solar power project in two villages in India,
which feeds in to the power generated to the state grid in India and native
tree planting in the Great Rift Valley In Kenya, which is also linked to
further support for emission reductions in the Brazilian rainforest. In 2022
JTC extended UN PRI signatory status to the whole group, covering over 1,400
people in 30 offices spanning 20 jurisdictions. JTC also reports under TCFD
and under the SASB framework.
The AIFM and Atrato Partners Limited 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 Key documents - Atrato Onsite
Energy (atratoroof.com) (https://atratoroof.com/key-documents/) .
Since the publication of those documents, the AIFM, Investment Adviser 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 Advisor's Report, the section
headed "Sustainability", the Section 172 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 also 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 its executive directors, Graham Taylor, Gregory Kok, James Tracey
and Kobus Cronje, because they were all employees of the JTC group of
companies, of which the AIFM forms part. During the Company's financial year,
Messrs Kok and Tracey resigned as directors of the AIFM and Mr Kobus Cronje
was appointed as a director. Matthew Tostevin is a non-executive director and
is paid a fixed fee of £10,000 for acting as a director, attendance at all
quarterly Board meetings and work performed as a director of the Company in
the ordinary course of business. Subject to the prior approval of the Board of
directors on each occasion, Mr Tostevin is paid additional remuneration on a
time spent basis for services rendered to the Company which are not in the
ordinary course of business. 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 Company paid £10,000 in fixed fees
and £54,794.54 in variable remuneration to its directors.
6. Remuneration of the AIFM Payable by the Company
The AIFM was during the year under review until 30 September 2022 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. The total
fees paid to the AIFM during the year under review were £53,907.05.
JTC Global AIFM Solutions Limited
Alternative Investment Fund Manager
28 November 2022
Independent Auditors' Report to the Members of Atrato Onsite Energy Plc
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company's affairs as
at 30 September 2022 and of its loss for the period then ended;
• have been properly prepared in accordance with UK adopted
international accounting standards; and
• have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Atrato Onsite Energy Plc for the
period from 16 September 2021 (date of incorporation) to 30 September 2022
which comprise the Statement of Comprehensive Income, the Statement of
Financial Position, the Statement of Changes in Equity, the Statement of Cash
Flows and notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework that has
been applied in their preparation is applicable law and UK adopted
international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion. Our audit opinion is consistent with the additional
report to the Audit Committee.
Independence
Following the recommendation of the audit committee, we were appointed by
Board of Directors on 21 October 2021 to audit the financial statements for
the period ending 30 September 2022 and subsequent financial periods. The
period of total uninterrupted engagement is one year being the period from 16
September 2021 to 30 September 2022. We remain independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC's Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. The non-audit
services prohibited by that standard were not provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Company's ability to continue to adopt the going concern
basis of accounting included:
● agreeing the inputs and assumptions within the forecast that forms the basis
of the board's assessment of the going concern status of the Company to
supporting documentation and our own understanding of the Company.
● Performing stress testing of downside scenarios and cash flow forecasts, as
well as conducting a robust review of the Company's liquidity position.
● Assessing the appropriateness of the Directors' assumptions and judgements
made in their base case and stress tested forecasts including the
consideration of the available cash resources relative to forecast expenditure
and commitments; and
● Calculating financial ratios to consider the financial health of the Company.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability to continue
as a going concern for a period of at least twelve months from when the
financial statements are authorised for issue.
In relation to the Company's reporting on how it has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in
relation to the Directors' statement in the financial statements about whether
the Directors considered it appropriate to adopt the going concern basis of
accounting.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
Key audit matters 2022
Valuation of investments Yes
Materiality Company financial statements as a whole
£2,086,000 being 1.5% of the net asset value.
Materiality
Company financial statements as a whole
£2,086,000 being 1.5% of the net asset value.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its
environment, including the Company's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
This matter was addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on this matter.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of Investments The Company holds an investment through Atrato Onsite Energy Holdco Limited. In respect of the unquoted investments in the solar assets held by Atrato
As the Company meets the definition of an investment entity it measures this Onsite Energy Holdco Limited as at 30 September 2022, which are valued using
investment at fair value through profit and loss rather than consolidating it. discounted cash flow models with net asset adjustments, we performed the
following procedures:
See note 4 and accounting policy on page 72 - 74.
