REG - HydrogenOne Cap Gwth - Half-year Report
20/09/2022 07:00
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RNS Number : 8204Z HydrogenOne Capital Growth PLC 20 September 2022
20 September 2022
HydrogenOne Capital Growth plc
Half-year results for the six months ended 30 June 2022
HydrogenOne Capital Growth plc ("HydrogenOne" or the "Company"), the first
London-listed fund investing in clean hydrogen for a positive environmental
impact, is pleased to announce its unaudited half-year results for the six
months ended 30 June 2022, with the following highlights:
● The fundamentals of the clean hydrogen sector continued to strengthen, despite
recent weak macro-economic conditions;
● During the period, the Company has successfully completed investments in five
Private Hydrogen Assets deploying £46.1 million;
● An oversubscribed placing completed in April 2022 raised £21 million in net
proceeds;
● At 30 June 2022, approximately 75% of the equity net proceeds raised since IPO
had been deployed, taking the total invested capital since IPO to £94.8
million;
● The Company's NAV as at 30 June 2022 was £124.8 million or 96.8 pence per
Ordinary Share;
● The NAV per Ordinary Share of the Company increased by 1.1% during the period;
● The NAV of the Company's private investments increased by 3% during the
period, reflecting higher valuations in multiple positions;
● A further investment has been completed post-period end in Strohm Holding B.V.
for total consideration of £8.4 million;
● The Company will commence the external reporting of its performance in
accordance with the Sustainable Finance Disclosure Regulation ("SFDR") and the
International Sustainability Standards Board ("ISSB") frameworks in the next
annual report;
● Ongoing development of a significant pipeline of private clean hydrogen
investments by HydrogenOne Capital LLP (the "Investment Adviser") in excess of
£500 million, including a near-term pipeline over £100 million; and
● Intention to establish a share issuance programme to enable the Company to
raise capital in an efficient manner.
At 30 June 2022 At 31 December 2021 % change(1,2,3)
NAV per Ordinary Share 96.8p 95.7p 1.1%
NAV(3) £124.8m £102.8m 21%
Market capitalisation(3) £120.1m £128.3m (6%)
Share price premium/(discount) to NAV(1) (3.8%) 24.8% (28.6%)
(1)These are alternative performance measures
(2)Total returns in sterling for the six months to 30 June 2022
(3)Includes April 2022 fundraise proceeds of £20.9 million net of costs
( )
The half-year results are available on the Company's website:
https://hydrogenonecapitalgrowthplc.com/investors/corporate-documents/
(https://hydrogenonecapitalgrowthplc.com/investors/corporate-documents/)
Simon Hogan, Chairman of HydrogenOne, commented:
"We are pleased with our performance during the period, as we continued to
deliver solid results and growth in value of our private portfolio, through
implementing our distinctive strategy of investing in clean hydrogen
opportunities.
We continue to see strong support for the energy transition from governments
around the world and view the policy focus in this area as a catalyst for
further growth. With this support and investment, there has been an increase
in the size and scale of hydrogen projects and further exciting opportunities
that HydrogenOne can capture.
We will continue to pursue opportunities to grow the Company and make further
selective investments, aimed at a climate-positive environmental impact, in
line with our ESG commitments."
Presentation from the Investment Adviser
Dr JJ Traynor and Richard Hulf, principals of the Investment Adviser, will be
presenting on the half-year results via a webcast on Thursday, 22 September
2022 at 15:00 British Summer Time (BST). The presentation is open to all
existing and potential shareholders, and we encourage all investors to attend
by registering via this link:
https://www.investormeetcompany.com/hydrogenone-capital-growth-plc/register-investor
(https://www.investormeetcompany.com/hydrogenone-capital-growth-plc/register-investor)
A copy of the half-year results presentation will be available on the
Company's website from 22 September.
The Company's LEI is 213800PMTT98U879SF45.
For further information, please visit www.hydrogenonecapitalgrowthplc.com
(http://www.hydrogenonecapitalgrowthplc.com) or contact:
HydrogenOne Capital LLP - Investment Adviser +44 20 3830 8231
JJ Traynor/Richard Hulf
Eva Bezruchko
Panmure Gordon - Corporate Broker and Financial Adviser
Tom Scrivens +44 20 7886 2500
Alex Collins
FTI Consulting - Media Enquiries +44 20 3727 1725
Matthew O'Keeffe +44 78 1492 1439
Cally Billimore hygen@fticonsulting.com
About HydrogenOne:
HydrogenOne is the first London-listed hydrogen fund investing in clean
hydrogen for a positive environmental impact. The Company was launched in 2021
with an investment objective to deliver an attractive level of capital growth
by investing in a diversified portfolio of hydrogen and complementary hydrogen
focussed assets. INEOS Energy is a strategic investor in HydrogenOne. The
Company is listed on the London Stock Exchange's main market (ticker code:
HGEN).
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to report on the six-month period ended
30 June 2022.
During the period, we have continued to deliver solid results and growth in
value of our private portfolio, through implementing our distinctive strategy
of investing in clean hydrogen opportunities not readily accessible elsewhere.
Our careful and thorough approach to investing for a climate-positive
environmental impact, has resulted in us completing a further five private
investments, all of which are supporting a reliable, faster and cheaper green
energy transition. ESG is fully embedded in our investment decisions and we
are dedicated to further developing and progressing our ESG framework to
achieve the highest reporting levels.
The fundamentals of the hydrogen sector continued to strengthen, despite weak
macro-economic conditions, enabling us to identify unique accretive
opportunities to invest in, across the entire value chain of the sector.
We continue to see strong support for the energy transition from governments
around the world and view the policy focus in this area as a catalyst for
further growth. With this support and investment, there has been an increase
in the size and scale of hydrogen projects and further exciting opportunities
that HydrogenOne can capture.
Overall, despite the uncertainty of the current economic environment, we
remain confident that the Company is investing in a sector with a favourable
outlook and believe in its growth potential as illustrated by the strength of
our current pipeline of private clean hydrogen investments.
Performance
During the period, we continued to deploy capital into the clean hydrogen
sector with five new private investments completed, bringing the total
portfolio to eight private and 19 listed investments. Including a further
private investment completed post period end, we have deployed a total of
£103 million, or 82% of the net proceeds raised of £126m, into low-carbon
growth companies.
The total NAV on 30 June 2022 was £124.8 million, including a £95.0 million
portfolio valuation, £29.9 million of cash held by the Company and other net
liabilities of £0.1 million.
Since the Company's IPO, the shares have predominantly traded at a premium to
NAV, first trading at a discount in May 2022.
Earnings and dividend
The Company made a revenue loss after tax of £0.7m for the period, equal to
0.57 pence per share.
The Company's dividend policy is to only pay dividends in order to satisfy the
ongoing requirements under the Investment Trust (Approved Company) (Tax)
Regulations 2011. The Company has paid no dividend during the period, as we
continue to focus on growth investments.
Fundraising
The Company's equity raise in April 2022 was oversubscribed, underpinning our
investment case, with £21 million raised (post costs). We were encouraged by
the continued support of our existing shareholders and were pleased to welcome
new investors to our register.
Portfolio activity
The following new private investments have been completed during the period:
· £10.0 million investment in fuel cell innovation company Bramble
Energy Limited ("Bramble Energy");
· £3.5 million investment in Norwegian green hydrogen developer Gen2
Energy AS ("Gen2 Energy");
· £7.0 million investment in UK passenger flight innovator Cranfield
Aerospace Solutions Ltd ("Cranfield Aerospace");
· £20.5 million investment in leading global solid oxide fuel cell and
stack specialist Elcogen Plc ("Elcogen"); and
· £5.1 million investment in German green hydrogen developer HH2E AG
("HH2E").
Board
Abigail Rotheroe joined our Board as a Non-Executive Director, to replace
Caroline Cook. Abigail brings a wealth of experience in sustainable and impact
investing. Roger Bell, the INEOS Energy appointed director was replaced by
David Bucknall, the CEO of INEOS Energy. INEOS Energy remains one of our
cornerstone shareholders and supporters. I would like to take this opportunity
to thank Caroline and Roger for their contributions to the Board as
Non-Executive Directors.
ESG
Since our launch in 2021, we have set our focus specifically on investing in
clean Hydrogen Assets and their role in the energy transition, combined with
wider ESG principles, leading to avoided GHG emissions and targeting net
negative emissions.
In addition to climate-positive impact, particular focus is placed on
engagement to deliver effective boards and the encouragement of sustainable
business practices. These, and other issues, are reviewed and integrated prior
to any investment decision, and managed thereafter through close relationships
with the Company's private company investments.
