Greencoat UK Wind - Final Results Announcement
29/02/2024 07:00
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RNS Number : 8724E Greencoat UK Wind PLC 29 February 2024
LEI: 213800ZPBBK8H51RX165
29 February 2024
GREENCOAT UK WIND PLC
(the "Company")
Greencoat UK Wind PLC reports results for the year ended 31 December 2023
Greencoat UK Wind PLC today announces the final results for the year to 31
December 2023.
2023 Highlights
Performance
· Net cash generation was £405.5 million and dividend cover was
2.1x.
· The Group's investments generated 4,743GWh of sustainable
electricity.
Dividends and balance sheet
· The target dividend for the year was 8.76 pence per share. With
the increased dividend for the final quarter of 3.43 pence per share, declared
dividends for 2023 were 10 pence per share.
· The target dividend with respect to 2024 is also 10 pence per
share, an increase of 14.2 per cent above the target dividend for 2023,
significantly above December's RPI of 5.2 per cent.
· Aggregate Group Debt of £2,375 million as at 31 December 2023,
equivalent to 38 per cent of GAV.
High quality NAV accretive investments
· £174.2 million of NAV accretion from investment in Dalquhandy,
London Array, South Kyle and Kype Muir Extension wind farms, which increased
the portfolio to 49 operating wind farm investments and net generating
capacity to 2,007MW as at 31 December 2023.
Key Metrics
As at As at
31 December 2023
31 December 2022
Market capitalisation £3,502.9 million £3,523.5 million
Share price 151.5 pence 152.0 pence
Dividends with respect to the year £231.4 million £178.9 million
Dividends with respect to the year per share 10 pence 7.72 pence
GAV £6,169.0 million £5,652.7 million
NAV £3,794.0 million £3,873.2 million
NAV per share 164.1 pence 167.1 pence
TSR 5.4 per cent 13.5 per cent
CO(2) emissions reduced per annum 2.5 million tonnes 2.0 million tonnes
Homes powered per annum 2.3 million homes 1.8 million homes
Funds invested in community projects in the year £4.4 million £4.0 million
Commenting on today's results, Lucinda Riches, Chairman of Greencoat UK Wind,
said:
"I'm pleased to present the results of another significant year for the
company. With investment of £821 million into Dalquhandy, London Array, South
Kyle and Kype Muir Extension wind farms, our portfolio has surpassed 2GW of
net generating capacity. We remain one of the largest owners of wind farms in
the UK."
"We are proud to have generated approximately 1.5% of the UK's electricity
demand last year, and the portfolio was generating enough electricity to power
2.3 million homes and avoid approximately 2.5 million tonnes of CO(2)
emissions through the displacement of thermal generation by the end of 2023."
"With the final dividend for the year, our investors will have received over
£1 billion of dividends since listing. With our continuing strong cash flow
and dividend cover, we can confidently target a dividend of 10p per share with
respect to 2024, extending our track record of attractive dividends and
returns."
"We are now delivering net returns to investors of 10% on NAV, and we remain
confident in our ability to continue to meet our objectives of dividend growth
in line with RPI and capital preservation in real terms."
Annual report
A copy of the annual report has been submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The annual report
will also shortly be available on the Company's website at
www.greencoat-ukwind.com (http://www.greencoat-ukwind.com) where further
information on the Company can also be found.
Details of the conference call for analysts and investors:
There will be a conference call at 9.30am today for analysts and investors.
Analysts and investors can register and watch the event at:
https://www.netroadshow.com/events/login?show=508b1486&confId=61424
(https://www.netroadshow.com/events/login?show=508b1486&confId=61424) .
Presentation materials will be posted on the Company's
website, www.greencoat-ukwind.com (http://www.greencoat-ukwind.com) , from
7.00am.
For further information, please contact:
Greencoat UK Wind PLC 020 7832 9425
Stephen Lilley
Laurence Fumagalli
Matt Ridley
Headland Consultancy 020 3805 4822
Stephen Malthouse
Rob Walker
About Greencoat UK Wind
Greencoat UK Wind PLC is the leading listed renewable infrastructure fund,
invested in UK wind farms. The Company's aim is to provide investors with an
annual dividend that increases in line with RPI inflation while preserving the
capital value of its investment portfolio in the long term on a real basis
through reinvestment of excess cashflow.
The Company provides investors with the opportunity to participate directly in
the ownership of UK wind farms, so increasing the resources and capital
dedicated to the deployment of renewable energy and the reduction of
greenhouse gas emissions.
Defining Characteristics
Greencoat UK Wind PLC was designed for investors from first principles to be
simple, transparent and low risk.
· The Group is invested solely in UK wind farms.
· Wind is the most mature and largest scale renewable technology.
· The UK has a long established regulatory regime, high wind
resource and £100 billion worth of wind farms in operation.
· The Group is wholly independent and thus avoids conflicts of
interests in its investment decisions.
· The independent Board is actively involved in key investment
decisions and in monitoring the efficient operation of the assets, and works
in conjunction with the most experienced investment management team in the
sector.
· Low gearing is important to ensure a high level of cash flow
stability and higher tolerance to downside sensitivities.
· The Group invests in sterling assets and thus does not incur
material currency risk.
Chairman's Statement
I am pleased to present the Annual Report of Greencoat UK Wind PLC for the
year ended 31 December 2023.
Performance
My first annual statement as Chairman comes in the year of the Company's 10th
anniversary as a listed company and it is pleasing that this year has seen a
further demonstration of the Company's resilience despite rising interest
rates, volatile power prices and broader turmoil in global financial markets.
With the final dividend for the year, our investors will have received over
£1 billion of dividends since listing. The Company has consistently
generated excess cash flow beyond its dividend and has now reinvested £906
million. Our net generating capacity now exceeds 2GW and last year we
generated 4.7TWh of renewable electricity, approximately 1.5 per cent of the
UK's electricity demand.
Net cash generated by the Group and wind farm SPVs was £406 million,
providing cover of 2.1x on £197 million of dividends paid in the year.
By the end of 2023, the portfolio was generating sufficient electricity to
power 2.3 million homes and avoiding CO(2) emissions of approximately 2.5
million tonnes per annum through the displacement of thermal generation.
Dividends and Returns
The target dividend for the year was 8.76 pence per share. With the increased
dividend for the final quarter of 3.43 pence per share, to be paid on 29
February 2024, the declared dividends for 2023 will be 10 pence per share.
With our continuing strong cash flow and dividend cover, we can confidently
target a dividend of 10 pence per share with respect to 2024, an increase of
14.2 per cent above the target dividend for 2023, significantly above
December's RPI of 5.2 per cent.
The Total Shareholder Return for the year was 5.4 per cent. NAV decreased by 3
pence per share to 164.1 pence per share, including the effects of a material
increase in the portfolio discount rate. Since listing, NAV per share has
increased by significantly more than RPI. The Company's aim remains to provide
investors with annual dividends that increase in line with RPI inflation.
In line with the higher interest rate environment, the Company has continued
to increase its discount rate and thus returns to investors. The forecast 10
per cent return to investors on NAV (net of all costs) includes reinvestment
of excess cash generation (dividend cover) in addition to the dividends paid.
Given the nature of the Company's business, we believe that this return
compares well with the 10 year gilt rate which was 4.1 per cent immediately
prior to the date of this report. At a share price below NAV, the return is
even higher.
Since listing, aggregate historical dividend cover of 2.0x has enabled the
Company to reinvest £906 million of excess cash generation. Given this
greater reinvestment and higher return, the Company has been and is able to
grow NAV per share significantly more than its peers in addition to generating
a higher dividend yield.
Investment
During the year we invested £821 million into Dalquhandy, London Array, South
Kyle and Kype Muir Extension wind farms, increasing net generating capacity by
397MW.
Outlook and Strategy
Wind continues to be the most mature and widely deployed renewable energy
technology in the UK (30 per cent of GB electricity generation in 2023) with
an offshore wind target of 50GW for 2030 being an important Government target
in the delivery of its 2050 net zero emissions commitment. The Company
supports the UK Government's commitment to achieve Net Zero by 2050 through
acquiring operational wind farms and thereby allowing developers and utilities
to recycle their capital into further renewable energy projects, and by
demonstrating the attractive long term returns in the industry through our
prudent management of wind farms, thereby reducing the cost of capital.
Our Investment Objective has remained unchanged over the last 11 years since
listing: to provide shareholders with an annual dividend that increases in
line with RPI inflation while preserving the capital value of the investment
portfolio in real terms. This has been more than achieved through a focused
strategy of investing only in wind farms and only in the UK while maintaining
a balanced exposure to power prices. Our intention remains to adhere to this
core strategy.
The Company is investing in a mature and growing market, and the Board
believes that there should continue to be further opportunities for
investments that are beneficial to shareholders.
The Company regularly reviews its capital allocation policy by considering a
range of options to optimise returns to shareholders. In October 2023, as part
of this consideration, the Company announced an increase in its annual
dividend target for 2024 to 10 pence per share, an increase beyond December's
RPI of 5.2 per cent. The dividend with respect to the final quarter of the
year will be 3.43 pence per share, taking the annual dividend for 2023 to 10
pence per share.
The Company also announced a £100 million share buyback programme. The
Company has bought back 14 million shares to date at an average cost of 142.1
pence per share.
The Company maintains a disciplined approach to acquisitions, only investing
when it is considered to be in the interests of shareholders to do so. With
the Company's share price currently trading at a discount to NAV, the
alternatives for capital allocation warrant significant consideration.
We will also continue to look at opportunistic disposals.
Through strong cash flow and dividend cover, coupled with our disciplined
approach, we are confident in our ability to continue to meet the objectives
of dividend growth in line with RPI and capital preservation in real terms.
Health and Safety and the Environment
As a responsible investor in operating wind farms, the Company takes its
health and safety responsibilities very seriously. We work with our Investment
Manager to promote the highest standard of health, safety and environmental
management practices in managing our portfolio of investments. Detailed key
performance indicators and the results of audits are regularly reviewed by the
Board and action taken where necessary. We continue to monitor the standards
maintained by the operators of our wind farm investments, to ensure that these
are at least in line with the wider industry, while seeking continuous
improvement.
Climate Change and Sustainability
As a Company investing in wind farms, our strategy and activities naturally
make a positive contribution towards the worldwide goal of achieving a net
zero carbon emissions economy and limiting global warming to 1.5°C. The
Company also considers the recommendations of the Taskforce for
Climate-related Financial Disclosures ("TCFD"). Detailed disclosures can be
found in the Strategic Report.
The Company qualified under Article 9 of the EU Sustainable Financial
Disclosure Regulation ("SFDR") in 2023. The Company's Investment Policy
supports the environmental objective of climate change mitigation that helps
to facilitate the transition to a low carbon economy. The Company will
continue to provide periodic reporting as required under Article 9 of the SFDR
in its Annual Report.
In 2023, the Financial Conduct Authority published its final rules regarding
Sustainability Disclosure Requirements ("SDR"). The Company, with support from
the Investment Manager, will consider the rules and work to meet any
obligations of the SDR in the coming financial year.
The Board, Governance and Executive Management
At the AGM on 28 April 2023, Shonaid Jemmett-Page retired from the Board and
Nick Winser assumed the role of Senior Independent Director. On behalf of the
whole Board, I would like to thank Shonaid for her excellent contribution,
first as Chairman of the Audit Committee and then as Chairman of the Board.
With Shonaid being the last Director who was with the Company at IPO, the
succession of the whole Board has now taken place. I am delighted to have
taken over as Chairman and look forward to the Company continuing to deliver
shareholder value.
On 1 May 2023, Jim Smith joined the Board bringing his extensive experience
from the electricity industry including in offshore wind asset management,
notably leading SSE's renewable business. Jim will oversee the performance of
the Investment Manager's asset management activities.
On 1 March 2024, Abigail Rotheroe will join the Board. Abigail has extensive
experience in the investment and asset management industry, with a focus on
ESG. Abigail's appointment broadens the experience of the Board at a time when
ESG considerations are becoming a major factor in the sustainability of the
investment industry.
At the forthcoming AGM, Martin McAdam will retire from the Board and on behalf
of the Board, I would also like to thank him for his services as a
non-executive Director of the Company since his appointment in 2015 and for
his wisdom and insight.
The annual internal evaluation of the Board raised no significant issues. The
Group's governance is further described in the Corporate Governance Report.
In December 2023, we announced that Laurence Fumagalli will be succeeded by
Matt Ridley as one of the investment managers, partnering Stephen Lilley. The
Board would like to thank Laurence for his vision and unwavering commitment to
list, manage and grow the Company and look forward to continuing to work
alongside Stephen and Matt as the Company continues to develop.
Annual General Meeting
Our AGM will take place at 2pm on 24 April 2024 at the office of the
Investment Manager.
Details of the formal business of the meeting are set out in a separate
circular which is sent to shareholders with the Annual Report.
Lucinda Riches C.B.E.
Chairman
28 February 2024
Investment Manager's Report
The Investment Manager
The investment management team covers all the skills and experience required
to manage the Group: investment, ownership, finance and operation. The
Investment Manager is authorised and regulated by the Financial Conduct
Authority and is a full scope UK AIFM.
Since the Company's IPO in March 2013, the investment management team has been
led by Stephen Lilley and Laurence Fumagalli.
In December 2023, the Company announced Laurence Fumagalli's intention to step
down from his role and that Matt Ridley will succeed Laurence Fumagalli
leading the investment management team alongside Stephen Lilley from 1 March
2024.
Matt brings a broad range of renewable investment experience across both
public and private investment vehicles with a primary focus on wind. Prior to
his appointment, Matt had led the private markets group of the Investment
Manager.
The other key figures in the Investment Manager's team dedicated to managing
the Company remain unchanged, and the majority of the team have been involved
in the management of the Group for over 5 years. The investment management
team has breadth and depth, with core competencies across investment, asset
management and finance, and is supported by the 130 strong wider team within
the Investment Manager.
Investment Portfolio
As at 31 December 2023, the Group owned investments in a diversified portfolio
of 49 operating UK wind farms totalling 2,007MW.
Asset Management
The Group operates a sizeable and diverse portfolio of 49 assets with net
generating capacity in excess of 2GW. The Investment Manager has an
experienced and specialist asset management team, which has expanded
considerably as the portfolio has grown. The team focusses on the safe and
optimal performance of the Group's assets, as well as ensuring the delivery of
the Company's long term investment case. The team continues to move forward
several key initiatives to optimise the performance of the Group's assets,
creating long term value for shareholders. Initiatives include, for instance,
lease extensions, turbine performance upgrades, and revenue and operating cost
optimisation.
Operating and Financial Performance
Portfolio generation in the year was 4,743GWh, 13 per cent below budget owing
to low wind.
The following table shows wind speed and portfolio generation since IPO:
UK weighted average wind speed Generation
(variation to long term mean)
(variation to budget)
2013 (adjusted) +3% +8%
2014 -2% -3%
2015 +5% +8%
2016 -6% -6%
2017 -1% 0%
2018 -4% -6%
2019 -8% -11%
2020 +2% -3%
2021 -12% -20%
2022 -5% -5%
2023 -7% -13%
Variation to budget lies within reasonable statistical parameters. The annual
standard deviation of wind speed is 6 per cent and the annual standard
deviation of generation is 10 per cent (less than 2 per cent over 30 years).
Net cash generated by the Group and wind farm SPVs was £405.5million and
dividend cover for the year was 2.1x.
Group and wind farm SPV cash flows For the year ended 31 December 2023
£'000
Net cash generation ((1)) 405,510
Dividends paid (197,043)
Acquisitions (820,925)
Acquisition costs (2,742)
Share buybacks (9,439)
Share buyback costs (56)
Net amounts drawn under debt facilities 690,000
Upfront finance costs (4,939)
Movement in cash (Group and wind farm SPVs) 60,366
Opening cash balance (Group and wind farm SPVs) 160,851
Closing cash balance (Group and wind farm SPVs) ((2)) 221,217
Net cash generation 405,510
Dividends 197,043
Dividend cover 2.1x
((1) ) Alternative Performance Measure as defined below.
((2) ) Includes £40,119k security cash deposits recognised as a
receivable in note 11 to the financial statements.
The following tables provide further detail in relation to net cash generation
of £405.5 million:
Net Cash Generation - Breakdown ((1)) For the year ended
31 December 2023
£'000
Revenue 785,608
Operating expenses (198,611)
Tax (62,661)
SPV level debt interest (20,044)
SPV level debt amortisation (47,129)
Other 28,133
Wind farm cash flow 485,296
Management fee (24,993)
Operating expenses (2,564)
Ongoing finance costs (62,834)
Other 5,013
Group cash flow (85,378)
VAT (Group and wind farm SPVs) 5,592
Net cash generation 405,510
(1 ) Alternative Performance Measure as defined below.
Net Cash Generation - Reconciliation to Net Cash Flows from Operating For the year ended
Activities ((1))
31 December 2023
£'000
Net cash flows from operating activities ((2)) 359,801
Movement in cash balances of wind farm SPVs 18,225
Repayment of shareholder loan investment ((2)) 50,199
Finance costs ((2)) (67,773)
Upfront finance costs ((3)) 4,939
Placing of security cash deposits ((4)) 40,119
Net cash generation 405,510
(1) Alternative Performance Measure as defined below.
(2) Consolidated Statement of Cash Flows.
(3) £4,350k facility arrangement fees plus £589k professional fees per note
13 to the financial statements.
(4) Note 11 to the financial statements.
Investment and Gearing
The following table lists investments in the year:
£m
Dalquhandy 51.5
London Array 443.6
South Kyle 315.9
Kype Muir Extension ((1)) 9.9
Total 820.9
((1)) In addition to £39.4 million invested as at 31 December 2022.
All of the above investments were materially accretive to NAV (£174.2 million
in total). The Investment Manager believes that there should continue to be
further opportunities for investments that are beneficial to shareholders.
The Company also continues to review its capital allocation, with 14 million
shares having been repurchased as of 27 February 2024 as part of its £100
million buyback programme announced in October 2023, at an average cost of
142.1 pence per share. The Company may also use excess cash generation to
return capital to shareholders through further increased dividends, or for the
repayment of debt.
As at 31 December 2023, Aggregate Group Debt was £2,375 million, comprising
£1,390 million of term debt at Company level, £400 million drawn under the
Company's revolving credit facility plus £585 million being the Group's share
of limited recourse debt in Hornsea 1. Cash balances (Group and wind farm
SPVs) as at 31 December 2023 were £221.2 million (including £40.1 million of
security cash deposits).
Gearing as at 31 December 2023 was 38 per cent of GAV, with a weighted cost of
debt of 4.59 per cent across a spread of maturities (October 2024 to March
2036):
Facility Maturity date Loan principal Loan margin Swap rate All-in rate
£ 000 % / SONIA %
%
RCF 29 Oct 24 400,000 1.75 5.20 ((1)) 6.95
NAB 4 Nov 24 50,000 1.15 1.06 2.21
CBA 14 Nov 24 50,000 1.35 0.81 2.16
CBA 6 Mar 25 50,000 1.55 1.53 3.08
CIBC 3 Nov 25 100,000 1.50 1.51 3.01
ANZ 3 May 26 75,000 1.45 5.92 7.37
NAB 1 Nov 26 75,000 1.50 1.60 3.10
NAB 1 Nov 26 25,000 1.50 0.84 2.34
CIBC 14 Nov 26 100,000 1.40 0.81 2.21
Lloyds 9 May 27 150,000 1.60 5.65 7.25
CBA 4 Nov 27 100,000 1.60 1.37 2.97
ABN AMRO 2 May 28 100,000 1.75 5.04 6.79
ANZ 3 May 28 75,000 1.75 5.38 7.13
Barclays 3 May 28 100,000 1.75 4.99 6.74
AXA 31 Jan 30 125,000 - - 3.03
AXA 31 Jan 30 75,000 1.70 1.45 3.15
AXA 28 Apr 31 25,000 - - 6.43
AXA 28 Apr 31 115,000 1.80 5.20 ((1)) 7.00
Hornsea 1 31 Mar 36 585,000 - - 2.60
2,375,000 Weighted average 4.59
(1) Facility pays SONIA as variable rate.
In June 2023, the Investment Manager led a placing of £640 million of new
term loan facilities with 5 lenders, 2 of which were new lending relationships
to the Company. This included the refinancing of £150 million of term debt
tranches maturing in late 2023. The Company's revolving credit facility is due
to mature in October 2024 in addition to £150 million of term loan tranches
by March 2025. The Investment Manager has commenced discussions with existing
and new lenders to refinance the near-maturing revolving credit facility and
term debt and has found significant appetite.
Net Asset Value
The following table sets out the movement in NAV from 31 December 2022 to 31
December 2023:
£'000 Pence per share
NAV as at 31 December 2022 3,873,228 167.1
Net cash generation 405,510 17.5
Dividend (197,043) (8.5)
Depreciation (118,742) (5.1)
Power price (278,137) (12.0)
Inflation 132,279 5.7
Discount rate (263,252) (11.4)
Accretive investments 174,228 7.5
Share buybacks (9,496) 0.1
Other ((1)) 75,421 3.3
NAV as at 31 December 2023 3,793,997 164.1
((1)) Includes REGOs and wind farm SPV budget updates.
( )
Reconciliation of Statutory Net Assets to Reported NAV
As at As at
31 December 2023
31 December 2022
£'000 £'000
Operating portfolio 5,964,343 5,458,334
Construction portfolio - 39,414
Cash (wind farm SPVs) 159,293 141,068
Fair value of investments((1)) 6,123,636 5,638,816
Cash (Group) 21,805 19,783
Other relevant assets/(liabilities) 23,556 (5,867)
GAV 6,168,997 5,652,732
Aggregate Group Debt((1)) (2,375,000) (1,779,504)
NAV 3,793,997 3,873,228
Reconciling items - -
Statutory net assets 3,793,997 3,873,228
Shares in issue 2,312,131,799 2,318,089,989
NAV per share (pence) 164.1 167.1
((1)) Includes limited recourse debt of £585 million at Hornsea 1, not
included in the Consolidated Statement of Financial Position.
Health and Safety and the Environment
Health and safety is of key importance to both the Company and the Investment
Manager.
The Investment Manager is an active member of SafetyOn, the UK's leading
health and safety focused organisation for the onshore wind industry. The
Investment Manager also has its own health and safety forum, chaired by
Stephen Lilley, where best practice is discussed and key learnings from
incidents across the industry are shared.
During the year, routine health and safety audits were conducted across 14
sites by an independent consultant. In addition, the Investment Manager
undertook 73 safety walks. No material areas of concern were identified from
all audits and safety walks performed in the year.
The Company has continued to contribute to local community funds and to invest
in a range of local environmental and social projects. In addition, the
Company is funding a £250,000 programme to advance knowledge on blade
recycling and repurposing.
As at 31 December 2023, the portfolio powers 2.3 million homes and avoids the
emission of 2.5 million tonnes of CO(2) per annum.
Power Price
Long term power price forecasts are provided by a leading market consultant,
updated quarterly, and may be adjusted by the Investment Manager where more
conservative assumptions are considered appropriate. Short term power price
assumptions reflect the forward curve as at 29 December 2023.
A discount of 10-20 per cent is applied to power price assumptions in all
years to reflect the fact that wind generation typically captures a lower
price than the base load power price. During the year, the portfolio captured
an average price of £89.03/MWh versus an average N2EX index price of
£94.47/MWh (6 per cent discount).
In addition to the above capture discount, a further discount is applied to
reflect the terms of each PPA. The price of some PPAs is expressed as a
percentage of a given price index, whereas other PPAs include a fixed £/MWh
discount to the price index. Other PPAs pay a fixed £/MWh price for power.
The following table shows the assumed power price (post capture discount, pre
PPA discount) and also the price post a representative PPA discount (90 per
cent x index price).
£/MWh (real 2022) 2024 2025 2026 2027 2028 2029 2030
Pre PPA discount 61.34 60.88 56.37 63.76 63.28 60.56 57.36
Post representative PPA discount 55.21 54.79 50.73 57.38 56.95 54.50 51.62
2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Pre PPA discount 57.04 57.20 58.32 58.32 56.48 57.60 57.20 54.00 53.68 54.00
Post representative PPA discount 51.34 51.48 52.49 52.49 50.83 51.84 51.48 48.60 48.31 48.60
2041 2042 2043 2044 2045 2046 2047 2048 2049 2050
Pre PPA discount 51.84 49.84 48.96 49.12 49.36 48.88 48.48 48.80 49.76 47.20
Post representative PPA discount 46.66 44.86 44.06 44.21 44.42 43.99 43.63 43.92 44.78 42.48
2051 2052 2053 2054 2055 2056 2057 2058 2059 2060
Pre PPA discount 47.28 45.68 46.40 46.40 43.84 43.60 42.24 40.88 41.60 40.80
Post representative PPA discount 42.55 41.11 41.76 41.76 39.46 39.24 38.02 36.79 37.44 36.72
The portfolio benefits from a substantial fixed revenue base. Furthermore,
most fixed revenues are index linked (RPI in the case of ROCs, CPI in the case
of CFDs).
The fixed revenue base means that dividend cover is robust in the face of
extreme downside power price sensitivities:
2024 2025 2026 2027 2028
RPI increase (%) 3.5 3.5 3.5 3.5
Dividend (pence / share) 10.00 10.35 10.71 11.09 11.48
Dividend (£ 000) 231,213 239,306 247,681 256,350 265,322
Dividend cover (x)
Base case 2.0 2.0 2.0 2.3 2.4
£50/MWh 1.8 1.8 1.9 1.9 2.0
£40/MWh 1.6 1.6 1.7 1.7 1.7
£30/MWh 1.5 1.5 1.5 1.5 1.5
£20/MWh 1.3 1.3 1.3 1.2 1.2
£10/MWh 1.1 1.1 1.0 1.0 0.9
All numbers illustrative. Power prices real 2022, pre PPA discount.
The Group's strategy remains to maintain an appropriate balance between fixed
and merchant revenue. To the extent that merchant revenues were to increase as
a proportion of total revenues then new fixed price PPAs would be entered
into. However, it is likely that an appropriate revenue balance would be
maintained through the acquisition of new fixed revenue streams (for example,
offshore wind CFD assets).
Inflation
Base case assumptions in relation to inflation are:
CPI: 2.5 per cent (all years)
RPI: 4.3 per cent (2024), 3.5 per cent (2025-2030), 2.5 per cent (2031
onwards)
The ROC price is inflated annually from 1 April each year based on the
previous year's average RPI. For example, on 1 April 2024, the ROC price will
increase by 9.7 per cent (average RPI over 2023).
CFD prices are also inflated annually from 1 April each year. However, in the
case of CFDs, the price is inflated based on January CPI. For example, on 1
April 2024, CFD prices will increase by 4.0 per cent (January 2024 CPI).
Given the explicit inflation linkage of a substantial proportion of portfolio
revenue (ROCs, CFDs, certain PPAs) and the implicit inflation linkage inherent
in power prices, there is a strong link between inflation and portfolio
return.
Returns
The portfolio discount rate was increased by 1 per cent as at 30 June 2023
(total increases of 2 per cent over 2022 and 2023). The levered portfolio IRR
now stands at 11 per cent.
Given that the Company's ongoing charges ratio is less than 1 per cent, the
net return to investors is thus 10 per cent (assuming investment at a share
price equal to NAV - the return is greater assuming investment at a share
price below NAV).
A 10 per cent inflation linked return should be very attractive versus other
investment opportunities. The Company's 10 year track record demonstrates
relatively low volatility and the historical and projected dividend cover is
robust. By investing in operating UK wind farms (higher returning than
European or solar generation assets, and lower risk than batteries or
development assets), the Company aims to continue to generate consistent
superior risk adjusted returns.
A total return of 10 per cent and a dividend yield of 6 per cent would imply
NAV growth of 4 per cent. The total return is more important than the dividend
yield, which depends on the chosen dividend policy (the Company could choose a
different combination of dividend yield and NAV growth).
Excess cash generation (dividend cover) is reinvested to drive NAV growth.
Therefore the size of dividend cover is important; it is not just a question
of "covered or not covered". The business model is self funding and does not
rely on further equity issuance.
Since IPO, aggregate historical dividend cover has been 2.0x and the Group has
reinvested £906 million to deliver NAV growth significantly in excess of RPI.
Outlook
There are currently approximately 30GW (£100 billion) of operating UK wind
farms (15GW onshore plus 15GW offshore). The Group's market share is
approximately 7 per cent. As at 31 December 2023, the average age of the
portfolio was 7.5 years (versus 5 years at IPO in March 2013).
The portfolio is robust in the face of downside power price sensitivities and
remains exposed to significant upside (power prices, asset life extension,
asset optimisation, new revenue streams, interest rate cycle etc). The levered
portfolio IRR of 11 per cent and net return to investors of 10 per cent should
be very attractive versus other investment opportunities.
Given the leading market position of the Group and the Investment Manager,
there is no shortage of investment opportunities, further fuelled by the
challenging fundraising environment affecting all buyers (in both public and
private markets). The Company will continue to review its capital allocation
policy and will assess new acquisitions in this light.
In general, the outlook for the Group is extremely encouraging.
Strategic Report
Introduction
The Directors present their Strategic Report for the year ended 31 December
2023. Details of the Directors who held office during the year and as at the
date of this report are given below.
Investment Objective
The Company's aim is to provide investors with an annual dividend that
increases in line with RPI inflation while preserving the capital value of its
investment portfolio in the long term on a real basis through reinvestment of
excess cash flow.
The Company provides investors with the opportunity to participate directly in
the ownership of UK wind farms, so increasing the resources and capital
dedicated to the deployment of renewable energy and the reduction of
greenhouse gas emissions.
The target return to investors is an IRR net of fees and expenses of 10 per
cent. As a result of the Company's prospects, strong balance sheet and cash
flow generation, the Board decided to increase the 2024 target dividend to 10
pence per share which represents a 14.2 per cent increase above the target
dividend for 2023 and is significantly higher than December 2023 RPI. The
Board also decided to pay a 3.43 pence per share dividend for Q4 2023,
increasing the 2023 full year dividend to 10 pence per share.
Progress on the objectives is measured by reference to the key metrics as
provided above.
Investment Policy
The Group invests in UK wind farms predominantly with a capacity of over 10MW.
Low gearing ensures that the annual dividend is sufficiently protected against
lower power prices. This means that the Group also has the ability to benefit
from higher power prices as it is not required to enter into long term fixed
price contracts.
The Group used debt facilities to make additional investments in the year and
intends to continue to use short term debt facilities to make further
investments, where appropriate. The Group will look to repay its short term
debt facilities by refinancing them with longer term debt facilities or in the
equity markets in order to refresh its debt capacity. While debt facilities
are drawn, the Group benefits from an increase in investor returns because
borrowing costs are below the underlying return on investments.
The Board believes that there is a significant market in which the Group can
continue to grow over the next few years.
Capital Allocation
The Company regularly reviews its capital allocation policy by considering a
range of options to optimise returns to shareholders. In October 2023, as part
of this consideration, the Company announced an increase in its annual
dividend target for 2024 at 10 pence per share, an increase beyond December's
RPI of 5.2 per cent. The dividend with respect to the final quarter of the
year will be 3.43 pence per share, taking the annual dividend for 2023 to 10
pence per share.
The Company also announced a £100 million share buyback programme and bought
back 6.6 million shares in the final 2 months of the year at an average cost
of 144.4 pence per share.
The Company maintains a disciplined approach to acquisitions, only investing
when it is considered to be in the interests of shareholders to do so. With
the Company's share price currently trading at a discount to NAV, the
alternatives for capital allocation warrant significant consideration.
Structure
The Company is a UK registered investment company with a premium listing on
the London Stock Exchange. The Group comprises the Company and Holdco. Holdco
invests in SPVs which hold the underlying wind farm assets. The Group employs
Schroders Greencoat LLP as its Investment Manager.
Discount Control
The Articles of Association require a continuation vote by shareholders if the
share price were to trade at an average discount to NAV of 10 per cent or more
over a 12 month period.
During the year, the Company's shares have traded at an average discount to
NAV of 10.5 per cent. In accordance with the Company's Articles of
Association, a continuation vote will be proposed at the 2024 AGM.