• Challenged the appropriateness of the selection and application of
The fair value of the Company's investment is determined in reference to the key assumptions in the discounted cash flow model including the discount rate,
fair values of the underlying investments held by Atrato Onsite Energy Holdco energy yield, power price, inflation rate and asset life by benchmarking to
Limited, which comprise of various solar asset investments. These investments available industry data and consulting with our internal valuation experts on
are not traded, and their valuation is derived from discounted cash flow the appropriateness of the assumptions, including the discount rate,
models ("DCFs") which incorporate unobservable inputs and management inflation, power price, and asset life;
judgements. As such there is a high level of estimation uncertainty involved
in determining the investment valuations. • Agreed energy yields, non-contracted future power prices,
inflation rates and asset lives used in the model to independent reports;
• Considered whether all agreements and contracts, such as sales
The Investment Adviser's fee is based on the value of the net assets of the & purchases agreements, power price agreements, leases agreements etc,
Company. The investment adviser is responsible for preparing the valuation of were accurately reflected in the valuation model;
investments which are reviewed and approved by the Board. Notwithstanding this
review, there is a potential risk of misstatement in the investment • Used spreadsheet analysis tools to assess the integrity of the
valuations. models;
• Agreed cash and other net assets to bank statements and investee
company management accounts to support the net asset adjustments from
We, therefore, have determined the valuation of investments to be a key audit underlying investments to Atrato Onsite Energy Holdco Limited;
matter.
• Performed sensitivity analysis by adjusting certain key inputs in
order to calculate a reasonable range of possible valuations where
appropriate; and
• Considered the accuracy of forecasting by comparing previous
forecasts to actual results.
For loan investments to Atrato Onsite Energy Holdco Limited, we performed the
following:
• Agreed to loan agreements and confirmed the terms of the loan;
• Agreed the cash outflow associated with making the loan investment
to the bank statements
Key Observations:
Based on the procedures performed, consider the estimates and judgements made
in the valuation of investments to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
2022
£m
Materiality £2,086,000
Basis for determining materiality 1.5% of net asset value
Rationale for the benchmark applied Net Asset Value is a key indicator of performance and as such was considered
to be the most relevant benchmark on which to base materiality for the users
of the financial statements.
Performance materiality £1,460,000
Basis for determining performance materiality We set the performance materiality at 70% of Materiality based on our risk
assessment of the control environment and consideration of potential errors
due to this being a first period audit and the first period in which financial
statements have been produced.
Lower testing threshold
We determined that for items impacting realised returns, a misstatement of
less than materiality for the financial statements as a whole, could influence
the economic decisions of users. As a result, we determined a lower testing
threshold for these items based on 5% of the total expenditure, being
£118,000.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £41,000. We also agreed to report
differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the Annual Report other than the
financial statements and our Auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors' statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Company's compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained during the
audit.
Going concern and longer-term viability · The Directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material uncertainties
identified set out on page 33; and
· The Directors' explanation as to their assessment of the
Company's prospects, the period this assessment covers and why the period is
appropriate set out on page 34.
Other Code provisions · The Directors' statement on fair, balanced and understandable set
out on page 46;
· The Board's confirmation that it has carried out a robust
assessment of the emerging and principal risks set out on page 47;
· The section of the annual report that describes the review of
effectiveness of risk management and internal control systems set out on page
47; and
· The section describing the work of the audit committee set out on
page 45.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during
the course of the audit, we are required by the Companies Act 2006 and ISAs
(UK) to report on certain opinions and matters as described below.
Strategic report and Directors' report In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic report and the Directors'
report for the financial period for which the financial statements are
prepared is consistent with the financial statements; and
· the Strategic report and the Directors' report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in the strategic report or the Directors' report.
Directors' remuneration In our opinion, the part of the Directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
Corporate governance statement In our opinion, based on the work undertaken in the course of the audit the
information about internal control and risk management systems in relation to
financial reporting processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and
Transparency Rules sourcebook made by the Financial Conduct Authority (the FCA
Rules), is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its
environment obtained in the course of the audit, we have not identified
material misstatements in this information.