We will commence the external reporting of the Company's performance in
accordance with the SFDR and ISSB frameworks in the next annual report,
including EU taxonomy alignment of our portfolio companies and avoided GHG
emissions disclosure.
Presentation from the Investment Adviser
Dr JJ Traynor and Richard Hulf, principals of the Investment Adviser, will be
presenting on the Half-Year Results via a webcast on Thursday, 22 September
2022 at 15:00 British Summer Time (BST). The presentation is open to all
existing and potential shareholders, and we encourage all investors to attend
by registering via this link:
https://www.investormeetcompany.com/hydrogenone-capital-growth-plc/register-investor
(https://www.investormeetcompany.com/hydrogenone-capital-growth-plc/register-investor)
Events After the Period End
We completed an £8.4 million investment in the Netherlands-based hydrogen
pipeline company Strohm Holding B.V ("Strohm").
Outlook
As the first London-listed fund dedicated to clean hydrogen, we are well
positioned to capitalise on the opportunities being presented by the rapidly
growing sector. The Investment Adviser has developed a significant pipeline of
private clean hydrogen investments in excess of £500m, including a near-term
pipeline over £100m. We will continue to pursue opportunities to grow the
Company and make further selective investments, aimed at a climate-positive
environmental impact, in line with our ESG policy commitments. In order to
facilitate this future growth, we are intending to establish a share issuance
programme to enable the Company to raise capital in an efficient manner, which
will be announced in due course.
I would like to thank our shareholders, my fellow Directors, the Investment
Adviser and our external advisers for their support and look forward to our
progress during a very busy period ahead.
Simon Hogan, Chairman
16 September 2022
INVESTMENT ADVISER'S REPORT
About the Investment Adviser
The Company's Alternative Investment Fund Manager ("AIFM"), Sanne Fund
Management (Guernsey) Limited, (part of Apex Group), and the Company have
appointed HydrogenOne Capital LLP as the Investment Adviser to the AIFM in
respect of the Company.
Its key responsibilities are to originate, analyse, assess and recommend
suitable investments within the hydrogen sector, and advise the AIFM
accordingly. Additionally, the Investment Adviser performs asset management
services in relation to the investments in the portfolio or, to the extent
asset management is delegated to third parties, oversees and monitors such
asset management.
HydrogenOne Capital LLP was founded in 2020 by Dr JJ Traynor and Richard Hulf
as an alternative investment firm focused specifically on investing in
Hydrogen Assets and their role in the energy transition. As a responsible
investor, HydrogenOne Capital LLP is committed to contributing to the energy
transition through the financing of sustainable investments and by providing
investment solutions that reduce carbon emissions.
HydrogenOne Capital LLP employs a fully integrated investment and asset
management approach and integrates its focus on ESG criteria throughout the
entire investment process.
The Principals of the Investment Adviser
The principals of the Investment Adviser have in excess of 60 years of
combined experience and a track record of success in the energy industry and
capital markets which are directly applicable to the hydrogen industry,
including acquisitions, mergers and divestments, development of growth energy
projects, supervision of profitable energy production, ESG track record,
investments in both listed and private companies and board advisory.
Dr JJ Traynor - Dr John Joseph "JJ" Traynor has extensive experience in
energy, capital markets, project management, and M&A. He has held a series
of senior energy and banking sector positions, including Executive Vice
President at Royal Dutch Shell, where he led investor relations and
established the company's ESG programme; Managing Director at Deutsche Bank,
where he was the number one ranked analyst in European and Global oil &
gas; Geologist at BP, in the North Sea, West Africa and Asia Pacific. He has a
Geology BSc from Imperial College, a PhD from Cambridge University. He
attended the INSEAD Advanced Management Programme and is a Fellow of the
Geological Society of London.
Richard Hulf - Richard Hulf is a fund manager with corporate finance and
engineering background. Richard has 30 years of experience in the Utilities
and Energy sectors and is a Chartered Engineer, originally from Babcock Power
and latterly Exxon. In addition, his financial experience spans stock broking,
corporate finance, and fund management with Henderson Crosthwaite, Ernst &
Young and Artemis Investment Management, where he invested into renewables
companies. He has an MSc in Petroleum Engineering from Imperial College.
The Investment Adviser's team
The principals have assembled an experienced team to support the Company. This
group brings a mixture of finance, technical and sector skills to support the
Investment Adviser in its day-to-day activity. The Investment Adviser has
established a team which is responsible for financial modelling, corporate and
asset valuation analysis, and opportunity assessment for the Company.
Advisory Board of the Investment Adviser
The principals of the Investment Adviser are supported by an experienced team
which comprises the Advisory Board. The Advisory Board has been carefully
selected to provide expert advice to the Investment Adviser on the hydrogen
sector, project finance and capital markets. The Investment Adviser has
appointed the members of the Advisory Board to provide it with advice from
time to time. No members of the Advisory Board are directors, officers,
employees or consultants of the Company, the AIFM or the Investment Adviser.
It is envisaged that the Advisory Board will expand over time, with additional
experts being added or substituted as and when required.
Market review and outlook
Policy makers and industry are converging on clean hydrogen as a core
technology to deliver net zero, improved air quality and enhanced energy
security.
The Paris Agreement in 2015 has led at least 39 countries to set out hydrogen
policies and US$70 billion of funding as part of net zero targets to deliver
the energy transition.
According to the World Health Organisation ("WHO"), some 4.2 million deaths
per year are caused by poor ambient air quality, and 91% of the world's
population live in places exceeding the WHO's air quality guidelines. Much of
this pollution is a result of emissions from internal combustion engines and
fossil fuel power plants.
The 2022 Russian invasion of Ukraine has compelled decision makers across the
world to focus on the importance of sustained investment and policy support
for domestic energy production and, crucially, less reliance on energy imports
from overseas. This new drive is further amplifying the demand pull for clean
hydrogen from energy transition and air quality needs. As a result,
governments and industries have responded with new initiatives in 2022 to
deliver affordable, secure, and sustainable low-carbon energy, with clean
hydrogen set to play a vital role.
Many countries are now focusing on developing energy supplies that are not
reliant on imports from Russia, and at the same time an acceleration of the
transition to low carbon energy, from renewable power and clean hydrogen.
Alongside this, 2022 has seen a significant increase in fossil fuels prices,
with Brent oil prices for example increasing from a range of US$60-$80 per
barrel to a range of US$100-120 per barrel. This change, combined with
substantial increases in regional natural gas prices, has improved the
relative economics of clean hydrogen compared to grey hydrogen, which is
currently the lowest cost and most polluting form of hydrogen supply. Whereas
the cost of fossil fuel feedstocks used to make grey hydrogen has increased,
the cost outlook for clean hydrogen continues to improve, with larger scale
and more efficient electrolysers coming to the market.
In 2022, the EU reshaped its energy policy to the REPowerEU 2030 plan, which
calls for over 300GW of clean hydrogen by 2030, compared to 80GW in previous
plans. Some EUR5.4 billion in hydrogen subsidies have recently been approved
under Important Projects of Common European Interest ("IPCEI"), which are
expected to unlock a further EUR8.8 billion of private investment. The Hy2Tech
scheme, also announced in 2022, links 41 projects and 35 companies building
out the hydrogen sector, and has qualified for IPCEI funding.
In the United States, the Department of Energy has announced a US$8 billion
programme to develop clean regional hydrogen hubs across the country, as part
of net zero ambitions by 2050. The 2022 Inflation Reduction Act set aside
US$369 billion for climate and energy proposals. Within this Act, there is a
tax credit for clean hydrogen of US$0.6-$3/kg, depending on life cycle
emissions. This is expected to make green hydrogen cost competitive with grey
hydrogen, and make US clean hydrogen amongst the lowest cost in the world.
In the UK, 2030 clean hydrogen targets have been doubled this year to 10GW.
The UK Government has recently announced a national clean hydrogen subsidy
scheme called Hydrogen Business Model ("HBM"), which will use a
contracts-for-difference style set-up to help fund an initial 1GW of clean
hydrogen projects in 2023, as part of the target to reach 10GW of low-carbon
hydrogen by 2030, in a potentially £9 billion sector. This is in addition to
the Net Zero Hydrogen Fund ("NZHF") with up to £240 million of grant funding
to support the upfront costs of developing and building low carbon hydrogen
production projects.
In Denmark, a Hydrogen and Power-to-X strategy was announced in March 2022,
calling for 4-6GW of installed hydrogen electrolysis by 2030, using wind and
solar power, putting DKK 1.25 billion of subsidy funding in place, and the
policy and regulatory frameworks that are required for this.