Notwithstanding this, it is the intention of the Board for the Company to buy
back its own shares in the market if the share price is trading at a material
discount to NAV, providing that it is in the interests of shareholders to do
so. Given that the share price had continued to trade at a material discount
to NAV, on 26 October 2023 the Company announced the commencement of a share
buyback programme of up to £100 million executed under the authority granted
by shareholders at the 2023 AGM.
Review of Business and Future Outlook
A detailed discussion of individual asset performance and a review of the
business in the year together with future outlook are covered in the
Investment Manager's Report.
Key Performance Indicators
The Board believes that the key metrics detailed above, which are typical for
investment entities, will provide shareholders with sufficient information to
assess how effectively the Group is meeting its objectives.
Ongoing Charges
The ongoing charges ratio of the Company is 0.92 per cent of the weighted
average NAV for the year to 31 December 2023. This is made up as follows and
has been calculated using the AIC recommended methodology.
31 December 2023 31 December 2022
£'000 % £'000 %
Total management fee 32,844 0.86% 31,348 0.87%
Directors' fees 385 0.01% 338 0.01%
Other ongoing expenses ((1)) 2,058 0.05% 1,970 0.05%
Total 35,287 0.92% 33,656 0.93%
Weighted average NAV 3,834,654 3,622,216
((1)) Other ongoing expenses do not include £1,772k of management and
administration fees relating to the wind farm SPVs that is recharged to them
and £549k of broken deal and project costs.
Assuming no further changes in NAV, the 2024 ongoing charges ratio is expected
to be 0.92 per cent.
The Investment Manager is not paid any performance or acquisition fees.
Employees and Officers of the Company
The Company does not have any employees and therefore employee policies are
not required. The Directors of the Company are listed below.
Principal Risks and Uncertainties
In the normal course of business, each investee company has a rigorous risk
management framework with a comprehensive risk register that is reviewed and
updated regularly and approved by its board. The principal risks identified by
the Board to the performance of the Group are detailed below.
The Board maintains a risk matrix setting out the risks affecting both the
Group and the investee companies. This risk matrix is reviewed and updated at
least annually to ensure that procedures are in place to identify principal
risks and to mitigate and minimise the impact of those risks should they
crystallise. This risk matrix is also reviewed and updated to identify
emerging risks, such as climate related risks, and to determine whether any
actions are required. This enables the Board to carry out a robust assessment
of the risks facing the Group, including those risks that would threaten its
business model, future performance, solvency or liquidity.
The risk appetite of the Group is considered in light of the principal risks
and their alignment with the Company's Investment Objective. The Board
considers the risk appetite of the Group and the Company's adherence to the
Investment Policy in the context of the regulatory environment taking into
account, inter alia, gearing and financing risk, wind resource risk, the level
of exposure to power prices and environmental and health and safety risks.
As it is not possible to eliminate risks completely, the purpose of the
Group's risk management policies and procedures is to reduce risks and to
ensure the Group is adequately prepared to respond to such risks and minimise
any impact should they materialise.
The spread of assets within the portfolio ensures that the portfolio benefits
from a diversified wind resource and spreads the exposure to a number of
potential technical risks associated with grid connections and with local
distribution and national transmission networks. In addition, the portfolio
includes 6 different turbine manufacturers, which diversifies technology and
maintenance risks. Finally, each site contains a number of individual
turbines, the performance of which is largely independent of other turbines.
Risks Affecting the Group
Investment Manager
The ability of the Group to achieve the Company's Investment Objective depends
heavily on the experience of the management team within the Investment Manager
and more generally on the Investment Manager's ability to attract and retain
suitable staff. The sustained growth of the Group depends upon the ability of
the Investment Manager to identify, select and execute further investments
which offer the potential for satisfactory returns.
The Investment Management Agreement includes key man provisions which would
require the Investment Manager to employ alternative staff with similar
experience relating to investment, ownership, financing and management of wind
farms should any key man cease to be employed by the Investment Manager. The
Investment Management Agreement ensures that no investments are made following
the loss of key men until suitable replacements are found and there are
provisions for a reduction in the investment management fee during the loss
period. It also outlines the process for key man replacement with the Board's
approval. In addition, the key men are shareholders in the Company.
On 7 December 2023, the Company announced that Laurence Fumagalli would be
stepping down from his role leading the investment management team alongside
Stephen Lilley with effect from 1 March 2024, with Matt Ridley replacing him.
Matt has 16 years' renewable energy investment management experience, spanning
the development, construction and operational phases across a range of
technologies, with a focus on wind, and previously was the Head of Private
Markets at the Investment Manager. Stephen and Matt will lead the broad and
experienced team focused on the management of the Group and its wind farm
portfolio. The majority of the team have been involved in the management of
the Group for over 5 years.
The Investment Manager is one of Europe's leading renewable investment
managers, which employs over 130 professionals and has over £10 billion of
assets under management. The Investment Manager is 75 per cent owned by
Schroders Group PLC, founded over 200 years ago, and managing over £726
billion of assets (as of 30 June 2023) with over 6,000 staff globally.
Financing Risk
The Group will finance further investments either by borrowing or by issuing
further shares in addition to its cash resources. The ability of the Group to
deliver expected real NAV growth is dependent on access to debt facilities and
equity capital markets. There can be no assurance that the Group will be able
to borrow additional amounts or refinance on reasonable terms or that there
will be a market for further raising of equity.
Investment Returns Become Unattractive
Higher interest rates could persist, making the listed infrastructure asset
class relatively less attractive to investors. In such circumstances, it is
likely that discount rates would be adjusted to maintain a suitable premium
over increased risk free rates.
Risks Affecting Investee Companies
Regulation
If a change in Government renewable energy policy were applied retrospectively
to current operating projects including those in the Group's portfolio, this
could adversely impact the market price for renewable energy or the value of
the green benefits earned from generating renewable energy. The Government has
evolved the regulatory framework for new projects being developed but has
consistently stood behind the framework that supports operating projects as it
understands the need to ensure investors can trust regulation.
Electricity Prices
Other things being equal, a decline in the market price of electricity would
reduce the investee companies' revenues.
The Group's dividend policy has been designed to withstand significant short
term variability in power prices. A longer period of power price decline would
materially affect the revenues of investee companies.
Wind Resource
The investee companies' revenues are dependent upon wind conditions, which
will vary across seasons and years within statistical parameters. The standard
deviation of energy production is 10 per cent over a 12 month period (less
than 2 per cent over 30 years). Since long term variability is low, there is
no significant diversification benefit to be gained from geographical
diversification across weather systems.
The Group does not have any control over the wind resource but has designed
its dividend policy such that it can withstand significant short term
variability in production relating to wind. Before investment, the Group
carries out extensive due diligence and relevant historical wind data is
available over a substantial period of time. The other component of wind
energy generation, a wind farm's ability to turn wind into electricity, is
mitigated by purchasing wind farms, where possible, with a proven operating
track record.
When acquiring wind farms that have only recently entered into operation, only
limited operational data is available. In these instances, the acquisition
agreements with the vendors of these wind farms will include a ''wind energy
true-up'' or an appropriate discount to the purchase price.
Asset Life
In the event that the wind turbines do not operate for the period of time
assumed by the Group or require higher than expected maintenance expenditure
to do so, it could have a material adverse effect on investment returns.
The Group performs regular reviews and ensures that maintenance is performed
on all wind turbines across the wind farm portfolio. Regular maintenance
ensures the wind turbines are in good working order, consistent with their
expected life-spans.
Health and Safety and the Environment
The physical location, operation and maintenance of wind farms may, if
inadequately assessed and managed, pose health and safety risks to those
involved. Inappropriate wind farm operation and maintenance may result in
bodily injury, particularly if an individual were to fall from height, fall or
be crushed in transit from a vessel to an offshore installation or be
electrocuted. If an accident were to occur in relation to one or more of the
Group's investments and if the Group were deemed to be at fault, the Group
could be liable for damages or compensation to the extent such loss is not
covered by insurance policies. In addition, adverse publicity or reputational
damage could follow.
The Board reviews health and safety at each of its scheduled Board meetings
and Martin McAdam serves as the appointed Health and Safety Director. After
Martin's retirement at the AGM in April 2024, Jim Smith will assume this
responsibility. The Group also engages an independent health and safety
consultant to ensure the ongoing appropriateness of its health and safety
policies.
The investee companies comply with all regulatory and planning conditions
relating to the environment, including in relation to noise emissions, habitat
management and waste disposal.
Going Concern
As further detailed in note 1 to the financial statements, the Directors have
a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence from the date of approval of
this report to at least February 2025. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
Longer Term Viability
As further disclosed below, the Company is a member of the AIC and complies
with the AIC Code. In accordance with the AIC Code, the Directors are required
to assess the prospects of the Group over a period longer than the 12 months
associated with going concern. The Directors conducted this review for a
period of 10 years, which is deemed appropriate, given the long term nature of
the Group's investments which are modelled over 30 years, coupled with its
long term strategic planning horizon.
In considering the prospects of the Group, the Directors looked at the key
risks facing both the Group and the investee companies, focusing on the
likelihood and impact of each risk as well as any key contracts, future events
or timescales that may be assigned to each key risk. The Directors also tested
and are comfortable that the Company would continue to remain viable under
several robust downside scenarios, including loss of government subsidies and
a significant decline in long term power price forecasts, both considered
principal risks and uncertainties affecting investee companies.
As a sector-focused infrastructure fund, the Group aims to produce stable and
inflating dividends while preserving the capital value of its investment
portfolio on a real basis. The Directors believe that the Group is well placed
to manage its business risks successfully over both the short and long term
and accordingly, the Board has a reasonable expectation that the Group will be
able to continue in operation and to meet its liabilities as they fall due for
a period of at least 10 years.
The Board does not believe that the lower power prices projected in the high
transition risk scenario, will diminish the longer term viability of the
Company.
The Directors have also considered the continuation vote to be proposed at the
Company's AGM in April 2024, caused by the Company's shares trading at 10.5
per cent average discount to NAV in line with its Articles of Association. The
Directors believe that the outcome of the shareholder continuation vote will
not impact their opinion of the Company's longer term viability.
While the Directors have no reason to believe that the Group will not be
viable over a longer period, they are of the opinion that it would be
difficult to foresee the economic viability of any company with any degree of
certainty for a period of time greater than 10 years.
Directors' Responsibilities Pursuant to Section 172 of the Companies Act 2006
The Directors are responsible for acting in a way that they consider, in good
faith, is the most likely to promote the success of the Company for the
benefit of its members. In doing so, they should have regard for the needs of
stakeholders and the wider society. The Company's objective is to provide
investors with an annual dividend that increases in line with RPI inflation
while preserving the capital value of its investment portfolio in the long
term on a real basis through reinvestment of excess cash flow.
The Company provides investors with the opportunity to participate directly in
the ownership of UK wind farms, so increasing the resources and capital
dedicated to the deployment of renewable energy and the reduction of
greenhouse gas emissions. The Board is also aware of its responsibility for
the risk management of the Group's climate related risks and for transparent
disclosure of these risks, appreciating how this is integral to the success of
the Company.
Key decisions are those that are either material to the Company or are
significant to any of the Company's key stakeholders, as defined in the
Corporate Governance Report. The Company's engagement with its key
stakeholders, including the Investment Manager, is discussed further in the
Corporate Governance Report. The key decisions and discussions detailed in the
table below were made or approved by the Directors during the year, with the
overall aim of promoting the success of the Company while considering the
impact on its members and wider stakeholders.
Topic Stakeholder considerations and outcome
Dividends Shareholders voted 99.99 per cent in favour to approve the Company's dividend
policy at the AGM on 28 April 2023. In recognition of the very strong cash
flow delivered by the business during the year, the Board approved a special
dividend payment of 3.43 pence per share for Q4 2023 which brought total
dividends to 10 pence per share with respect to the year.
The Board has also announced a target dividend of 10 pence per share for 2024,
an increase of 14.2 per cent from 2023's target dividend of 8.76 pence per
share.
Stakeholders influencing and/or impacting considerations:
Shareholders and potential investors
Investments During the year, the Company invested in two wind farms and completed the
acquisition of two further wind farms which it committed to acquire in 2020,
bringing the Company's net generating capacity to over 2GW. Following
recommendation from the Investment Manager, the Directors considered each of
the Company's investments in the context of the Company's Investment Policy,
availability of financing and the potential returns to investors. They also
considered each investment in the context of sustainability and its impact on
the surrounding community.
Stakeholders influencing and/or impacting considerations:
Shareholders, potential investors, local communities and Investment Manager.
Share Capital On 26 October 2023, the Company announced the commencement of a share buyback
programme of up to £100 million executed under the authority granted by
shareholders at the 2023 AGM. The Board determined that buying back shares was
in the best interests of shareholders. As at 31 December 2023, 6.6 million
shares were purchased under the above authority at a total cost of £9.5
million.
During the year, the Company issued 619,546 Ordinary Shares to satisfy the
Equity Element of the Investment Management Fee, in accordance with the
Investment Management Agreement. No shares were issued through equity raisings
during the year.
Stakeholders influencing and/or impacting considerations:
Shareholders, potential investors and Investment Manager.
Annual review of service providers The Board annually reviews the Company's external service providers and, in
particular, the quality and costs of the services provided and organisational
strength where appropriate. It has concluded that the interests of the
Company's shareholders would be best served by the ongoing appointments of the
Investment Manager, the Administrator and the Company's other key service
providers on the existing terms.
Stakeholders influencing and/or impacting considerations:
Investment Manager, Administrator and other key service providers.
Strategy session The Board holds an annual strategy session with the Investment Manager,
outside of the scheduled quarterly Board meetings, to consider the Company's
strategic objectives. The Board believes that the strategy session helped to
strengthen a clear and collaborative vision for the strategic direction of the
Company, while taking into account the views and needs of stakeholders.
Stakeholders influencing and/or impacting considerations:
Shareholders, potential investors and Investment Manager.
Board Composition and Internal Evaluation
During the year, Jim Smith was appointed as a non-executive Director of the
Company with effect from 1 May 2023. With effect from 28 April 2023, Lucinda
Riches C.B.E. succeeded Shonaid Jemmett-Page as Chairman, following her
retirement from the Board, with Nick Winser C.B.E. succeeding Lucinda Riches
as Senior Independent Director.
On 1 March 2024, Abigail Rotheroe will join the Board. At the forthcoming AGM,
Martin McAdam will not seek re-election and will retire from the Board.
As disclosed in the Corporate Governance Report, the Board undertakes a formal
and rigorous internal evaluation of its performance each financial year to
determine effectiveness and performance in various areas, as well as the
Directors' continued independence and tenure. The reviews concluded that the
overall performance of the Board and Audit Committee was satisfactory and the
Board was confident in its ability to continue to govern the Company well.
Environmental, Social and Governance
The Group's approach
The Group invests in wind farms and the environmental benefits of renewable
energy are proven and key to delivering the Government's and society's climate
change objectives. As the largest renewable infrastructure fund and one of the
largest owners of wind farms in the UK, the Company continues to prove the
viability of clean energy as a robust sector for investment.
The Group now owns over 2GW of installed capacity across 49 onshore and
offshore operating wind farms. By dedicating resources to the deployment of
renewable energy, the Group is playing an active role in reducing the UK's
greenhouse gas emissions and accelerating a move towards Net Zero for the
whole economy. Since listing, the Group's operating wind farms have produced
23.5TWh of clean energy, avoiding 9.4 million tonnes of CO(2).
During the year, the Group's wind farms generated 4,743GWh of renewable
electricity. By the end of 2023, the portfolio was generating sufficient
electricity to power 2.3 million homes(1) and avoiding approximately 2.5
million tonnes of CO(2) emissions per annum through the displacement of
thermal generation(2).
Through acquiring operational wind farms from third parties, this allows
capital to be recycled into further renewable energy projects.
Both generating renewable electricity and enabling capital recycling
contribute to SDG 7 (ensure access to affordable, reliable, sustainable and
modern energy for all) and SDG 13 (take urgent action to combat climate change
and its impacts).
Responsible Investment
To sustain the long term success of the business, the Company acknowledges and
understands the importance of effective management of ESG matters for all
stakeholders.
The Company continues to have an important role to play in championing both
responsible investment and the development of the renewable energy sector.
This is achieved through continuous engagement with all industry stakeholders,
including suppliers, O&M partners, industry associations, policy makers,
peers and communities. The Company transparently shares its ESG approach and
results with investors.
Responsible investing principles have been applied to each of the investments
made, which require the Group to make reasonable endeavours to ensure the
ongoing compliance of its investee companies with its policies on responsible
investment and ESG matters.
Although the non-executive Board has overall responsibility for the activities
of the Company and its investments, the day-to-day management of the business
is delegated to the Investment Manager. This includes responsibility for ESG
matters and applies as investments are being made and continuously during the
life of each wind farm. The Investment Manager assesses how ESG should be
managed and the Company has developed its ESG policy in accordance with the
Investment Manager's ESG Policy. The ESG Policy of the Company is approved and
overseen by the Company's Board.
(1) The number of homes powered is based on the average annual household
energy consumption (2.7MWh/annum (Ofgem)), using the latest reported figures,
and reflects the portfolio's annual electricity generation as at the relevant
reporting date.
(2) The portfolio's annual CO(2) emissions avoided through the displacement of
thermal generation, based on the portfolio's annual generation as at the
relevant reporting date. The Group assumes that wind generation replaces CCGT
in the UK and applies a carbon factor of 0.4tCO(2)/MWh (Ofgem).
The Group will continue to lead the way in encouraging responsible investment
to accelerate the development of the UK's wind energy sector further and will
do this in a way that maximises returns for our shareholders and creates
benefits for the communities and the natural environment in which its wind
farms operate.
The Investment Manager has representation on the boards of the operating wind
farm companies which oversee performance, including on ESG matters, and meet
quarterly. From these ongoing reviews, the Investment Manager reports
quarterly to the Company's Board, with data on production, wind farm
availability, key events and health and safety performance.
This robust management structure enables the Investment Manager to oversee ESG
issues effectively throughout the lifecycle of the Group's wind farms:
Screening
· screening the investment against investment mandate and
restrictions; and
· assessing the ability of the investment to comply with ESG
standards.
Due Diligence
· rigorously assessing ESG risks and opportunities of the
investment based on commitment, capacity, track record and features of the
wind farm; and
· identifying mitigation plans for ESG risks, where identified.
Investment decision
· identifying and addressing ESG issues in extracts of the
Investment Manager's Investment Committee papers that inform investment
decisions; and
· determining and costing plans to address ESG issues, and price
into the investment decision process.
Asset Management
· establishing appropriate governance structures;
· complying with all relevant laws and regulations;
· ensuring ongoing monitoring and management of ESG issues;
· managing impacts on the natural habitat surrounding the wind
farms under management;
· engaging with and supporting the local communities;
· performing due diligence on third parties and ensuring compliance
with the Company's ESG policy; and
· ensuring business integrity with a focus on avoiding money
laundering, negligent or corrupt practices.
Environment
As one of the largest owners of wind farms in the UK, the Group is focused on
taking actions to support climate change mitigation through the generation of
renewable energy, whilst minimising the potential impacts that the operation
of wind farms may have on local habitats and the environment.
The world continues to face a serious climate challenge, and the UK is taking
an active role as a global leader in greenhouse gas emissions reduction. The
Company supports the UK Government's commitment to achieve Net Zero by 2050
through acquiring operational wind farms and thereby allowing developers and
utilities to recycle their capital into further renewable energy projects, and
by demonstrating the attractive long term returns in the industry through our
prudent management of wind farms, thereby reducing the cost of capital.
The Group is committed to protecting the local environment around its wind
farms, recognising the potential impact that wind farms can have on local
terrestrial and aquatic wildlife and landscape.
As such, the Group seeks to protect the local environment around its wind
farms by using robust environmental management systems. These include
policies, periodic risk assessments, monitoring and regular reporting to the
Board and the boards of each of the wind farm companies. Through these
measures, the Group also ensures compliance with all applicable laws,
regulations and planning permissions as administered by the Environment
Agency, Health Protection Agency, local authorities, Ofgem, UREGNI or any
other relevant regulatory body, including the data reporting obligations under
Renewable Obligation Order 2009.
The Group's core activities include:
· maintaining management systems to evaluate the potential risks
and impacts of its activities and avoiding or mitigating environmental impacts
on biodiversity, air quality, noise and waste management where relevant;
· running habitat management plans at its wind farms;
· undertaking additional environmental impact assessments or
undergoing regular monitoring as required;
· seeking to work with partners who uphold good industry standards
- from operational managers whose management systems comply with the
requirements of ISO 14001:2015 (environmental management systems) to the
material contractors used; and
· reporting regularly to the Board and the boards of each of the
wind farm companies.
The Company also recognises the importance of a circular economy in achieving
Net Zero targets and in reducing the environmental impact associated with
renewable energy generation. After setting up a grant-making programme to fund
and support academic research and non-profit projects last year, the first 2
projects are underway. The 'Added-value Coatings' research project, led by The
University of Edinburgh, aims to turn decommissioned wind turbine blade
materials into powders that can be used in surface coatings to protect
engineering and structural components from corrosion. The second project is
led by Imperial College, London and aims to develop an end-of-life
decision-making tool to predict how much damage a wind turbine blade has
accumulated in its lifetime. The tool aims to support the industry in making
informed and sustainable decisions about the optimal end-of-life route for
turbine blades.
CASE STUDY
Seal rescue and rehabilitation in Caithness
Caithness Seal Rehab and Rescue was set up to protect, rescue, treat and
release Common, Harbour and Grey seals along the Caithness coastline. A barn
near the harbour in Brough has been repurposed to establish a seal hospital
and can house up to four seals in purpose built pens, a nursery area that can
accommodate a further two seal pups, and three mobile pens. Seals are picked
up, checked by vets, fed and rehabilitated until they are healthy and at a
suitable weight to be released. Local volunteers help to run the centre and
provide local educational talks about seals.
During the year, Stroupster contributed £15,000 to a project to improve
facilities within the barn such as: a new insulated food preparation room with
increased hygiene standards; a small laboratory station; and the creation of
four new large seal pens with concrete floors, insulation, tiling and
drainage. The project facilitates better working conditions for the volunteers
at the centre, better storage of equipment, and an opportunity to accommodate
more visitors to the sanctuary to enable it to become a popular tourist
attraction. The funding of such projects remains a key aspect of the Company's
approach to community engagement and the environment.
Social
Supporting worker safety and fair employment on our sites
Worker safety is a top priority for the Group. The Group also recognises the
need for people to be paid fairly for the work they do and to have appropriate
working conditions. In prioritising these elements, it supports the local
communities in which its wind farms operate, ensuring the long term viability
of its operations.
The Group achieves this through a range of activities, including:
· complying with all applicable laws relating to employment,
occupational health and safety, human rights, prevention of human trafficking
and modern slavery, public safety and security and community matters,
including the Wind Turbine Safety Rules;
· implementing health and safety best practices through wind farm
specific health and safety policies, project management, contractual
arrangements, staff training and stakeholder education;
· assessing and monitoring health and safety practices through wind
farm specific risk identification and prevention activities; and
· reporting on key health and safety data regularly, with
escalation and rapid response procedures in place in case of emergency.
During the year, these activities included:
· 530 regular safety checks carried out by the operations and
maintenance service providers at all wind farms;
· safety walks by the Investment Manager's team at 43 wind farms;
· independent health and safety audits by accredited professionals
at 14 wind farms and 16 O&M partners; and
· HV audits at 10 wind farms.
The Group's focus on prevention arises out of a culture of transparent
reporting, collaboration, and best practice. Identifying both hazards and
analysing the causes of incidents is a key risk mitigant.
As a member of Renewable UK, the UK's leading wind energy trade association,
the Company is keen to work with other stakeholders to develop the industry
further including on health and safety. In addition, the Investment Manager is
an active member of SafetyOn, the UK's leading health and safety focused
organisation for the onshore wind industry. With the increase in offshore wind
capacity in the Company's portfolio, the Investment Manager also became a
member of G+, to help ensure industry best practice for offshore wind assets.
Supporting the communities around our wind farms
It is important that the wind farms are truly part of the community. The
Group's approach aids long term support by local communities for wind farms in
the UK, which ultimately enables the continued growth of the industry.
The Group cares about the communities around its wind farms and engages with
local communities to ensure respect for land and access rights and that its
wind farms are managed in accordance with planning permissions.
The Group holds regular dialogue with community funds and provides financial
support to local groups through community benefit schemes that fund local
projects.
These funds help deliver a range of services, from improving local amenities
and infrastructure to aiding educational projects for local schools.
In 2023, the Group provided £4.4 million to community funds.
Diversity
The Board has a policy to base appointments on merit and against objective
criteria, with due regard for the benefits of diversity, including both gender
and ethnic diversity. Its objective is to attract and maintain a Board that,
as a whole, comprises an appropriate balance of skills and experience.
The Board consists of individuals from relevant and complementary backgrounds
offering experience in the investment management of listed funds, as well as
in the energy sector from both a public policy and a commercial perspective.
As at the date of this report, the Board comprised 3 men and 2 women, all
non-executive Directors who are considered to be independent of the Investment
Manager and free from any business or other relationship that could materially
interfere with the exercise of their independent judgement. Currently, the
Chairman and Audit Committee Chairman positions are both held by women who
represent 40 per cent of Directors on the Board. After the Company's AGM on 24
April 2024, the Board will comprise of 3 women and 2 men.
The Board is cognisant that it does not currently have ethnic minority
representation, contrary to the FCA diversity guidelines. The size of the
Board is relatively small in comparison to the wider FTSE 250 and FTSE 100
constituents and therefore provides a greater challenge in complying with
diversity guidelines. In the recruitment processes conducted during the year,
enhancing the Board's ethnic diversity was a key focus. Whilst the Board has
not become more ethnically diverse as a result of the recruitment in 2023,
this will continue to be an important objective during future succession
planning, whilst ensuring an appropriate balance of skills and experience in
the Board.
The Board recognises the importance of an inclusive and diverse Board in
facilitating a collaborative culture and enhancing the delivery of the
Company's strategic objectives.
In accordance with Listing Rule 9.8.6R(10), as at the date of this report and
as described above, the composition of the Board is as follows:
Number of Board members in scope Percentage of the Board Number of senior positions on the Board (CEO, CFO,
SID and Chair) (1)
Men 3 60% 1
Women 2 40% 2
Not specified/prefer not to say - - -
(1) The positions of CEO and CFO are not applicable to the Company as an
externally managed investment fund. Senior Board positions will continue to be
reviewed.
Number of Board members in scope Percentage of the Board Number of senior positions on the Board (CEO, CFO,
SID and Chair)(1)
White British or other White (including minority-white groups) 5 100% 3
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British - - -
Black/African/Caribbean/ - - -
Black British
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
(1) The positions of CEO and CFO are not applicable to the Company as an
externally managed investment fund. Senior Board positions will continue to be
reviewed.
The above information is based on voluntary self-declaration from the
Directors.
The Investment Manager operates an equal opportunities policy and its partners
and employees comprise 92 men and 35 women.
CASE STUDY
Errogie Church - Driving positive social impact in the local community
The Group is committed to investing in projects that benefit communities in
the long term: the Errogie Church project is a great example of this approach.
Co-funded by Corriegarth, the Stratherrick & Foyers Community Trust (SFCT)
looks to encourage positive community development near the wind farm.
Specifically, the project aims to repurpose Errogie Church into a community
hub.
Following the acquisition of Errogie Church 4 years ago, the project followed
an inclusive approach to decision making with extensive consultations being
held with local residents to gauge the community's needs and support for a
communal space. This fostered a sense of ownership and pride in local
heritage. Over the lifetime of the project, the building will be restored,
local talent showcased and community cohesion enhanced. Additionally,
opportunities for economic growth have emerged with craft markets,
exhibitions, and other activities which have supported local businesses taking
place.
In 2023, we celebrated the completion of the first phase of the project, as
extensive works have been completed to ensure that the building was fit for
basic use. The Errogie Doors Open Day and the large turnout are evidence of
the consensus around the initiative and testimony of the positive impact it
will have in the future.
Through ongoing partnerships and community-led initiatives, the project is on
track to leave a lasting legacy of positive social impact for generations to
come.
Governance
Detailed disclosure on the Company's governance structure and activities can
be found in the Corporate Governance Report and in the TCFD Governance
section.
Task Force on Climate Related Financial Disclosures (TCFD)
The Company strives to maintain the highest standards of corporate governance
and effective risk identification and management at both Group and wind farm
level. The Company supports the recommendations of the TCFD and refers to them
for guidance on addressing climate related risks and opportunities across the
Group and enhancing our disclosure.
These disclosures are categorised between the 4 thematic areas as recommended
by the TCFD.
Governance
Board oversight and the role of the Investment Manager
The Board is responsible for the determination of the Company's Investment
Objective and Investment Policy. It also oversees the management of the
Company and its investments, including ESG and climate related risks and
opportunities. The Board also delegates the day-to-day management of the
business, including management of ESG matters, to the Investment Manager.
The Audit Committee also considers the Company's climate related disclosures
in its Annual Report and Financial Statements.
As discussed in the Corporate Governance Report, the Board and the Investment
Manager meet regularly and discuss risk management. Climate related risks are
covered during these discussions, as they naturally arise from the Group's
underlying investments and the Company's significant role in the
decarbonisation of the UK economy. A formal risk matrix is maintained by the
Investment Manager and reviewed and approved by the Board on an annual basis.
In addition, the Investment Manager has its own ESG Committee that meets
regularly to discuss ESG and climate related risks relating to the Group and
other funds it manages. This committee has implemented an ESG Policy that
looks to establish best practice in climate related risk management, reporting
and transparency. Stephen Lilley is on this ESG Committee and therefore
remains well informed and involved with ESG and climate related discussions,
which may impact the Company. Representatives from the Investment Manager also
sit on all of the boards of the wind farm companies, which meet quarterly and
discuss ESG and climate related risk management.
Strategy
The Board understands that climate change poses risks and opportunities to the
Company.
As the leading listed renewable infrastructure fund, invested in UK wind
farms, the Company plays a significant role in the UK renewables industry.
Overall, the Board believes that the decarbonisation of the UK economy will
continue to present a significant investment opportunity and the size of the
Company's growth will be related to the success of the sector and the
engagement of its stakeholders. The Company is committed to its strategy and
Investment Policy of investing in operating wind assets to benefit from this
opportunity. The Company also recognises, however, that there are short term
and medium to long term transition risks that could impact its future
financial performance. The Company seeks to manage these risks to mitigate
potential impact.
The tables below summarise the principal opportunities and risks identified by
the Company and details, where relevant, how it manages the risks or
opportunities.
Opportunities
Category Climate issue Opportunities Company consideration
Transition Increased demand for renewable energy generation Increasing ambition of corporate and Government Net Zero targets could lead to The Board considers that the decarbonisation of the UK economy will continue
a material increase in the procurement of renewable energy by businesses and to present a significant investment opportunity in the short and medium term
consumers. Moreover, companies are increasingly required to demonstrate their (0-15 years) and the size of the Company's growth will be related to the
commitment to reducing their carbon footprints, which may increase the demand success of the sector and the engagement of its stakeholders.
for corporate PPAs.
Transition Increased investor interest in renewable energy funds Institutional investors are increasingly expected by regulators and clients to The Board believes that providing investors with a vehicle that supports their
disclose their strategies to mitigate climate change. This includes the Net Zero ambitions is an opportunity to the Company in the short term (<5
setting of Net Zero targets and investing in assets that contribute to climate years). The Company continues to evolve its engagement with the market and its
change mitigation such as renewable energy assets to meet these targets. disclosures to better explain the positive role that wind energy generation
Increased investor interest in renewable energy funds could lead to a lower plays in the energy transition.
cost of capital and enable greater capital raises to support the long term
growth and investment activities of the Company.
Risks
Category Climate issue Risk Company consideration
Transition Retrospective changes to policies providing financial support to renewable There is a risk that the UK Government retrospectively changes its financial The Board considers the likelihood of any retrospective policy change to be
energy support for the renewable energy sector such as ROCs, network charges and low in the short term (less than 5 years). To manage any such risk, the Board
carbon price floors. Retrospective changes to such financial support could and Investment Manager keep themselves abreast of developments in
decrease portfolio revenues and increase operating costs making the technology international support for renewable energy as well as their impact and, where
less commercially viable. possible, respond to changes when and if they happen. The Investment Manager
is also actively engaged in discussion with both industry and the Government
on the ongoing REMA consultation.