In our opinion, based on the work undertaken in the course of the audit
information about the Company's corporate governance code and practices and
about its administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
We have nothing to report arising from our responsibility to report if a
corporate governance statement has not been prepared by the Company.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept, or returns adequate
for our audit have not been received from branches not visited by us; or
· the financial statements and the part of the Directors' remuneration
report to be audited are not in agreement with the accounting records and
returns; or
· certain disclosures of Directors' remuneration specified by law are
not made; or
· we have not received all the information and explanations we require
for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors' Responsibilities in
Respect of the Financial Statements, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the Directors determine
is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to
the Company and the industry in which it operates through our audit planning
procedures and various client meetings and considered the risk of acts by the
Company which were contrary to applicable laws and regulations, including
fraud. We considered the significant laws and regulations to be the Companies
Act 2006, the FCA listing and DTR rules, the principles of the AIC Code of
Corporate Governance, industry practice represented by the Association of
Investment Companies' Statement of Recommended Practice (SORP), the applicable
accounting framework, and qualification as an Investment Trust under UK tax
legislation as any non-compliance of this would lead to the Company losing
various deductions and exemptions from corporation tax.
We focused on laws and regulations that could give rise to a material
misstatement in the Company financial statements. Our tests included, but were
not limited to:
● agreement of the financial statement disclosures to underlying supporting
documentation;
● enquiries of management and those charged with governance relating to the
existence of any non-compliance with laws and regulations;
● review of minutes of board meetings throughout the period to identify any
non-compliance with laws and regulations;
● obtaining an understanding of the control environment in monitoring compliance
with laws and regulations; and
● reviewing the calculation in relation to Investment Trust compliance to verify
that the Company was meeting its requirements to retain its Investment Trust
Status.
We assessed the susceptibility of the financial statement to material
misstatement including fraud and considered the fraud risk areas to be the
valuation of unquoted investments and management override of controls.
Our tests included, but were not limited to:
· The procedures set out in the Key Audit Matters section above;
· Obtaining independent evidence to support the ownership of
investments;
· Recalculating investment advisory fees in total to ensure the
existence and accuracy of the expenses;
· Obtaining independent confirmation of bank balances to ensure
existence and accuracy to the bank record with independent party directly; and
· Testing journals which met a defined risk criteria by agreeing to
supporting documentation and evaluating whether there was evidence of bias by
the Investment Advisor and Directors that represented a risk of material
misstatement due to fraud.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members and remained alert to any
indications of fraud or non-compliance with laws and regulations throughout
the audit.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are
to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://insite.bdo.co.uk/sites/audit/Documents/www.frc.org.uk/auditorsresponsibilities)
. This description forms part of our Auditor's report.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an Auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Eran Wieder (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
28 November 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
Statement of Comprehensive Income
Period from Incorporation on 16 September 2021 to 30 September 2022
Revenue Capital Total
Notes £'000 £'000 £'000
Loss arising on the revaluation of investments at the period end 4 - (1,850) (1,850)
Investment Income 5 781 - 781
Investment advisory fees 6 (1,285) - (1,285)
Other expenses 7 (684) (401) (1,085)
Loss on ordinary activities before taxation (1,188) (2,251) (3,439)
Taxation 9 - - -
Loss on ordinary activities after taxation (1,188) (2,251) (3,439)
Earnings per share (pence) - basic and diluted 8 (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 period.
Loss on ordinary activities after taxation is also the total comprehensive
income for the period.
The accompanying Notes on pages 66 to 83 are an integral part of these
financial statements.
Statement of Financial Position
As at 30 September 2022
Notes £'000
Non-current assets
Investments at fair value through profit or loss 4 47,105
Current assets
Fixed deposits 10 20,000
Cash and cash equivalents 11 69,361
Other receivables and prepayments 12 3,215
92,576
Current liabilities
Trade and other payables 13 (555)
Net current assets 92,021
Net assets 139,126
Capital and reserves
Share capital 14 1,500
Capital reduction reserve 16 141,065
Revenue and capital reserve (3,439)
Total Shareholders' funds 139,126
Net assets per share (pence) 17 92.8
Approved and authorised by the Board of Directors for issue on 28 November
2022.