As a further example, in 2019 the Netherlands set targets for 3-4GW of
electrolysis by 2030 with multi-billion-euro funding support announced by the
Netherlands government. The government is providing EUR750 million of funding
support for a 'hydrogen backbone', retrofitting existing natural gas pipelines
to transport hydrogen between five industrial clusters in the Netherlands, and
at cross-border connection points.
Burning fossil fuels for energy releases green-house gas and poisonous
particulates. More than 20 countries have announced sales bans on internal
combustion engine vehicles before 2035, and over 25 cities have pledged to buy
only zero-emission buses from 2025 onwards. This is driven by net zero
agendas, plus the imperative to reduce poisonous emissions from diesel in
urban environments.
Access to clean hydrogen is a priority for refiners and steel and ammonia
producers as they address GHG emissions. These heavy industries are under
tremendous pressure to reduce or eliminate grey hydrogen from processes, to
reduce the GHG emissions that result from this.
Most of today's demand for clean hydrogen is a clean-up of grey hydrogen. In
the future, clean hydrogen can displace fossil fuels in hard to decarbonise
sectors, either by burning it in power plants to replace natural gas, coal,
and oil, or by converting it to electricity through hydrogen fuel cells.
Water vapour is the only by-product of using hydrogen as a fuel. Hydrogen can
store and transport intermittent renewable power at a grid scale. As wind and
solar become a large percentage of electricity supply over time, the electric
grid will need large scale electricity storage to offset periods of low wind
and low light. By converting electricity to hydrogen, the energy can be stored
over long periods of time either in pipelines and tanks, or in underground
salt caverns.
The hydrogen sector has US$1 trillion market potential by 2040. A 200x
increase in clean hydrogen supply is anticipated from 2019 to 2030, in order
to achieve net zero, as the scale-up of renewable power alongside the
phase-out of fossil fuels, improves the economics of established hydrogen
technologies. Clean hydrogen could be 20% of the energy mix by 2050.
Today, we see some 50+ clean hydrogen projects on stream around the world with
a total capacity of c. 330MW, along with in excess of 110 further projects
under construction, totaling at least 7GW. In addition, we note that there are
some 10GW of offshore hydrogen projects in design, in tandem with rapid growth
in offshore wind.
Investment portfolio
During the period, the Company has invested a total of £46.1 million in five
new Private Hydrogen Assets, which are the foundation of a diversified
portfolio for investors in clean hydrogen and related technologies.
Uninvested funds of £29.9 million are currently held in cash and cash
equivalents in the Company's Liquidity Reserve, ahead of investment.
New Private Hydrogen Assets acquisitions
Bramble Energy
Company description · UK-based fuel cell and portable power solutions company
Investment size / date · £10.0m / February 2022
Co-investors · IP Group, BGF, Parkwalk, UCL Technology Fund
Why invested · Pioneering revolutionary fuel cell design and manufacturing
techniques
· Novel printed circuit board design PCBFC™ - low cost, scalable and
recyclable fuel cell modules
· Launched a portable power product range
· Developing high-power density, mobility fuel cell systems
Total Addressable Market · >£100bn (by 2030)
Recent developments · UK Government funding for its fuel cell technology developments
Key milestones · SDX portable power launch 2022
· Mobility technology development
Gen2 Energy
Company description · Norwegian green hydrogen project developer
Investment size / date · £3.5m / March 22
Co-investors · HyCap, Vitol, Hoegh LNG, Knutsen Group
Why invested · Up to 700MW green hydrogen projects in Norway, with expected production
in 2025-2027
· Specialist in low-cost 24/7 hydroelectric power
· HGEN has follow-on investment rights in project SPVs
Total Addressable Market · >£100bn
Recent developments · Progressing with plans for clean hydrogen supply in Norway,
with agreements reached in shipping and logistics
Key milestones · First hydrogen project launch at Mosjøen in 2023
Cranfield Aerospace
Company description · UK-based passenger flight innovator, powering turboprop flight with
hydrogen
Investment size / date · £7.0m / March 22 (£5.6m invested to date, a further £1.4m
committed on successful completion of milestones)
Co-investors · Safran Ventures, Tawazun Strategic Development Fund, Motus Ventures
Why invested · Aerospace market leader in the design and manufacture of new aircraft
design concepts, complex modifications to existing aircraft
and integration of cutting-edge technologies
· Working on CAA certification of the Britten-Norman Islander passenger
aircraft using hydrogen
Total Addressable Market · £1.4bn (by 2030)
Recent developments · Collaboration and supply agreement for 10 hydrogen-fuelled planes
with EVIA AERO in Northern Europe
· New funding from Tawazun Strategic Development Fund and Motus Ventures
(total investment round £14.4m)
Key milestones · Test flight 2023
· Commercial certification 2025
Elcogen
Company description · Fuel cell and electrolyser manufacturer with presence
in Estonia and Finland
Investment size / date · £20.5m / May 2022
Co-investors · Biofuel OÜ, VNTM Powerfund II
Why invested · Amongst the world's most advanced solid oxide specialists, with lower
than-normal operating temperatures and superior economics
· Developed a reversible ceramic technology that can convert hydrogen
into emission-free electricity and vice versa
· +10 year track record
· Over 60 established industrial customers worldwide
Total Addressable Market · >£40bn (by 2030)
Recent developments · c. €17m public funding for research & innovation activities under
IPCEI Hy2Tech project
· WattAnyWhere supply partnership for BEV
Key milestones · Expansion of manufacturing facilities during 2022-23 at 25MW/year,
rising to 50MW/year (equivalent to 100MW - 200MW in electrolysis mode)
HH2E
Company description · German green hydrogen project developer with a focus on industrial
customers
Investment size / date · £5.1m / May 22
Co-investors · Foresight Group LLP
Why invested · Assessing five new projects for Final Investment Decision ("FID")
· Provides HGEN with investment rights in multiple large-scale industrial
decarbonization projects
· The new zinc electrolyser (or battery+alkali electrolyser) in
combination with the high-temperature storage unit enables constant production
with only a limited number of hours of renewable electricity supply
Total Addressable Market · >£100bn
Recent developments · Announced a new 6,000 tpa/ 200MW (c.1GW by 2030) clean hydrogen
project with MET Group in Lubmin, Germany
Key milestones · First hydrogen project launch Lubmin expected in Germany in 2023
Listed Hydrogen Assets portfolio
The Company has invested in 19 global hydrogen sector listed equities with an
average market capitalisation of £1.4 billion overall and a minimum market
capitalisation of £200 million at the time of the investment. The aggregate
value of the Listed Hydrogen Assets portfolio as at 30 June 2022 was £5.4
million. These companies are key players in the electrolysis, fuel cell and
clean hydrogen projects sectors.
These are long term strategic holdings in companies that the Investment
Adviser expects will be the eventual leaders in the listed hydrogen market.
Post period end acquisition
In August 2022, the Company has made a new £8.4m investment in Strohm.
Strohm
Company description · The Netherlands-based hydrogen pipeline company
Investment size / date · £8.4m / August 2022
Co-investors · Shell Ventures, Chevron Technology Ventures, Evonik Venture Capital
Why invested · Global market leader in design and manufacturing of Thermoplastic
Composite Pipe ("TCP")
· TCP is more cost-effective than steel pipe and has c.50% less
greenhouse gas emissions on as-installed basis
· TCP can transfer up to nine times the amount of energy compared to
a cable, and can be used to store hydrogen
· TCP's flexibility, lack of corrosion, fatigue and embrittlement make
it the superior pipeline solution for offshore wind farms, generating hydrogen
Total Addressable Market · >100GW (2040)
Recent developments · Doubled production capacity in the Netherlands-based plant
Key milestones · Aiming to increase revenue generation from energy transition
applications including hydrogen to over 50%, effective 2025
Valuation
The Investment Adviser has carried out fair market valuations of the Private
Hydrogen Assets at 30 June 2022, which have been reviewed by the Valuation
Committee, and the Directors have satisfied themselves as to the methodology
used, the discount rates and key assumptions applied, and the valuation.
All Private Hydrogen Assets at 30 June 2022 have been valued using either the
Price of Recent Investment or discounted cash flow methodology as described by
the International Private Equity and Venture Capital Valuation 2018 ("IPEV")
Guidelines. Each valuation has been calibrated with a discounted cash flow
analysis of the future expected cash flows accruing to the Company from each
portfolio investment where applicable, and progress assessed against specific
milestones assessed for indications of positive or negative performance which
may impact valuation.
Listed Hydrogen Assets are valued at fair value, which is the bid market
price, or, if bid price is unavailable, last traded price on the relevant
exchange.