Transition Increased renewable generation capacity reduces power prices It is possible that the deployment of new renewable energy generation The Board considers there to be limited potential impact on the Company from
capacity, required to meet future UK and global emission reduction targets, fluctuating power prices due to the nature of the portfolio's cashflows, which
could reduce the power prices captured by the Group's portfolio investments are both fixed and merchant. The Group's dividend policy has also been
resulting in reduced revenues. designed to withstand significant short term variability in generation or
power price capture.
Transition Increased reputational risks associated with climate-related disclosures and There is also an increase in reputational risk should incorrect or unclear The Company considers the potential impact of this risk to the Company to be
reporting obligations statements be made in climate related disclosures that could result in low in the short and medium term. To manage this risk, the Investment Manager
investor dissatisfaction, fines linked to greenwashing or broader reputational engages specialist consultants to measure and report on the Company's carbon
damage to the Company and the Investment Manager. emissions. The Investment Manager also uses internal processes to monitor
emerging climate-related disclosure regulations and disclosures that are made
by the Company are reviewed by the Audit Committee as well as the Investment
Manager's compliance and ESG teams.
Physical Increase in extreme weather events The UK has witnessed an increase in extreme weather events including flooding, The Company considers the impact of such risks to its portfolio to be low. The
heatwaves and storms including high wind speeds in recent years. Extreme current portfolio of wind farms is designed to withstand extreme weather
weather events have the potential to disrupt portfolio operations impacting conditions and to take advantage of weather systems such as increased wind
cash flows, and to damage assets resulting in increased operating costs or speeds. In addition, wind turbines are designed to shut down in the event that
insurance premiums. wind speeds exceed very high speeds to protect them from damage.
The Investment Manager does not consider an increase in flooding to pose
significant issues to the Company's portfolio as onshore wind turbines are not
typically located in areas prone to flooding. To mitigate risk of damage from
extreme weather events, the Company procures property damage and business
interruption insurance should operations be disrupted, or assets be damaged.
Climate scenarios
The Company recognises the requirement under the TCFD for considering the
resilience of its strategy under different climate related scenarios,
including a 2°C or lower increase scenario. The Board has also considered the
potential impact of a high transition risk scenario on its strategy and sets
out high level conclusions below. The scenarios were developed by a market
leading consultant.
To meet the FCA's product level TCFD disclosure requirements, the Company will
publish a separate report on its website before 30 June 2024. This will
include information relating to an assessment of the potential impacts of
specific transition scenarios as listed in the FCA Handbook.
High transition risk scenario
Transition risks are those associated with the pace and extent at which
society adapts and mitigates the risk of climate change. Transition risks can
occur when moving to a greener economy has adverse impacts on certain sectors,
due to policy, legal, market or technological shifts. The Board and the
Investment Manager continue to believe that the key factor that could impact
the Company in the transition to a lower carbon economy is the variability of
long term prices for wholesale electricity. In a lower carbon economy, where
considerable build-out of renewable generation capacity will be required,
there is a risk that the power price received by the Group's portfolio could
be negatively impacted, depending on how successful the Government is in
implementing its plan and depending on future electricity market design
including the ongoing REMA consultation.
The Investment Manager has assessed the potential impact of a high transition
risk scenario using a third party Net Zero model built by leading power market
experts. The model sets out how electricity prices and the market may develop
in line with meeting the legislated target of Net Zero emissions by 2050,
including current and future policy implementation to achieve carbon
neutrality, technological developments and commodity price forecasts for a
global outlook.
In this high transition risk scenario where global temperature increases are
limited to only 1.5(o)C to 2(o)C (most typically associated with Net Zero), it
is assumed that the UK Government is successful in implementing its plan in
its entirety and the REMA consultation does not conclude in significantly
different market design. In this scenario, the long term power price is lower
than the base case used to calculate the Company's NAV. The lower long term
power price, provided by a leading market consultant, reflects the wider
deployment of low marginal cost renewable generation capacity, partially
offset by the expected deployment of electrolysers as part of a growing
hydrogen economy, increased electrification of transport and heat and the
build-out of data centres. Modelling the lower long term power price would
equate to approximately a 17 pence reduction in NAV per share.
The base case long term power price assumes significant renewable generation
and other measures to reduce carbon emissions and represents the independent
consultant's best estimate of likely outturn. The high transition risk
scenario assumes further measures. The precise effect on power price of any
measures (in the base case and in the high transition risk scenario) is highly
uncertain and is highly dependent on future electricity market design. The
high transition risk scenario also assumes no other offsetting factors.
High physical risk scenario
Physical risks may consist of acute physical risk, which can refer to event
driven perils including increased severity and frequency of extreme weather
events, and chronic physical risk, which can refer to longer term shifts in
climate patterns that cause sea level rises, heat waves, droughts and
desertification.
The Board and the Investment Manager continue to believe that a scenario where
global temperature increases are significantly higher than 2(o)C (a high
physical risk scenario) would not lead to any significant physical risk to the
Group's wind farms, which are designed to operate in extreme weather
conditions and are typically not located in areas prone to flooding.
The Board recognises that climate change could lead to more extreme weather
events including extreme temperature changes, increased electrical storms,
increased rainfall levels and changes in wind speed and direction. The Board
does not consider these potential changes to be a material risk to the Group
because the wind farms are designed to operate in extreme weather conditions,
are typically not located in areas prone to flooding, and insurance and
business continuity plans are in place to manage such an event, should it
occur.
In the medium to long term, the Board and the Investment Manager recognise
that there is a risk that weather systems may change as a result of higher
temperature change scenarios, but do not believe it is possible, at this time,
to determine whether this would impact the Group positively or negatively. The
Board and the Investment Manager will continue to investigate options for
physical climate risk models and tools to support further assessment of the
potential physical risks associated with the Group and wind farm portfolio.
In 2022, the Investment Manager, with the assistance of an independent
consultant, completed a risk modelling exercise for a representative sample of
the wind farm SPVs reflecting climate related hazard exposure over a future
period of time. The outcomes of the risk modelling exercise were reviewed by
the Investment Manager but not considered a credible basis from which to
assess forward looking climate risks. The Investment Manager will continue to
explore appropriate climate physical risk analysis tools.
Risk Management
As a full scope UK AIFM, the Investment Manager has established a Risk
Management Committee that meets on a quarterly basis to discuss, amongst other
matters, the risk framework of the Group and investee companies including
processes for identifying, assessing and managing climate related risks. The
Company's risk matrix, reviewed and approved by the Board, includes climate
related risks.
All risks identified, including climate related risks are assessed based on
likelihood, impact and mitigation. The risk assessment is carried out on a
qualitative basis by the Investment Manager, although consideration is given
to how quantitative measures can be used to support climate related risk
assessment. The risk matrix is then presented to the Board for discussion and
approval on an annual basis.
As mentioned above, climate related risks can be classified into two broad
categories: (i) risks associated with the transition to a decarbonised
economy; and (ii) risks associated with the physical impacts of climate
change. The table below aims to summarise the most material transition and
physical risks associated with climate change and the extent to which the
Board considers the impact high or low, based on exposure and mitigation
actions.
To ensure strong performance and risk mitigation, the Group has specific
oversight on environmental and social issues including climate change. It
reinforces this oversight with a range of activities, including:
· appointing at least one senior representative from the Investment
Manager to the boards of the wind farm companies to ensure monitoring and
influence of both financial and ESG performance, including climate related
risks and opportunities; and
· carrying out due diligence during the acquisition of new wind
farms in accordance with the Investment Manager's established procedures and
ESG Policy, which requires an analysis of climate issues.
The Investment Manager's Investment Committee comprises experienced senior
managers. Whilst making investment decisions, due consideration is given to
climate related risks as well as to opportunities identified during due
diligence.
Metrics and Targets
The world continues to face a serious climate challenge, and the UK is taking
an active role as a global leader in greenhouse gas emissions reduction.
The Government's Net Zero strategy includes:
• complete decarbonisation of the electricity sector by 2035;
• 50GW of offshore wind capacity by 2030;
• 70GW of solar PV capacity by 2035;
• 10GW of low carbon hydrogen production capacity by 2030;
• 24GW of nuclear capacity by 2050;
• capture and store 20-30 MtCO(2) per year by 2030; and
• electrification of transportation (thus increasing demand for
electricity).
The Group supports this strategy by allowing developers and utilities to
recycle their capital, and by demonstrating the attractive long term returns
in the industry through its prudent management of wind farms, thereby reducing
the cost of capital and increasing the potential for further construction of
renewable energy capacity and the decarbonisation of the economy.
Renewable energy generators avoid CO(2) emissions on a net basis at a rate of
approximately 0.4t CO(2) per MWh. Given the size of the Group's investment
portfolio on 31 December 2023, the portfolio's contribution to reducing CO(2)
emissions is approximately 2.5 million tonnes per annum. The portfolio is also
generating sufficient electricity to power 2.3 million homes per annum, at 2.7
MWh per home.
The portfolio's Scope 1, Scope 2 and Scope 3 greenhouse gas emissions are
disclosed below.
Year ended Year ended
31 December 2023 31 December 2022
Disclosure
Scope 1 - direct emissions (tonnes CO(2)) 13 149
Scope 2 - indirect emissions, location based (tonnes CO(2)) 2,162 1,731
Scope 3 - indirect emissions (tonnes CO(2)) ((1)) 261,138 136,161
Total Scope 1, 2 and 3 emissions (tonnes CO(2)) 263,313 138,041
Scope 2 - indirect emissions, market based (tonnes CO(2)) 1,485 1,422
Carbon Footprint - scope 1,2 and 3 emissions normalised by value of the 42.9 24.6
Company (tonnes CO(2)e/£ million invested) ((2))
Weighted Average Carbon Intensity (revenue) - weighted exposure to investee 1,193.1 535.1
scope 1,2 & 3 emissions per revenue generation (tonnes CO(2)e/£ million)
((2))
Carbon Intensity - Scope 1,2 and 3 emissions per MWh renewable generation 0.00038 0.00035
(tonnes CO(2)e/MWh renewable energy generation) ((2))
((1)) Scope 3 emissions are the result of activities from assets not owned or
controlled by the Group, but that the Group indirectly impacts in its value
chain. Scope 3 emissions include all sources not within the Group's Scope 1
and 2 boundary and include, inter alia, emissions arising from the
construction of each wind farm acquired in the year, including those emissions
associated with the manufacturing and transport of all equipment and material,
before the wind farm was commissioned, as well as the expected spare part
provision throughout its lifetime.
((2)) Calculations for metrics can be found in the EU SFDR disclosures.
It is the Investment Manager's view that Scope 3 emissions are less meaningful
given the Company's strategy of investing in UK wind farms for the duration of
their asset lives. Furthermore, recognising a wind farm's construction and
whole life operating emissions in the year the Group acquires it is
potentially misleading as it both overestimates carbon emissions in the year
of acquisition and underestimates carbon emissions generated in every other
year.
The carbon payback of a wind turbine, how quickly it offsets the emissions
generated during its manufacture, transportation and on-site construction, is
an indicator of its contribution to accelerating energy transition. At current
rates, carbon payback is typically around 5-6 months for onshore and 8 months
for offshore wind farms, which is approximately 3 per cent of the assumed
asset life. Carbon footprint indicators are measured in line with the industry
standard Greenhouse Gas Protocol based on an equity control approach, meaning
emissions from the Group's operations are weighted according to the Group's
proportionate ownership of its SPV investments.
Targets
The Company has not set a carbon emissions reduction target. It commits to
continuing to invest solely in operating wind power generation assets and to
continue growing its renewable energy generation and generating capacity to
support the transition to a Net Zero economy. The Investment Manager has been
a signatory to the Net Zero Asset Managers initiative ('NZAM') since 2021.
NZAM is an international group of asset managers committed to supporting the
goal of net zero greenhouse gas emissions by 2050 or sooner. In 2022, the
Investment Manager established a Net Zero Policy, formalising a commitment to
cut the intensity of its Scope 1 and 2 emissions by 50 per cent by 2030. With
support from the Investment Manager, the Company will work to develop a plan
in line with evolving UK requirements in this regard, including how it intends
to reduce its carbon footprint to support the Investment Manager's commitment
whilst continuing to grow its portfolio and avoid carbon emissions as a result
of its generation activities.
UK Sustainability Disclosure Requirements (SDR)
In 2023, the FCA published its final rules regarding Sustainability Disclosure
Requirements (SDR). The Investment Manager has a working group in place,
reporting to its ESG Committee, to understand and implement requirements of
the SDR for funds in scope. The Company, with support from the Investment
Manager, will consider the rules and work to meet any obligations of the SDR
in the coming financial year.
EU Sustainable Financial Disclosure Regulation (SFDR)
The Company became Article 9 qualified under EU SFDR in 2022 and makes
sustainability related disclosures in the financial services sector. Through
its Investment Policy of investing in UK wind farms predominately with a
capacity over 10MW, the Company contributes to the environmental objective of
climate change mitigation that helps to facilitate the transition to a low
carbon economy.
ESG Report
The Company publishes an annual standalone ESG Report. This provides further
information on how the Group approaches responsible investment and ESG matters
in addition to further case studies and ESG performance. The Company's ESG
Report for 2023 will be published on its website in April 2024.
Detailed Annex V disclosures and the Company's principal adverse impacts
statement can be found in the EU SFDR Disclosures below.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Board of Directors
As at the date of this report, the Board comprises 5 individuals from relevant
and complementary backgrounds.
During the year and with effect from the conclusion of the 2023 AGM on 28
April 2023, Shonaid Jemmett-Page retired from the Board and Lucinda Riches
C.B.E. was appointed as Chairman with Nick Winser C.B.E. succeeding her as
Senior Independent Director.
The Directors are of the opinion that the Board as a whole comprises an
appropriate balance of skills, experience and diversity. The Directors of the
Company who were in office during the year and up to the date of signing the
financial statements are listed below.
Lucinda Riches C.B.E., Chairman of the Board (appointed 1 May 2019)
Lucinda Riches C.B.E. (Chairman), aged 62, brings significant capital markets
experience, having advised public companies on strategy, fundraising and
investor relations for many years. She also brings extensive experience as a
public company non-executive director across a variety of businesses,
including two FTSE 100 companies.
Lucinda worked at UBS and its predecessor firms for 21 years until 2007 where
she was a managing director, global head of Equity Capital Markets and a
member of the board of the investment bank. She is Chairman of Peel Hunt
Limited and a non-executive Director of Ashtead Group plc. Previously she was
a non-executive Director of UK Financial Investments, a non-executive Director
of The Diverse Income Trust plc, Senior Independent Director of The British
Standards Institution and until 2021 she was a non-executive Director of CRH
plc and Senior Independent Director of ICG Enterprise Trust plc. She was
awarded a C.B.E. in 2017 for her services to financial services, British
industry and to charity.
Caoimhe Giblin, Chairman of the Audit Committee (appointed 1 September 2019)
Caoimhe Giblin (Director and Audit Committee Chairman), aged 47, has extensive
experience in the electricity industry sector and is currently Commercial
Director at ElectroRoute, an energy trading company which is part of the
Mitsubishi Corporation group of companies.
Prior to that, Caoimhe was Director of Finance for SSE Renewables where she
had responsibility for the financial activities of SSE's significant on and
offshore wind development and construction portfolio. Prior to this, Caoimhe
held various roles in the Corporate Finance department at Airtricity where she
gained significant experience of corporate acquisitions and disposals, equity
fundraising, project finance, debt financing and managed the company's
corporate valuation process. Caoimhe was appointed Head of Corporate Finance
of SSE Renewables in 2008 following the acquisition of Airtricity by SSE plc.
Caoimhe qualified as a Chartered Accountant with KPMG and spent the early part
of her career focusing on providing corporate finance due diligence, internal
audit and risk management services in both Dublin and New Zealand. Caoimhe is
a Fellow of Chartered Accountants of Ireland and has a BA in Accounting &
Finance and an MBS in Accounting from Dublin City University. Caoimhe also
holds a Diploma in Company Direction from the Institute of Directors, of which
she is a member. In 2018, Caoimhe was elected to sit on the Wind Energy
Ireland Council.
Nick Winser C.B.E. Senior Independent Director (appointed 1 January 2022)
Nick Winser C.B.E. (Senior Independent Director), aged 63, has a 30 year
career in the energy sector which included being CEO of National Grid across
UK and Europe, President of the European Network of Transmission System
Operators for Electricity and CIGRE UK Chairman. Nick has been the Chairman of
Energy Systems Catapult since 2015 and was appointed Chairman of the Advisory
Board for the Energy Revolution ISCF programme in 2018. He was appointed
Electricity Network Commissioner by the Government in summer 2022 and is
Energy Commissioner at the National Infrastructure Commission.
Nick is a Fellow of the Institute of Engineering and Technology, serving as
its President in 2017/18 and is a Fellow of the Royal Academy of Engineering.
Nick is also former Chairman of the MS Society and a former member of the
Board of the Kier Group.
Martin McAdam (appointed 1 March 2015)
Martin McAdam (Director), aged 62, is an accomplished executive with
significant experience in the energy and renewables sector. He was formerly
Chief Executive Officer of Aquamarine Power. Prior to that, Martin was
President and Chief Executive Officer of the US subsidiary of Airtricity, a
role in which he constructed over 400MW of wind farm capacity.
Martin spent his early career at ESB, the Irish utility, involved in a number
of activities including power station construction and generation planning.
After a number of years in information services, he returned to the power
industry and joined Airtricity, a significant developer and constructor of
wind farms throughout the UK and Ireland, managing construction of new wind
farms. Martin's role expanded into operations and ultimately to take
responsibility for the growing US business. He led the integration of the
Airtricity generation business unit into the SSE Renewables Division after its
sale.
Martin is a Chartered Engineer and a Fellow of Engineers Ireland and a Fellow
of the Royal Society for the Encouragement of Arts, Manufactures and
Commerce.
Jim Smith (appointed 1 May 2023)
Jim Smith (Director), age 61, is the former Managing Director of SSE
Renewables with 34 years experience within the electricity industry at SSE.
Since retiring from full time employment in 2022 he has transitioned into a
number of part time roles and is Chair of Noriker Power Ltd, Chair of
Inverness & Cromarty Firth Green Freeport Ltd, a non-executive Director of
Seabank Power Ltd and a renewable energy ambassador to Cowi UK Ltd.
Jim's early career in SSE was in development, construction and operations in
both hydro and gas fired generation where he became Station Manager at
Peterhead Power Station. He then went on to be Director of Major Projects
responsible for the group's major capital infrastructure investments in
renewables, thermal generation, gas storage and transmission.
Following SSE's acquisition of Airtricity in 2008, he led offshore wind
development and construction before taking responsibility for all wind
development and construction. He also spent time as the Managing Director of
the groups energy trading business followed by Managing Director of Generation
Operations. Following a restructuring in 2018 Jim took up his final position
as Managing Director of SSE Renewables with responsibility for the 4000MW
operational fleet and the development pipeline, taking over 5GW (gross) of
projects through financial close prior to his retirement.
Jim is a Mechanical Engineer, trained mediator and a mentor for the MCR
Pathways charity.
Shonaid Jemmett-Page (appointed 5 December 2012 and retired 28 April 2023)
Shonaid Jemmett-Page, (Chairman) FCA (Director), aged 62, is an experienced
non-executive director in the energy and financial sectors. Shonaid spent the
first 20 years of her career at KPMG in London and Tokyo, rising to the
position of Partner, Financial Services. In 2001, she moved to Unilever, where
she was Senior Vice President, Finance and Information for Asia, based in
Singapore, before returning to the UK as Finance Director for Unilever's
global non-food business. In 2009, Shonaid joined CDC Group as Chief Operating
Officer, a position she held until 2012.
Since then, Shonaid has focused on non-executive appointments and is currently
Chairman of Cordiant Digital Infrastructure Limited as well as Chairman of its
nominations and management engagement committees, Chairman of ClearBank Ltd
and a member of its nomination and risk committees, non-executive Director of
Aviva plc as well as Chairman of its customer and sustainability committee and
a member of its nomination and governance, risk and audit committees, and
non-executive Director of QinetiQ Group plc and Chairman of its audit
committee and a member of its risk and security, remuneration and nomination
committees. Until April 2018 she was non-executive Director of GKN plc where
she served as Chairman of its audit committee and was a member of its
remuneration and nominations committees. Until November 2019 she was
non-executive Director of MS Amlin plc where she served as Chairman and was
also the Chairman of its remuneration and nominations committees and a member
of its risk and solvency committee. Until March 2020 she served as
non-executive Chairman and then non-executive Director of MS Amlin Insurance
SE (a Belgian subsidiary of MS Amlin plc), and until May 2022 she was a
non-executive Director of Caledonia Investments plc where she served as
Chairman of its remuneration committee and a member of its governance,
nomination and audit committees. She is also the examiner of the UK branch of
an Indian children's cancer charity.
Abigail Rotheroe (with effect from 1 March 2024)
Abigail is a CFA Charterholder and brings over 20 years' experience in the
investment industry and knowledge of fund governance and sustainable
investing. She is the former Investment Director of Snowball Impact
Management, responsible for developing the firm's approach to impact
investment and measurement. She has held positions at Schroder Capital
Management, HSBC Asset Management and was a Director of Columbia Threadneedle
Investments, managing retail and pension fund assets in Asia and emerging
markets.
She is currently a non-executive director of HydrogenOne Capital Growth plc,
Baillie Gifford Shin Nippon plc and Templeton Emerging Markets Investment
Trust plc.
Other UK Listed Public Company Directorships
In addition to their directorships of the Company, the below Directors
currently hold the following UK listed public company directorships:
Lucinda Riches C.B.E.
Ashtead Group plc
Peel Hunt Limited
With the exception of Martin McAdam, the Directors have all offered themselves
for re-election and resolutions concerning this will be proposed at the 2024
AGM.
Conflicts of Interest
The Directors have declared any conflicts or potential conflicts of interest
to the Board which has the authority to approve such situations. The Company
Secretary maintains the Register of Directors' Conflicts of Interests which is
reviewed bi-annually by the Board and when changes are notified. The Directors
advise the Company Secretary and the Board as soon as they become aware of any
conflicts of interest. Directors who have conflicts of interest do not take
part in discussions which relate to any of their conflicts.
In accordance with Provision 9 of the AIC Code, the appointment of any
Director has included consideration of the time they have available to the
role. Any additional external appointments will be submitted by Directors to
the Board for approval before the appointment is accepted.
The Directors present their Annual Report, together with the consolidated
financial statements of Greencoat UK Wind PLC for the year to 31 December
2023. The Corporate Governance Report forms part of this report.
Details of the Directors who held office during the year and as at the date of
this report are given above.
Capital Structure
The Company has one class of ordinary shares which carry no rights to fixed
income. Shareholders are entitled to all dividends paid by the Company and, on
a winding up, provided the Company has satisfied all of its liabilities, the
shareholders are entitled to all of the surplus assets of the Company.
Shareholders will be entitled to attend and vote at all general meetings of
the Company and, on a poll, to one vote for each ordinary share held.
Authority to Purchase Own Shares
The current authority of the Company to make market purchases of up to 14.99
per cent of its issued share capital expires at the conclusion of the 2024
AGM. Special resolution 15 will be proposed at the forthcoming AGM seeking
renewal of such authority until the next AGM (or 30 June 2025, whichever is
earlier). The price paid for the shares will not be less than the nominal
value or more than the maximum amount permitted to be paid in accordance with
the rules of the UK Listing Authority in force at the date of purchase. This
power will be exercised only if, in the opinion of the Directors, a repurchase
would be in the best interests of shareholders as a whole. Any shares
repurchased under this authority will either be cancelled or held in treasury
at the discretion of the Board for future resale in appropriate market
conditions.
The Directors believe that the renewal of the Company's authority to purchase
shares, as detailed above, is in the best interests of shareholders as a whole
and therefore recommend shareholders to vote in favour of special resolution
15.
The Directors also recommend shareholders to vote in favour of resolutions 12,
13 and 14, which renew their authority to allot equity securities for the
purpose of satisfying the Company's obligations to pay the Equity Element of
the Investment Manager's fee, and also their authority to allot equity
securities for cash either pursuant to the authority conferred by resolution
12 or by way of a sale of treasury shares.
Major Interests in Shares
Significant shareholdings as at 15 February 2024 are detailed below.
Shareholder Ordinary shares held %
15 February 2024
BlackRock Investment Management 7.32
Rathbone Investment Management 5.58
Investec Wealth & Investment 4.61
Schroder Investment Management 4.58
Newton Investment Management 4.16
Hargreaves Lansdown Asset Management 3.69
Charles Stanley 3.02
Significant shareholdings as at 31 December 2023 are detailed below.
Shareholder Ordinary shares held %
31 December 2023
BlackRock Investment Management 8.07
Rathbone Investment Management 5.49
Investec Wealth & Investment 4.65
Schroder Investment Management 4.65
Newton Investment Management 4.38
Hargreaves Lansdown Asset Management 3.50
Charles Stanley 3.02
Companies Act 2006 Disclosures
In accordance with Schedule 7 of the Large and Medium Sized Companies and
Groups (Accounts and Reports) Regulations 2008 the Directors disclose the
following information:
· the Company's capital structure is detailed in note 15 to the
financial statements and all shareholders have the same voting rights in
respect of the share capital of the Company. There are no restrictions on
voting rights that the Company is aware of, nor any agreement between holders
of securities that result in restrictions on the transfer of securities or on
voting rights;
· there exist no securities carrying special rights with regard to
the control of the Company;
· the Company does not have an employees' share scheme;
· the rules concerning the appointment and replacement of Directors
are contained in the Company's Articles of Association and the Companies Act
2006;
· there exist no agreements to which the Company is party that may
affect its control following a takeover bid;
· there exist no agreements between the Company and its Directors
providing for compensation for loss of office that may occur because of a
takeover bid; and
· the Directors' responsibilities pursuant to Section 172 of the
Companies Act 2006, as detailed in the Strategic Report.
Investment Trust Status
The Company has been approved as an investment trust under sections 1158 and
1159 of the Corporation Taxes Act 2010. As an investment trust, the Company is
required to meet relevant eligibility conditions and ongoing requirements. In
particular, the Company must not retain more than 15 per cent of its eligible
investment income. The Company has conducted and monitored its affairs so as
to enable it to comply with these requirements.
Diversity and Business Review
A business review is detailed in the Investment Manager's Report and the
Group's policy on diversity is detailed in the Strategic Report.
Directors' Indemnity
Directors' and Officers' liability insurance cover is in place in respect of
the Directors. The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors in respect of costs
which they may incur relating to the defence of any proceedings brought
against them arising out of their positions as Directors, in which they are
acquitted or judgement is given in their favour by the Court.
Except for such indemnity provisions in the Company's Articles of Association
and in the Directors' letters of appointment, there are no qualifying third
party indemnity provisions in force.
Streamlined Energy Carbon Reporting
As the Group has outsourced operations to third parties, there are no
significant greenhouse gas emissions to report from the operations of the
Group. The Group qualifies as a low energy user and is therefore exempt from
disclosures on greenhouse gas emissions and energy consumption.
The underlying assets of the Group's investee companies are renewable energy
generators which avoid CO(2) emissions on a net basis (at a rate of
approximately 0.4t CO(2) per MWh and approximately 2.5 million tonnes per
annum given the size of the Group's investment portfolio as at 31 December
2023).
Further details of the portfolio's Scope 1, Scope 2 and Scope 3 greenhouse gas
emissions can be found in the Strategic Report.
Risks and Risk Management
The Group is exposed to financial risks such as price risk, interest rate
risk, credit risk and liquidity risk and the management and monitoring of
these risks are detailed in note 18 to the financial statements.
Independent Auditor
The Directors will propose the reappointment of BDO LLP as the Company's
Auditor and resolutions concerning this and the remuneration of the Company's
Auditor will be proposed at the 2024 AGM.
So far as each of the Directors at the time that this report was approved are
aware:
· there is no relevant audit information of which the Auditor is
unaware; and
· they have taken all the steps they ought to have taken to make
themselves aware of any audit information and to establish that the Auditor is
aware of that information.
Annual Accounts
The Board is of the opinion that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the position, performance, strategy and business model
of the Company.
The Board recommends that the Annual Report, the Report of the Directors and
the Independent Auditor's Report for the year ended 31 December 2023 are
received and adopted by the shareholders and a resolution concerning this will
be proposed at the 2024 AGM.
Dividend
The Board recommended an interim dividend of £79.1 million, equivalent to
3.43 pence per share with respect to the 3 month period ended 31 December
2023, bringing total dividends with respect to the year to £231.4 million,
equivalent to 10 pence per share as disclosed in note 8 to the financial
statements.
Subsequent Events
Significant subsequent events have been disclosed in note 21 to the financial
statements.
Strategic Report
A review of the business and future outlook, going concern statement and the
principal risks and uncertainties of the Group have not been included in this
report as they are disclosed in the Strategic Report.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Directors' Remuneration Report
This report has been prepared by the Directors in accordance with the
requirements of the Companies Act 2006 and the Large and Medium sized
Companies and Groups (Accounts and Reports) Regulations 2008. A resolution to
approve the Directors' Remuneration Report will be proposed at the 2024 AGM.
At the AGM on 28 April 2023, shareholders voted 99.92 per cent in favour to
approve the Directors' Remuneration Report for the year ended 31 December
2022.
The Company's Auditor is required to give their opinion on the information
provided on Directors' remuneration in this report and this is explained
further in its report to shareholders. The remainder of this report is outside
the scope of the external audit.
Annual Statement from the Chairman of the Board
The Board, which is profiled above, consists solely of non-executive Directors
and is considered to be independent. The Board considers at least annually the
level of the Board's fees, in accordance with the AIC Code. During the year,
the basic fee for non-executive Directors increased by £10,000 per annum to
£65,000, the fee for the Senior Independent Director and the Audit Committee
Chairman increased by £5,000 and £10,000 per annum respectively, and the fee
for the Chairman increased by £25,000 per annum to £110,000, following an
internal evaluation. The Board confirmed that this increase was appropriate
through benchmarking by an external consultant.
Remuneration Policy
As at the date of this report, the Board comprised 5 Directors, all of whom
are non-executive. The Board does not have a separate Remuneration Committee
as, being wholly comprised of non-executive Directors, the whole Board
considers these matters.
At the AGM on 28 April 2023, shareholders voted 99.78 per cent in favour to
approve the Company's Remuneration Policy, which is put to a vote by
shareholders every 3 years. The details of the Company's Remuneration Policy
are set out in full below. No changes are expected for 2024 and this policy
will next be put to a vote by shareholders at the 2026 AGM.
Each Director receives a fixed fee per annum based on their roles and
responsibility within the Company and the time commitment required. It is not
considered appropriate that Directors' remuneration should be performance
related and none of the Directors are eligible for pension benefits, share
options, long term incentive schemes or other benefits in respect of their
services as non-executive Directors of the Company.
The Company's Articles of Association empower the Board to award a
discretionary bonus where any Director has been engaged in exceptional work on
a time spent basis to compensate for the additional time spent over their
expected time commitment.
The Articles of Association provide that Directors retire and offer themselves
for re-election at the first AGM after their appointment and at least every 3
years thereafter. However, in accordance with the AIC Code, the Directors are
required to be re-elected annually. All of the Directors have been provided
with letters of appointment for an initial term of 3 years and for each 3 year
term thereafter, which are subject to annual re-election in accordance with
the AIC Code. The following table outlines the effective date and expiry date
of each of the Directors' current letters of appointment:
Effective date of current appointment letter Expiry date of
current appointment letter
Lucinda Riches C.B.E. 28 April 2023 27 April 2026
Martin McAdam 1 March 2021 24 April 2024
Caoimhe Giblin 1 September 2022 31 August 2025
Nick Winser C.B.E. 28 April 2023 27 April 2026
Jim Smith 1 May 2023 30 April 2026
A Director's appointment may at any time be terminated by and at the
discretion of either the Director or the Company upon 6 months' written
notice. A Director's appointment will automatically end without any right to
compensation whatsoever if they are not re-elected by the shareholders. A
Director's appointment may also be terminated with immediate effect and
without compensation in certain other circumstances. Being non-executive
Directors, none of the Directors have a service contract with the Company.