Juliet Davenport
Chair of the Board
28 November 2022
Atrato Onsite Energy Plc was incorporated in England and Wales with registered
number 13624999.
The accompanying Notes on pages 66 to 83 are an integral part of these
financial statements.
Statement of Changes in Equity
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 2022 were £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 66 to 83 are an integral part of these
financial statements.
Statement of Cash Flows
Period from Incorporation on 16 September 2021 to 30 September 2022
As at 30 September
2022
Notes £'000
Operating activities
Loss on ordinary activities before taxation (3,439)
Adjustment for unrealised losses arising on the revaluation of investments at 1,850
the period end
Interest income (781)
Increase in other receivables and prepayments (3,215)
Increase in trade and other payables 555
Net cash flow used in operating activities (5,030)
Investing activities
Purchase of investments 4 (48,955)
Increase in fixed deposit (20,000)
Increase in interest receivable 614
Interest income received 167
Net cash flow used in investing (68,174)
Financing activities
Proceeds of share issues 14 150,000
Share issue costs (2,920)
Dividends paid 15 (4,515)
Net cash flow from financing 142,565
Increase in cash 69,361
Cash and cash equivalents at start of the Period -
Cash and cash equivalents at end of the Period 69,361
As at 30 September
2022
£'000
Cash and cash equivalents
Cash at bank 49,361
Fixed deposits with original maturity less than 3 months 20,000
Total cash and cash equivalents at end of the Period 69,361
The accompanying Notes on pages 66 to 83 are an integral part of these
financial statements.
Notes to the Financial Statements
Period from incorporation on 16 September 2021 to 30 September 2022
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 6(th) Floor, Bastion House,
140 London Wall, London, EC2Y 5DN. 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 Period from incorporation
on 16 September 2021 to 30 September 2022 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 2021 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 Period to
30 September 2022.
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 period in which
the estimates are revised and in any future periods affected. The significant
estimates, judgments or assumptions for the Period are set out below under
"Critical accounting judgements, estimates and assumptions".
There is no comparative as this is the Company's first accounting period.
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
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 the COVID-19 pandemic 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 2022 were £139.1 million. As at 30 September 2022, the
Company held £69.4 million in cash and cash equivalents of £20 million in a
fixed deposit account due to mature in December 2022. The Company continues to
meet its day-to-day liquidity needs through its cash resources. The total
ongoing expenses for the Period ended 30 September 2022 was £1.98 million,
which represented approximately 1.4% of average net assets during the Period.
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 financing 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 markets, in order to
fund commitments to acquisitions detailed in note 22 to the financial
statements, should they become payable. The Company has provided a £125m loan
facility, of which £48.8m had been drawn by 30 September 2022, to its
immediate subsidiary repayable on 31 December 2028. The facility has been
provided out of the £150m raised in the initial public offering. As at 30
September 2022, the Company had capital commitments of £1.4m.
In light of the COVID-19 pandemic and the macro-economic situation brought
about by the Russian invasion of Ukraine, 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 2022 of 19 years.
During the Period and 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 COVID-19 pandemic, and measures introduced to combat its spread, 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 (including those related to COVID-19) 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 has increased above the forecasts. Having
considered these increases, the Board do not anticipate as material adverse
effect on the portfolio.
The Company's ability to continue as a going concern has been assessed by the
Directors for a period of at least 12 months 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.
− Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces
a definition of 'accounting estimates'. The amendments are effective for
annual reporting periods beginning on or after 1 January 2023.
− Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements. The amendments to IAS 1 are
applicable for annual periods beginning on or after 1 January 2023.
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
period 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 accrual's 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 period 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 period,
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.
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.
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
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 period 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 period 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 2022, the
cost of the equity investment in Holdco is £1, while the debt investment in
Holdco is £48.9m.