Net assets
Net assets increased from £102.8 million at 31 December 2021 to £124.8
million at 30 June 2022. The increase is due to the fund raise of £20.88
million (net of costs) and an uplift in the value of the Private Hydrogen
Assets of £4.6 million, offset by the fall in global stocks generally and the
hydrogen sector more specifically.
The net assets of £124.8 million comprise £95.0 million portfolio value of
investments, including the holding in the HydrogenOne Capital Growth
Investments (1) LP ("Limited Partnership"), and the Company's cash balances of
£29.9 million, and other net liabilities of £0.1 million.
The Limited Partnership's net assets of £89.5 million comprise £90.5 million
portfolio value of investments, cash balances of £0.5 million, and other net
liabilities of £1.5 million.
Cash
At 30 June 2022, the Group had a total cash balance of £30.4 million,
including £29.9 million in the Company's balance sheet and £0.5 million in
the Limited Partnership, which is included in the Company's balance sheet
within 'investments held at fair value through profit or loss'.
Gain for period
The Company's total gain before tax for the period ended 30 June 2022 is £1.2
million, generating gains of 0.97 pence per Ordinary Share.
In the period to 30 June 2022, the gains on fair value of investments were
£1.8 million.
The expenses included in the income statement for the year were £0.7 million,
in line with expectations. These comprise £0.2 million Investment Adviser
fees and £0.5 million operating expenses. The details on how the Investment
Adviser fees are charged are as set out in note 5 to the financial statements.
Ongoing charges
The 'ongoing charges' ratio is an indicator of the costs incurred in the
day-to-day management of the Company.
The ongoing charges percentage for the six-month period to 30 June 2022 was
2.5%. The ongoing charges have been calculated, in accordance with AIC
guidance, as annualised ongoing charges (i.e. excluding acquisition costs and
other non-recurring items) divided by the average published undiluted Net
Asset Value in the period. The ongoing charges percentage has been calculated
on the consolidated basis and therefore takes into consideration the expenses
of Limited Partnership as well as the Company.
Richard Hulf, Dr JJ Traynor
HydrogenOne Capital LLP
16 September 2022
PORTFOLIO
Private Hydrogen Assets held by HydrogenOne Capital Growth Investments (1) LP*
Company Country of incorporation Value of investment £'000
Sunfire GmbH Germany 20,659
HiiROC Limited United Kingdom 13,000
NanoSUN Limited United Kingdom 10,100
Bramble Energy Limited United Kingdom 12,000
Cranfield Aerospace Solutions Ltd United Kingdom 5,600
Gen2 Energy Norway 3,335
Elcogen Plc United Kingdom 20,659
HH2E AG Germany 5,164
Total 90,519
Listed Hydrogen Assets held by HydrogenOne Capital Growth PLC*
Country of Market value % of
Company main listing £'000 net assets
Hexagon Purus ASA Norway 459 0.4
SFC Energy AG-BR France 439 0.4
NEL ASA Norway 415 0.4
Powercell Sweden AB Sweden 400 0.3
Doosan Fuel Cell Co Ltd South Korea 361 0.3
Bloom Energy Corp United States 357 0.3
S-Fuelcell Co Ltd South Korea 328 0.3
Hydrogen-Refueling-Solutions SA Germany 308 0.2
McPhy Energy SA France 302 0.2
Plug Power Inc United States 291 0.2
Aker Horizons AS Norway 286 0.2
Fuelcell Energy Inc United States 279 0.2
Ceres Power Holdings plc United Kingdom 231 0.2
AFC Energy plc United Kingdom 222 0.2
Green Hydrogen Systems A/S Denmark 191 0.2
Cell Impact AB Sweden 186 0.2
ITM Power plc United Kingdom 180 0.1
Ballard Power Systems Inc Canada 178 0.1
Enapter AG Germany 20 0.0
Total listed investments 5,433 4.4
Private Assets investment*
HydrogenOne Capital Growth Investments (1) LP United Kingdom 89,536 71.8
Total investments 94,969 76.2
Cash 29,863 23.9
Other net assets (65) (0.1)
Total net assets 124,767 100.0
*As at 30 June 2022.
All investments are in equity securities.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Overview
The ESG criteria is fully embedded in the Company's investment and divestment
decisions, from screening through to engagement and asset monitoring.
The Board has oversight of, and monitors, the compliance of the AIFM, and the
Investment Adviser and any undertaking advised by the Investment Adviser in
which it invests, with the Company's ESG policy, and ensures that the ESG
policy is kept up to date with developments in industry and society.
The Company continues to develop its ESG framework and the level of
disclosure. As part of this commitment, it has engaged an external
sustainability consultant. During the second half of the financial year, the
Company will be working to:
· Commence the external reporting in accordance with SFDR and ISSB
frameworks;
· Adopt an appropriate reporting framework and methodology to quantify
avoided GHG emissions;
· Map its portfolio to the EU Taxonomy; and
· Complete its application to become a signatory to the UN PRI.
HydrogenOne's ESG Tool - "HET"
The Company has embedded four ESG principles into its policy:
ESG principles HGEN performance (for the six months ended 30 June 22)
1 · Investing for a climate-positive environmental impact £46.1 million invested in low-carbon growth during the period, including
investments in a fuel cell innovation company Bramble Energy; a Norwegian
Allocating capital to low-carbon growth · Prioritise this long-term goal over short-term maximisation of shareholder green hydrogen developer Gen2 Energy; a UK passenger flight innovator
returns or Cranfield Aerospace; a leading global solid oxide fuel cell and stack
corporate profits specialist Elcogen; and a German green hydrogen developer HH2E, bringing the
total to £85.4 million.
· Backing innovators in low carbon industries
2 · Positive and proactive engagement with the boards of Private Hydrogen The Investment Adviser is represented on all of the Boards of its Private
Assets Hydrogen Assets and is actively engaged in ESG matters in these businesses.
Engagement to deliver effective boards
· Effective and diverse independent directors The Company and the Investment Adviser support the UK Stewardship code issued
by the Financial Reporting Council and the Investment Adviser on behalf of the
· Simple and transparent pay structures that reward superior outcomes Company votes at all meetings where they are able to exercise the Company's
vote.
3 · Strong ethical standards, to deliver positive impacts on the environment The Investment Adviser is actively and constructively engaged with the
and society invested companies in the implementation of sustainable business practices.
Encourage sustainable business practices
· Alignment with ISSB and the EU Taxonomy This includes a demonstrated awareness of the interests of material
stakeholders and engagement to deliver positive impacts on the environment and
· Encourage transparency and alignment society. Hydrogen Assets should support the letter, and spirit, of regional
of lobbying activities laws and regulations.
The Company and the Investment Adviser will encourage adoption of initiatives
such as the ISSB and the EU Sustainable Finance Taxonomy and will encourage
transparency and alignment of lobbying activities.
4 · KPIs, in particular avoided GHG emissions The Investment Adviser has implemented ESG screening on key metrics and UN
SDGs, spanning 22 assessments within the Company's four ESG principals.
ESG in the Company · Framing investments around UN SDGs,
UN GC, LSE This results in an aggregate scoring of ESG performance, which frames
engagement with invested companies to drive continuous improvement, and in
· Green Economy Mark and UN PRI some cases may mean the Company decides not to invest in the relevant company.
· The Company manages its own direct carbon footprint The Company is particularly focused on the greenhouse gas emissions from
investments and the emissions that have been avoided ("avoided emissions") as
a result of the investments and intends to actively engage with portfolio
companies to be able to adopt an appropriate reporting framework in this area.
The estimation of the emissions that might be avoided through the deployment
of new hydrogen and related technologies forms an important part of the
investment assessments made by the Investment Adviser. These estimates
complement perspectives on total addressable markets in revenue terms. Work
continues on an avoided emissions framework that is broad and robust enough
for useful publication and comparison across assets.
SFDR / ISSB / EU taxonomy - relevant disclosures will be included in the 2022
annual report.
SFDR
Whilst SFDR compliance is not mandatory for UK domiciled funds, the Company
has elected to comply with article 8 of the SFDR. Article 8 applies where a
financial product promotes, among other characteristics, environmental or
social characteristics, or a combination of those characteristics, provided
that the companies in which the investments are made follow good governance
practices. The external reporting of the Company's performance in accordance
with the SFDR framework will commence in the 2022 year-end annual report.
United Nations Sustainable Development Goals
The Company's investment objective and investment policy are closely aligned
with seven of the United Nations Sustainable Development Goals:
Goal UN SDG target The Company's focus
· Reduce deaths from pollution (3.9) Fuel cell vehicles to displace diesel and fuel oil. Direct use in industrial
activities to displace fuel oil and coal.