The terms and conditions of appointment of non-executive Directors are
available for inspection from the Company's registered office.
Annual Report on Remuneration
During the year, the basic fee for non-executive Directors increased by
£10,000 per annum to £65,000, with effect from 1 January 2023, with the
Senior Independent Director and the Audit Committee Chairman receiving an
additional £5,000 and £10,000 per annum respectively. The Chairman's basic
fee was also increased by £25,000 to £110,000 per annum.
The level of fees for Directors were benchmarked during the year by
independent consultants, Heidrick & Struggles, as in line with the market.
The Company is the largest independent generator of renewable electricity in
the UK. Its GAV has grown to £6.2 billion through acquisitions and equity
raisings and, in the last 3 years, the Board and its committees have held 84
meetings.
For the first time since listing in 2013, the Board will be proposing a
resolution to increase the aggregate amount of fees to be paid to Directors
per annum to £500,000, up from £400,000, via an amendment to Article 85 of
the Company's Articles of Association at the 2024 AGM.
The Directors remain eligible to receive discretionary payments where
significant additional work is incurred, however, no discretionary payments
were made during the year.
The table below (audited information) shows the total remuneration earned by
each individual Director during the current year:
Paid in the year to 31 December 2023 Fixed remuneration Discretionary remuneration((1)) Total remuneration
Lucinda Riches C.B.E. (Chairman) ((2)) £97,178 - £97,178
Caoimhe Giblin £75,000 - £75,000
(Audit Committee Chairman)
Nick Winser C.B.E. (Senior Independent Director) ((3)) £68,397 - £68,397
Martin McAdam £65,000 - £65,000
Jim Smith ((4)) £43,630 - £43,630
Shonaid Jemmett-Page ((5)) £35,562 - £35,562
Total £384,767 - £384,767
((1)) The Directors received no additional discretionary payment during the
year.
((2)) Appointed as Chairman with effect from 28 April 2023.
((3)) Appointed as Senior Independent Director with effect from 28 April
2023.
((4)) Appointed to the Board with effect from 1 May 2023.
((5)) Retired with effect from 28 April 2023.
The table below (audited information) shows the total remuneration earned by
each individual Director during the prior year:
Paid in the year to 31 December 2022 Fixed remuneration Discretionary remuneration ((1)) Total remuneration
Shonaid Jemmett-Page (Chairman) £85,000 - £85,000
Caoimhe Giblin £65,000 - £65,000
(Audit Committee Chairman)
Lucinda Riches C.B.E. (Senior Independent Director) ((2)) £58,397 - £58,397
Martin McAdam £55,000 - £55,000
Nick Winser C.B.E. £55,000 - £55,000
William Rickett C.B. ((3)) £19,397 - £19,397
Total £337,794 - £337,794
( )
((1)) The Directors received no additional discretionary payment during the
year.
((2)) Appointed as Senior Independent Director with effect from 28 April
2022.
((3)) Retired with effect from 28 April 2022.
The table below (audited information) shows the change in total remuneration
earned by each individual Director over prior years:
2023 2022 2021 2020
Paid in the year to 31 December 2023 % change from prior year((1)) % change from prior year % change from prior year % change from prior year
Lucinda Riches C.B.E. (Chairman) ((2)) 66% 6% 10% 11%
Caoimhe Giblin 15% 0% 15% 42%
(Audit Committee Chairman)
Nick Winser C.B.E. (Senior Independent Director) ((3)) 24% 100% n/a n/a
Martin McAdam 18% 0% 10% 0%
Jim Smith ((4)) 100% n/a n/a n/a
Shonaid Jemmett-Page ((5)) -58% 0% 16% 22%
William Rickett C.B.((6)) n/a 0% 9% 0%
Tim Ingram ((7)) n/a n/a -100% -13%
Dan Badger ((8)) n/a n/a n/a -100%
((1)) Movement in individual Director's salary based on annualised total
figures.
((2)) Appointed as Chairman with effect from 28 April 2023.
((3)) Appointed as Senior Independent Director with effect from 28 April
2023.
((4)) Appointed to the Board with effect from 1 May 2023.
((5)) Retired with effect from 28 April 2023.
((6)) Retired with effect from 28 April 2022.
((7)) Retired with effect from 30 April 2020.
((8)) Retired with effect from 31 July 2019.
Directors who held office and had interests in the shares of the Company as at
31 December 2023 are given in the table below. There were no changes to the
interests of each Director as at the date of this report.
Ordinary shares of 1p each held at 31 December 2023 Ordinary shares of 1p each held at 31 December 2022
Martin McAdam 153,689 103,689
Lucinda Riches C.B.E. 120,000 120,000
Jim Smith ((1)) 100,000 n/a
Caoimhe Giblin 70,000 40,000
((1)) Appointed to the Board with effect from 1 May 2023.
( )
Relative Importance of Spend on Pay
The remuneration of the Directors with respect to the year totalled £384,767
(2022: £337,794) in comparison to dividends paid or declared to shareholders
with respect to the year of £231,414,095 (2022: £178,945,737) and the cost
of share buybacks of £9,501,098 (2022: £nil). This is 0.2 per cent (2022:
0.2 per cent) of dividends paid or declared and 4.1 per cent (2022: 0 per
cent) of the cost of share buybacks.
Company Performance
Due to the positioning of the Company in the market as a sector focused
infrastructure fund investing in UK wind farms to produce stable and inflating
dividends for investors while aiming to preserve capital value, the Directors
consider that a listed infrastructure fund has characteristics of both an
equity index and a bond index.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with 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
Group's financial statements, and have elected to prepare the Company's
financial statements, in accordance with UK adopted international accounting
standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those 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 Group and Company and
of the profit or loss for the Group for that period.
In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements of IFRS are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group and
Company financial position and performance;
· make judgements and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business; and
· prepare a Report of the Directors, a Strategic Report and
Directors' Remuneration Report which comply with the requirements of the
Companies Act 2006.
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 Companies
Act 2006. 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, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group's
performance, business model and strategy.
The Directors are also responsible under section 172 of the Companies Act 2006
to promote the success of the Company for the benefit of its members as a
whole and in doing so have regard for the needs of wider society and other
stakeholders.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the UK 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'
responsibilities also extend to the ongoing integrity of the financial
statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge that:
· the Group's financial statements have been prepared in accordance
with UK adopted international accounting standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards, and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group; and
· the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Group and the
Parent Company, together with a description of the principal risks and
uncertainties that they face.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the Directors.
The Board operates under a framework for corporate governance which is
appropriate for an investment company. All companies with a premium listing of
equity shares in the UK are required under the UK Listing Rules to report on
how they have applied the UK Code in their Annual Report and financial
statements.
The Company became a member of the AIC with effect from 27 March 2013 and has
therefore put in place arrangements to comply with the AIC Code and, in
accordance with the AIC Code, complies with the UK Code.
The AIC Code, as explained by the AIC Guide, addresses all the principles set
out in the UK Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to investment
companies such as the Company.
The AIC Code and the AIC Guide are available on the AIC's website,
www.theaic.co.uk (http://www.theaic.co.uk) . The UK Code is available on the
FRC's website, www.frc.org.uk (http://www.frc.org.uk) .
The Company has complied with the recommendations of the AIC Code throughout
the year, where applicable.
Purpose, Culture and Values
The Company's purpose remains clear; to provide shareholders with an annual
dividend that increases in line with RPI inflation while preserving the
capital value of its investment portfolio in the long term on a real basis
through reinvestment of excess cash flow.
The Company provides investors with the opportunity to participate directly in
the ownership of UK wind farms, so increasing the resources and capital
dedicated to the deployment of renewable energy and the reduction of
greenhouse gas emissions.
As an investment trust with no employees, the Board have agreed that its
culture and values should be aligned with those of the Investment Manager and
centred on long term relationships with the Company's key stakeholders and
sustainable investment as follows:
· Integrity is at the heart of every activity, with importance being
placed on transparency, trustworthiness and dependability.
· The trust of stakeholders is very important to maintain the Company's
reputation, particularly for execution certainty for asset sellers and
delivery of investment promises to investors.
· Respect for differing opinions is to be shown across all interaction
and communication.
· Individual empowerment is sought with growth in responsibility and
autonomy being actively encouraged.
· Collaboration and effectively utilising the collective skills of
all participants is important to ensure ideas and information are best shared.
The Board
As at the date of this report, the Board consists of 5 non-executive Directors
and represents a range of investment, financial and business skills and
experience. During the year, Shonaid Jemmett-Page retired as Director and
Chairman of the Company with effect from 28 April 2023, and Jim Smith was
appointed as a Director with effect from 1 May 2023.
The Chairman of the Board is Lucinda Riches C.B.E, who was selected to succeed
Shonaid following the 2023 AGM. In considering the independence of the
Chairman, the Board took note of the provisions of the AIC Code relating to
independence, and has determined that Lucinda remains independent as a
non-executive Director with a clear division of responsibilities from the
Investment Manager. The Senior Independent Director is Nick Winser C.B.E., who
was selected to succeed Lucinda following the 2023 AGM. The Company, as an
Investment Trust, has no employees and therefore there is no requirement for a
chief executive.
The Articles of Association provide that Directors shall retire and offer
themselves for re-election at the first AGM after their appointment and at
least every 3 years thereafter. However, the AIC Code requires that Directors
be subject to an annual election by shareholders, and the Directors comply
with this requirement. All of the Directors, other than Martin McAdam, shall
offer themselves for re-election at the forthcoming AGM. Having considered
their effectiveness, demonstration of commitment to the role, length of
service, attendance at meetings and contribution to the Board's deliberations,
the Board approves the nomination for re-election of the Directors.
The Company's view is that the continuity and experience of its Directors are
important and that a suitable balance needs to be struck with the need for
independence and the refreshing of the skills and expertise of the Board. The
Company believes that some limited flexibility in its approach to Director
rotation and Chair tenure will enable it to manage succession planning more
effectively, as set out below. During the year, the Board conducted
comprehensive recruitment processes aimed at ensuring a sustained balance of
skills and experience on the Board in addition to maintaining diversity. In
addition to the appointment of Jim Smith, the Board engaged an external
recruitment consultant to recruit a non-executive Director to replace Martin
who has surpassed the nine year director tenure limit and therefore will not
seek re-election at the 2024 AGM. On 1 March 2024, Abigail Rotheroe will join
the Board bringing over 20 years' experience from the investment industry and
knowledge of fund governance and sustainable investing.
The terms and conditions of appointment of non-executive Directors are
available for inspection from the Company's registered office.
Chair Tenure Policy
The Company's policy on Chair tenure is available on the Company website. The
Company's policy on Chair tenure is that the Chairman should normally serve no
longer than 9 years as a Director and Chairman but, where it is in the best
interests of the Company, its shareholders and stakeholders, the Chairman may
serve for a limited time beyond that to help the Company manage succession
planning whilst at the same time still address the need for regular
refreshment and diversity. In such circumstances the independence of the other
Directors will ensure that the Board as a whole remains independent.
Diversity Policy
The Company's policy on Board diversity is available on the Company website
and sets out the approach that will be adopted to ensure that the Board
remains appropriately balanced, and relevant to the Company's operations. The
composition of the Board is reviewed annually by the Nomination Committee,
including the balance of skills, knowledge, experience and the diversity
policy is considered in conjunction with all Board appointments. The Board's
composition is detailed within the Strategic Report.
Performance and Evaluation
Pursuant to Provision 26 of the AIC Code, the Board undertakes a formal and
rigorous evaluation of its performance each financial year. As a FTSE 250
company, in keeping with the provisions of the AIC Code, it is the Company's
policy that every 3 years an external consultant, who has no connection with
the Company, carries out a formal review of the Board's performance. This was
last conducted in 2022 and therefore the Board will be subject to an external
evaluation again in 2025.
An internal evaluation of the Board, the Committees and individual Directors
was conducted during 2023 in the form of annual performance appraisals,
questionnaires and discussions to determine effectiveness and performance in
various areas, as well as the Directors' continued independence and tenure.
This process was facilitated by the Company Secretary. The reviews concluded
that the overall performance of the Board and its Committees was satisfactory
and the Board was confident in its ability to continue to govern the Company
well.
Each individual Director's training and development needs are reviewed
annually. All new Directors receive an induction from the Investment Manager
and Company Secretary, which includes the provision of information about the
Company and their responsibilities. In addition, site visits and specific
Board training sessions are arranged involving presentations on relevant
topics on a regular basis.
Board Responsibilities
The Board will meet, on average, 6 times in each calendar year for scheduled
Board meetings and on an ad hoc basis as and when necessary. At each meeting
the Board follows a formal agenda that will cover the business to be
discussed. Between meetings there is regular contact with the Investment
Manager and the Administrator. The Board requires to be supplied with
information by the Investment Manager, the Administrator and other advisers in
a form appropriate to enable it to discharge its duties.
The Board has responsibility for ensuring that the Company keeps proper
accounting records which disclose with reasonable accuracy at any time the
financial position of the Company and which enable it to ensure that the
financial statements comply with applicable regulation. It is the Board's
responsibility to present a fair, balanced and understandable Annual Report,
which provides the information necessary for shareholders to assess the
performance, strategy and business model of the Company. This responsibility
extends to the half year and other price-sensitive public reports.
Audit Committee
The Company's Audit Committee is chaired by Caoimhe Giblin and consists of a
minimum of 3 members. In accordance with best practice, the Company's Chairman
is not a member of the Audit Committee however she does attend Audit Committee
meetings as and when deemed appropriate. The Audit Committee Report in this
report describes the work of the Audit Committee.
Management Engagement Committee
The Company's Management Engagement Committee comprises all of the Directors
and is required to meet at least once per year. The Chairman of the Management
Engagement Committee is Lucinda Riches C.B.E. The Management Engagement
Committee's main function is to keep under review the performance of the
Investment Manager and make recommendations on any proposed amendment to the
Investment Management Agreement.
The Management Engagement Committee met once during the year and agreed an
amendment to the Investment Management Agreement with the Investment Manager.
Terms of reference for the Management Engagement Committee have been approved
by the Board and are available on the Company's website.
Nominations Committee
The Company's Nominations Committee comprises all of the Directors and is
required to meet at least once per year. The Chairman of the Nominations
Committee is Lucinda Riches C.B.E. The Nominations Committee's main function
is to plan for Board succession and to review annually the structure, size and
composition of the Board and make recommendation to the Board with regard to
any changes that are deemed necessary. Terms of reference for the Nominations
Committee have been approved by the Board and are available on the Company's
website.
The Nominations Committee met 5 times during the year to consider Director
remuneration and Board succession planning, as well as to commence a Director
recruitment process with the assistance of an external recruitment consultant,
Heidrick & Struggles.
Communications and Disclosure Committee
The Company has established a Communications and Disclosure Committee which is
required to meet at least once a year. The committee has responsibility for,
amongst other things, determining on a timely basis the disclosure treatment
of material information, and assisting in the design, implementation and
periodic evaluation of disclosure controls and procedures. The Committee also
has responsibility for the identification of inside information for the
purpose of maintaining the Company's insider list.
Terms of reference for the Communications and Disclosure Committee have been
approved by the Board and are available on the Company's website. Membership
consists of the Chairman (or one other Director) and one of Stephen Lilley and
Laurence Fumagalli (to be succeeded by Matt Ridley on 1 March 2024).
Additional members of the Committee may be appointed and existing members
removed by the Committee. The membership of the Committee is reviewed by the
Board on a periodic basis and at least once a year.
The AIC Code recommends that companies appoint a Remuneration Committee,
however the Board has not deemed this necessary, as being wholly comprised of
non-executive Directors, the whole Board considers these matters.
The Investment Manager
The Board has entered into the Investment Management Agreement with the
Investment Manager under which the Investment Manager is responsible for
developing strategy and the day-to-day management of the Group's investment
portfolio, in accordance with the Group's Investment Objective and Investment
Policy, subject to the overall supervision of the Board. A summary of the fees
paid to the Investment Manager are given in note 3 to the financial
statements.
The Investment Management Agreement may be terminated with immediate effect
and without compensation, by either the Investment Manager or the Company if
the other party has gone into liquidation, administration or receivership or
has committed a material breach of the Investment Management Agreement.
The Board as a whole reviewed the Company's compliance with the UK Corporate
Governance Code, the Listing Rules, the Disclosure Guidance and Transparency
Rules and the AIC Code. In accordance with the Listing Rules, the Directors
confirm that the continued appointment of the Investment Manager under the
current terms of the Investment Management Agreement is in the interests of
shareholders. The Board also reviewed the performance of other service
providers and examined the effectiveness of the Company's internal control
systems during the year.
Board Meetings, Committee Meetings and Directors' Attendance
The number of meetings of the full Board attended in the year to 31 December
2023 by each Director is set out below:
Scheduled Board Meetings Additional Board Meetings
(Total of 5) (Total of 7)
Lucinda Riches C.B.E. 5 6
Martin McAdam 5 5
Caoimhe Giblin 5 6
Nick Winser C.B.E. 5 6
Jim Smith ((1)) 2 2
Shonaid Jemmett-Page ((2)) 3 5
((1)) Appointed with effect from 1 May 2023, at which point 3 scheduled Board
meetings and 5 additional Board meetings had taken place.
((2)) Resigned with effect from 28 April 2023, at which point 3 scheduled
Board meetings and 5 additional Board meetings had taken place.
The number of meetings of the committees of the Board attended in the year to
31 December 2023 by each committee member is set out below:
Audit Committee Meetings Management Engagement Committee Meetings Nominations Committee Meetings
(Total of 4) (Total of 1) (Total of 5)
Lucinda Riches C.B.E. ((1)) 2 1 5
Martin McAdam 4 1 5
Caoimhe Giblin 4 1 5
Nick Winser C.B.E. 4 1 5
Jim Smith ((2)) 2 1 4
Shonaid Jemmett-Page ((3)) n/a 0 1
((1) ) Appointed as Chairman and resigned from Audit Committee with effect
from 28 April 2023, at which point 2 Audit Committee meetings had taken place.
((2) ) Appointed to the Board with effect from 1 May 2023, at which point 2
Audit Committee meetings, no Management Engagement Committee meetings and 1
Nominations Committee meeting had taken place.
((3) ) Resigned as Chairman with effect from 28 April 2023, at which point no
Management Engagement Committee meetings and 1 Nominations Committee meeting
had taken place.
Internal Control
The Board is responsible for the Company's system of internal control and for
reviewing its effectiveness. The Board confirms that it has an ongoing process
for identifying, evaluating and managing the significant risks faced by the
Company. This process has been in place throughout the year and has continued
since the year end.
The Company's principal risks and uncertainties are detailed in the Strategic
Report. As further explained in the Audit Committee Report, the risks of the
Company are outlined in a risk matrix which was reviewed and updated during
the year. The Board continually reviews its policy setting and updates the
risk matrix at least annually to ensure that procedures are in place with the
intention of identifying, mitigating and minimising the impact of risks should
they crystallise. The Board has a process in place to identify emerging risks,
such as climate related risks, and to determine whether any actions are
required. The Board relies on reports periodically provided by the Investment
Manager and the Administrator regarding risks that the Company faces. When
required, experts are employed to gather information, including tax and legal
advisers. The Board also regularly monitors the investment environment and the
management of the Company's portfolio, and applies the principles detailed in
the internal control guidance issued by the FRC.
The Board holds an annual risk and strategy discussion, which enables the
Directors to consider risk outside the scheduled quarterly Board meetings.
This enables emerging risks to be identified and discussions on horizon
scanning to occur, so the Board can consider how to manage and potentially
mitigate any relevant emerging risks.
The principal features of the internal controls systems which the Investment
Manager and Administrator have in place in respect of the Group's financial
reporting are focused around the 3 lines of defence model and include:
· internal review of all financial reports;
· review by the Board of financial information prior to its
publication;
· authorisation limits over expenditure incurred by the Group;
· review of valuations; and
· authorisation of investments.
Whistleblowing
The Board has considered the AIC Code recommendations in respect of
arrangements by which staff of the Investment Manager or Administrator may, in
confidence, raise concerns within their respective organisations about
possible improprieties in matters of financial reporting or other matters. It
has concluded that adequate arrangements are in place for the
proportionate and independent investigation of such matters and, where
necessary, for appropriate follow-up action to be taken within their
organisation.
Amendment of Articles of Association
The Company's Articles of Association may be amended by the members of the
Company by special resolution (requiring a majority of at least 75 per cent of
the persons voting on the relevant resolution).
Engagement with Stakeholders
The Company is committed to maintaining good communications and building
positive relationships with all stakeholders, including shareholders, debt
providers, analysts, potential investors, suppliers and the wider communities
in which the Group and its investee companies operate. This includes regular
engagement with the Company's shareholders and other stakeholders by the
Board, the Investment Manager and the Administrator. Highlights of some of the
principal decisions that have been made in the interests of stakeholders can
be found within the section 172 statement of this report. Regular feedback is
provided to the Board to ensure they understand the views of stakeholders and
a stakeholder matrix is reviewed at each scheduled Board and Audit Committee
meeting to record the stakeholders considered for each item of business.
Relations with Shareholders
The Company welcomes the views of shareholders and places great importance on
communication with its shareholders. The Investment Manager is available at
all reasonable times to meet with principal shareholders and key sector
analysts. The Chairman, the Senior Independent Director and other Directors
are also available to meet with shareholders, if required.
All shareholders have the opportunity to put questions to the Company at its
registered address or via email. The AGM of the Company also provides a forum
for shareholders to meet and discuss issues with the Directors and Investment
Manager. The Company issues regulatory announcements via the London Stock
Exchange in respect of routine reporting obligations, periodic financial and
portfolio information updates and in response to other events.
The Board receives comprehensive shareholder reports from the Company's
Registrar and regularly monitors the views of shareholders and the shareholder
profile of the Company. The Board is also kept fully informed of all relevant
market commentary on the Company by the Investment Manager.
Relations with Other Stakeholders
The Company values its relationships with its debt providers. The Investment
Manager ensures the Company continues to meet its debt covenants and reporting
requirements. During the year, the Company drew £640 million of new term debt
and repaid £150 million of existing term debt, as disclosed in note 13 to the
financial statements.
The Investment Manager conducts presentations with analysts and investors to
coincide with the announcement of the Company's full and half year results,
providing an opportunity for discussions and queries on the Company's
activities, performance and key metrics. In addition to these semi-annual
presentations, the Investment Manager meets regularly with analysts and
investors to provide further updates with how the Company and the investment
portfolio are performing.
The Directors and Investment Manager receive informal feedback from analysts
and investors, which is presented to the Board by the Company's Joint Brokers.
The Company Secretary also receives informal feedback via queries submitted
through the Company's website and these are addressed by the Board, the
Investment Manager or the Company Secretary, where applicable.
The Company recognises that relationships with suppliers are enhanced by
prompt payment and the Company's Administrator ensures all payments are
processed within the contractual terms agreed with the individual suppliers.
The Company, via its Investment Manager, has long term and important
relationships with its operational site managers and turbine operations and
maintenance managers and reviews performance, including health and safety, on
a monthly basis. Representatives of the site manager and SPV board directors
from the Investment Manager, visit all operational sites on a regular basis
and generally carry out safety walks at least once a year on each site. The
Board's Health and Safety Director also visits sites at regular intervals.
Similarly, environment protection issues are reported on every month by the
site managers and annual habitat management plans are agreed by each SPV board
for all sites to ensure that the environment in and surrounding each windfarm
is carefully protected.
The Directors recognise that the long term success of the Company is linked to
the success of the communities in which the Group, and its investee companies,
operate. During the year, a number of community projects were supported by the
Group's investee companies.
Key decisions made or approved by the Directors during the year and the impact
of those decisions on the Company's members and wider stakeholders is
disclosed further in the Strategic Report.
Shareholders may also find Company information or contact the Company through
its website.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman of the Board
28 February 2024
Audit Committee Report
At the date of this report, the Audit Committee comprised Caoimhe Giblin
(Chairman), Martin McAdam, Nick Winser C.B.E. and Jim Smith. The AIC Code has
a requirement that at least one member of the Audit Committee should have
recent and relevant financial experience and the Audit Committee as a whole
shall have competence relevant to the sector. The Board is satisfied that the
Audit Committee is properly constituted in these respects. The qualifications
and experience of all Audit Committee members are disclosed in the Board of
Directors section of this report.
The Audit Committee operates within clearly defined terms of reference which
were reviewed during the financial year and approved by the Board, and include
all matters indicated by Disclosure Guidance and Transparency Rule 7.1 and the
AIC Code and are available for inspection on the Company's website:
www.greencoat-ukwind.com. The Company's Annual Report complies with the
provisions of the Competition and Markets Authority's (CMA) Order.
Audit Committee meetings are scheduled at appropriate times in the reporting
and auditing cycle. The Chairman, other Directors and third parties may be
invited to attend meetings as and when deemed appropriate.
Summary of the Role and Responsibilities of the Audit Committee
The duties of the Audit Committee, amongst other things, include reviewing the
Company's quarterly NAV, half year report, Annual Report and financial
statements and any formal announcements relating to the Company's financial
performance.
The Audit Committee is the forum through which the external Auditor reports to
the Board and is responsible for reviewing the terms of appointment of the
Auditor, together with their remuneration. On an ongoing basis, the Audit
Committee is responsible for reviewing the objectivity of the Auditor along
with the effectiveness of the audit and the terms under which the Auditor is
engaged to perform non-audit services (restricted to the limited scope review
of the half year report and reporting accountant services in relation to
equity raises). The Audit Committee is also responsible for reviewing the
Company's corporate governance framework, system of internal controls and risk
management, ensuring they are suitable for an investment company.
The Audit Committee reports its findings to the Board, identifying any matters
on which it considers that action or improvement is needed, and makes
recommendations on the steps to be taken.
During the year, the Audit Committee undertook an assessment of its
obligations and processes under the FRC's Minimum Standard for audit
committees published during the year.
Overview
During the year, the Audit Committee's discussions have been broad ranging. In
addition to the 4 formally convened Audit Committee meetings, the Audit
Committee has had regular contact and meetings with the Investment Manager,
the Administrator and the Auditor. These meetings and discussions focused on,
but were not limited to:
· a detailed analysis of the Company's quarterly NAVs;
· reviewing the updated risk matrix of the Company and assessing
the Company's risk management systems;
· reviewing the Company's corporate governance framework, including
climate related reporting disclosures under the TCFD framework;
· reviewing the internal controls framework for the Company, the
Administrator and the Investment Manager, considering the need for a separate
internal audit function;
· considering any incidents of internal control failure or fraud
and the Company's response;
· considering the ongoing assessment of the Company as a going
concern;
· considering the principal risks and period of assessment for the
longer term viability of the Company;
· monitoring the ongoing appropriateness of the Company's status as
an investment entity under IFRS 10, in particular following an acquisition;
· monitoring compliance with AIFMD, the AIC code and other
regulatory and governance frameworks;
· reviewing and approving the audit plan in relation to the audit
of the Company's Annual Report and financial statements;
· monitoring the performance of the Auditor and its engagement with
the Investment Manager and Administrator;
· monitoring compliance with the Company's policy on the provision
of non-audit services by the Auditor;
· reviewing the effectiveness, resources, qualifications and
independence of the Auditor;
· reviewing the Company's adherence to the responsibilities within
the FRC Audit Committees and the External Audit: Minimum Standard; and
· reviewing the anti-money laundering procedures for the Company,
the Administrator and the Investment Manager.
Financial Reporting
The primary role of the Audit Committee in relation to financial reporting is
to review with the Investment Manager, the Administrator and the Auditor the
appropriateness of the half year report and Annual Report and financial
statements, concentrating on, amongst other matters:
· the quality and acceptability of accounting policies and
practices;
· the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
· amendments to legislation and corporate governance reporting
requirements and accounting treatment of new transactions in the year;
· the impact of new and amended accounting standards on the
Company's financial statements;
· whether the Audit Committee believes that proper and appropriate
processes and procedures have been followed in the preparation of the half
year report and Annual Report and financial statements;
· considering and recommending to the Board for approval the
contents of the annual financial statements and reviewing the Auditor's report
thereon including considering whether the financial statements are overall
fair, balanced and understandable;
· material areas in which significant judgements have been applied
or there has been discussion with the Auditor; and
· any correspondence from regulators in relation to the Company's
financial reporting.
BDO LLP attended 2 of the 4 Audit Committee meetings held during the year. The
Audit Committee has also held private meetings with the Auditor to provide
additional opportunities for open dialogue and feedback. Matters typically
discussed include the Auditor's assessment of the transparency and openness of
interactions with the Investment Manager and the Administrator, confirmation
that there has been no restriction in scope placed on them, the independence
of their audit and how they have exercised professional scepticism.
Significant Issues
The Audit Committee discussed the planning, conduct and conclusions of the
external audit as it proceeded. At the Audit Committee meeting in advance of
the year end, the Audit Committee discussed and approved the Auditor's audit
plan. The Audit Committee identified the carrying value of investments as a
key area of risk of misstatement in the Company's financial statements.
Assessment of the Carrying Value of Investments
The Group has an accounting policy to designate investments at fair value
through profit or loss. Therefore, the most significant risk in the Group's
financial statements is whether its investments are fairly valued due to the
uncertainty involved in determining the investment valuations. There is also
an inherent risk of management override as the Investment Manager's fee is
calculated based on NAV, as disclosed in note 3 to the financial statements.
The Investment Manager is responsible for calculating the NAV with the
assistance of the Administrator, prior to approval by the Board.
On a quarterly basis, the Investment Manager provides a detailed analysis of
the NAV highlighting any movements and assumption changes from the previous
quarter's NAV. This analysis and the rationale for any changes made is
considered and challenged by the Chairman of the Audit Committee and
subsequently considered, challenged and approved by the Board. The Audit
Committee has satisfied itself that the key estimates and assumptions used in
the valuation model are appropriate and that the investments have been fairly
valued. The key estimates and assumptions include the useful life of the
assets, the discount rates, the level of wind resource, the rate of inflation,
the price at which the power and associated benefits can be sold and the
amount of electricity the assets are expected to produce.
Internal Control
The Audit Committee has established a set of ongoing processes designed to
meet the particular needs of the Company in managing the risks to which it is
exposed.
The Investment Manager has identified the principal risks to which the Company
is exposed, and recorded them on a risk matrix together with the controls
employed to mitigate these risks. The Investment Manager also identifies
emerging risks and determines whether any actions are required. A residual
risk rating has been applied to each risk. The Audit Committee is responsible
for reviewing the risk matrix and associated controls before recommending to
the Board for consideration and approval, challenging the Investment Manager's
assumptions, to ensure a robust internal risk management process.
The Audit Committee considers risk and strategy regularly, and formally
reviewed the updated risk matrix in Q1 2024 and will continue to do so at
least annually. By their nature, these procedures provide a reasonable, but
not absolute, assurance against material misstatement or loss. Regular reports
are provided to the Audit Committee highlighting material changes to risk
ratings.
The Audit Committee reviewed the Group's principal risks and uncertainties as
at 30 June 2023 to determine that these were unchanged from those disclosed in
the Company's 2022 Annual Report and remained the most likely to affect the
Group in the second half of the year.
During the year, the Audit Committee discussed and reviewed in depth the
internal controls frameworks in place at the Investment Manager and the
Administrator. Discussions were centred around 3 lines of defence: assurances
at operational level; internal oversight; and independent objective assurance.
The Administrator holds the International Standard on Assurance Engagements
(ISAE) 3402 Type 2 certification. This entails an independent rigorous
examination and testing of their controls and processes.
The Audit Committee concluded that these frameworks were appropriate for the
identification, assessment, management and monitoring of financial, regulatory
and other risks, with particular regard to the protection of the interests of
the Company's shareholders.
Internal Audit
The Audit Committee continues to review the need for an internal audit
function and has decided that the systems, processes and procedures employed
by the Company, Investment Manager and Administrator, including their own
internal controls and procedures, provide sufficient assurance that an
appropriate level of risk management and internal control is maintained. In
addition to this, the Company's external Depositary provides cash monitoring,
asset verification and oversight services to the Company.