Total
£'000
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through profit or loss 47,105
Total investment as at 30 September 2022 47,105
(b) Movements during the Period:
Opening balance of investment, at cost -
Additions, at cost 48,955
Cost of investment as at 30 September 2022 48,955
Revaluation of investments to fair value:
Unrealised movement in fair value of investment (1,850)
Fair value of investment as at 30 September 2022 47,105
(c) Profits or loss on investment in the Period:
Unrealised movement in fair value of investment (1,850)
Loss on investment (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 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 period. 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 Period is shown
below:
As at
30 September 2022
£'000
Opening balance -
Additions during the Period 48,955
Unrealised movement in fair value of investment (1,850)
Total investment as at 30 September 2022 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 (£2.7m), other receivables (£0.2m), trade
payables and accruals (£0.4m) and other payables (£2.6m) and the
aforementioned fair value of the underlying investments (£47.2m) as derived
from the DCF of each asset. As at 30 September 2022, 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 are
considered the most significant unobservable 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 2022, the blended post-tax discount rates applied
to the portfolio ranged from 6.5% to 7.5% with the overall weighted average of
6.6%.
An increase of 50bps and decreases of 50bps, 100bps and 200bps in the discount
rates would have the following impact on NAV:
Discount Rate + 50 bps - 50 bps -100bps -200bps
Increase/(decrease) in NAV (£'000) (1,612) 1,706 3,531 7,541
NAV per share 91.7p 93.9p 95.1 97.8
NAV per share change (1.1p) 1.1p 2.4p 5.0p
Change (1.2)% 1.2% 2.5% 5.4%
(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 "P75" level of energy yield (i.e. a level of energy production that is
below the "P50", with a 75% probability of being exceeded) would cause a
decrease in the total portfolio valuation, while an assumed "P25" level of
power output (i.e. a level of energy production that is above the "P50", with
a 25% probability of being achieved) would cause an increase in the total
portfolio valuation.
The application of a P75 and a P25 energy yield case would have the following
impact on NAV:
Energy Production P75 P25
Increase/(decrease) in NAV (£'000) (1,849) 1,694
NAV per share 91.5p 93.9p
NAV per share change (1.2p) 1.1p
Change (1.3)% 1.2%
(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 8.7% 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 £395/MW over
the next five years, with an average of £179/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) (6) 227
NAV per Share 92.8p 92.9p
NAV per Share Change (0.0)p 0.2p
Change (0.0)% 0.2%
(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 12.3%,
reducing to 3.92% by September 2027 and a long-term average of 3.3%.
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) (1,165) 1,339
NAV per share 92.0p 93.6p
NAV per share change (0.8)p 0.9p
Change (0.8)% 1.0%
5. Income
For the Period ended 30
September 2022
£'000
Interest from Holdco 483
Deposit interest 298
Total Income 781
6. Investment advisory fees
For the Period ended 30 September 2022
Revenue Capital Total
£'000 £'000 £'000
Investment advisory fees 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.
7. Other Expenses
For the Period ended 30 September 2022
Revenue Capital Total
£'000 £'000 £'000
Secretary and Administrator fees 111 - 111
Directors' fees 126 - 126
Directors' other employment costs 25 - 25
Brokers' retainer 51 - 51
Auditor's fees
- Fees payable to the Company's auditor for audit services 118 - 118
- Fees payable to the Company's auditor for non-audit related assurance 18 - 18
services
Regulatory and Registrar's fees 38 - 38
Marketing fees 121 - 121
Tax compliance 36 - 36
Other expenses 40 - 40
684 - 684
Expenses charged to capital
Initial listing costs - 401 401
Total expenses 684 401 1,085
The Auditor's fee for the statutory audit of the period is £117,600
(including VAT of £19,600). BDO also reviewed the Company's initial accounts
as at 31 January 2022 for a fee of £18,000 (including VAT of £3,000). In
addition, BDO provided services in relation to the IPO for a fee of £104,550
(including VAT of £17,425), which has been set off against the share premium
along with other IPO costs.
8. Earnings Per Share
Earnings per share is based on the loss in the period from incorporation on 16
September 2021 to 30 September 2022 of £3,439,000 attributable to the
weighted average number of shares in issue of 128,750,000 in the Period.
Revenue and capital loss are £1,188,000 and £2,251,000 respectively.