· Increase renewable energy in the global energy mix (7.2) Enable the expansion of renewable energy through direct use of clean hydrogen
and as a form of energy storage. Exclude those involved in the production of
· Increase access to electricity (7.1) fossil fuels.
· Increase energy efficiency (7.3)
· Upgrade industries for sustainability (9.4) Enabling the decarbonisation of processes in heavy industry and enhancing
innovation for a more circular economy.
· Increase R&D in industrial technologies (9.5)
· Reduce the environmental impacts of cities (11.6) Enabling the adoption of cleaner fuels for transportation and in heavy
industry to reduce pollution and advance a more sustainable economy.
· Adopt sustainable practices and reporting (12.6) Engagement for good governance and transparency across the portfolio.
· Reduce acidification (14.3) Enabling the replacement of fossil fuels, to reduce CO(2) emissions and the
corresponding negative impacts on ocean chemistry.
· Combatting desertification and land degradation (15.3) Enabling the replacement of fossil fuels to reduce GHG emissions and the
associated acceleration of global warming.
LSE Green Economy Mark
The Company's role in clean hydrogen investments has been recognised by its
award of the Green Economy Mark by London Stock Exchange plc, which recognises
companies that derive 50% or more of their total annual revenues from products
and services that contribute to the global green economy.
ESG Screening
As part of the investment process, the Investment Adviser scores each proposed
investment against the criteria, which align with the four ESG principles in
its policy. These criteria have been established by the Investment Adviser and
approved by the Board. Each investment is scored against these criteria in the
initial investment review, and investments which do not meet the expected
level of the Board and Investment Adviser are not progressed.
ESG screens for the investments
Allocating capital to carbon growth • Significant revenue from hydrogen and related technologies
• Avoided GHG emissions (annual/life cycle)
• Excludes fossil fuels extraction or production
Engagement for effective Boards • Effective
board
• Independence of Audit Committee
• Alignment with long term minorities
• Board qualifications (skills, tenure, diversity)
• Alignment of Executive pay with long term shareholders
Encourage sustainable business practices • Board oversight of HSSE process
• Company policy and disclosure of supply and reporting chain practices
• Transparency including International Sustainability Standards
Board ("ISSB") and SFDR
• Framing investments around UN GC ('UN Global Compact')
Mapping • 3.9 Reduce deaths from pollution
vs. UN SDGs • 7.1 Increase access to electricity
• 7.2 Increase renewables in the energy mix
• 7.3 Increase energy efficiency
• 9.4 Upgrade industries for sustainability
• 9.5 Increase R&D in industrial technologies
• 11.6 Reduce environmental impact of cities
• 12.6 Adopt sustainable practices and reporting
• 14.3 Reduce acidification (water)
• 15.3 Desertification and land degradation
GOVERNANCE
INVESTMENT OBJECTIVE AND POLICY
Investment objective and policy
The Company's investment objective is to deliver an attractive level of
capital growth by investing, directly or indirectly, in a diversified
portfolio of hydrogen and complementary hydrogen focused assets whilst
integrating core ESG principles into its decision-making and ownership
process.
The Company will seek to achieve this objective through investment in a
diversified portfolio of hydrogen and complementary hydrogen focussed assets,
with an expected focus in developed markets in Europe, North America and Asia
Pacific. The Company intends to implement its investment policy through the
acquisition of Private Hydrogen Assets and Listed Hydrogen Assets, comprising:
· assets that supply clean hydrogen;
· large scale energy storage assets;
· carbon capture, use and storage assets;
· hydrogen distribution infrastructure assets;
· assets involved in hydrogen supply chains, such as electrolysers and
fuel cells; and
· businesses that utilise hydrogen applications such as transport,
power generation, feedstock and heat (together "Hydrogen Assets").
The Company intends to implement its investment policy through the acquisition
of hydrogen and complementary hydrogen focussed assets. No investments will be
made in companies or projects that generate revenues from the extraction or
production of fossil fuels.
Private Hydrogen Assets
The Company will invest in unquoted Hydrogen Assets, which may be operational
companies or hydrogen projects (completed or under construction). Investments
are expected to be mainly in the form of equity, although investments may be
made by way of debt and/or convertible securities. The Company may acquire a
mix of controlling and non-controlling interests in Private Hydrogen Assets,
however the Company intends to invest principally in non-controlling positions
(with suitable minority protection rights to, inter alia, ensure that the
Private Hydrogen Assets are operated and managed in a manner that is
consistent with the Company's investment policy).
Given the time frame required to fully maximise the value of an investment,
the Company expects that investments in Private Hydrogen Assets will be held
for the medium to long term, although short term disposals of assets cannot be
ruled out in exceptional or opportunistic circumstances. The Company intends
to re-invest the proceeds of disposals in accordance with the Company's
investment policy. The Company will observe the following investment
restrictions, assessed at the time of an investment, when making investments
in Private Hydrogen Assets:
· no single Private Hydrogen Asset will account for more than 20 per
cent of Gross Asset Value;
· Private Hydrogen Assets located outside developed markets in Europe,
North America, the GCC and Asia Pacific will account for no more than 20 per
cent of Gross Asset Value; and
· at the time of an investment, the aggregate value of the Company's
investments in Private Hydrogen Assets under contract to any single Offtaker
will not exceed 40 per cent of Gross Asset Value.
The Company will initially acquire Private Hydrogen Assets via the HydrogenOne
Partnership, a wholly owned subsidiary undertaking of the Company structured
as an English limited partnership which is controlled by the Company and
advised by the Investment Adviser. The HydrogenOne Partnership's investment
policy and restrictions are the same as the Company's investment policy and
restrictions for Private Hydrogen Assets and cannot be changed without the
Company's consent. In due course, the Company may acquire Private Hydrogen
Assets directly or by way of holdings in special purpose vehicles or
intermediate holding entities (including successor limited partnerships
established on substantially the same terms as the HydrogenOne Partnership)
or, if the Company is considered a 'feeder fund' under the Listing Rules,
other undertakings advised by the Investment Adviser and, in such
circumstances, the investment policy and restrictions will also be applied on
a look-through basis and such undertaking(s) will also be managed in
accordance with the Company's investment policy.
Listed Hydrogen Assets
The Company will also invest in quoted or traded Hydrogen Assets, which will
predominantly be equity securities but may also be corporate debt and/or other
financial instruments (Listed Hydrogen Assets). The Company will be free to
invest in Listed Hydrogen Assets in any market or country with a market
capitalisation (at the time of investment) of at least US$200 million. The
Company's approach is to be a long-term investor and will not ordinarily adopt
short-term trading strategies.
The Company will observe the following investment restrictions, assessed at
the time of an investment, when making investments in Listed Hydrogen Assets:
· no single Listed Hydrogen Asset will account for more than 3 per cent
of the Gross Asset Value, with a targeted average stock weighting of 1.5 per
cent of the Gross Asset Value;
· the portfolio of Listed Hydrogen Assets will comprise no fewer than
15 Listed Hydrogen Assets at times when the Company is substantially invested;
and
· each Listed Hydrogen Asset must derive at least 50 per cent of
revenues from hydrogen and/or related technologies.
Liquidity reserve
The Company intends to allocate the relevant net proceeds of any capital
raise/realisation of Private Hydrogen Assets to cash (in accordance with the
Company's cash management policy set out below) and/or to additional Listed
Hydrogen Assets and related businesses pending subsequent investment in
Private Hydrogen Assets (the Liquidity Reserve). The Company anticipates
holding cash to cover the near-term capital requirements of the pipeline of
Private Hydrogen Assets and in periods of high market volatility.
It is anticipated that, once the Initial Net Proceeds are fully invested (with
the Liquidity Reserve having been subsequently invested in Private Hydrogen
Assets), at least 70% of the Company's assets will be invested in Private
Hydrogen Assets with the balance invested in Listed Hydrogen Assets. Over the
medium term, it is expected that the weighting to Listed Hydrogen Assets will
reduce further, to approximately 10% of the Company's assets, as the
allocation to Private Hydrogen Assets grows, with Listed Hydrogen Assets
primarily focussed on strategic equity holdings derived from the listing of
operational companies within the Private Hydrogen Assets portfolio over time.