The Audit Committee has therefore concluded that shareholders' investments and
the Company's assets are adequately safeguarded and an internal audit function
specific to the Company is considered unnecessary.
The Audit Committee is available on request to meet investors in relation to
the Company's financial reporting and internal controls.
External Auditor
Effectiveness of the Audit Process
The Audit Committee assessed the effectiveness of the audit process by
considering BDO LLP's fulfilment of the agreed audit plan through the
reporting presented to the Audit Committee by BDO LLP and the discussions at
the Audit Committee meeting, which highlighted the major issues that arose
during the course of the audit. In addition, the Audit Committee also sought
feedback from the Investment Manager and the Administrator on the
effectiveness of the audit process. For this financial year, the Audit
Committee was satisfied that there had been appropriate focus and challenge on
the primary areas of audit risk and assessed the quality of the audit process
to be good.
Non-Audit Services
The Audit Committee has a policy regarding the provision of non-audit services
by the external Auditor. The Audit Committee monitors the Group's expenditure
on non-audit services provided by the Company's Auditor who should only be
engaged for non-audit services where they are deemed to be the most
commercially viable supplier and prior approval of the Audit Committee has
been sought.
Details of fees paid to BDO LLP during the year are disclosed in note 5 to the
financial statements. The Audit Committee approved these fees after a review
of the level and nature of work to be performed and are satisfied that they
are appropriate for the scope of the work required. The Audit Committee seeks
to ensure that any non-audit services provided by the external Auditor do not
conflict with their statutory and regulatory responsibilities, as well as
their independence, before giving written approval prior to their engagement.
The Audit Committee was satisfied that provision of these non-audit services
did not provide threats to the Auditor's independence.
Independence
The Audit Committee is required to consider the independence of the external
Auditor. In fulfilling this requirement, the Audit Committee has considered a
report from BDO LLP describing its arrangements to identify, report and manage
any conflict of interest and the extent of non-audit services provided by
them.
The Audit Committee has concluded that it considers BDO LLP to be independent
of the Company and that the provision of the non-audit services described
above is not a threat to the objectivity and independence of the conduct of
the audit.
Re-appointment
BDO LLP has been the Company's Auditor from its incorporation on 4 December
2012. The Auditor is required to rotate the audit partner responsible for the
Group audit every 5 years. A new lead partner was appointed in 2020 and
therefore the lead partner will be required to rotate after the completion of
the 2024 year end audit.
The external audit contract is required to be put to tender at least every 10
years. The Audit Committee last conducted a formal and competitive external
audit tender process in 2022 and resolved to reappoint BDO LLP as the
Company's Auditor for the year ending 31 December 2023.
As described above, the Audit Committee reviewed the effectiveness and
independence of the Auditor and remains satisfied that the Auditor provides
effective independent challenge to the Board, the Investment Manager and the
Administrator. The Audit Committee will continue to monitor the performance of
the Auditor on an annual basis and will consider their independence and
objectivity, taking account of appropriate guidelines.
The Audit Committee has therefore recommended to the Board that BDO LLP be
proposed for re-appointment as the Company's Auditor at the 2024 AGM of the
Company.
Caoimhe Giblin
Chairman of the Audit Committee
28 February 2024
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2023
Note For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Investment income 4 422,724 577,156
Unrealised movement in fair value of investments 9 (191,402) 446,096
Other income 3,059 1,878
Total income and gains 234,381 1,025,130
Operating expenses 5 (37,608) (35,346)
Investment acquisition costs (2,797) (3,146)
Operating profit 193,976 986,638
Finance expense 13 (67,396) (32,775)
Profit for the year before tax 126,580 953,863
Tax 6 (392) -
Profit for the year after tax 126,188 953,863
Profit and total comprehensive income attributable to:
Equity holders of the Company 126,188 953,863
Earnings per share
Basic and diluted earnings from continuing operations in the year (pence) 7 5.44 41.16
The accompanying notes form an integral part of the financial statements.
Consolidated Statement of Financial Position
As at 31 December 2023
Note 31 December 2023 31 December 2022
£'000 £'000
Non current assets
Investments at fair value through profit or loss 9 5,538,636 4,959,312
5,538,636 4,959,312
Current assets
Receivables 11 41,129 2,487
Cash at bank 21,805 19,783
62,934 22,270
Current liabilities
Loans and borrowings 13 (500,000) (150,000)
Payables 12 (17,573) (8,354)
Net current liabilities (454,639) (136,084)
Non current liabilities
Loans and borrowings 13 (1,290,000) (950,000)
Net assets 3,793,997 3,873,228
Capital and reserves
Called up share capital 15 23,121 23,181
Share premium account 15 2,471,515 2,470,396
Capital redemption reserve 15 66 -
Retained earnings 1,299,295 1,379,651
Total shareholders' funds 3,793,997 3,873,228
Net assets per share (pence) 16 164.1 167.1
Authorised for issue by the Board of Greencoat UK Wind PLC (registered number
08318092) on 28 February 2024 and signed on its behalf by:
Lucinda Riches C.B.E.
Caoimhe Giblin
Chairman
Director
The accompanying notes form an integral part of the financial statements.
Statement of Financial Position - Company
As at 31 December 2023
Note 31 December 2023 31 December 2022
£'000 £'000
Non current assets
Investments at fair value through profit or loss 9 5,558,357 4,978,816
5,558,357 4,978,816
Current assets
Receivables 11 40,381 125
Cash at bank 52 2,446
40,433 2,571
Current liabilities
Loans and borrowings 13 (500,000) (150,000)
Payables 12 (14,793) (8,159)
Net current liabilities (474,360) (155,588)
Non current liabilities
Loans and borrowings 13 (1,290,000) (950,000)
Net assets 3,793,997 3,873,228
Capital and reserves
Called up share capital 15 23,121 23,181
Share premium account 15 2,471,515 2,470,396
Capital redemption reserve 15 66 -
Retained earnings 1,299,295 1,379,651
Total shareholders' funds 3,793,997 3,873,228
Net assets per share (pence) 16 164.1 167.1
The Company has taken advantage of the exemption under section 408 of the
Companies Act 2006 and accordingly has not presented a Statement of
Comprehensive Income for the Company alone. The profit after tax of the
Company alone for the year was £126,188,000 (2022: £953,863,000).
Authorised for issue by the Board on 28 February 2024 and signed on its behalf
by:
Lucinda Riches C.B.E.
Caoimhe Giblin
Chairman
Director
The accompanying notes form an integral part of the financial statements.
Consolidated and Company Statement of Changes in Equity
For the year ended 31 December 2023
For the year ended Note Share capital Share premium Capital redemption reserve Retained earnings Total
31 December 2023
£'000 £'000 £'000 £'000 £'000
Opening net assets attributable to shareholders 23,181 2,470,396 - 1,379,651 3,873,228
(1 January 2023)
Issue of share capital 15 6 1,119 - - 1,125
Share buybacks 15 (66) - 66 (9,439) (9,439)
Share buyback costs - - - (62) (62)
Profit and total comprehensive income for the year - - - 126,188 126,188
Interim dividends paid in the year 8 - - - (197,043) (197,043)
Closing net assets attributable to shareholders 23,121 2,471,515 66 1,299,295 3,793,997
After taking account of cumulative unrealised gains of £522,040,697, the
total reserves distributable by way of a dividend as at 31 December 2023 were
£777,254,592.
For the year ended Note Share capital Share premium Retained earnings Total
31 December 2022
£'000 £'000 £'000 £'000
Opening net assets attributable to shareholders (1 January 2022) 23,171 2,468,940 601,588 3,093,699
Issue of share capital 15 10 1,490 - 1,500
Share issue costs 15 - (34) - (34)
Profit and total comprehensive income for the year - - 953,863 953,863
Interim dividends paid in the year 8 - - (175,800) (175,800)
Closing net assets attributable to shareholders 23,181 2,470,396 1,379,651 3,873,228
After taking account of cumulative unrealised gains of £713,442,660, the
total reserves distributable by way of a dividend as at 31 December 2022 were
£666,208,331.
The accompanying notes form an integral part of the financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Note For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Net cash flows from operating activities 17 359,801 545,851
Cash flows from investing activities
Acquisition of investments 9 (820,925) (484,153)
Investment acquisition costs (2,742) (4,667)
Repayment of shareholder loan investments 9 50,199 13,482
Net cash flows from investing activities (773,468) (475,338)
Cash flows from financing activities
Payment of issue costs - (42)
Share buybacks (9,439) -
Share buyback costs (56) -
Amounts drawn down on loan facilities 13 1,040,000 460,000
Amounts repaid on loan facilities 13 (350,000) (310,000)
Finance costs (67,773) (29,689)
Dividends paid 8 (197,043) (175,800)
Net cash flows from financing activities 415,689 (55,531)
Net increase in cash during the year 2,022 14,982
Cash at the beginning of the year 19,783 4,801
Cash at the end of the year 21,805 19,783
The accompanying notes form an integral part of the financial statements.
Statement of Cash Flows - Company
For the year ended 31 December 2023
Note For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Net cash flows from operating activities 17 (65,695) (30,949)
Cash flows from investing activities
Loans advanced to Group companies 9 (680,800) (260,811)
Repayment of loans to Group companies 9 328,412 347,862
Net cash flows from investing activities (352,388) 87,051
Cash flows from financing activities
Payment of issue costs - (42)
Share buybacks (9,439) -
Share buyback costs (56) -
Amounts drawn down on loan facilities 13 1,040,000 460,000
Amounts repaid on loan facilities 13 (350,000) (310,000)
Finance costs (67,773) (29,689)
Dividends paid 8 (197,043) (175,800)
Net cash flows from financing activities 415,689 (55,531)
Net (decrease)/increase in cash during the year (2,394) 571
Cash at the beginning of the year 2,446 1,875
Cash at the end of the year 52 2,446
The accompanying notes form an integral part of the financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
1. Material accounting policies
Basis of accounting
The consolidated annual financial statements have been prepared in accordance
with UK adopted international accounting standards and with the requirements
of the Companies Act 2006 as applicable to companies reporting under those
standards.
The annual financial statements have been prepared on the historical cost
basis, as modified for the measurement of certain financial instruments at
fair value through profit or loss. The principal accounting policies are set
out below.
These consolidated financial statements are presented in pounds sterling,
which is the currency of the primary economic environment in which the Group
operates and are rounded to the nearest thousand, unless otherwise stated.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the
Investment Manager's Report. The Group faces a number of risks and
uncertainties, as set out in the Strategic Report. The financial risk
management objectives and policies of the Group, including exposure to price
risk, interest rate risk, credit risk and liquidity risk are discussed in note
18 to the financial statements.
As at 31 December 2023, the Group had net current liabilities of £454.6
million (2022: £136.1 million), cash balances of £21.8 million (2022: £19.8
million) (excluding cash balances within investee companies of £159.3
million) and security cash deposits of £40.1 million (2022: £nil). The
significant net current liabilities position of the Group at 31 December 2023
is due to both the Company's revolving credit facility and two of the
Company's term debt tranches with NAB and CBA maturing within 12 months of the
year end and therefore being classified as current liabilities. The Company
expects to refinance the maturing term debt during 2024.
The Company had £1,390 million (2022: £1,100 million) of term debt as at 31
December 2023, with an additional £400 million drawn on its £600 million
revolving credit facility. The covenants on the Company's banking facilities
are limited to gearing and interest cover and the Company is expected to
continue to comply with these covenants going forward.
The Group continues to meet day-to-day liquidity needs through its cash
resources.
The major cash outflows of the Group are the payment of dividends, costs
relating to the acquisition of new assets and purchases of its own shares, all
of which are discretionary. The Group has sufficient access to debt, including
its revolving credit facility, in order to fund any future wind farm
investment within the parameters of its Investment Policy.
As the Company's shares traded at an average discount to NAV of 10.5 per cent
during the year, a continuation vote is to be proposed at the Company's AGM in
April 2024 in line with its Articles of Association. The Board believe that
the Company's share price performance during the year is reflective of its
macroeconomic environment, and not of the financial prospects of the Company.
The Board believe that the outcome of the shareholder continuation vote will
not impair the Company's ability to operate as a going concern.
The Board has reviewed Group forecasts and projections which cover a period of
at least 12 months from the date of approval of this report. On the basis of
this review, taking into account foreseeable changes in investment and trading
performance, and after making due enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to continue
in operational existence from the date of approval of this report to at least
February 2025. Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
Accounting for subsidiaries
The Directors have concluded that the Group has all the elements of control as
prescribed by IFRS 10 "Consolidated Financial Statements" in relation to all
its subsidiaries and that the Company continues to satisfy the 3 essential
criteria to be regarded as an investment entity as defined in IFRS 10, IFRS 12
"Disclosure of Interests in Other Entities" and IAS 27 "Consolidated and
Separate Financial Statements". The 3 essential criteria are such that the
entity must:
1. Obtain funds from one or more investors for the purpose of providing
these investors with professional investment management services;
2. Commit to its investors that its business purpose is to invest its
funds solely for returns from capital appreciation, investment income or both;
and
3. Measure and evaluate the performance of substantially all of its
investments on a fair value basis.
In satisfying the second essential criteria, the notion of an investment time
frame is critical. An investment entity should not hold its investments
indefinitely but should have an exit strategy for their realisation. Although
the Company has invested in equity interests in wind farms that have an
indefinite life, the underlying wind farm assets that it invests in have an
expected life of 30 years. The Company intends to hold these wind farms for
the remainder of their useful life to preserve the capital value of the
portfolio. However, as the wind farms are expected to have no residual value
after their 30 year life, the Directors consider that this demonstrates a
clear exit strategy from these investments.
Subsidiaries are therefore measured at fair value through profit or loss, in
accordance with IFRS 13 "Fair Value Measurement" and IFRS 9 "Financial
Instruments". The financial support provided by the Company to its
unconsolidated subsidiaries is disclosed in note 10.
Notwithstanding this, IFRS 10 requires subsidiaries that provide services that
relate to the investment entity's investment activities to be consolidated.
Accordingly, the annual financial statements include the consolidated
financial statements of Greencoat UK Wind PLC and Greencoat UK Wind Holdco
Limited (a 100 per cent owned UK subsidiary). In respect of these entities,
intra-Group balances and any unrealised gains arising from intra-Group
transactions are eliminated in preparing the consolidated financial
statements. Unrealised losses are eliminated unless the costs cannot be
recovered. The financial statements of subsidiaries that are included in the
consolidated financial statements are included from the date that control
commences until the dates that control ceases.
In the Parent Company's financial statements, investments in subsidiaries are
measured at fair value through profit or loss in accordance with IFRS 9, as
permitted by IAS 27.
Accounting for associates and joint ventures
The Group has taken the exemption permitted by IAS 28 "Investments in
Associates and Joint Ventures" and IFRS 11 "Joint Arrangements" for entities
similar to investment entities and measures its investments in associates and
joint ventures at fair value. The Directors consider an associate to be an
entity over which the Group has significant influence, through an ownership of
between 20 per cent and 50 per cent. The Group's associates and joint ventures
are disclosed in note 10.
New and amended standards and interpretations applied
The following new standards or interpretations are effective for the first
time for periods beginning on or after 1 January 2023 and had an effect on the
Group's or Company's financial statements:
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgements);
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors); and
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes).
New and amended standards and interpretations not applied
At the date of authorisation of these financial statements, the following
amendments had been published and will be effective in future accounting
periods.
Effective for accounting periods beginning on or after 1 January 2024:
· Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1 Presentation of Financial Statements);
· Non-current Liabilities with Covenants (Amendments to IAS 1
Presentation of Financial Statements); and
· Supplier Finance Arrangements (Amendments to IAS 7 Statement of
Cash Flows and IFRS 7 Financial Instruments: Disclosures)
Effective for accounting periods beginning on or after 1 January 2025:
· Lack of Exchangeability (Amendments to IAS 21 The Effects of
Changes in Foreign Exchange Rates)
The impact of these standards is not expected to be material to the reported
results and financial position of the Group.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's
Consolidated Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument.
At 31 December 2023 and 2022, the carrying amounts of cash at bank, security
cash deposits, receivables, payables, accrued expenses and short term
borrowings reflected in the financial statements are reasonable estimates of
fair value in view of the nature of these instruments or the relatively short
period of time between the original instruments and their expected
realisation. The fair value of advances and other balances with related
parties which are short term or repayable on demand is equivalent to their
carrying amount.
Financial assets
The classification of financial assets at initial recognition depends on the
purpose for which the financial asset was acquired and its characteristics.
All financial assets are initially recognised at fair value. All purchases of
financial assets are recorded at the date on which the Group became party to
the contractual requirements of the financial asset.
The Group's and Company's financial assets principally comprise of investments
held at fair value through profit or loss and receivables.
Receivables at amortised cost
Impairment provisions for receivables are recognised based on a
forward-looking expected credit loss model. All financial assets assessed
under this model are immaterial to the financial statements.
Financial assets held at fair value through profit or loss
Investments are designated upon initial recognition as held at fair value
through profit or loss. Gains or losses resulting from the movement in fair
value of the Group's loan and equity investments are recognised in the
Consolidated Statement of Comprehensive Income at each valuation point. As
shareholder loan investments form part of a managed portfolio of assets whose
performance is evaluated on a fair value basis, loan investments are
designated at fair value in line with equity investments.
The Company's loan and equity investments in Holdco are held at fair value
through profit or loss. Gains or losses resulting from the movement in fair
value are recognised in the Company's Statement of Comprehensive Income at
each valuation point.
Fair value is defined as the amount for which an asset could be exchanged
between knowledgeable willing parties in an arm's length transaction. Fair
value is calculated on a discounted cash flow basis in accordance with IFRS 13
and IFRS 9.
Recognition and derecognition of financial assets
Financial assets are recognised/derecognised at the date of the
purchase/disposal. Investments are initially recognised at cost, being the
fair value of consideration given. Transaction costs are recognised in the
Consolidated Statement of Comprehensive Income as incurred.
A financial asset (in whole or in part) is derecognised either:
· when the Group has transferred substantially all the risks and
rewards of ownership; or
· when it has neither transferred or retained substantially all the
risks and rewards and when it no longer has control over the assets or a
portion of the asset; or
· when the contractual right to receive cash flow has expired.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual agreements entered into and are recorded on the date on which the
Group becomes party to the contractual requirements of the financial
liability.
All loans and borrowings are initially recognised at cost, being fair value of
the consideration received, less issue costs where applicable. After initial
recognition, all interest bearing loans and borrowings are subsequently
measured at amortised cost using the effective interest rate method. Loan
balances as at the year end have not been discounted to reflect amortised
cost, as the amounts are not materially different from the outstanding
balances.
Finance expenses
Borrowing costs are recognised in the Consolidated Statement of Comprehensive
Income in the period to which they relate on an accruals basis.
Share capital
Financial instruments issued by the Company are treated as equity if the
holder has only a residual interest in the assets of the Company after the
deduction of all liabilities. The Company's ordinary shares are classified as
equity instruments.
Incremental costs directly attributable to the issue of new shares are shown
in share premium as a deduction from proceeds. Incremental costs include those
incurred in connection with the placing and admission which include fees
payable under a placing agreement, legal costs and any other applicable
expenses.
Repurchase of ordinary share capital
The cost of repurchasing ordinary shares including the related stamp duty and
transaction costs are recognised in the Consolidated Statement of Changes in
Equity and included within retained earnings. Share repurchase transactions
are accounted for on a trade date basis. The nominal value of ordinary share
capital repurchased and cancelled is transferred out of share capital and into
the capital redemption reserve.
Cash at bank
Cash at bank comprises cash balances held at bank.
Security cash deposits
Security cash deposits comprise amounts held on call with banks and other
short term highly liquid deposits, that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
These balances have been included within receivables.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's obligation to make payment has been established.
Income recognition
Dividend income and interest income on shareholder loan investments are
recognised when the Group's entitlement to receive payment is established.
Gains or losses resulting from the movement in fair value of the Group's and
Company's investments held at fair value through profit or loss are recognised
in the Consolidated or Company Statement of Comprehensive Income at each
valuation point.
Expenses
Expenses are accounted for on an accruals basis. Share issue expenses of the
Company directly attributable to the issue and listing of shares are charged
to the share premium account.
The Company issues shares to the Investment Manager in exchange for receiving
investment management services. The fair value of the investment management
services received in exchange for shares is recognised as an expense at the
time at which the investment management fees are earned, with a corresponding
increase in equity. The fair value of the investment management services is
calculated by reference to the definition of investment management fees in the
Investment Management Agreement.
Taxation
Under the current system of taxation in the UK, the Group is liable to
taxation on its operations in the UK.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates that have been enacted or substantively enacted at the date of
the Consolidated Statement of Financial Position.
The Group does not expect to recognise any deferred tax assets or liabilities
as it would expect to avail from substantial shareholder relief on any
temporary or permanent difference arising from any potential future sale of an
investment.
2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires the application of
estimates and assumptions which may affect the results reported in the
financial statements. Estimates, by their nature, are based on judgement and
available information.
As disclosed in note 1, the Directors have concluded that the Company meets
the definition of an investment entity as defined in IFRS 10, IFRS 12 and IAS
27. This conclusion involved a degree of judgement and assessment as to
whether the Company met the criteria outlined in the accounting standards.
Significant accounting 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 9 to
the financial statements.
The key assumptions that have a significant impact on the carrying value of
investments that are valued by reference to the discounted value of future
cash flows are the useful life of the assets, the discount rates, the level of
wind resource, the rate of inflation, the price at which the power and
associated benefits can be sold and the amount of electricity the assets are
expected to produce. The sensitivity analysis of these key assumptions is
outlined in note 9 to the financial statements.
Significant judgement
Useful lives are based on the Investment Manager's estimates of the period
over which the assets will generate revenue which are periodically reviewed
for continued appropriateness. The assumption used for the useful life of the
wind farms is 30 years. The actual useful life may be a shorter or longer
period depending on the actual operating conditions experienced by the asset.
The discount rates are subjective and therefore it is feasible that a
reasonable alternative assumption may be used resulting in a different value.
The discount rates applied to the cash flows are reviewed periodically by the
Investment Manager to ensure they are at the appropriate level. The Investment
Manager will take into consideration market transactions, where of similar
nature, when considering changes to the discount rates used.
The revenues and expenditure of the investee companies are frequently partly
or wholly subject to indexation and an assumption is made that inflation will
increase at a long term rate.
The price at which the output from the generating assets is sold is a factor
of both wholesale electricity prices and the revenue received from the
Government support regimes. Future power prices are estimated using external
third party forecasts, and may be adjusted by the Investment Manager where
more conservative assumptions are considered appropriate. These third party
forecasts take the form of specialist consultancy reports, reflecting various
factors including gas prices, carbon prices and renewables deployment, each of
which reflect the UK and global response to climate change. The future power
price assumptions are reviewed as and when these forecasts are updated. There
is an inherent uncertainty in future wholesale electricity price projection.
Specifically commissioned external reports are used to estimate the expected
electrical output from the wind farm assets taking into account the expected
average wind speed at each location and generation data from historical
operation. The actual electrical output may differ considerably from that
estimated in such a report mainly due to the variability of actual wind to
that modelled in any one period. Assumptions around electrical output will be
reviewed only if there is good reason to suggest there has been a material
change in this expectation.
As disclosed in note 10, the fair value of guarantees and counter-indemnities
provided by the Group on behalf of its investments are considered to be £nil,
as the Directors do not expect Group cash flows to crystalise as a result of
these guarantees or counter-indemnities.
3. Investment management fees
Under the terms of the Investment Management Agreement, the Investment Manager
is entitled to a combination of a Cash Fee and an Equity Element from the
Company.
The Cash Fee is based upon the NAV as at the start of the quarter in question
on the following basis:
· on that part of the then most recently announced NAV up to and
including £500 million, an amount equal to 0.25 per cent of such part of the
NAV;
· on that part of the then most recently announced NAV over £500
million and up to and including £1,000 million, an amount equal to 0.225 per
cent of such part of the NAV;
· on that part of the then most recently announced NAV over £1,000
million and up to and including £3,000 million, an amount equal to 0.2 per
cent of such part of the NAV; and
· on that part of the then most recently announced NAV over £3,000
million, an amount equal to 0.175 per cent of such part of the NAV.
The Equity Element is calculated quarterly in advance and has a value as set
out below:
· on that part of the then most recently announced NAV up to and
including £500 million, 0.05 per cent; and
· on that part of the then most recently announced NAV over £500
million up to and including £1,000 million, 0.025 per cent.
The ordinary shares issued to the Investment Manager under the Equity Element
are subject to a 3 year lock-up starting from the quarter in which they are
due to be paid.
As at 31 December each year, the Cash Fee and Equity Element shall be subject
to a true-up to the value that would have been deliverable had they been
calculated quarterly in arrears.
Investment management fees paid or accrued in the year were as follows:
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Cash Fee 31,344 29,848
Equity Element 1,500 1,500
32,844 31,348
The value of the Equity Element and the Cash Fee detailed in the table above
include the true-up amount for the year calculated in accordance with the
Investment Management Agreement.
The Cash Fee and Equity Element relating to the quarter ended 31 December 2023
were accrued at year end. This is further detailed in note 19.
4. Investment income
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Dividends received (note 19) 359,939 525,897
Interest on shareholder loan investment received (note 19) 62,785 51,259
422,724 577,156
5. Operating expenses
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Management fees (note 3) 32,844 31,348
Group and SPV administration fees 1,231 1,000
Non-executive Directors' fees 385 338
Other expenses 2,895 2,469
Fees to the Company's Auditor:
for audit of the statutory financial statements 248 187
for other audit related services 5 4
37,608 35,346
Total fees payable to the Company's Auditor, BDO LLP, for non-audit services
during the year ended 31 December 2023 were £4,800 (2022: £4,290), payable
in relation to a limited review of the half year report.
6. Taxation
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
UK Corporation Tax charge 392 -
392 -
The corporation tax rate increased from 19 per cent to 25 per cent (for
companies with profits over £250,000), from 1 April 2023.
The tax charge for the year shown in the Statement of Comprehensive Income is
lower than the standard rate of corporation tax of 23.52 per cent (2022: 19
per cent). The differences are explained below.
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Profit for the year before taxation 126,580 953,863
Profit for the year multiplied by the standard rate of corporation tax of 29,772 181,234
23.52 per cent (2022: 19 per cent)
Fair value movements (not subject to taxation) 47,667 (83,484)
Dividends received (not subject to taxation) (84,660) (99,920)
Expenditure not deductible for tax purposes 658 603
Surrendering of tax losses to other group companies for nil consideration 5,042 819
Other net tax adjustments 1,521 748
Adjustment from previous period 392 -
Total tax charge 392 -
7. Earnings per share
For the year ended For the year ended
31 December 2023
31 December 2022
Profit attributable to equity holders of the Company - £'000 126,188 953,863
Weighted average number of ordinary shares in issue 2,317,758,378 2,317,629,517
Basic and diluted earnings from continuing operations in the year (pence) 5.44 41.16
Dilution of the earnings per share as a result of the Equity Element of the
investment management fee as disclosed in note 3 does not have a significant
impact on the basic earnings per share.
8. Dividends declared with respect to the year
Interim dividends paid during the year ended 31 December 2023 Dividend per share Total dividend
pence £'000
With respect to the quarter ended 31 December 2022 1.93 44,742
With respect to the quarter ended 31 March 2023 2.19 50,775
With respect to the quarter ended 30 June 2023 2.19 50,780
With respect to the quarter ended 30 September 2023 2.19 50,746
8.50 197,043
Interim dividends declared after 31 December 2023 and not accrued in the year Dividend per share Total dividend
pence £'000
With respect to the quarter ended 31 December 2023 3.43 79,114
3.43 79,114
On 29 January 2024, the Company announced a dividend of 3.43 pence per share
with respect to the quarter ended 31 December 2023, bringing the total
dividend declared with respect to the year to 31 December 2023 to £231.4
million, equivalent to 10 pence per share. The record date for the dividend is
16 February 2024 and the payment date is 29 February 2024.
The following table shows dividends paid in the prior year.
Interim dividends paid during the year ended 31 December 2022 Dividend per share Total dividend
pence £'000
With respect to the quarter ended 31 December 2021 1.795 41,597
With respect to the quarter ended 31 March 2022 1.930 44,730
With respect to the quarter ended 30 June 2022 1.930 44,734
With respect to the quarter ended 30 September 2022 1.930 44,739
7.585 175,800
9. Investments at fair value through profit or loss
Group 31 December 2023 31 December 2022
£'000 £'000
Opening balance 4,959,312 4,042,545
Additions 820,925 484,153
Repayment of shareholder loan investments (note 19) (50,199) (13,482)
Unrealised movement in fair value of investments (191,402) 446,096
5,538,636 4,959,312
The investments made in underlying assets are carried at fair value through
profit and loss. The investments are typically made through a combination of
shareholder loans and equity into the SPVs which own the underlying asset. The
nominal value of the shareholder loan investments as at 31 December 2023 was
£1,484,003,180 (2022: £1,087,080,412).
The movement in investments of the Company during the year and the prior year
was made up as follows:
Company 31 December 2023 31 December 2022
£'000 £'000
Opening balance 4,978,816 4,046,365
Loan advanced to Holdco (note 19) 680,800 260,811
Repayment of loan to Holdco (note 19) (328,412) (347,862)
Unrealised movement in fair value of investments 227,153 1,019,502
5,558,357 4,978,816
The Company's shareholder loan investment in Holdco is repayable on demand.
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 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· Level 2 - inputs other than quoted prices included within Level
1 that are observable for the assets or liabilities, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
· Level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant
judgement by the Group. The Group considers observable data to be market data
that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The only financial instruments held at fair value are the instruments held by
the Group in the SPVs, which are fair valued at each reporting date. The
Group's investments have been classified within Level 3 as the investments are
not traded and contain unobservable inputs. The Company's investments are all
considered to be Level 3 assets. As the fair value of the Company's equity and
loan investments in Holdco is ultimately determined by the underlying fair
values of the SPV investments, the Company's sensitivity analysis of
reasonably possible alternative input assumptions is the same as for the
Group.
Due to the nature of the investments, they are always expected to be
classified as Level 3. There have been no transfers between levels during the
year ended 31 December 2023.
Any transfers between the levels would be accounted for on the last day of
each financial period.
Valuations are derived using a discounted cash flow methodology in line with
IPEV Valuation Guidelines and take into account, inter alia, the following:
· due diligence findings where relevant;
· the terms of any material contracts including PPAs;
· asset performance;
· power price forecast from a leading market consultant; and
· the economic, taxation or regulatory environment.
Sensitivity analysis
The fair value of the Group's investments is £5,538,635,628 (2022:
£4,959,311,361). The analysis below is provided to illustrate the sensitivity
of the fair value of investments to an individual input, while all other
variables remain constant. The Board considers these changes in inputs to be
within reasonable expected ranges. This is not intended to imply the
likelihood of change or that possible changes in value would be restricted to
this range.
31 December 2023
Input Base case Change in input Change in fair value of investments Change in NAV per share
£'000 pence
Discount rate 11 per cent levered portfolio IRR + 0.5 per cent (170,310) (7.4)
- 0.5 per cent 179,963 7.8
Long term inflation rate RPI: 3.5 per cent to 2030, 2.5 per cent thereafter - 0.5 per cent (162,604) (7.0)
CPI: 2.5 per cent
+ 0.5 per cent 170,870 7.4
Energy yield P50 10 year P90 (352,901) (15.3)
10 year P10 352,854 15.3
Power price Forecast by leading consultant - 10 per cent (335,334) (14.5)
+ 10 per cent 316,943 13.7
Asset life 30 years - 5 years (313,935) (13.6)
+ 5 years 204,932 8.9
31 December 2022
Input Base case Change in input Change in fair value of investments Change in NAV per share
£'000 pence
Discount rate 10 per cent levered portfolio IRR + 0.5 per cent (155,166) (6.7)
- 0.5 per cent 163,665 7.1
Long term inflation rate RPI: 3.5 per cent to 2030, 2.5 per cent thereafter - 0.5 per cent (144,045) (6.2)
CPI: 2.5 per cent
+ 0.5 per cent 151,076 6.5
Energy yield P50 10 year P90 (323,717) (14.0)
10 year P10 323,657 14.0
Power price Forecast by leading consultant - 10 per cent (249,393) (10.8)
+ 10 per cent 236,130 10.2
Asset life 30 years - 5 years (229,237) (9.9)
+ 5 years 148,321 6.4
The portfolio is valued on an unlevered basis using a lower discount rate for
fixed cash flows and a higher discount rate for merchant cash flows. This
results in a blended unlevered portfolio IRR. The equivalent levered
portfolio IRR is calculated assuming 35 per cent gearing and an all-in
interest cost of 5 per cent.