9. Taxation
(a) Analysis of charge in the Period
For the Period ended 30 September 2022
Revenue Capital Total
£'000 £'000 £'000
Corporation tax - - -
Taxation - - -
(b) Factors affecting total tax charge for the Period:
The effective UK corporation tax rate applicable to the Company for the Period
is 19.00%. 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:
Revenue Capital Total
£'000 £'000 £'000
Profit / (loss) on ordinary activities before taxation (1,188) (2,251) (3,439)
Corporation tax at 19% (226) (428) (654)
Effects of:
Profit / (loss) on investments held at fair value not allowable - 352 352
Expenses not deductible for tax purposes 10 76 86
Unutilised management expenses 216 - 216
Total tax charge for the Period - - -
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
2022
£'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%, maturing on 28(th) December 2022.
11. Cash and cash equivalents
As at 30
September
2022
£'000
Cash at bank 49,361
Money market fixed deposits 20,000
Total 69,361
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
2022
£'000
Amounts receivable from related parties 20 3,049
Other receivables and prepayments 166
Total 3,215
13. Trade and other payables
As at 30
September
2022
£'000
Accounts payable 59
Amounts payable to related parties 20 271
Accrued expenses and other taxes 225
Total 555
14. Share Capital
Nominal value of
shares
No. of shares £
Allotted, issued and fully paid:
Opening balance as at 16 September 2021 - -
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 1,5000,000
Initial redeemable preference shares redeemed (50,000) (50,000)
Shares issued for the investment advisory fee
Share issued
Closing balance as at 30 September 2022 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 Period
The Company paid the following interim dividends during the Period:
For the Period ended 30 September 2022
Pence per Capital Revenue
reduction
share reserve reserve Total
£'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 in respect of the financial period
The dividends paid and payable in respect of the financial period are the
basis on which the requirements of s1158-s1159 of the Corporation Tax Act 2010
are considered.
For the Period ended 30 September 2022
Capital
Pence per reduction Revenue
share reserve reserve Total
£'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
Quarter ended 30 September 2022 1.26p 1,890 - 1,890
Total 4.27p 6,405 - 6,405
After the Period end, the Company declared an interim dividend of 1.26 pence
per share for the period 1 July 2022 to 30 September 2022, to be paid on 16
December 2022 to Shareholders on the register at 25 November 2022.
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. The amount of the share premium
account cancelled and credited to the Company's Capital reduction reserve was
£145,579,902, which can be utilised to fund distributions to the Company's
Shareholders.
17. Net Assets Per Share
Net asset value per ordinary share is based on the £139,126,000 of net assets
of the Company attributable to the 150,000,000 ordinary shares as at 30
September 2022.
18. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 30 September 2022.
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 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.
The Company has no significant credit exposure at the current time. 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.
As at 30 September 2022, the Company's maximum exposure is the cash and cash
equivalents and fixed rate deposits, with initial terms greater than three
months, stated on the Statement of Financial Position. Appropriate credit
checks are required to be made on all counterparties to the Company. Cash and
all fixed deposits are held in accounts with HSBC Bank Plc, which has a credit
rating as per Moody's Investor Services of A1. During the Period ended 30
September 2022, there are no balances past due or impaired.
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 2022, the Company has
financial assets of cash and cash equivalents without contractual maturity
that can meet the current expected financial liabilities.
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 Period end
the Company does 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 2022 are summarised below:
Interest bearing Non-interest bearing Total
£'000 £'000 £'000
Assets
Cash and cash equivalents 40,002 29,359 69,361
Fixed deposits 20,000 - 20,000
Other receivables and prepayments - 3,215 3,215
Investment at fair value through profit or loss 47,105 - 47,105
Total assets 107,107 32,574 139,681
Liabilities
Trade and other payables - (555) (555)
Total liabilities - (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 2022, 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 period 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, Faye Goss is paid director's
remuneration of £37,500 per annum and Marlene Wood is paid director's
remuneration of £37,500 with an additional £5,000 per annum for
responsibilities as Audit Committee Chair. Total directors' remuneration of
£150,570 was incurred in respect to the Period. 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 2022 were as follows:
Shares held
at 30 September
Director 2022
Juliet Davenport 20,000
Faye Goss 20,000
Marlene Wood 20,000
There have been no changes to the above holdings since the Period 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 Period, investment advisory fees amounted to £1,284,824 with the
£257,910 outstanding and payable as at 30 September 2022. A further amount
payable to the Investment Adviser includes expenses paid on behalf of the
Company and amounted to £12,685 at the Period end.