Investment restrictions
The Company, in addition to the investment restrictions set out above, will
comply with the following investment restrictions when investing in Hydrogen
Assets:
· the Company will not conduct any trading activity which is
significant in the context of the Company as a whole;
· the Company will, at all times, invest and manage its assets:
o in a way which is consistent with its object of spreading investment risk;
and
o in accordance with its published investment policy;
· the Company will not invest in other UK listed closed-ended
investment companies; and
· no investments will be made in companies or projects that generate
revenues from the extraction or production of fossil fuels (mining, drilling
or other such extraction of thermal coal, oil or gas deposits).
Compliance with the above restrictions will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
Hydrogen Assets following investment will not be considered as a breach of the
investment policy or restrictions.
Borrowing policy
The Company may take on debt for general working capital purposes or to
finance investments and/or acquisitions, provided that at the time of drawing
down (or acquiring) any debt (including limited recourse debt), total debt
will not exceed 25% of the prevailing Gross Asset Value at the time of drawing
down (or acquiring) such debt. For the avoidance of doubt, in calculating
gearing, no account will be taken of any investments in Hydrogen Assets that
are made by the Company by way of a debt investment.
Gearing may be employed at the level of an SPV or any intermediate subsidiary
undertaking of the Company (such as the HydrogenOne Partnership) or, if the
Company is considered a 'feeder fund' under the Listing Rules, other
undertakings advised by the Investment Adviser in which the Company has
invested or the Company itself. The limits on debt shall apply on a
consolidated and look-through basis across the Company, the SPVs or any such
intermediate holding entities (such as the Limited Partnership) or, if the
Company is considered a 'feeder fund' under the Listing Rules, other
undertakings advised by the Investment Adviser in which the Company has
invested but intra-group debt will not be counted.
Gearing of one or more Hydrogen Assets in which the Company has a
non-controlling interest will not count towards these borrowing restrictions.
However, in such circumstances, the matter will be brought to the attention of
the Board who will determine the appropriate course of action.
Currency and hedging policy
The Company has the ability to enter into hedging transactions for the purpose
of efficient portfolio management. In particular, the Company may engage in
currency, inflation, interest rates, energy prices and commodity prices
hedging. Any such hedging transactions will not be undertaken for speculative
purposes.
Cash management
The Company may hold cash on deposit and may invest in cash equivalent
investments, which may include short-term investments in money market type
funds ("Cash and Cash Equivalents"). There is no restriction on the amount of
Cash and Cash Equivalents that the Company may hold and there may be times
when it is appropriate for the Company to have a significant Cash and Cash
Equivalents position. For the avoidance of doubt, the restrictions set out
above in relation to investing in UK listed closed-ended investment companies
do not apply to money market type funds.
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement and the Investment Adviser's Report of this Half-yearly Financial
Report, provide details of the important events which have occurred during the
six months ended 30 June 2022 ("Period") and their impact on the financial
statements. The statement on related party transactions and the Directors'
Statement of Responsibility (below), the Chairman's Statement and the
Investment Adviser's Report together constitute the Interim Management Report
of the Company for the Period. The outlook for the Company for the remaining
six months of the year ending 31 December 2022 is discussed in the Chairman's
Statement and the Investment Adviser's Report.
Details of the Private and Listed Hydrogen Assets held at the Period end are
provided in the Portfolio section of the Half Yearly Report.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties facing the Company are summarised below:
(i) Regulatory - changes in political or environmental conditions in the
hydrogen sector (for example, changes in government policy or support) could
affect the Company's prospects;
(ii) Policy support - the technologies required to produce and use green
hydrogen need policy support to underpin the scale needed to drive stand-alone
cost competitiveness. Governments worldwide are showing such support today,
but that may be volatile over the investment time horizon of the Company;
(iii) Power price - the income and value of the Company's investments may be
affected by changes in the market prices of electricity and hydrogen, both
current and expected;
(iv) Operational - initial pre-deal due diligence may not uncover all risks
associated to a transaction. Investments are subject to operating and
technical risks. While the Company will seek investments with creditworthy and
appropriately insured counterparties who bear the majority of these risks,
there can be no assurance that all risks can be mitigated;
(v) Performance - underperforming investments or investment strategy can
lead to underperformance to the Company's target return and ultimate
investment objective;
(vi) Private Assets - investments in Private Hydrogen Assets are highly
illiquid and have no public market. Such illiquidity may affect the
Company's ability to vary or liquidate its portfolio, in a timely fashion or
at satisfactory prices.
(vii) Future acquisitions and capital raises - ongoing capital raises are
intended. Should there be a deterioration of the intended investment pipeline
and the capital unable to be deployed into suitable opportunities in the
expected time frame, this will result in 'cash drag'. Cash drag will have the
potential to impact on the ongoing dividend target and investment objective;
(viii) Refinancing - the operational risks of the company including
market, counterparty, credit and liquidity risk. Extreme market volatility can
disrupt capital raising process and ability to raise monies to repay a debt
demand in full;
(ix) Service providers - disruption to, or failure of the Company's
Administrator or other parties to complete their role efficiently, on time and
in line with expectation;
(x) Portfolio valuation - risk that portfolio asset valuations published do
not represent the Fair Market Values in accordance with the accounting
requirements. Investment valuations are based on modelling/ financial
projections for the relevant investments. Projections will primarily be based
on the Investment Adviser's assessment and are only estimates of future
results based on assumptions made at the time of the projection. Actual
results may vary significantly from the projections, which may reduce the
profitability of the Company leading to reduced returns to Shareholders;
(xi) Key person - the Investment Adviser has only been in existence for a
limited period, with minimum employees. As such, there are significant Key
Person risks at this time and should they become unavailable, this could have
a negative impact on the Company's ability to achieve its investment
objective;
(xii) Tax - breaches of Section 1158 of the Corporation Tax Act could result
in loss of investment trust status. Changes in tax legislation such as BEPS,
WHT rules and structural requirements result in increased tax and resulting;
and
(xiii) Political and associated economic risk - exposure to Russia
and/or Ukraine within the investment portfolio could lead to losses on
investments. The impact on the global equity markets, and hydrogen stocks in
particular, of a prolonged downturn caused by the situation, could lead to
reduced valuations of the Company.
The Company's Annual Report for the year ended 31 December 2021 contains more
detail on the Company's principal risks and uncertainties, including the
Board's ongoing process to identify, and where possible mitigate, emerging
risks (pages 30 to 31). The Annual Report can be found on the Company's
website at www.hydrogenonecapitalgrowthplc.com.
The Board is of the opinion that these principal risks are equally applicable
to the remaining six months of the financial year as they were to the six
months being reported on.
Related Party Transactions
Details of the investment management arrangements were provided in the Annual
Report. There have been no changes to the related party transactions described
in the Annual Report that could have a material effect on the financial
position or performance of the Company. Amounts payable to the Investment
Adviser and the Directors in the period are detailed in note 13 to the
financial statements on pages 35 to 37.
Going Concern
This Half-yearly Financial Report has been prepared on a going concern basis.
The Directors consider this the appropriate basis as they have a reasonable
expectation that the Company and Group has adequate resources to continue in
operational existence for at least twelve months from the date of this report.
In reaching this conclusion, the Directors considered the income and expense
projections and the liquidity of the investment portfolio, and considered the
mitigation measures which key service providers, including the Investment
Adviser, have in place to maintain operational resilience particularly in
light of secondary effects of the COVID-19 pandemic and the war in Ukraine.
The Company and Group continue to meet day-to-day liquidity needs through its
cash resources. The Company and Group had unrestricted cash of £29.9 million
as well as £5.4 million in Listed Hydrogen Assets at 30 June 2022. The
Company and Group's net assets at 30 June 2022 were £124.8 million and total
expenses for the period ended 30 June 2022 were £0.7 million, which
represented approximately 0.6% of the average net assets value of the Company
in the six months to 30 June 2022 (£110,669,477).
The Directors also recognise that the continuation of the Company is subject
to the approval of shareholders at the Annual General Meeting ("AGM") in 2026,
and every fifth AGM thereafter.
The Directors have considered the impact of the secondary effects of the
COVID-19 pandemic and the Russian invasion of Ukraine on the Company's
portfolio of investments, and that any future prolonged and deep market
decline would likely lead to falling values in the Company's investments
and/or reduced dividend receipt. However, as explained above, the Company has
more than sufficient liquidity available to meet its expected future
obligations and to date impact has been limited. In addition, the Board
believes that the Company and its key third party service providers have in
place appropriate business continuity plans to continue to maintain service
levels throughout future pandemics.