The sensitivities above are assumed to be independent of each other. Combined
sensitivities are not presented. The sensitivity analysis shown above would be
the same for the Company as for the Group. Also see the high transition risk
scenario discussed in the Strategic Report.
10. Unconsolidated subsidiaries, associates and joint ventures
The following table shows subsidiaries of the Group. As the Company is
regarded as an Investment Entity as referred to in note 1, these subsidiaries
have not been consolidated in the preparation of the financial statements:
Investment Place of Business Ownership Interest as at Ownership Interest as at
31 December 2023
31 December 2022
Andershaw Scotland((11)) 100% 100%
Bin Mountain Northern Ireland((10)) 100% 100%
Bishopthorpe England((11)) 100% 100%
Braes of Doune Scotland((12)) 100% 100%
Breeze Bidco((1)) Scotland((11)) 100% 100%
Brockaghboy Northern Ireland((10)) 100% 100%
Carcant Scotland((12)) 100% 100%
Church Hill Northern Ireland((10)) 100% 100%
Corriegarth Scotland((12)) 100% 100%
Cotton Farm England((11)) 100% 100%
Crighshane Northern Ireland((10)) 100% 100%
Dalquhandy Scotland((12)) 100% -
Douglas West Scotland((12)) 100% 100%
Earl's Hall Farm England((11)) 100% 100%
Glen Kyllachy Scotland((10)) 100% 100%
Kildrummy Scotland((11)) 100% 100%
Langhope Rig Scotland((11)) 100% 100%
Maerdy Wales((11)) 100% 100%
North Hoyle Wales((11)) 100% 100%
Screggagh Northern Ireland((10)) 100% 100%
Slieve Divena Northern Ireland((10)) 100% 100%
Slieve Divena 2 Northern Ireland((10)) 100% 100%
South Kyle Scotland((12)) 100% -
Stroupster Scotland((11)) 100% 100%
Tappaghan Northern Ireland((10)) 100% 100%
Twentyshilling Scotland((11)) 100% 100%
Walney Holdco((2)) England((11)) 100% 100%
Windy Rig Scotland((11)) 100% 100%
Bicker Fen England((11)) 80% 80%
Fenlands((3)) England((11)) 80% 80%
Humber Holdco((4)) England((11)) 77.2% 77.2%
Nanclach((1)) Scotland((12)) 75% 75%
Dunmaglass Holdco((5)) Scotland((12)) 71.2% 71.2%
Stronelairg Holdco((6)) Scotland((12)) 71.2% 71.2%
Hoylake((7)) England((12)) 63% 63%
London Array ((8)) England((12)) 54.9% -
Drone Hill Scotland((12)) 51.6% 51.6%
North Rhins Scotland((11)) 51.6% 51.6%
Sixpenny Wood England((11)) 51.6% 51.6%
Yelvertoft England((11)) 51.6% 51.6%
SYND Holdco((9)) UK((11)) 51.6% 51.6%
(1) The Group's investment in Nanclach is held through Breeze Bidco.
(2) The Group holds 100 per cent of Walney Holdco, which owns 25.1 per cent of
Walney Wind Farm, resulting in the Group holding a 25.1 per cent indirect
investment in Walney Wind Farm.
(3) The Group's investments in Deeping St. Nicholas, Glass Moor, Red House and
Red Tile are held through Fenlands.
(4) The Group holds 77.2 per cent of Humber Holdco, which owns 49 per cent of
Humber Wind Farm, resulting in the Group holding a 37.8 per cent indirect
investment in Humber Wind Farm.
(5) The Group holds 71.2 per cent of Dunmaglass Holdco, which owns 49.9 per
cent of Dunmaglass Wind Farm, resulting in the Group holding a 35.5 per cent
indirect investment in Dunmaglass Wind Farm.
(6) The Group holds 71.2 per cent of Stronelairg Holdco, which owns 49.9 per
cent of Stronelairg Wind Farm, resulting in the Group holding a 35.5 per cent
indirect investment in Stronelairg Wind Farm.
(7) The Group holds 62.7 per cent of Hoylake, which owns 25 per cent of Burbo
Bank Extension, resulting in the Group holding a 15.7 per cent indirect
investment in Burbo Bank Extension.
(8) The Group holds 54.9 per cent of London Array Holdco, which owns 25 per
cent of London Array Limited, resulting in the Group holding a 13.7 per cent
indirect investment in London Array Limited.
(9) The Group's investments in Drone Hill, North Rhins, Sixpenny Wood and
Yelvertoft are held through SYND Holdco.
(10) The registered office address is The Legacy Building, Northern Ireland
Science Park, Belfast, BT3 9DT.
(11) The registered office address is 5(th) Floor, 20 Fenchurch Street,
London, EC3M 3BY.
(12) The registered office address is Collins House, Rutland Square,
Edinburgh, EH1 2AA.
( )
There are no significant restrictions on the ability of the Group's
unconsolidated subsidiaries to transfer funds in the form of cash dividends.
The following table shows associates and joint ventures of the Group which
have been recognised at fair value as permitted by IAS 28 "Investments in
Associates and Joint Ventures":
Investment Place of Business Ownership Interest as at Ownership Interest as at
31 December 2023
31 December 2022
Kype Muir Extension Scotland((3)) 49.9% -
ML Wind((1)) England((4)) 49% 49%
Little Cheyne Court England((4)) 41% 41%
Clyde Scotland((5)) 28.2% 28.2%
Hornsea 1 Holdco((2)) England((6)) 25% 25%
Rhyl Flats Wales((4)) 24.95% 24.95%
(1) The Group's investments in Middlemoor and Lindhurst are 49 per cent (2022:
49 per cent). These are held through ML Wind.
(2) The Group holds 25 per cent of Hornsea 1 Holdco, which owns 50 per cent of
Hornsea 1 Limited, resulting in the Group holding a 12.5 per cent indirect
investment in Hornsea 1 Limited.
(3) The registered office address is Inkerman House St John's Road,
Meadowfield, Durham, DH7 8XL.
(4) The registered office address is Windmill Hill Business Park, Whitehill
Way, Swindon, Wiltshire, SN5 6PB.
(5) The registered office address is Inveralmond House, 200 Dunkeld Road,
Perth, PH1 3AQ.
(6) The registered office address is 1 Bartholomew Lane, London, England, EC2N
2AX.
Loans advanced by Holdco to the investments are disclosed in note 19.
Guarantees and counter-indemnities provided by the Group on behalf of its
investments are as follows:
Provider of security Investment Beneficiary Nature Purpose Amount
£'000
The Company Hornsea 1 National Westminster Bank Letter of credit Debt service reserve 65,300
The Company London Array Orsted Guarantee PPA 60,000
Holdco Clyde SSE Counter-indemnity Grid, radar, decommissioning 21,771
The Company London Array Shareholders Guarantee JOA participants guarantee 20,000
The Company North Hoyle The Crown Estate Guarantee Decommissioning, rent 14,744
The Company Glen Kyllachy RWE Counter-indemnity Decommissioning, grid 12,238
The Company Burbo Bank Extension Orsted Counter-indemnity Rent, radar 11,000
The Company Twentyshilling Whiteside Hill Wind Farm Guarantee Land access, cabling 10,000
The Company Hornsea 1 Orsted Letter of Credit Lease obligations 8,410
The Company London Array Orsted Counter-indemnity OFTO, O&M 8,300
The Company Dalquhandy BT Guarantee PPA 5,897
The Company South Kyle Land owner Guarantee Decommissioning 5,332
The Company South Kyle East Ayrshire Council Counter-indemnity Decommissioning 5,000
The Company Humber Gateway RWE Guarantee Radar 4,900
The Company South Kyle Scottish Ministers Counter-indemnity Decommissioning 4,327
The Company South Kyle Dumfries and Galloway Council Counter-indemnity Decommissioning 3,748
The Company Andershaw Statkraft Guarantee Decommissioning 3,500
Holdco Kype Muir Extension Nordex Guarantee Turbine supply 3,185
Holdco Dalquhandy BayWa Counter-indemnity Decommissioning 2,525
The Company Braes of Doune Land owner Guarantee Decommissioning 2,000
The Company Rhyl Flats The Crown Estate Guarantee Decommissioning 1,829
The Company Twentyshilling Santander Counter-indemnity Decommissioning 1,807
The Company Twentyshilling Ministry of Defence Guarantee Seismic array equipment 1,800
The Company Windy Rig Santander Counter-indemnity Access rights, decommissioning, grid 1,409
The Company Tom nan Clach RBS Unsecured guarantee Decommissioning 1,348
The Company Twentyshilling NATS Guarantee Radar 1,244
The Company Douglas West Land owner Guarantee Decommissioning 1,200
The Company Windy Rig NATS Guarantee Radar 601
The Company Stroupster RBS Unsecured guarantee Decommissioning 366
Holdco Stronelairg SSE Guarantee Grid 301
The Company South Kyle NATS Guarantee Radar 285
Holdco Dunmaglass SSE Guarantee Grid 201
The Company Cotton Farm Land owner Guarantee Decommissioning 165
The Company Sixpenny Wood Land owner Guarantee Community fund 150
The Company Twentyshilling Santander Counter-indemnity Decommissioning 96
The Company Yelvertoft Daventry District Council Guarantee Decommissioning 82
The Company Langhope Rig Barclays Counter-indemnity Decommissioning 81
The Company Maerdy Natural Resource Wales Guarantee Access rights to neighbouring land n/a
285,142
The fair value of these guarantees and counter-indemnities provided by the
Group are considered to be £nil (2022: £nil) as disclosed in note 2.
11. Receivables
Group 31 December 2023 31 December 2022
£'000 £'000
Security cash deposits 40,119 -
VAT receivable 676 527
Interest income receivable 111 -
Prepayments 151 122
Other receivables 72 190
Amounts due from SPVs (note 19) - 1,648
41,129 2,487
Company 31 December 2023 31 December 2022
£'000 £'000
Security cash deposits 40,119 -
Prepayments 151 122
Interest income receivable 111 -
Other receivables - 3
40,381 125
12. Payables
Group 31 December 2023 31 December 2022
£'000 £'000
Investment management fee payable 8,090 1,364
Loan interest payable (note 13) 5,487 5,490
Commitment fee payable (note 13) 235 402
Letter of credit fees payable (note 13) 93 324
Amounts due to SPVs (note 19) 2,508 -
Acquisition costs payable 55 -
Other payables 1,105 774
17,573 8,354
Company 31 December 2023 31 December 2022
£'000 £'000
Investment management fee payable 8,090 1,364
Loan interest payable (note 13) 5,487 5,490
Commitment fee payable (note 13) 235 402
Letter of credit fees payable (note 13) 93 324
Other payables 888 579
14,793 8,159
13. Loans and borrowings
Group and Company 31 December 2023 31 December 2022
£'000 £'000
Opening balance 1,100,000 950,000
Revolving credit facility
Drawdowns 400,000 260,000
Repayments (200,000) (310,000)
Term debt facilities
Drawdowns 640,000 200,000
Repayments (150,000) -
Closing balance 1,790,000 1,100,000
Reconciled as:
Current liabilities 500,000 150,000
Non current liabilities 1,290,000 950,000
Group and Company For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Loan interest 58,787 27,489
Facility arrangement fees 4,350 500
Commitment fees 2,289 3,114
Letter of credit fees 1,137 324
Professional fees 589 1,163
Other facility fees 244 185
Finance expense 67,396 32,775
The loan balance as at 31 December 2023 has not been adjusted to reflect
amortised cost, as the amounts are not materially different from the
outstanding balances.
The terms of the revolving credit facility remain unchanged and comprise a
margin of 1.75 per cent per annum and a commitment fee of 0.65 per cent per
annum of any undrawn facility.
As at 31 December 2023, the Company has a total revolving credit facility of
£600 million (2022: £600 million), of which amounts drawn were £400 million
(2022: £200 million), accrued interest payable was £228,404 (2022: £52,675)
and the outstanding commitment fee payable was £235,068 (2022: £401,753).
The facility has a maturity date of 29 October 2024 and is classified as a
current liability.
In the prior year, the Company placed a letter of credit facility provided by
Lloyds. The fee for this facility is 1.25 per cent and the fee payable, as at
31 December 2023, was £93,400 (2022: £324,221).
On 31 August 2023, the Company placed a letter of credit facility provided by
ANZ. The fee for this facility is 0.24 per cent per annum.
The Company's term debt facilities and associated interest rate swaps have
various maturity dates, as set out in the below table.
Accrued interest at 31 December 2023
Provider Maturity date Loan margin Swap rate / SONIA All-in rate Loan principal
% % % £'000 £'000
NAB 4 Nov 2024 1.15 1.06 2.21 50,000 179
CBA 14 Nov 2024 1.35 0.81 2.16 50,000 166
CBA 6 Mar 2025 1.55 1.53 3.08 50,000 236
CIBC 3 Nov 2025 1.50 1.51 3.01 100,000 454
ANZ 3 May 2026 1.45 5.92 7.37 75,000 45
NAB 1 Nov 2026 1.50 1.60 3.10 75,000 376
NAB 1 Nov 2026 1.50 0.84 2.34 25,000 95
CIBC 14 Nov 2026 1.40 0.81 2.21 100,000 334
Lloyds 9 May 2027 1.60 5.65 7.25 150,000 89
CBA 4 Nov 2027 1.60 1.37 2.97 100,000 455
ABN AMRO 2 May 2028 1.75 5.04 6.79 100,000 57
ANZ 3 May 2028 1.75 5.38 7.13 75,000 44
Barclays 3 May 2028 1.75 4.99 6.74 100,000 57
AXA 31 Jan 2030 - - 3.03 125,000 1,598
AXA 31 Jan 2030 1.70 1.45 3.15 75,000 995
AXA 28 Apr 2031 - - 6.43 25,000 13
AXA 28 Apr 2031 1.80 5.20(1) 7.00 115,000 66
1,390,000 5,259
(1) Facility pays SONIA as variable rate.
Loans with maturity dates of less than 12 months amount to £100 million and
are classified as current liabilities. The remaining term debt of £1,290
million is classified as non current liabilities.
£1,125 million of these term loans contain swaps. £1,050 million of these
instruments have been treated as a single fixed rate loan agreement, which
effectively set interest rates payable at fixed rates as:
• the contractual agreements for the loan and swap are
directly linked, were executed at the same time and are not independently
transferable;
• there is a common counterparty for loan and swap
instruments; and
• all loan and swap instruments are co terminus and their
commercial and financial terms reflect each other.
The £75 million term loan with AXA is hedged with an interest rate swap with
NAB, which demonstrates consistent characteristics with the other term loans
and swaps other than the common counterparty. Similarly, the £150 million
term loan with Lloyds is hedged with an interest rate swap with a different
Lloyds counterparty. In such cases, the interest rate swaps have not been
recognised as separate instruments at fair value and the Board is of the view
that their fair values are not sufficiently material to be separately
recognised.
The £115 million term loan tranche with AXA has not been hedged with an
interest rate swap and so the loan will be fully variable until maturity of
the loan.
£150 million term loan tranches with AXA have fixed all-in rates and have not
been hedged by interest rate swaps.
All borrowing ranks pari passu and is secured by a debenture over the assets
of the Company, including its shares in Holdco, and a floating charge over
Holdco's bank accounts.
14. Contingencies and commitments
The Group had no contingencies and commitments for the year ended 31 December
2023.
15. Share capital - ordinary shares of £0.01
Date Authorised, issued and fully paid Number of shares issued Share capital Share premium Capital redemption reserve Total
£'000 £'000 £'000 £'000
1 January 2023 2,318,089,989 23,181 2,470,396 - 2,493,577
Shares issued to the Investment Manager
3 February 2023 True-up of 2022 and 167,923 2 373 - 375
Q1 2023 Equity Element
5 May 2023 Q2 2023 Equity Element 225,441 2 373 - 375
4 August 2023 Q3 2023 Equity Element 226,182 2 373 - 375
619,546 6 1,119 - 1,125
Share buybacks (6,577,736) (66) - 66 -
31 December 2023 2,312,131,799 23,121 2,471,515 66 2,494,702
Authorised, issued and fully paid Number of shares issued Share capital Share premium Total
Date
£'000 £'000 £'000
1 January 2022 2,317,097,822 23,171 2,468,940 2,492,111
Shares issued to the Investment Manager
4 February 2022 True-up of 2021 and 254,855 3 372 375
Q1 2022 Equity Element
6 May 2022 Q2 2022 Equity Element 251,219 3 372 375
5 August 2022 Q3 2022 Equity Element 244,151 2 373 375
4 November 2022 Q4 2022 Equity Element 241,942 2 373 375
992,167 10 1,490 1,500
Other
1 January 2022 Less costs relating to 29 November 2021 share issue - - (34) (34)
31 December 2022 2,318,089,989 23,181 2,470,396 2,493,577
Shareholders are entitled to all dividends paid by the Company and, on a
winding up, provided the Company has satisfied all of its liabilities, the
shareholders are entitled to all of the residual assets of the Company.
Pursuant to the terms of the Investment Management Agreement, the Investment
Manager receives an Equity Element as part payment of its investment
management fee as disclosed in note 3. The figures given in the table in note
3 include the true-up amount of the investment management fee for the periods
calculated in accordance with the Investment Management Agreement and issued
subsequent to 31 December 2023.
Following the commencement of the share buyback programme at the end of
October 2023, the Company repurchased and cancelled 6.6 million shares in the
final 2 months of the year. Further details regarding the Company's purchase
of its own shares are included in the Chairman's Statement.
16. Net assets per share
Group and Company 31 December 2023 31 December 2022
Net assets - £'000 3,793,997 3,873,228
Number of ordinary shares issued 2,312,131,799 2,318,089,989
Total net assets - pence 164.1 167.1
17. Reconciliation of operating profit for the year to net cash from operating activities
Group For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Operating profit for the year 193,976 986,638
Adjustments for:
Unrealised movement in fair value of investments (note 9) 191,402 (446,096)
Investment acquisition costs 2,797 3,146
(Increase)/decrease in receivables (38,639) 144
Increase in payables 9,157 519
Equity Element of Investment Manager's fee (note 3) 1,500 1,500
Tax paid (392) -
Net cash flows from operating activities 359,801 545,851
Company For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Operating profit for the year 193,976 986,638
Adjustments for:
Unrealised movement in fair value of investments (note 9) (227,153) (1,019,502)
Increase in receivables (40,253) (19)
Increase in payables 6,627 434
Equity Element of Investment Manager's fee (note 3) 1,500 1,500
Tax paid (392) -
Net cash flows from operating activities (65,695) (30,949)
Reconciliation of cash flows and non-cash flow changes in liabilities arising from financing activities
Group and Company Loans and borrowings Other liabilities
£'000 £'000
As at 1 January 2023 1,100,000 6,168
Cash flows (net) 690,000 (67,773)
Movements in Statement of Comprehensive Income - 67,396
As at 31 December 2023 1,790,000 5,791
Group and Company Loans and borrowings Other liabilities
£'000 £'000
As at 1 January 2022 950,000 3,082
Cash flows (net) 150,000 (29,689)
Movements in Statement of Comprehensive Income - 32,775
As at 31 December 2022 1,100,000 6,168
18. Financial risk management
The Investment Manager 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 its operations. The Group's
activities expose it to a variety of financial risks: market risk (including
price risk, interest rate risk and foreign currency risk), credit risk and
liquidity risk.
The Group's market risk is managed by the Investment Manager in accordance
with the policies and procedures in place. The Group's overall market
positions are monitored on a quarterly basis by the Board.
Price risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Group will fluctuate. Investments are measured at fair
value through profit or loss and are valued on a discounted cash flow basis.
Therefore, the value of these investments will be (amongst other risk factors)
a function of the discounted value of their expected cash flows and, as such,
will vary with movements in interest rates and competition for such assets. As
disclosed in note 9, the key assumptions determining fair value of investments
are subjective and therefore it is feasible that a reasonable alternative
assumption may be used resulting in a different valuation for these
investments.
Interest rate risk
The Group's interest rate risk on interest bearing financial assets is limited
to interest earned on security cash deposits. The Group also has exposure to
interest rate risk due to floating interest rates required to service external
borrowings through the revolving credit facility and the unhedged £115
million term loan tranche with AXA. An increase of 1 per cent (2022: 3 per
cent) represents the Investment Manager's assessment of a reasonably possible
change in interest rates. Should the SONIA rate increase by 1 per cent, the
annual interest due on the facility and term loan would increase by
£5,150,000 (2022: £6,000,000) on the basis that the revolving credit
facility is £400 million drawn (2022: £200 million). The Group's only other
exposure to interest rate risk is due to the £75 million term loan with AXA
and £150 million term loan with Lloyds that are hedged by different
counterparties. No material impact is expected for these swaps. The Investment
Manager regularly monitors interest rates to ensure the Group has adequate
provisions in place in the event of significant fluctuations.
The associated interest rate swaps on amounts drawn under the other term debt
facilities detailed in note 13, effectively set interest payable at a fixed
rate for the full term of the loans, thereby mitigating the risks associated
with the variability of cash flows arising from interest rate fluctuations.
The Board considers that, as shareholder loan investments bear interest at a
fixed rate, they do not carry any interest rate risk.
The Group's interest bearing assets and liabilities as at 31 December 2023 are
summarised below:
Group Fixed rate Floating rate
£'000 £'000
Assets
Security cash deposits (note 11) - 40,119
Other receivables (note 11) - 111
Investments 1,484,003 -
1,484,003 40,230
Liabilities
Loans and borrowings (note 13) (1,275,000) (515,000)
(1,275,000) (515,000)
The Group's interest bearing assets and liabilities as at 31 December 2022 are
summarised below:
Group Fixed rate Floating rate
£'000 £'000
Assets
Investments 1,087,081 -
1,087,081 -
Liabilities
Loans and borrowings (note 13) (900,000) (200,000)
(900,000) (200,000)
The Company's interest bearing assets and liabilities as at 31 December 2023
are summarised below:
Company Fixed rate Floating rate
£'000 £'000
Assets
Security cash deposits (note 11) - 40,119
Other receivables (note 11) - 111
- 40,230
Liabilities
Loans and borrowings (note 13) (1,275,000) (515,000)
(1,275,000) (515,000)
The Company's interest bearing assets and liabilities as at 31 December 2022
are summarised below:
Company Fixed rate Floating rate
£'000 £'000
Liabilities
Loans and borrowings (note 13) (900,000) (200,000)
(900,000) (200,000)
Foreign currency risk
Foreign currency risk is defined as the risk that the fair values of future
cash flows will fluctuate because of changes in foreign exchange rates. The
Group's financial assets and liabilities are denominated in GBP and
substantially all of its revenues and expenses are in GBP. The Group is not
considered to be materially exposed to foreign currency risk.
Credit risk
Credit risk is the risk of loss due to the failure of a borrower or
counterparty to fulfil its contractual obligations. The Group is exposed to
credit risk in respect of other receivables, cash at bank, security cash
deposits, loan investments and loan advances. The Group's credit risk exposure
is minimised by dealing with financial institutions with investment grade
credit ratings and making loan investments which are equity in nature. As loan
investments are carried at fair value, any credit risk movement is reflected
in the fair value. The Investment Manager regularly reviews the future cash
flows and valuations of the investee companies, to gain comfort as to the
recoverability of the loans. No balances are past due or impaired.
The table below details the Group's maximum exposure to credit risk:
Group 31 December 2023 31 December 2022
£'000 £'000
Other receivables (note 11) 859 717
Cash at bank 21,805 19,783
Security cash deposits (note 11) 40,119 -
Loan investments (note 9) 1,484,003 1,087,081
1,546,786 1,107,581
The table below details the Company's maximum exposure to credit risk:
Company 31 December 2023 31 December 2022
£'000 £'000
Other receivables (note 11) 111 3
Cash at bank 52 2,446
Security cash deposits (note 11) 40,119 -
Loan investments (note 9) 2,696,103 2,343,715
2,736,385 2,346,164
The table below shows the cash balances of the Group and the credit rating for
each counterparty:
Group Rating 31 December 2023 31 December 2022
£'000 £'000
RBS International A 21,805 17,505
The Crown Estate n/a - 2,278
21,805 19,783
The table below shows the cash balances of the Company and the credit rating
for each counterparty:
Company Rating 31 December 2023 31 December 2022
£'000 £'000
RBS International A 52 168
The Crown Estate n/a - 2,278
52 2,446
Liquidity risk
Liquidity risk is the risk that the Group and the Company may not be able to
meet a demand for cash or fund an obligation when due. The Investment Manager
and the Board continuously monitor forecast and actual cash flows from
operating, financing and investing activities to consider payment of
dividends, the repurchase of ordinary shares, repayment of the Company's
outstanding debt or further investing activities.
The significant net current liabilities position of the Group at 31 December
2023 is due to both the Company's revolving credit facility and two of the
Company's term debt tranches with NAB and CBA maturing within 12 months of the
year end and therefore being classified as current liabilities. The Company
expects to refinance the maturing term debt during 2024.
The following tables detail the Group's expected maturity for its financial
assets (excluding equity) and liabilities together with the contractual
undiscounted cash flow amounts:
Group - 31 December 2023 Less than 1 year 1 - 5 years 5+ years Total
£'000 £'000 £'000 £'000
Assets
Other receivables (note 11) 859 - - 859
Cash at bank 21,805 - - 21,805
Security cash deposits (note 11) 40,119 - - 40,119
Loan investments - - 1,484,003 1,484,003
Liabilities
Other payables (note 12) (17,573) - - (17,573)
Loans and borrowings (589,744) (1,129,977) (369,089) (2,088,810)
(544,534) (1,129,977) 1,114,914 (559,597)
Group - 31 December 2022 Less than 1 year 1 - 5 years 5+ years Total
£'000 £'000 £'000 £'000
Assets
Other receivables (note 11) 717 - - 717
Cash at bank 19,783 - - 19,783
Loan investments - - 1,087,081 1,087,081
Liabilities
Other payables (note 12) (8,354) - - (8,354)
Loans and borrowings (185,768) (819,975) (212,815) (1,218,558)
(173,622) (819,975) 874,266 (119,331)
The shareholder loan investments are repayable on demand.
The following tables detail the Company's expected maturity for its financial
assets (excluding equity) and liabilities together with the contractual
undiscounted cash flow amounts:
Company - 31 December 2023 Less than 1 year 1 - 5 years 5+ years Total
£'000 £'000 £'000 £'000
Assets
Other receivables (note 11) 111 - - 111
Cash at bank 52 - - 52
Security cash deposits (note 11) 40,119 - - 40,119
Loan investments - - 2,696,103 2,696,103
Liabilities
Other payables (note 12) (14,793) - - (14,793)
Loans and borrowings (589,744) (1,129,977) (369,089) (2,088,810)
(564,255) (1,129,977) 2,327,014 632,782
Company - 31 December 2022 Less than 1 year 1 - 5 years 5+ years Total
£'000 £'000 £'000 £'000
Assets
Other receivables (note 11) 3 - - 3
Cash at bank 2,446 - - 2,446
Loan investments - - 2,343,715 2,343,715
Liabilities
Other payables (note 12) (8,159) - - (8,159)
Loans and borrowings (185,768) (819,975) (212,815) (1,218,558)
(191,478) (819,975) 2,130,900 1,119,447
The Group and Company will use cash flow generation, equity placings, debt
refinancing or disposal of assets to manage liabilities as they fall due in
the longer term.
Capital risk management
The Company considers its capital to comprise ordinary share capital,
distributable reserves and retained earnings. The Company is not subject to
any externally imposed capital requirements.
The Group's and the Company's primary capital management objectives are to
ensure the sustainability of its capital to support continuing operations,
meet its financial obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded with a combination of current cash,
debt and equity.
19. Related party transactions
Amounts paid to the Directors during the year are as outlined in the
Directors' Remuneration Report. £46,461 (2022: £39,927) of employer's
national insurance was paid on non-executive Directors' fees during the year.
During the year, the Company increased its loan to Holdco by £680,800,000
(2022: £260,811,425) and Holdco settled amounts of £328,411,737 (2022:
£347,862,031). The amount outstanding at the year end was £2,696,103,477 (31
December 2022: £2,343,715,214).
Under the terms of a Management Services Agreement with Holdco, the Company
receives £800,000 per annum in relation to management and administration
services. During the year, £800,000 (2022: £800,000) was paid from Holdco to
the Company under this agreement and amounts due to the Company at the year
end were £nil (2022: £nil).
Holdco has Management Service Agreements in place with various wind farms.
Total amounts received by Holdco, amounts paid to the Investment Manager and
amounts paid to the Administrator during the year, are outlined in the table
below.
During the year, Holdco received £1,861,994 (2022: £2,847,873) in relation
to renewables obligation proceeds on behalf of Bin Mountain, Carcant and
Tappaghan. Amounts due to these investee companies as at 31 December 2023 were
£3,246 (2022: £nil).
As at 31 December 2023, £182,698 was due to Bicker Fen (2022: £230,214 due
from Bicker Fen), £834,064 was due to Fenlands (2022: £120,135 due from
Fenlands), £924,611 was due to North Hoyle (2022: £869,799 due from North
Hoyle), £147,295 was due to Nanclach (2022: £nil), £51,783 was due to
Langhope Rig (2022: £nil), £27,133 was due to Douglas West (2022: £nil)
and £1,017,709 was due from Burbo (2022: £nil) in respect of tax
payments/rebates paid/received by Holdco.
As at 31 December 2023, under the terms of Management Services Agreements with
the SPVs, Holdco was due to receive £982 from Fenlands (2022: £899 from
Bicker Fen, £899 from Fenlands and £32,588 from Windy Rig).
As at 31 December 2023, under the terms of the Investment Management
Agreement, the Company owed the Investment Manager a Cash Fee of £7,715,319
and an Equity Element of £375,000, relating to the final quarter of the year
and a 2023 true-up.
As at 31 December 2023, an amount of £1,539,501 (2022: £nil) was payable
from the Group to Douglas West, being a return of a dividend received during
the year.