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 2022 were as follows:
· Benedict Luke Green, a director of the Investment Adviser: 113,076
shares (0.08% of issued share capital).
· Steve Peter Windsor, a director of the Investment Adviser: 1,101,419
shares (0.73% of issued share capital).
· Gurpreet Gujral, Fund manager of the Investment Adviser: 43,324
shares (0.03% 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
During the 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
During the period the Company entered into a loan agreement with Holdco for
£125million at 7% interest, of which £48.9m was drawn during the year and is
outstanding as at year end. Interest outstanding and included in amounts
receivable from related parties at year end was £483,232 and was received
during November 2022. The Company additionally provided funding to Holdco for
working capital and VAT. The balance outstanding at year end was £2,565,305,
which was repaid in November 2022.
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, Bastion House, 140 London Wall, London, EC2Y 5DN
Atrato Rooftop Solar 1 Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, Bastion House, 140 London Wall, London, EC2Y 5DN
EMDC Solar Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, Bastion House, 140 London Wall, London, EC2Y 5DN
Hylton Plantation Solar Farm Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, Bastion House, 140 London Wall, London, EC2Y 5DN
Sonne Solar Ltd 100% Operating subsidiary entity, owned by Holdco UK 6(th) Floor, Bastion House, 140 London Wall, London, EC2Y 5DN
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 2022 the Company had the following future investment
obligations:
£0.8 million to Atrato Rooftop Solar 1 Limited, in relation to Recipharm and
Gardner projects.
£0.6 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.
23. Post Balance Sheet Events
On the penultimate day of the financial year, a customer, Vale of Mowbray, of
Atrato Rooftop Solar 1 Ltd entered voluntary administration. The
administrators continued to consume energy generated during October 2022,
which has been fully settled. The generation not consumed has been sold to the
network under the existing spill PPA. Since November, generation has been sold
to the grid and will continue to be until a new owner of the site is secured
by the administrators.
Since year end the market has stabilised particularly following the Autumn
Statement on 17 November 2022, which has resulted in reductions in the
risk-free rate from the levels seen enduring September and October. This
stability has provided more certainty to investors and companies to make
decisions. Analysis of the impact on the fair value of the investments can be
seen is note 4.
No other significant events have occurred between 30 September 2022 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:
Premium/Discount
The amount, expressed as a percentage, by which the share price at 30
September 2022, is greater or less the NAV per share.
As at
30 September
2022
NAV per share (pence) a 92.8
Share price (pence) b 99.5
Premium (b÷a)-1 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.
Share price
For the period from IPO to 30 September 2022 (pence) NAV (pence)
Opening at IPO a 100.0 98.1
Closing at 30 September 2022 b 99.5 92.8
Dividends paid during the period c 3.0 3.0
Adjusted closing (d=b + c) d 102.5 95.8
Total return (d÷a)-1 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 period
from IPO to
30 September
2022
Average NAV (£'000) a 143,037
Ongoing fees* (£'000) b 1,969
Ongoing charges ratio (b÷a) 1.4%
*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
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
Contacts and Company Details
Directors Juliet Davenport (Non-Executive Chair)
Marlene Wood (Chair of Audit Committee)
Faye Goss (Chair of Management Engagement Committee)
Company Secretary Apex Securities LLP
6th Floor, 140 London Wall, London, EC2Y 5DN
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 Alvarium Securities Limited
10 Old Burlington Street, London W1S 3AG
Auditors BDO LLP
55 Baker Street, London, W1U 7EU
Financial PR Advisers KL Communications
40 Queen Street, London, EC4R 1DD
Website www.atratoroof.com (http://www.atratoroof.com)
Registered Office Bastion House
6(th) Floor, 140 London Wall, London, EC2Y 5DN
Stock exchange ticker 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 page 83
2 (#_ftnref2) Projection based on first full year of operations
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