Board of Directors
16 September 2022
DIRECTORS' STATEMENT OF RESPONSIBILITY
The Directors confirm to the best of their knowledge that:
· The condensed set of financial statements contained within the
Half-yearly Financial Report has been prepared in accordance with IAS 34
Interim Financial Reporting and gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
· The Interim Management Report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R (indication of
important events during the first six months, their impact on the condensed
set of Financial Statements and a description of the principal risks and
uncertainties for the remaining six months of the year); and
· The Interim Financial Report includes a fair review of the information
required by Disclosure and Transparency Rule 4.2.8R (disclosure of related
party transactions and changes therein).
Simon Hogan
Chairman of the Board of Directors
16 September 2022
FINANCIAL STATEMENTS
CONDENSED PARENT AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2022
Six months to 30 June 2022 (Unaudited)
Revenue Capital Total
Note £'000 £'000 £'000
Gain on investments - 1,794 1,794
Income 20 - -
Total gain 20 1,794 1,814
Investment Advisor fee 5 (206) - (206)
Other expenses 6 (475) - (475)
(Loss)/gain before finance costs and taxation (661) 1,794 1,133
Finance costs - - -
Operating (loss)/gain before taxation (661) 1,794 1,133
Taxation 7 - - -
(Loss)/gain for the period (661) 1,794 1,133
Return per Ordinary Share (basic and diluted) 11 (0.57)p 1.54p 0.97p
There is no other comprehensive income and therefore the 'Loss for the period'
is the total comprehensive income for the period.
The total column of the above statement is the Parent and Consolidated
Statement of Comprehensive Income, including the return per Ordinary Share,
which has been prepared in accordance with IFRS. The supplementary revenue and
capital columns, including the return per Ordinary Share, are prepared under
guidance from the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
CONDENSED PARENT AND CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2022 and 31 December 2021
30 June 2022 (Unaudited) 31 December 2021 (Audited)
Note £'000 £'000
Assets
Non-current assets
Investments held at fair value through profit or loss 4 94,969 68,830
Current assets
Cash and cash equivalents 29,863 34,019
Trade and other receivables 8 163 183
Total current assets 30,026 34,202
Total assets 124,995 103,032
Current liabilities
Trade and other payables 9 (228) (246)
Total liabilities (228) (246)
Net assets 124,767 102,786
Equity
Share capital 10 1,288 1,074
Share premium account 124,763 104,129
Capital reserve 182 (1,612)
Revenue reserve (1,466) (805)
Total equity 124,767 102,786
Net asset value per Ordinary Share 12 96.85p 95.75p
Approved by the Board of Directors and authorised for issue on 16 September
2022 and signed on their behalf by:
Simon Hogan
Chairman
HydrogenOne Capital Growth plc is incorporated in England and Wales with
registration number 13340859.
CONDENSED PARENT AND CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2022 (Unaudited)
Note Share capital £'000 Share premium account £'000 Capital reserve £'000 Revenue reserve £'000 Total £'000
Opening balance as at 1 January 2022 1,074 104,129 (1,612) (805) 102,786
Issue of Ordinary Shares 10 214 21,255 - - 21,469
Ordinary Share issue costs - (621) - - (621)
Profit/(loss) for the period - - 1,794 (661) 1,133
Closing balance as at 30 June 2022 1,288 124,763 182 (1,466) 124,767
CONDENSED PARENT AND CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
Six months to 30 June 2022 (Unaudited)
£'000
Cash flows from operating activities
Income 20
Management expenses (681)
Decrease in trade and other receivables 20
(Decrease) in trade and other payables (18)
Net cash flow used in operating activities (659)
Cash flows from investing activities
Purchase of investments (24,345)
Net cash flow used in investing activities (24,345)
Cash flows from financing activities
Proceeds from issue of Ordinary Shares 21,469
Ordinary Share issue costs (621)
Net cash flow from financing activities 20,848
Decrease in cash and cash equivalents (4,156)
Cash and cash equivalents at start of period 34,019
Cash and cash equivalents at end of period 29,863
CONDENSED PARENT AND CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2022
Six months to 30 June 2022 (Unaudited)
£'000
Cash flows from operating activities
Income
20
Management expenses
(681)
Decrease in trade and other receivables
20
(Decrease) in trade and other payables
(18)
Net cash flow used in operating activities
(659)
Cash flows from investing activities
Purchase of investments
(24,345)
Net cash flow used in investing activities
(24,345)
Cash flows from financing activities
Proceeds from issue of Ordinary Shares
21,469
Ordinary Share issue costs
(621)
Net cash flow from financing activities
20,848
Decrease in cash and cash equivalents
(4,156)
Cash and cash equivalents at start of period
34,019
Cash and cash equivalents at end of period
29,863
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Company information
HydrogenOne Capital Growth plc (the "Company" or "Parent") was incorporated in
England and Wales on 16 April 2021 with registered number 13340859 as a public
company limited by shares and is an investment company within the terms of
Section 833 of the Companies Act 2006 (the "Act"). The Company is listed and
began trading on the Main Market of the London Stock Exchange and was admitted
to the premium segment of the Official List on 30 July 2021 (the "IPO"). The
Company has applied for and been accepted as an approved investment trust
under sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2
Chapter 1 of Statutory Instrument 2011/2999.
Sanne Fund Management (Guernsey) Limited acts as the Company's Alternative
Investment Fund Manager ("AIFM").
Sanne Fund Services (UK) Limited (the "Company Secretary" or "Administrator")
provides administrative and company secretarial services to the Company.
The Company's Investment Adviser is HydrogenOne Capital LLP.
The Company's registered office is 6th Floor, 125 London Wall, London, EC2Y
5AS.
Investment objective
The Company's investment objective is to deliver an attractive level of
capital growth by investing, directly or indirectly, in a diversified
portfolio of hydrogen and complementary hydrogen focussed assets whilst
integrating core environmental, social and governance ("ESG") principles into
its decision making and ownership process.
Company structure
The Company makes its investment in unquoted Hydrogen Assets ("Private
Hydrogen Assets") through HydrogenOne Capital Growth Investments (1) LP (the
"Limited Partnership"), in which the Company is the sole Limited Partner. The
Limited Partnership registered as a private fund limited partnership in
England and Wales under the Limited Partnerships Act 1907 with registered
number LP021814. The Limited Partnership has been established pursuant to a
Limited Partnership Agreement dated 5 July 2021 as amended and restated on 26
November 2021 (the "Limited Partnership Agreement") in order to make
investments pursuant to the investment policy of the Limited Partnership. The
Limited Partnership's investment policy and restrictions are consistent with
the Company's investment policy and restrictions for Private Hydrogen Assets.
The General Partner of the Limited Partnership is HydrogenOne Capital Growth
(GP) Limited (the "General Partner"), a wholly owned subsidiary of the
Company. The General Partner was incorporated in England and Wales on 19 May
2021 with registered number 13407844. The General Partner undertakes the
responsibility for the management, operation and administration of the
business and affairs of the Limited Partnership. The General Partner's Profit
Share for each accounting period shall be an amount equal to 1.5% per annum of
the prevailing NAV of the Limited Partnership, which shall be allocated to the
General Partner as a first charge on the profits of the Limited Partnership.
For so long as the Company is the sole Limited Partner, the General Partner's
Profit Share shall be allocated and distributed to the Company rather than the
General Partner.
The carried interest partner of the Limited Partnership is HydrogenOne Capital
Growth (Carried Interest) LP (the "Carried Interest Partner") which, in
certain circumstances, will receive carried interest on the realisation of
Private Hydrogen Assets by the Limited Partnership. The Carried Interest
Partner has been set up for the benefit of the principals of the Investment
Adviser.
Private Hydrogen Assets
The Company invests via the Limited Partnership in Private Hydrogen Assets,
which may be operational companies or hydrogen projects. Investments are
mainly in the form of equity, although investments may be made by way of debt
and/or convertible securities. The Company may acquire a mix of controlling
and non-controlling interests in Private Hydrogen Assets, however the Company
invests principally in non-controlling positions (with suitable minority
protection rights to, inter alia, ensure that the Private Hydrogen Assets are
operated and managed in a manner that is consistent with the Company's
investment policy).
The Company will initially acquire Private Hydrogen Assets via the Limited
Partnership. In due course, the Company may acquire Private Hydrogen Assets
directly or by way of holdings in special purpose vehicles or intermediate
holding entities (including successor limited partnerships established on
substantially the same terms as the Limited Partnership) or, if the Company is
considered a 'feeder fund' under the Listing Rules, other undertakings advised
by the Investment Adviser and, in such circumstances, the investment policy
and restrictions will also be applied on a look-through basis and such
undertaking(s) will also be managed in accordance with the Company's
investment policy.