For the year ended
31 December 2023
Income received Expenses paid to the Investment Manager Expenses paid to the Administrator
£ £ £
Andershaw, Bin Mountain, Bishopthorpe, Brockaghboy, Carcant, Church Hill, 1,366,019 683,010 683,010
Cotton Farm, Corriegarth, Crighshane, Douglas West, Earl's Hall Farm, Glen
Kyllachy, Kildrummy, Langhope Rig, Maerdy, North Hoyle, Screggagh, Slieve
Divena, Slieve Divena 2, Stroupster, Tappaghan, Tom nan Clach, Twentyshilling,
Windy Rig:
£56,918 income receivable per wind farm per annum
£28,459 expenses payable to the Investment Manager per wind farm per annum
£28,459 expenses payable to the Administrator per wind farm per annum
Braes of Doune, Drone Hill, North Rhins, Sixpenny Wood, Yelvertoft: 213,440 71,147 142,293
£42,688 income receivable per wind farm per annum
£14,229 expenses payable to the Investment Manager per wind farm per annum
£28,459 expenses payable to the Administrator per wind farm per annum
Dalquhandy: 32,200 16,100 16,100
£32,200 income receivable per annum
£16,100 expenses payable to the Investment Manager per annum
£16,100 expenses payable to the Administrator per annum
Dunmaglass Holdco, Stronelairg Holdco: 17,148 - 17,148
£8,574 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per annum
£8,574 expenses payable to the Administrator per wind farm per annum
Bicker Fen, Fenlands: 6,548 6,548 -
£3,274 income receivable per wind farm per annum
£3,274 expenses payable to the Investment Manager per wind farm per annum
£nil expenses payable to the Administrator per wind farm per annum
Walney Holdco: 21,570 10,785 10,785
£21,570 income receivable per annum
£10,785 expenses payable to the Investment Manager per annum
£10,785 expenses payable to the Administrator per annum
Humber Holdco: 8,459 - 8,459
£8,459 income receivable per annum
£nil expenses payable to the Investment Manager per annum
£8,459 expenses payable to the Administrator per annum
Burbo Bank Extension: 6,740 6,740 -
£6,740 income receivable per annum
£6,740 expenses payable to the Investment Manager per annum
£nil expenses payable to the Administrator per wind farm per annum
Total 1,672,124 794,329 877,795
For the year ended
31 December 2022
Income received Expenses paid to the Investment Manager Expenses paid to the Administrator
£ £ £
Andershaw, Bishopthorpe, Brockaghboy, Church Hill, Corriegarth, Crighshane, 864,312 432,156 432,156
Douglas West, Glen Kyllachy((1)), Langhope Rig, North Hoyle, Screggagh, Slieve
Divena, Slieve Divena 2, Stroupster, Tom nan Clach, Twentyshilling((2)), Windy
Rig((3)):
£52,102 income receivable per wind farm per annum
£26,051 expenses payable to the Investment Manager per wind farm per annum
£26,051 expenses payable to the Administrator per wind farm per annum
Bin Mountain, Braes of Doune, Carcant, Cotton Farm, Drone Hill, Earl's Hall 468,922 156,307 312,615
Farm, Kildrummy, Maerdy, North Rhins, Sixpenny Wood, Tappaghan, Yelvertoft:
£39,077 income receivable per wind farm per annum
£13,026 expenses payable to the Investment Manager per wind farm per annum
£26,051 expenses payable to the Administrator per wind farm per annum
Dunmaglass Holdco, Stronelairg Holdco: 15,697 - 15,697
£7,848 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per annum
£7,848 expenses payable to the Administrator per wind farm per annum
Bicker Fen, Fenlands: 5,994 5,994 -
£2,997 income receivable per wind farm per annum
£2,997 expenses payable to the Investment Manager per wind farm per annum
£nil expenses payable to the Administrator per wind farm per annum
Walney Holdco: 19,746 9,873 9,873
£19,746 income receivable per annum
£9,873 expenses payable to the Investment Manager per annum
£9,873 expenses payable to the Administrator per annum
Humber Holdco: 7,744 - 7,744
£7,744 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per annum
£7,744 expenses payable to the Administrator per wind farm per annum
Total 1,382,415 604,330 778,085
((1)) Acquired in December 2021. £53,396 income received and £26,698 paid to
the Investment Manager during the year.
((2)) Acquired in June 2022. £27,157 income received and £13,579 paid to the
Investment Manager during the year.
((3)) Acquired in December 2021. £54,326 income received and £27,163 paid to
the Investment Manager during the year.
The table below shows dividends received in the year from the Group's
investments.
For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Humber Holdco ((1)) 53,436 53,017
Clyde 46,776 51,055
Stronelairg Holdco ((2)) 26,154 33,733
Walney Holdco ((3)) 25,298 28,890
Hornsea 1 Holdco ((4)) 16,842 -
North Hoyle 14,412 27,730
Braes of Doune 14,361 28,724
Brockaghboy 13,804 18,763
Corriegarth 13,097 32,463
Hoylake ((5)) 12,583 7,342
Dunmaglass Holdco ((6)) 11,298 13,177
ML Wind ((7)) 10,143 16,317
Fenlands ((8)) 9,515 16,937
SYND Holdco ((9)) 9,430 18,695
Rhyl Flats 8,258 13,099
Stroupster 6,610 3,021
Little Cheyne Court 6,437 9,184
Windy Rig 5,277 14,942
Tappaghan 5,017 9,221
Andershaw 4,417 15,599
Slieve Divena 4,345 7,951
Maerdy 4,318 9,038
Twentyshilling 4,046 8,384
Bishopthorpe 3,944 7,952
Bicker Fen 3,770 6,382
Langhope Rig 3,475 9,287
Screggagh 3,404 6,477
Cotton Farm 2,960 4,467
Slieve Divena 2 2,732 5,490
Kildrummy 2,359 4,614
Crighshane 2,201 5,677
Glen Kyllachy 2,131 11,300
Earl's Hall Farm 1,788 2,264
Douglas West 1,500 14,250
Carcant 1,340 3,237
Bin Mountain 1,260 3,168
Church Hill 1,201 4,050
359,939 525,897
(1) The Group's investment in Humber Gateway is held through Humber Holdco.
(2) The Group's investment in Stronelairg is held through Stronelairg Holdco.
(3) The Group's investment in Walney is held through Walney Holdco.
(4) The Group's investment in Hornsea 1 is held through Hornsea 1 Holdco.
(5) The Group's investment in Burbo Bank Extension is held through Hoylake.
(6) The Group's investment in Dunmaglass is held through Dunmaglass Holdco.
(7) The Group's investments in Middlemoor and Lindhurst are held through ML
Wind.
(8) The Group's investments in Deeping St. Nicholas, Glass Moor, Red House and
Red Tile are held through Fenlands.
(9) The Group's investments in Drone Hill, North Rhins, Sixpenny Wood and
Yelvertoft are held through SYND Holdco.
The table below shows interest received in the year from the Group's
shareholder loan investments.
For the year ended 31 December 2023 For the year ended 31 December 2022
£'000 £'000
Hoylake ((1)) 10,662 6,706
Walney Holdco ((2)) 9,994 11,244
Stronelairg Holdco ((3)) 5,197 5,197
Clyde 4,283 4,206
South Kyle 4,239 -
Dunmaglass Holdco ((4)) 3,412 3,412
Tom nan Clach 2,890 2,809
Glen Kyllachy 2,886 3,085
Corriegarth 2,805 2,658
London Array ((5)) 2,605 -
Douglas West 2,532 2,947
Hornsea 1 Holdco ((6)) 2,206 -
Andershaw 1,894 2,125
Windy Rig 1,850 2,309
Twentyshilling 1,473 1,005
Slieve Divena 2 1,340 1,329
Crighshane 1,257 1,283
Church Hill 843 944
Dalquhandy 417 -
62,785 51,259
(1) The Group's investment in Burbo Bank Extension is held through Hoylake.
(2) The Group's investment in Walney is held through Walney Holdco.
(3) The Group's investment in Stronelairg is held through Stronelairg
Holdco.
(4) The Group's investment in Dunmaglass is held through Dunmaglass Holdco.
(5) The Group's investment in London Array is held through London Array
Holdco.
(6) The Group's investment in Hornsea 1 is held through Hornsea 1 Holdco.
The table below shows the Group's shareholder loans with the wind farm
investments.
Loans at 1 January 2023((1)) Loans advanced in the year ((2)) Loans restructured in the year Loan repayments in the year Loans at 31 December 2023 Accrued interest at 31 December 2023 Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Andershaw 32,641 - - (2,695) 29,946 135 30,081
Church Hill 13,830 - - (1,176) 12,654 2 12,656
Clyde 71,503 - - - 71,503 1,022 72,525
Corriegarth 42,553 - - - 42,553 70 42,623
Crighshane 20,497 - - (1,970) 18,527 - 18,527
Dalquhandy - 40,878 - - 40,878 987 41,865
Douglas West 43,248 - - (3,139) 40,109 - 40,109
Dunmaglass Holdco ((3)) 56,864 - - - 56,864 860 57,724
Glen Kyllachy 48,776 - - (2,146) 46,630 - 46,630
Hornsea 1 Holdco ((4)) 109,475 6,906 - (15,050) 101,331 34 101,365
Hoylake ((5)) 178,120 1,239 - - 179,359 - 179,359
Kype Muir Extension 39,415 6,553 (15,809) - 30,159 152 30,311
London Array((6)) - 146,987 - (13,718) 133,269 1,542 134,811
Slieve Divena 2 21,378 - - (706) 20,672 - 20,672
South Kyle - 208,505 - (1,714) 206,791 - 206,791
Stronelairg 86,619 - - - 86,619 1,310 87,929
Tom nan Clach 73,709 - - (7,885) 65,824 11 65,835
Twentyshilling 32,190 - - - 32,190 464 32,654
Walney Holdco ((7)) 172,727 - - - 172,727 369 173,096
Windy Rig 36,772 - - - 36,772 369 37,141
1,080,317 411,068 (15,809) (50,199) 1,425,377 7,327 1,432,704
(1) Excludes accrued interest at 31 December 2022 of £6,763,541.
(2) Includes capitalised interest of £2,074,396 for Kype Muir Extension,
£1,239,406 for Hoylake and £5,070,644 for Hornsea 1, plus a true-up of
£1,835,512 relating to the Hornsea 1 loan.
(3) The Group's investment in Dunmaglass is held through Dunmaglass Holdco.
(4) The Group's investment in Hornsea 1 is held through Hornsea 1 Holdco.
(5) The Group's investment in Burbo Bank Extension is held through Hoylake.
(6) The Group's investment in London Array is held through London Array
Holdco.
(7) The Group's investment in Walney is held through Walney Holdco.
20. Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings advised to
them, the Company has no ultimate controlling party.
21. Subsequent events
On 29 January 2024, the Company announced a dividend of £79.1 million,
equivalent to 3.43 pence per share with respect to the quarter ended 31
December 2023, bringing the total dividend declared with respect to the year
to 31 December 2023 to 10 pence per share. The record date for the dividend
was 16 February 2024 and the payment date is 29 February 2024.
On 30 January 2024, the Company announced that Abigail Rotheroe will join the
Board, effective from 1 March 2024.
Post year end, the Company had announced cumulative buybacks of 14 million
shares between 1 January and 27 February 2024.
Company Information
Directors (all non-executive) Registered Company Number
Lucinda Riches C.B.E (Chairman) 08318092
Martin McAdam
Caoimhe Giblin Registered Office
Nick Winser C.B.E. 5(th) Floor
Jim Smith((1)) 20 Fenchurch Street
Shonaid Jemmett-Page((2)) London
EC3M 3BY
Investment Manager
Schroders Greencoat LLP Registered Auditor
4(th) Floor, The Peak BDO LLP
5 Wilton Road 55 Baker Street
London London
SW1V 1AN W1U 7EU
Administrator and Company Secretary
Ocorian Administration (UK) Limited Joint Broker
Unit 4, The Legacy Building RBC Capital Markets
Northern Ireland Science Park 100 Bishopsgate
Queen's Road London
Belfast EC2N 4AA
BT3 9DT
Depositary Joint Broker
Ocorian Depositary (UK) Limited Jefferies International Limited
Unit 4, The Legacy Building 100 Bishopsgate
Northern Ireland Science Park London
Queen's Road EC2N 4JL
Belfast
BT3 9DT
Registrar
Computershare Limited
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
((1)) Appointed to the Board with effect from 1 May 2023.
((2)) Retired from the Board with effect from 28 April 2023.
Supplementary Information (unaudited)
Under the Alternative Investment Fund Manager Regulations 2013 (as amended)
the Company is a UK AIF and the Investment Manager is a full scope UK AIFM.
Ocorian Depositary (UK) Limited provides depositary services under the AIFMD.
The AIFMD outlines the required information which has to be made available to
investors prior to investing in an AIF and directs that material changes to
this information be disclosed in the Annual Report of the AIF. There were no
material changes in the year.
All information required to be disclosed under the AIFMD is either disclosed
in this Annual Report or is detailed within a schedule of disclosures on the
Company's website at www.greencoat-ukwind.com
(http://www.greencoat-ukwind.com) .
The Investment Manager covers the potential professional liability risks
resulting from its activities by holding professional indemnity insurance in
accordance with Article 9(7)(b) of AIFMD.
The information in this paragraph relates to the Investment Manager, the AIFM,
and its subsidiary company providing services to the AIFM and it does not
relate to the Company. The total amount of remuneration paid by the Investment
Manager, in its capacity as AIFM, to its 118 staff for the financial year
ending 31 December 2023 was £29.4 million, consisting of £19.1 million fixed
and £10.3 million variable remuneration. The aggregate amount of remuneration
for the 14 staff members of the Investment Manager constituting senior
management and those staff whose actions have a material impact on the risk
profile of the Company was £5.3 million. These figures relate to the
Investment Manager's entire AIFM business and not to the Company.
EU Sustainable Finance Disclosure Regulation (unaudited)
ANNEX V
Template periodic disclosure for the financial products referred to in Article
9, paragraphs 1 to 4a,
of Regulation (EU) 2019/2088 and Article 5, first paragraph, of Regulation
(EU) 2020/852
Product name: Greencoat UK Wind PLC (the "Company")
Legal entity identifier: 213800ZPBBK8H51RX165
Sustainable investment objective
Did this financial product have a sustainable investment objective?
Yes - It made sustainable investments with an environmental objective: 99% -
in economic activities that qualify as environmentally sustainable under the
EU Taxonomy
To what extent was the sustainable investment objective of this financial
product met?
The Company invests in operating UK wind farms, supporting the transition to
Net Zero. The Company's aim is to provide investors with an annual dividend
per Ordinary Share that increases in line with RPI inflation while preserving
the capital value of its investment portfolio on a real basis over the long
term, through re-investment of excess cashflow.
The Company has sustainable investment as its objective within the meaning of
Article 9 SFDR. More specifically, the Company is intended to contribute to
the environmental objective of climate change mitigation on the basis of the
activities of the assets targeted by the Company, which are wind power
generation assets that help to facilitate the transition to a low-carbon
economy.
The Company does not have a carbon reduction objective and has not designated
a reference benchmark for the purpose of attaining the sustainable investment
objective.
As at 31 December 2023, the Company's portfolio comprises interests in 49
operating wind farms totalling 2,007MW capacity.
These sustainable investments contribute to the Company's sustainable
investment objective as the electricity generated from wind farms can be used
in place of non-renewable energy sources, thereby helping to stabilise
greenhouse gas concentrations in the atmosphere and contributing to climate
change mitigation. These investments are considered environmentally
sustainable in accordance with the technical screening criteria of the EU
Taxonomy relating to the environmental objective of climate change mitigation
and electricity generation from wind power.
How did the sustainability indicators perform?
The sustainability indicators used to measure attainment of the sustainable
investment objective of the Company performed as follows in the reporting
period:
- Renewable energy generated: 4,743GWh
- Greenhouse gas emissions( 1 ) avoided: 1.9 million tonnes
CO(2)e
- Equivalent number of homes powered ( 2 :) 1.8 million
Carbon footprint indicators are measured in line with the industry standard
Greenhouse Gas Protocol based on an equity control approach, meaning emissions
from the Group's operations are weighted according to the Group's
proportionate ownership in its SPV investments.
Scope emissions calculations are verified by third party consultants.
Scope 3 emissions are the result of activities from assets not owned or
controlled by the Group, but that the Group indirectly impacts in its value
chain. Scope 3 emissions include all sources not within the Group's Scope 1
and 2 boundary and include, inter alia, emissions arising from the
construction of each wind farm acquired in 2023, including those emissions
associated with the manufacturing and transport of all equipment and material,
before the wind farm was commissioned as well as the expected spare part
provision throughout its lifetime.
1 This reflects CO(2)e savings calculated based on the thermal generation
displaced. In the UK, this assumes the displacement of CCGT generation at a
carbon intensity factor of 0.4 kgCO(2)e/KWh (IEA).
2 Calculated based on average household consumption estimates. In the UK,
this was 2.7MWh/annum (Ofgem).
…and compared to previous periods?
Sustainability Indicator 2023 2022
Renewable electricity generated (GWh) 4,743 4,362
Greenhouse gas emissions avoided (tCO(2)) 1.9 million 1.7 million
Equivalent number of homes powered 1.8 million 1.5 million
All indicators increased year-on-year reflecting the increase in operating
capacity of the Group resulting from new investments in the year. Relative to
its MW capacity, homes powered by the Group decreased as the annual average
household consumption in the UK fell from 2.9MWh to 2.7MWh per annum.
How did the sustainable investments not cause significant harm to any
sustainable investment objective?
The Investment Manager has sought to ensure that the Company's sustainable
investments cause no significant harm to any sustainable investment objective
by predominately investing in operating wind farms and by actively engaging
and managing sustainability risks and opportunities for the Company and its
investments prior to investment and on an ongoing basis once an investment has
been made.
Prior to each investment, the Investment Manager's Investment Committee,
responsible for the Company, considered the Company's investment policy,
investment restrictions and the Company's ESG Policy (a copy of which can be
found on the Company's website, as well as the sustainability risks and
opportunities identified during due diligence (including by means of an ESG
checklist).
Each investment made is held through SPVs and the Investment Manager has
appointed directors to each of the boards of those SPVs to oversee all major
strategic and operational decisions.
Sustainability risks and opportunities have been fully embedded into the risk
management framework at both Company and asset SPV level. A risk matrix has
been set up for each new SPV, which includes sustainability risks, and
assesses risks (in respect of the likelihood of its occurrence and the impact
of its occurrence) on a numerical scale.
Ongoing sustainability risks for the portfolio were monitored, managed and
reported on by the Investment Manager to the Company's Board of Directors
which has overall responsibility for the activities of the Company and its
investments.
During 2023, there were no material incidents across the portfolio.
Specifically with regards to health and safety, there were 30 workdays lost to
injuries (based on 2 reportable lost time incidents). The Investment Manager
continues its focus on managing health and safety risks including regular
training for asset managers and Operations & Maintenance teams to promote
a culture of reporting to improve awareness and openness on the management of
health and safety at sites. The Investment Manager will continue to monitor
health and safety performance of all sites closely, in line with its ESG
Policy commitments.
In addition, the Company complied with the principles of good governance
contained in the AIC Code, which ensures the Company is in accordance with the
requirements of the UK Corporate Governance Code and provides a framework of
best practice for listed investment companies.
How were the indicators for adverse impacts on sustainability factors taken
into account?
The Investment Manager considers the Principal Adverse Impacts ("PAIs") of its
investment decisions relating to the Company on sustainability factors and
this informs its approach to long term investment stewardship and stakeholder
engagement.
As the Company predominantly targets investments in operating UK wind farms,
the PAIs that are most relevant to the Company include (but are not limited
to):
• Greenhouse gas emissions (Table 1 RTS: PAIs 1-6);
and
• Number of workdays lost to injuries, accidents, or
illness (Table 3 RTS: PAI 3)
The Investment Manager sought to mitigate the impact of the PAIs and other
indicators considered in relation to the Company firstly by implementing the
Company's ESG Policy, which has been developed in line with the Investment
Manager's own ESG Policy. This sets guidance and principles for integrating
sustainability across the Company's business and looks to establish best
practice in climate related risk management, reporting and transparency. It
outlines areas of focus for wind power generation assets including
environment, workplace standards, health and safety practices, governance
(including compliance with applicable laws and regulations) and local
community engagements. It also includes a list of key performance indicators
that are monitored and reported on (as appropriate). Sustainability factors
were considered prior to investment as part of early stage screening, detailed
due diligence and the Investment Committee's decision making, and are managed
post acquisition in accordance with the Investment Manager's wider asset
management practices.
A statement on principal adverse impacts on sustainability factors (the "PAI
Statement"), including the list of PAI indicators and associated metrics
considered in relation to the Company, can be found on the Company's website.
The Investment Manager considers the impacts reported within the PAI Statement
do not constitute significant harm to any sustainable investment objective, as
further described in the PAI Statement.
Were sustainable investments aligned with the OECD Guidelines for
Multinational Enterprises and the UN Guiding Principles on Business and Human
Rights? Details:
Yes - the Investment Manager believes that the Company's sustainable
investments were aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human Rights (the
"Minimum Safeguards").
During 2023, the Investment Manager conducted initial due diligence (for new
investments) and ongoing monitoring (for existing investments) of the SPVs in
which the underlying wind assets are held to ensure their alignment with the
Minimum Safeguards.
Further, the Investment Manager ensured that the key service providers
involved in the operations, maintenance and management of the SPVs acquired in
2023 comply with all applicable laws, rules, regulations and overarching
principles in the countries where they operate. This covers anti bribery and
corruption, financial crime, data protection and employment and health and
safety laws (including those relating to human rights, human trafficking,
modern slavery, and public safety). This was achieved, where possible, through
the application of the Investment Manager's 'Code of Conduct' Side Letter or
otherwise provided for in the key service provider contracts, and monitoring
by the Investment Manager's risk function.
There has been no material change to any existing service providers, or any
reports by the SPVs of any misalignment to the Minimum Safeguards.
For more information on how the sustainable investment objective of this
financial product was met, please refer to the Company's ESG Report which can
be found on the Company's website.
How did this financial product consider principal adverse impacts on
sustainability factors?
See the response to the question above "How were the indicators for adverse
impacts on sustainability factors taken into account."
What were the top investments of this financial product?
Largest investments Sector % Assets Country
Hornsea 1 Wind 16% UK
Humber Gateway Wind 9% UK
London Array Wind 8% UK
Walney Wind 7% UK
Clyde Wind 7% UK
South Kyle Wind 6% UK
Stronelairg Wind 5% UK
4%
Corriegarth Wind 4% UK
Burbo Bank Extension Wind 3% UK
Brockaghboy Wind 3% UK
What was the proportion of sustainability-related investments?
· What was the asset allocation?
#1 Sustainable 99% > Environmental 100% > Taxonomy aligned 100%
#1 Sustainable covers sustainable investments with environmental or social
objectives.
#2 Not sustainable includes investments which do not qualify as sustainable
investments.
· In which economic sectors were the investments made?
All of the Company's investments are in the economic sector "electricity
generation from wind power" (activity 4.3 of the Climate Change Mitigation
Technical Screening Criteria).
To what extent were sustainable investments with an environmental objective
aligned with the EU Taxonomy?
· Did the financial product invest in fossil gas and/or nuclear energy
related activities complying with the EU Taxonomy(1)?
The Company did not make any investments in fossil gas or nuclear energy
activities. In line with its Investment Policy, the Company will only invest
in UK wind farms.
(1) Fossil gas and/or nuclear related activities will only comply with the EU
Taxonomy where they contribute to limiting climate change ("climate change
mitigation") and do no significant harm to any EU Taxonomy objective - see
explanatory note in the left hand margin. The full criteria for fossil gas and
nuclear energy economic activities that comply with the EU Taxonomy are laid
down in the Commission Delegated Regulation (EU) 2022/1214
· What was the share of investments made in transitional and enabling
activities?
All activities of the Company are low carbon activities so the share of
investments in transitional and enabling activities is zero.
· How did the percentage of investments aligned with the EU Taxonomy
compare with previous reference periods?
Not applicable as this is the Company's first report produced with respect to
the EU Taxonomy alignment of the Company's investments.
What was the share of sustainable investments with an environmental objective
that were not aligned with the EU Taxonomy
There was no share of sustainable investments with an environmental objective
that were not aligned with the EU Taxonomy. 100 per cent of the Company's
sustainable investments are in wind generation assets which are considered
aligned with the EU Taxonomy in accordance with the relevant Technical
Screening Criteria for climate change mitigation (activity 4.3).
What was the share of socially sustainable investments?
0 per cent of the Company's investments are socially sustainable investments.
The Company does not target sustainable investments with a social objective.
What investments were included under "not sustainable", what was their purpose
and were there any minimum environmental or social safeguards?
The investments included under "#2 Not sustainable" comprise cash collateral
reserves (to the extent not generated from sustainable investments).
In 2023, "not sustainable" assets were 1 per cent of the Company's NAV and
reflected cash collateral reserves. Given the purpose of these investments,
there were no minimum environmental and social safeguards applied to such
investments.
What actions have been taken to attain the sustainable investment objective
during the reference period?
The Investment Manager sought to attain the Company's sustainable investment
objective by implementing the binding elements described in the Company's pre
contractual disclosures (Annex 3 RTS) on a continuous basis, and by
integrating sustainability risks in its investment decision making as
described above: "How did the sustainable investments not cause significant
harm to any sustainable investment objective?".
The Company continues to invest in further operating wind farms and in
construction projects to increase its renewable energy generation capacity.
In 2023, the Investment Manager continued to enhance its processes to measure
and monitor the application of the binding elements. For example, the
Investment Manager's ESG Policy, upon which the Company's ESG Policy has been
developed, was updated again in Q4 2023 to incorporate the Investment
Manager's approach to good governance and minimum safeguards.
Further, the Investment Manager continued to engage with stakeholders relevant
to the Group's portfolio to ensure its renewable investments positively impact
the local communities in which they operate. Sustainability related risks and
challenges were regularly discussed within the Investment Manager's asset
management teams, which were also reported to and discussed with the Board
through regular meetings and specific risk register review discussions. Key
sustainability factors such as those relating to health and safety, compliance
with environmental standards and stakeholder relations were regularly
discussed and documented.
How did this financial product perform compared to the reference sustainable
benchmark?
Not applicable (N/A) as the Company does not have a carbon reduction objective
and is not managed against a reference benchmark
· How did the reference benchmark differ from a broad market index?
N/A
· How did this financial product perform with regard to the
sustainability indicators to determine the alignment of the reference
benchmark with the sustainable investment objective?
N/A
· How did this financial product perform compared with the reference
benchmark?
N/A
· How did this financial product perform compared with the broad market
index?
N/A
Statement on principal adverse impacts "PAIs" of investment decisions on
sustainability factors
Financial Product:
Greencoat UK Wind PLC (LEI: 213800ZPBBK8H51RX165) (the "Company"), managed by
Schroders Greencoat LLP (the "Investment Manager")
1. Summary
The Investment Manager considers PAIs of its investment decisions on
sustainability factors in relation to the Company. The present statement is
the consolidated statement on PAIs on sustainability factors of the Company.
This statement on principal adverse impacts on sustainability factors of the
Company covers the reference period from 1 January to 31 December 2023.
The adverse sustainability indicators applicable to investee companies
considered by the Investment Manager are summarised in the table below
(including the relevant table and number associated with the adverse
sustainability indicators listed in Annex I of the RTS 1 (#_ftn1) ).
Theme Adverse Sustainability Indicator RTS Annex I Table RTS Annex I Number
Climate and other environment-related indicators Greenhouse gas ("GHG") emissions 1 1
Carbon footprint 1 2
GHG intensity of investee companies 1 3
Exposure to companies active in the fossil fuel sector 1 4
Share of non-renewable energy consumption and production 1 5
Energy consumption intensity per high impact climate sector 1 6
Emissions to water 1 8
Hazardous waste and radioactive waste ratio 1 9
Natural species and protected areas 2 14
Social and employee, respect for human rights, anti corruption and anti Violations of UN Global Compact principles and Organisation for Economic 1 10
bribery matters Cooperation and Development (OECD) Guidelines for Multinational Enterprises
Lack of processes and compliance mechanisms to monitor compliance with UN 1 11
Global Compact principles and OECD Guidelines for Multinational Enterprises
Exposure to controversial weapons (anti-personnel mines, cluster munitions, 1 14
chemical weapons and biological weapons)
Number of days lost to injuries, accidents, fatalities or illness 3 3
Lack of a supplier code of conduct 3 4
Lack of anti corruption and anti-bribery policies 3 15
1 The Regulatory Technical Standards accompanying the EU Sustainable Finance
Disclosure Regulation.
2. Description of the PAIs on sustainability factors
Adverse sustainability indicator Metric Impact 2023 Impact 2022 Explanation Actions taken, and actions planned and targets set for the next reference
period
Greenhouse gas emissions 1. GHG emissions Scope 1 GHG emissions 13 tonnes of CO(2) 149 tonnes of CO(2) Carbon footprint indicators are measured in line with the industry standard The GHG emissions of the Company increased year on year. This was mostly
GHG Protocol based on an equity control approach, meaning emissions from the driven by Scope 3 emissions which reflects the purchase of new assets for
Group's operations are weighted according to the Group's SPV ownership which carbon emissions reflect those associated with the original
interest. Scope emissions calculations are verified by third party construction
consultants. (embodied emissions) of those assets. More detail on the drivers of emissions
can be found in the historical comparison section below.
Scope 3 emissions are the result of activities from assets not owned or
controlled by the Group, but that the Group indirectly impacts in its value In 2023, the Investment Manager worked to reduce GHG emissions associated
chain. Scope 3 emissions include all sources not within the Company's Scope 1 with
and 2 boundary and include, inter alia, emissions arising from the Scope 2 by switching import electricity consumption for 16% of the assets in
construction of each wind farm acquired in 2023, including those emissions its portfolio to fully renewable tariffs. Based on the switching of tariffs
associated with the manufacturing and transport of all equipment and for these assets, using 2022 reported Scope 2 carbon emissions for the
material, Group's
before the wind farm was commissioned as well as the expected spare part portfolio, this initiative resulted in a reduction of 227tCO(2), a 16%
provision throughout its lifetime. reduction from the total portfolio Scope 2 emissions on a like-for-like
basis.
The asset management team will continue to work with the Investment Manager
to
switch import electricity tariffs to fully renewable as contracts come up for
renewal in 2024. The team will also consider engaging with co-investors for
joint venture investments to try to switch tariffs and consider opportunities
to reduce Scope 1 emissions.
Scope 2 GHG emissions 1,485 tonnes of CO(2) (market-based) 1,422 tonnes of CO(2) (market-based)
2,162 tonnes of CO(2) (location-based) 1,731 tonnes of CO(2) (location-based)
Scope 3 GHG emissions 261,138 tonnes of CO(2) 136,161 tonnes of CO(2)
Total GHG emissions 262,637 tonnes of CO(2) 137,732 tonnes of CO(2)
2. Carbon footprint Carbon footprint 42.9 tonnes of CO(2) 24.6 tonnes of CO(2)
3. GHG intensity of investee companies GHG intensity of investee companies 1,193 tonnes of CO(2) 535 tonnes of CO(2) / £ million revenue
4. Exposure to companies active in the fossil fuel sector Share of investments in companies active in the fossil fuel sector 0% 0% The Group does not have any exposure to the fossil fuel sector and will only
invest in UK wind farms in accordance with its Investment Objective and
Investment Policy.
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production
the carbon emissions and air pollution that would have otherwise been
of investee companies from non renewable energy sources compared to 0% non renewable. 0% non renewable. generated using fossil fuels. These assets consume electricity in the
renewable
generation of renewable electricity.
energy sources, expressed as a percentage of total energy sources Consumption share: Consumption share:
41.9% non renewable. 38% non renewable.
6. Energy consumption intensity per high impact climate sector Energy consumption in MWh per million GBP of revenue of investee companies, N/A N/A P
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Water 8. Emissions to water Tonnes of emissions to water generated by investee companies per million GBP N/A N/A PAI 8 is considered not relevant for the porfolio as the investments do not
invested, expressed as a weighted average produce emissions to water.
Waste 9. Hazardous waste and radioactive waste ratio Tonnes of hazardous waste and radioactive waste generated by investee N/A N/A There was a very minor spill of oil at a wind turbine site in 2023 of 0.045
companies per million GBP invested, expressed as a weighted average tonnes which was reported to SEPA. Remediation actions were implemented
immediately by the Operations Manager on site and the incident has been
closed. Learnings were identified by the Investment Manager to prevent
similar
incidents at other sites.
On a tonnes per million invested basis this has been considered not material
enough to report.
Social and employee matters 10. Violations of UN Global Compact principles and Organisation for Economic Share of investments in investee companies that have been involved in Data not available Data not available The Company invests in UK wind farms which are held through special purpose In 2023, the Investment Manager adopted the Schroders Group's Global Norms
Cooperation and Development (OECD) Guidelines for Multinational Enterprises violations of the UNGC principles or OECD Guidelines for Multinational vehicles ("SPVs"), which are standalone legal entities that typically do not Framework to support in the identification of companies and investments
Enterprises have any employees. The SPVs outsource all operations, maintenance and deemed
management activities to third parties, through long term contracts. in breach of OECD and UNGC principles and updated the Investment Manager's
Greencoat ESG Policy to reflect this.
The Investment Manager conducts initial due diligence and provides ongoing
monitoring of SPVs to ensure their alignment with the Minimum Safeguards. The ultimate output of this framework is the Global Norms list which
Where possible, the Investment Manager imposed obligations on the key service comprises
providers involved in the operations and management of the SPVs to ensure a list of companies that have: been identified as causing significant damage;
their ongoing compliance. In most instances, this was achieved by the not sufficiently addressed the issue in question through transparent
Investment Manager's 'Code of Conduct Side Letter' (or an equivalent communication and action; and not provided sufficient remedy for affected
standard) stakeholders. This list is then applied as an exclusion criteria for Article
which requires key service providers to comply with all applicable laws, 9
rules, regulations and overarching principles in the countries where they funds to ensure that investments in scope adhere to the 'Do No Significant
operate (which includes the Minimum Safeguards). This covers anti bribery and Harm' element of SFDR.
corruption, financial crime, data protection and employment and health and
safety laws (including those relating to human rights, human trafficking, In addition to the Global Norms process noted above, the Investment Manager
modern slavery, and public safety). is
working to develop a standard methodology to assess the alignment of the key
service providers with the OECD Guidelines for Multinational Enterprises and
the UN Guiding Principles on Business and Human Rights. This commenced in
2023
and the Investment Manager expects the methodology to be completed and
implemented in 2024.
11. Lack of processes and compliance mechanisms to monitor compliance with UN Share of investments in investee companies without policies to monitor Data not available Data not available The Investment Manager is currently enhancing its processes to monitor
Global Compact principles and OECD Guidelines for Multinational Enterprises compliance with the UNGC principles or OECD Guidelines for Multinational service
Enterprises or grievance /complaints handling mechanisms to address provider's adherence to compliance with UNGC principles and OECD Guidelines
violations through updates to the Code of Conduct. The Investment Manager commenced this
of the UNGC principles or OECD Guidelines for Multinational Enterprises project in 2023, including external legal guidance, and will finalise the
updated Code of Conduct in 2024 before working to roll out the updated
version
to all service providers.
14. Exposure to controversial weapons (anti-personnel mines, cluster Share of investments in investee companies involved in the manufacture or 0% 0% Exposure to controversial weapons is not within the Company's Investment T
munitions, chemical weapons and biological weapons) selling of controversial weapons Objective and no permissible within its Investment Policy. h
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Water, waste and material emissions 14. Natural species and protected areas Share of investments in investee companies whose operations affect threatened N/A N/A All habitat management plans are agreed for relevant sites to ensure that the Wind farms have the potential to have a negative environmental impact through
species
environment in and surrounding each wind farm is carefully protected. the manufacturing and supply chain process or locally through the ongoing
management of the projects. The Company's ESG policy helps to mitigate
against
these risks. The policies in place outline the environmental standards the
Company aims to meet.
The Investment Manager continues to carry out due diligence on new
investments
relating to environmental and biodiversity-related risks and is committed to
implementing any regulatory obligations regarding habitat and environmental
management.
There was and continues to be a strong commitment to continuous improvement
of
environmental management.
Share of investments in investee companies without a biodiversity protection Percentage of SPV investments without habitat management plans, or any Percentage of SPV investments without habitat management plans, or any
policy covering operational sites owned, leased, managed in a protected area environmental planning requirements, in place: 0% environmental planning requirements, in place: 0%
or an area of high biodiversity value outside protected areas
Social and employee matters 3. Number of days lost to injuries, accidents, fatalities or illness Number of workdays lost to injuries, accidents, or illness in investee Number of workdays lost: 30 Number of workdays lost: 41 A set of KPIs to improve health and safety management and performance is The Investment Manager has stringent health and safety policies and processes
companies
monitored continuously. These are reported at least on a monthly basis in place, which include safety statements, a Schroders Capital Health and
directly to the Investment Manager, the Directors of the SPVs, and the Board. Safety Forum, incidents/developing trends reports, site visits, onboarding
and
This figure is restated. training, and audits by both operating managers and accredited professionals.
There is a nominated health and safety director for each fully owned wind
farm
SPV. The Investment Manager's asset management teams are responsible for the
day to day implementation and monitoring of health and safety audits and
initiatives. The Board also reviews health and safety matters at each of its
scheduled meetings.
The Investment Manager continued to apply the policies and processes
referenced above in 2023 and will continue to apply these in 2024, using
learnings from audits and trend reports to continue to enhance its approach.
In 2023, the Company began vertical audits to its contractors (the Investment
Manager's asset management team and O&M partners) with Quadriga to ensure
that all elements of their health and safety management systems remain fit
for
purpose. The Investment Manager audited 16 service providers in total.
Similarly, HV management systems of 5 of our HV operators were audited by a
specialist HV auditor.
4. Lack of a supplier code of conduct Share of investments in investee companies without any supplier code of Data not available Data not available Upon acquisition, all wholly owned SPV's adopt the policies of the Company The Investment Manager is currently enhancing its processes to monitor
conduct (against unsafe working conditions, precarious work, child labour and
including the ESG Policy which states expectations regarding service service
forced labour) providers provider's adherence to compliance with UNGC principles and OECD Guidelines
in relation to legal and regulatory obligations related to ESG matters. through updates to the Code of Conduct. The Investment Manager commenced this
project in 2023, including external legal counsel guidance, and will finalise
Where possible, the Investment Manager imposes obligations on the key service the updated Code of Conduct in 2024.
providers involved in the operations and management of the portfolio to
ensure
their ongoing compliance. In most instances, this was achieved by the
Investment Manager's 'Code of Conduct Side Letter' (or an equivalent The Manager will work to roll out the updated version to all service
standard) providers.
which requires key service providers to comply with all applicable laws,
rules, regulations and overarching principles in the countries where they
operate (which includes the Minimum Safeguards). This covers anti bribery and
corruption, financial crime, data protection and employment and health and
safety laws (including those relating to human rights, human trafficking,
modern slavery, and public safety).
Anti corruption and anti bribery 15. Lack of anti corruption and anti bribery policies Share of investments in entities without policies on anti corruption and anti 0% 0% Upon acquisition, all wholly owned SPV's adopt the policies of the Company
bribery consistent with the United Nations Convention against Corruption
including anti-corruption and anti-bribery. These policies are regularly
reviewed by legal experts, and are updated for new legislation and new
geographies.
3. Description of policies to identify and prioritise principal adverse
impacts on sustainability factors
The Investment Manager seeks to mitigate the impact of PAIs and other
indicators considered in relation to the Company initially by implementing the
Company's ESG Policy (a copy of which can be found on the Company's website).
The Company ESG Policy, which has been developed in line with the Investment
Manager's ESG Policy, sets guidance and principles for integrating
sustainability across the Company's business and looks to establish best
practice in climate related risk management, reporting and transparency. It
outlines areas of focus for wind farms including environment, workplace
standards, health and safety practices, governance (including compliance with
applicable laws and regulations) and local community engagement. It also
includes a list of KPIs that are monitored and reported on as appropriate.
Sustainability factors are considered prior to investment as part of early
stage screening, detailed due diligence and the Investment Manager's
Investment Committee's decision making, and managed, post acquisition, in
accordance with the Investment Manager's wider asset management practices.
The Company's ESG Policy is reviewed at least annually by the Investment
Manager's ESG Committee and approved by the Board. It was last approved in
November 2023.
In implementing its approach to integrating sustainability and the
consideration of PAIs on sustainability factors, the Investment Manager does
not rely on a dedicated team, but rather responsibilities are shared on a
holistic basis:
· the investment and asset management team (as the first line of
defence) who embed sustainability practices (including the consideration of
PAIs on sustainability factors) into their investment decision making and
ongoing management of the assets;
· a dedicated ESG Committee focused on developing the ESG Policy
with support from the sustainability team;
· the Investment Committees; and
· a Valuation Committee independent of portfolio management and the
Investment Manager's Risk Management Committee (as overseen by the AIFM).
Sustainability related risks and challenges are regularly discussed within the
Investment Manager's asset management team and are also reported to and
discussed with the Board at quarterly meetings. A specific risk matrix is also
reviewed and approved on an annual basis by the Board. Key sustainability
factors such as those relating to health and safety, compliance with
environmental standards and stakeholder relations are regularly discussed and
documented.
The boards of each SPV are responsible for ensuring sustainability factors are
considered in the context of the operational performance, business objectives
and broader stakeholder relationships. During the holding period,
representatives of the Investment Manager will take one or more seats on the
board of each SPV and will oversee all major strategic and operational
decisions. Given this structure, outside health and safety risks and
organisational (including governance) risks within the SPVs are limited. None
of the SPVs have employees or management teams and therefore any employee
related social factors are focused on the third party service providers.
The Investment Manager's ESG Committee is responsible for (i) determining the
ESG Policy and reviewing it regularly to ensure it remains relevant to
evolving conditions, (ii) developing and evolving sustainability integration
practices for material sustainability factors within the different businesses
and assets, (iii) leveraging existing resources and research capabilities on
sustainability related topics for the benefit of the investment management
team, and (iv) promoting education and awareness of sustainability trends and
developments and sharing best practice.
The Investment Manager uses information provided directly from wind farm SPVs
in relation to the PAIs. In order to ensure data quality, the Investment
Manager works with specialist external advisers, such as environmental
consultants. These advisers review the Investment Manager's methodologies for
identifying and prioritising PAIs and advise on industry best practices.
The data collected as described above is processed as follows:
· KPI data is sourced directly from SPVs and supplemented by
specialist external advisers such as environmental consultants, as required;
· operations and maintenance service providers used by the SPVs
report to the Investment Manager, on a monthly basis, on a standard set of
KPIs and qualitative factors, such as health and safety, compliance with
relevant laws and regulations, local community engagement and habitat
management, where relevant; and
· carbon footprint indicators are measured in line with the
industry standard GHG Protocol based on an equity control approach, meaning
emissions from the Company's operations are weighted according to the Company
or its SPV's ownership interest. Scope emissions calculations will be verified
by third party consultants.
In some instances, the Company may need to use estimates or proxy data. Where
estimated data is used it will typically represent the minority of data used
and will be based upon reasonable assumptions and appropriate comparators. The
Board and the Investment Manager will act reasonably in using estimated or
proxy data. As the use of such data will vary on a case by case basis, it is
not possible to provide a proportion of estimated data.
Engagement policies
The Company is committed to engaging with all stakeholders relevant to its
portfolio to ensure its renewable investments positively impact the
communities in which they operate. The Board and Investment Manager recognise
that engagement is critical to long term sustainable investment and seek to
build strong, long term relationships with high quality, experienced
counterparties to give consistency of service and standards.
References to international standards
The Company proactively engages with the following responsible business codes
and/or internationally recognised standards to promote sustainable investment
practices, as discussed in the Company's ESG report available on its website:
1. Task Force on Climate Related Financial Disclosures ("TCFD")
Relevant for Table 1, PAI 1-5 (Greenhouse gas emissions)
The Company aligns with the TCFD recommendations and makes disclosures in the
Strategic Report. These disclosures report on climate change related impacts,
opportunities and risks to the Company. Given the Company's long term
investment perspective, the Board and the Investment Manager constantly assess
the risks its portfolio might be exposed to and factors them into decision
making and risk monitoring.
Historical comparison
Please refer to Table 1 for historical data comparison.
Specifically in relation to health and safety, in 2023 there were 30 workdays
lost to injuries (based on 2 reportable lost time incidents) in 2023. This
decreased from 2022, with 41 workdays lost to injuries (based on 6 reportable
lost time incidents). The Investment Manager continues its focus on managing
health and safety risks including regular training for asset managers and
Operations & Maintenance teams to promote a culture of reporting to
improve awareness and openness on the management of health and safety at
sites. The Manager will continue to monitor health and safety performance of
all sites closely, in line with its ESG Policy commitments.
In 2023, the Company began vertical audits to its contractors (Asset managers
and O&M) with quadriga at a corporate level, to ensure that all elements
of their health and safety management systems remain fit for purpose. The
Investment Manager audited 16 service providers in total. Similarly, the HV
management systems of 5 HV operators were audited by a specialist HV auditor.
The Company had a 91 per cent increase in total scope 1-3 emissions in 2023,
compared with the previous reporting year. The largest increase was due to a
108 per cent increase in scope 3 embodied carbon emissions, the indirect
emissions associated with the construction phase of infrastructure
investments. Scope 3 embodied carbon emissions must be accounted for in the
year an asset is acquired, and are not amortised for the year the asset is
bought, under GHG Protocol guidance. The Company has concerns that this leads
to double counting across the wind industry supply chain.
Scope 1 emissions decreased by 92 per cent as a result of a reduction in SF6
leakages. Scope 2 emissions increased by 29 per cent due to an increase in
electricity imported as a result of growth in the portfolio's operating
capacity. In 2023, the Company worked to switch electricity consumption for 16
per cent of the assets in its portfolio to fully renewable tariffs. The asset
management team will continue to work to switch electricity tariffs to fully
renewable as contracts come up for renewal, including for new assets
purchased. The team will also consider engaging with co-investors for JV
assets to try to switch tariffs.
ANNEX
Defined terms used in this statement
For the purposes of this statement, the following definitions shall apply:
(1) Scope 1, 2 and 3 GHG emissions means the scope of
greenhouse gas emissions referred to in points (1)(e)(i) to (iii) of Annex III
to Regulation (EU) 2016/1011 of the European Parliament and of the Council 2
(#_ftn2) ;
(2) Greenhouse gas ("GHG") emissions means greenhouse gas
emissions as defined in Article 3, point (1), of Regulation (EU) 2018/842 of
the European Parliament and of the Council 3 (#_ftn3) ;
(3) Weighted average means a ratio of the weight of the
investment by the financial market participant in a investee company in
relation to the GAV of the investee company;
(4) Companies active in the fossil fuel sector means
companies that derive any revenues from exploration, mining, extraction,
production, processing, storage, refining or distribution, including
transportation, storage and trade, of fossil fuels as defined in Article 2,
point (62), of Regulation (EU) 2018/1999 of the European Parliament and of
the Council 4 (#_ftn4) ;
(5) Renewable energy sources means renewable non fossil
sources, namely wind, solar (solar thermal and solar photovoltaic) and
geothermal energy, ambient energy, tide, wave and other ocean energy,
hydropower, biomass, landfill gas, sewage treatment plant gas, and biogas;
(6) Non renewable energy sources means energy sources
other than those referred to in point (5);
(7) Energy consumption intensity means the ratio of energy
consumption per unit of activity, output or any other metric of the investee
company to the total energy consumption of that investee company;
(8) Protected area means designated areas in the European
Environment Agency's Common Database on Designated Areas (CDDA);
(0) High impact climate sectors means the sectors listed
in Sections A to H and Section L of Annex I to Regulation (EC) No 1893/2006 of
the European Parliament and of the Council 5 (#_ftn5) ;
(10) Area of high biodiversity value outside protected areas
means land with high biodiversity value as referred to in Article 7b(3) of
Directive 98/70/EC of the European Parliament and of the Council 6 (#_ftn6) ;
(11) Emissions to water means direct emissions of priority
substances as defined in Article 2(30) of Directive 2000/60/EC of the European
Parliament and of the Council 7 (#_ftn7) and direct emissions of nitrates,
phosphates and pesticides ;
(12) Hazardous waste means hazardous waste as defined in
Article 3(2) of Directive 2008/98/EC of the European Parliament and of the
Council 8 (#_ftn8) ;
(13) Radioactive waste means radioactive waste as defined in
Article 3(7) of Council Directive 2011/70/Euratom 9 (#_ftn9) ;
(14) Threatened species means endangered species, including
flora and fauna, listed in the European Red List or the IUCN Red List, as
referred to in Section 7 of Annex II to Delegated Regulation (EU) 2021/2139;
(15) UN Global Compact principles means the ten Principles of
the United Nations Global Compact; and
(16) Board means the Directors of the Company.
For the purposes of this Annex, the following formulas shall apply:
(1) 'GHG emissions' shall be calculated in accordance with
the following formula:
(2) 'carbon footprint' shall be calculated in accordance
with the following formula:
(3) 'GHG intensity of investee companies' shall be
calculated in accordance with the following formula:
(4) 'GHG intensity of sovereigns' shall be calculated in
accordance with the following formula:
(5) 'inefficient real estate assets' shall be calculated
in accordance with the following formula:
7 Directive 2000/60/EC of the European Parliament and
of the Council of 23 October 2000 establishing a framework for Community
action in the field of water policy (OJ L 327, 22.12.2000, p. 1).
8 Directive 2008/98/EC of the European Parliament and
of the Council of 19 November 2008 on waste and repealing certain Directives
(OJ L 312, 22.11.2008, p. 3).
9 Council Directive 2011/70/Euratom of 19 July 2011
establishing a Community framework for the responsible and safe management of
spent fuel and radioactive waste (OJ L 199, 2.8.2011, p. 48).
For the purposes of the formulas, the following definitions shall apply:
(1) Current value of investment means the value in EUR of
the investment by the financial market participant in the investee company;
(2) Current value of all investments means the value in
EUR of all investments by the financial market participant;
(3) Nearly zero energy building (NZEB), primary energy
demand (PED) and energy performance certificate (EPC) shall have the meanings
given to them in paragraphs 2, 5 and 12 of Article 2 of Directive 2010/31/EU
of the European Parliament and of the Council 10 (#_ftn10) .
Defined Terms
ABN AMRO means ABN AMO Bank N.V.
Aggregate Group Debt means the Group's proportionate share of outstanding
third party borrowings, including its share of limited recourse debt in
Hornsea 1
AGM means Annual General Meeting of the Company
AIC means the Association of Investment Companies
AIC Code means the AIC's Code of Corporate Governance
AIF means an Alternative Investment Fund as defined under the AIFMD
AIFM means an Alternative Investment Fund Manager as defined under the AIFMD
AIFMD means the Alternative Investment Fund Managers Directive
Alternative Performance Measure means a financial measure other than those
defined or specified in the applicable financial reporting framework
Andershaw means Andershaw Wind Power Limited
ANZ means Australia and New Zealand Banking Group Limited
AXA means funds managed by AXA Investment Managers UK Limited
Barclays means Barclays Bank PLC
BDO LLP means the Company's Auditor as at the reporting date
Bicker Fen means Bicker Fen Windfarm Limited
Bin Mountain means Bin Mountain Wind Farm (NI) Limited
Bishopthorpe means Bishopthorpe Wind Farm Limited
Board means the Directors of the Company
Braes of Doune means Braes of Doune Wind Farm (Scotland) Limited
Breeze Bidco means Breeze Bidco (TNC) Limited
Brockaghboy means Brockaghboy Windfarm Limited
Burbo Bank Extension means Hoylake Wind Limited, Greencoat Burbo Extension
Holding (UK) Limited, Burbo Extension Holding Limited and Burbo Extension
Limited
Carbon Footprint means the calculation per TCFD guidance (ni)(outstanding
amount invested(i) total investee debt+equity(i) *investee scope 1 and 2 GHG
emissions(i) Company market value
Carcant means Carcant Wind Farm (Scotland) Limited
Cash Fee means the cash fee that the Investment Manager is entitled to under
the Investment Management Agreement
CBA means Commonwealth Bank of Australia
CCGT means combined cycle gas turbine
CFD means Contract For Difference
Church Hill means Church Hill Wind Farm Limited
CIBC means Canadian Imperial Bank of Commerce
Clyde means Clyde Wind Farm (Scotland) Limited
CO(2) means carbon dioxide
Company means Greencoat UK Wind PLC
Corriegarth means Corriegarth Wind Energy Limited
Cotton Farm means Cotton Farm Wind Farm Limited
CPI means the Consumer Price Index
Crighshane means Crighshane Wind Farm Limited
Dalquhandy means Dalquhandy Wind Farm Limited
DCF means Discounted Cash Flow
Deeping St. Nicholas means Deeping St. Nicholas wind farm
Depreciation means the unwinding of the discount rate assumptions
Douglas West means Douglas West Wind Farm Limited
Drone Hill means Drone Hill Wind Farm Limited
DTR means the Disclosure Guidance and Transparency Rules sourcebook issued by
the Financial Conduct Authority
Dunmaglass means Dunmaglass Holdco and Dunmaglass Wind Farm
Dunmaglass Holdco means Greencoat Dunmaglass Holdco Limited
Dunmaglass Wind Farm means Dunmaglass Wind Farm Limited
Earl's Hall Farm means Earl's Hall Farm Wind Farm Limited
Equity Element means the ordinary shares issued to the Investment Manager
under the Investment Management Agreement
ESG means Environmental, Social and Governance
EU means European Union
EU SFDR means EU Sustainable Financial Disclosure Regulation
FCA means Financial Conduct Authority
Fenlands means Fenland Windfarms Limited
FRC means the Financial Reporting Council
GAV means Gross Asset Value
GB means Great Britain consisting of England, Scotland and Wales
Glass Moor means Glass Moor wind farm
Glen Kyllachy means Glen Kyllachy Wind Farm Limited
Group means Greencoat UK Wind PLC and Greencoat UK Wind Holdco Limited
Holdco means Greencoat UK Wind Holdco Limited
Hornsea 1 means Hornsea 1 Holdco and Hornsea 1 Limited
Hornsea 1 Holdco means Jupiter Investor TopCo Limited
Hoylake means Hoylake Wind Limited
Humber Gateway means Humber Holdco and Humber Wind Farm
Humber Holdco means Greencoat Humber Limited
Humber Wind Farm means RWE Renewables UK Humber Wind Limited
HV means high voltage
IAS means International Accounting Standards
IFRS means International Financial Reporting Standards
Investment Management Agreement means the agreement between the Company and
the Investment Manager
Investment Manager means Schroders Greencoat LLP
IPEV Valuation Guidelines means the International Private Equity and Venture
Capital Valuation Guidelines
IPO mean Initial Public Offering
IRR means Internal Rate of Return
Kildrummy means Kildrummy Wind Farm Limited
KPI means Key Performance Indicator
Kype Muir Extension means Kype Muir Extension Wind Farm Limited
Langhope Rig means Langhope Rig Wind Farm Limited
Levered portfolio IRR means the Internal Rate of Return with an assumed level
of gearing
Lindhurst means Lindhurst Wind Farm
Listing Rules means the listing rules made by the UK Listing Authority under
Section 73A of the Financial Services and Markets Act 2000
Little Cheyne Court means Little Cheyne Court Wind Farm Limited
Lloyds means Lloyds Bank PLC and Lloyds Bank Corporate Markets PLC
London Array means London Array Holdco and London Array Limited
London Array Holdco means Greencoat London Array Holdco Limited
Maerdy means Maerdy Wind Farm Limited
Middlemoor means Middlemoor Wind Farm
ML Wind means ML Wind LLP
NAB means National Australia Bank
Nanclach means Nanclach Limited
NAV means Net Asset Value
NAV per Share means the Net Asset Value per Ordinary Share
Net Zero means the UK Government's strategy to decarbonise all sectors of the
UK economy
North Hoyle means North Hoyle Wind Farm Limited
North Rhins means North Rhins Wind Farm Limited
O&M means operations and maintenance
PPA means Power Purchase Agreement entered into by the Group's wind farms
RBC means the Royal Bank of Canada
RBS International means the Royal Bank of Scotland International Limited
RCF means revolving credit facility
Red House means Red House wind farm
Red Tile means Red Tile wind farm
REGO means Renewable Energy Guarantee of Origin
REMA means Government's Review of Electricity Market Arrangements
Review Section means the front end review section of this report (including
but not limited to the Chairman's Statement, and Investment Manager's Report)
Rhyl Flats means Rhyl Flats Wind Farm Limited
ROC means Renewable Obligation Certificate
RPI means the Retail Price Index
Santander means Santander Global Banking and Markets
Screggagh means Screggagh Wind Farm Limited
SDG means Sustainable Development Goal
Slieve Divena means Slieve Divena Wind Farm Limited
Slieve Divena 2 means Slieve Divena Wind Farm No. 2 Limited
SONIA means the Sterling Overnight Index Average
South Kyle means South Kyle Wind Farm Limited
SPVs means the Special Purpose Vehicles which hold the Group's investment
portfolio of underlying wind farms
Stronelairg means Stronelairg Holdco and Stronelairg Wind Farm
Stronelairg Holdco means Greencoat Stronelairg Holdco Limited
Stronelairg Wind Farm means Stronelairg Wind Farm Limited
Stroupster means Stroupster Caithness Wind Farm Limited
SYND Holdco means SYND Holdco Limited
Tappaghan means Tappaghan Wind Farm (NI) Limited
TCFD means Task Force on Climate-Related Financial Disclosures
Tom nan Clach means Breeze Bidco and Nanclach
TSR means Total Shareholder Return
Twentyshilling means Twentyshilling Limited
UK means the United Kingdom of Great Britain and Northern Ireland
UK Code means the UK Corporate Governance Code issued by the FRC
UREGNI means the Utility Regulator in Northern Ireland
WACI (revenue) means Weighted Average Carbon Intensity calculated per TCFD
guidance
(n)(i)outstanding amount invested(i)total investee debt+equity(i) *investee scope 1 and 2 GHG
emissions(i)investee revenue(i)
( )
WACI (activity) means the metric applies to the same approach as revenue based
WACI, however replaces an asset's revenue with MWh energy generation and
covers only Scope 1 and 2 emissions.
Walney means Walney Holdco and Walney Wind Farm
Walney Holdco means Greencoat Walney Holdco Limited
Walney Wind Farm means Walney (UK) Offshore Windfarms Limited
Windy Rig means Windy Rig Wind Farm Limited
Yelvertoft means Yelvertoft Wind Farm Limited
Alternative Performance Measures
Performance Measure Definition 2023 2022
Aggregate Group Debt The Group's proportionate share of outstanding third party borrowings of £2,375 million £1,780 million
£1,790 million per note 13 to the financial statements plus limited recourse
debt of £585 million at Hornsea 1, not included in the Consolidated Statement
of Financial Position
CO(2) emissions avoided per annum The estimate of the portfolio's annual CO(2) emissions avoided through the 2.5 million tonnes 2.0 million tonnes
displacement of thermal generation, based on the portfolio's estimated
generation as at the relevant reporting date
GAV Gross Asset Value £6,169.0 million £5,652.7 million
Homes powered per annum The estimate of the number of homes powered by electricity generated by the 2.3 million homes 1.8 million homes
portfolio, based on the portfolio's estimated generation as at the relevant
reporting date
NAV Net Asset Value £3,794.0 million £3,873.2 million
NAV per share The Net Asset Value per ordinary share per note 16 to the financial statements 164.1 pence 167.1 pence
Net cash generation The operating cash flow of the Group and wind farm SPVs as broken down below £405.5 million £560.1 million
Total Shareholder Return The theoretical return to a shareholder on a closing market basis, assuming 5.4 per cent 13.5 per cent
that all dividends received were reinvested without transaction costs into the
Ordinary Shares of the Company at the close of business on the day the shares
were quoted ex dividend
Group and wind farm SPV cash flows For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Net cash generation 405,510 560,077
Dividends paid (197,043) (175,800)
Acquisitions (820,925) (484,153)
Acquisition costs (2,742) (4,667)
Share buybacks / equity issuance (9,439) -
Share buyback / equity issuance costs (56) (42)
Net amounts drawn under debt facilities 690,000 150,000
Upfront finance costs (4,939) (1,663)
Movement in cash (Group and wind farm SPVs) 60,366 43,752
Opening cash balance (Group and wind farm SPVs) 160,851 117,099
Closing cash balance (Group and wind farm SPVs) 221,217 160,851
Net cash generation 405,510 560,077
Dividends 197,043 175,800
Dividend cover 2.1x 3.2x
Net Cash Generation - Breakdown For the year ended For the year ended
31 December 2023
31 December 2022
£'000 £'000
Revenue 785,608 981,752
Operating expenses (198,611) (234,439)
Tax (62,661) (122,910)
SPV level debt interest (20,044) (9,948)
SPV level debt amortisation (47,129) (19,947)
Other 28,133 21,838
Wind farm cash flow 485,296 616,446
Management fee (24,993) (29,556)
Operating expenses (2,564) (2,141)
Ongoing finance costs (62,834) (28,026)
Other 5,013 2,507
Group cash flow (85,378) (57,216)
VAT (Group and wind farm SPVs) 5,592 847
Net cash generation 405,510 560,077
Net Cash Generation - Reconciliation to Net Cash Flows from Operating For the year ended For the year ended
Activities
31 December 2023
31 December 2022
£'000 £'000
Net cash flows from operating activities 359,801 545,851
Movement in cash balances of wind farm SPVs 18,225 28,770
Repayment of shareholder loan investment 50,199 13,482
Finance costs (67,773) (29,689)
Upfront finance costs 4,939 1,663
Placing of security cash deposits 40,119 -
Net cash generation 405,510 560,077
Cautionary Statement
The Review Section of this report has been prepared solely to provide
additional information to shareholders to assess the Company's strategies and
the potential for those strategies to succeed. These should not be relied on
by any other party or for any other purpose.
The Review Section may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "may", "will" or
"should" or, in each case, their negative or other variations or comparable
terminology.
These forward-looking statements include all matters that are not historical
facts. They appear in a number of places throughout this document and include
statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager concerning, amongst other things, the
investment objectives and Investment Policy, financing strategies, investment
performance, results of operations, financial condition, liquidity, prospects,
and distribution policy of the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not guarantees of future
performance. The Company's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and the
development of its financing strategies may differ materially from the
impression created by the forward-looking statements contained in this
document.
Subject to their legal and regulatory obligations, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
In addition, the Review Section may include target figures for future
financial periods. Any such figures are targets only and are not forecasts.
This Annual Report has been prepared for the Company as a whole and therefore
gives greater emphasis to those matters which are significant in respect of
Greencoat UK Wind PLC and its subsidiary undertakings when viewed as a whole.
1 (#_ftnref1) The Regulatory Technical Standards accompanying the EU
Sustainable Finance Disclosure Regulation.
2 (#_ftnref2) Regulation (EU) 2016/1011 of the
European Parliament and of the Council of 8 June 2016 on indices used as
benchmarks in financial instruments and financial contracts or to measure the
performance of investment funds and amending Directives 2008/48/EC and
2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1).
3 (#_ftnref3) Regulation (EU) 2018/842 of the
European Parliament and of the Council of 30 May 2018 on binding annual
greenhouse gas emission reductions by Member States from 2021 to 2030
contributing to climate action to meet commitments under the Paris Agreement
and amending Regulation (EU) No 525/2013 (OJ L 156, 19.6.2018, p. 26).
4 (#_ftnref4) Regulation (EU) 2018/1999 of the
European Parliament and of the Council of 11 December 2018 on the Governance
of the Energy Union and Climate Action, amending Regulations (EC) No 663/2009
and (EC) No 715/2009 of the European Parliament and of the Council, Directives
94/22/EC, 98/70/EC, 2009/31/EC, 2009/73/EC, 2010/31/EU, 2012/27/EU and
2013/30/EU of the European Parliament and of the Council, Council Directives
2009/119/EC and (EU) 2015/652 and repealing Regulation (EU) No 525/2013 of the
European Parliament and of the Council (OJ L 328, 21.12.2018, p. 1).
5 (#_ftnref5) Regulation (EC) No 1893/2006 of
the European Parliament and of the Council of 20 December 2006 establishing
the statistical classification of economic activities NACE Revision 2 and
amending Council Regulation (EEC) No 3037/90 as well as certain EC
Regulations on specific statistical domains Text with EEA relevance (OJ L 393,
30.12.2006, p. 1-39).
6 (#_ftnref6) Directive 98/70/EC of the
European Parliament and of the Council of 13 October 1998 relating to the
quality of petrol and diesel fuels and amending Council Directive 93/12/EEC
(OJ L 350, 28.12.1998, p. 58).
7 (#_ftnref7) Directive 2000/60/EC of the
European Parliament and of the Council of 23 October 2000 establishing a
framework for Community action in the field of water policy (OJ L 327,
22.12.2000, p. 1).
8 (#_ftnref8) Directive 2008/98/EC of the
European Parliament and of the Council of 19 November 2008 on waste and
repealing certain Directives (OJ L 312, 22.11.2008, p. 3).
9 (#_ftnref9) Council Directive 2011/70/Euratom
of 19 July 2011 establishing a Community framework for the responsible and
safe management of spent fuel and radioactive waste (OJ L 199, 2.8.2011, p.
48).
10 (#_ftnref10) Directive 2010/31/EU of the
European Parliament and of the Council of 19 May 2010 on the energy
performance of buildings (recast) (OJ L 153, 18.6.2010, p. 13)
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