Listed Hydrogen Assets
The Company also invests directly in quoted or traded Hydrogen Assets, which
are predominantly equity securities but may also be corporate debt and/or
other financial instruments ("Listed Hydrogen Assets"). The Company has the
ability to invest in Listed Hydrogen Assets in any market or country with a
market capitalisation (at the time of investment) of at least US$200 million.
The Company's approach is to be a long-term investor and will not ordinarily
adopt short-term trading strategies.
Liquidity reserve
During the initial Private Hydrogen Asset investment period after a capital
raise (currently anticipated to be up to 18 months in respect of the IPO)
and/or a realisation of a Private Hydrogen Asset, the Company intends to
allocate the relevant net proceeds of such capital raise/realisation to cash
(in accordance with the Company's cash management policy) and/or to additional
Listed Hydrogen Assets and related businesses pending subsequent investment in
Private Hydrogen Assets (the "Liquidity Reserve"). The Company anticipates
holding cash to cover the near-term capital requirements of the pipeline of
Private Hydrogen Assets and in periods of high market volatility. The
Investment Adviser anticipates that the Liquidity Reserve will be allocated to
cash for the foreseeable future.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The principal accounting policies are set out below:
Reporting entity
These Parent and Consolidated Financial Statements (the "Financial
Statements") present the results of both the Parent; and the Parent and the
General Partner (together referred to as the "Group").
As at 30 June 2022, the statement of financial position of the General Partner
consisted of issued share capital and corresponding share capital receivable
in the amount of £1. The General Partner had no income, expenditure or cash
flows for the period.
Due to the immaterial balances of the General Partner there is no material
difference between the results of the Parent and the results of the Group. As
a result, the Financial Statements as presented represent both the Parent's
and the Group's financial position, performance, and cash flows.
Basis of accounting
The Financial Statements have been prepared in accordance with UK-adopted
international accounting standards ("IFRS") and the applicable legal
requirements of the Companies Act 2006.
The Financial Statements have also been prepared as far as is relevant and
applicable to the Company and Group in accordance with the Statement of
Recommended Practice ("SORP") issued by the Association of Investment
Companies ("AIC") in July 2022.
The Financial Statements are prepared on the historical cost basis, except for
the revaluation of financial instruments measured at fair value through profit
or loss.
Fair value is the price that would be received on sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique. In estimating the fair value
of an asset or liability, the Company and Group take into account the
characteristics of the asset or liability if market participants would take
those characteristics into account when pricing the asset or liability at the
measurement date. Fair value for measurement and/or disclosure purposes in
these Financial Statements is determined on such a basis.
The Financial Statements are presented in Pounds Sterling because that is the
currency of the primary economic environment in which the Company and Group
operate.
The accounting policies applied in these Financial Statements are consistent
with those applied in the last Annual Audited Financial Statements for the
year ended 31 December 2021. These condensed financial statements do not
include all information and disclosures required in the annual financial
statements and should be read in conjunction with the Company's annual
financial statements as of 31 December 2021. The audited annual accounts for
the year ended 31 December 2021 have been delivered to Companies House and the
audit report thereon was unqualified.
Going concern
Having reassessed the principal risks, the Directors considered it appropriate
to adopt the going concern basis of accounting in preparing these Financial
Statements. Details of the Directors' assessment of the going concern status
of the Company and Group, which considered the adequacy of resources and the
impacts of the COVID Pandemic and war in Ukraine are given in the Governance
section of the Half Yearly Report.
Critical accounting judgements, estimates and assumptions
There have been no changes to the critical accounting judgements estimates and
assumptions from those applied in the Company's Audited Annual Financial
Statements for the period ended 31 December 2021.
Comparatives
As the Company began trading on 30 July 2021, there are no comparatives for
the six months to 30 June. The financial information for the year ended 31
December 2021 has been extracted from the audited Annual Report and Accounts
for the period ended 31 December 2021.
3. SEGMENTAL REPORTING
The Board has considered the requirements of IFRS 8 - 'Operating Segments'.
The Company has entered into an Investment Advisory Agreement with the
Investment Adviser under which the Investment Adviser is responsible for the
management of the Company's investment portfolio, subject to the overall
supervision of the Board of Directors. Subject to its terms and conditions,
the Investment Advisory Agreement requires the Investment Adviser to manage
the Company's investment portfolio in accordance with the Company's investment
guidelines as in effect from time to time, including the authority to purchase
and sell investments and to carry out other actions as appropriate to give
effect thereto. However, the Board retains full responsibility to ensure that
the Investment Adviser adheres to its mandate. Moreover, the Board is fully
responsible for the appointment and/or removal of the Investment Adviser.
Accordingly, the Board is deemed to be the 'Chief Operating Decision Maker' of
the Company.
The Directors are of the opinion that the Company is engaged in a single
segment of business being investment into the hydrogen focused investments.
Segment information is measured on the same basis as that used in the
preparation of the Company's Financial Statements.
4. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Summary of valuation
As at 30 June 2022 31 December 2021
£'000 £'000
Investments held at fair value through profit or loss
Listed Hydrogen Assets 5,433 8,233
Limited Partnership 89,536 60,597
Closing valuation of financial assets at fair value through profit or loss 94,969 68,830
(b) Movements in valuation
£'000 £'000
Opening cost of financial assets at fair value through profit or loss 70,438 -
Additions, at cost - Listed Hydrogen Assets - 9,461
Additions, at cost - Limited Partnership 24,345 60,977
Cost of financial assets at fair value through profit or loss at the end of 94,783 70,438
the period
Loss on investments - Listed Hydrogen Assets (4,028) (1,228)
Gain on investments - Limited Partnership 4,214 (380)
Closing valuation of financial assets at fair value through profit or loss 94,969 68,830
(c) Loss on investments
£'000 £'000
Movement in unrealised gain/(loss) - Listed Hydrogen Assets (2,800) (1,228)
Movement in unrealised gain/(loss) - Limited Partnership 4,594 (380)
Total loss on investments 1,794 (1,608)
Under IFRS 13 'Fair Value Measurement', an entity is required to classify
investments using a fair value hierarchy that reflects the significance of the
inputs used in making the measurement decision.
The following shows the analysis of financial assets recognised at fair value
based on:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
Transfers between levels of the fair value hierarchy are recognised as at the
end of the reporting period during which the change has occurred. There have
been no transfers between levels during the period ended 30 June 2022.
(December 2021: same).
The classification of the Company and Group's investments held at fair value
through profit or loss is detailed in the table below:
30 June 2022 31 December 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Listed Hydrogen Assets 5,433 - - 5,433 8,233 - - 8,233
Limited Partnership - - 89,536 89,536 - - 60,597 60,597
Total 5,433 - 89,536 94,969 8,233 - 60,597 68,830
The Company and Group's Level 3 investment is the investment in the Limited
Partnership. The NAV of the Limited Partnership as of 30 June 2022 is
£89,536,000 (31 December 2021: £60,597,000). The movement on the Level 3
investments during the period is shown below:
30 31 December
June
2021
2022
£'000
£'000
Opening balance 60,597 -
Investment in Limited Partnership 24,345 60,977
Unrealised gain/(loss) on investment in Limited Partnership 4,594 (380)
Closing balance 89,536 60,597
Look-through financial information
The NAV of the Limited Partnership consists of the fair value of its Private
Hydrogen Assets and the carrying value of its assets and liabilities. As at
the period end, the Limited Partnership held three Private Hydrogen Assets.
The following table reconciles the fair value of the Private Hydrogen Assets
and the NAV of the Limited Partnership.
30June 31 December
2022 2021
£'000 £'000
Investment in Private Hydrogen Assets 90,519 39,231
Plus: net current assets/(liabilities) (983) 21,366
NAV of the Limited Partnership 89,536 60,597
The Level 3 Private Hydrogen Assets at 30 June 2022 have been valued using
either the Price of Recent Investment or discounted cash flow methodology as
described by the International Private Equity and Venture Capital Valuation
2018 ("IPEV") Guidelines. Each valuation has been calibrated with a
discounted cash flow analysis of the future expected cash flows accruing to
the Company from each portfolio investment where applicable, and progress
assessed against specific milestones assessed for indications of positive or
negative performance which may impact valuation.
Name Country of Value of Primary Significant Range input
Incorporation Investment valuation unobservable
£'000 technique inputs
Sunfire GmbH Germany 20,659 Price of recent Investment Third-party pricing (without adjustment) n/a
Elcogen Group plc United Kingdom 20,659 Price of recent Investment Third-party pricing (without adjustment) n/a
HiiROC Limited United Kingdom 13,000 11.5%-13.5%
Discounted cashflow Discount rates
Bramble Energy Limited United Kingdom 12,000 Price of recent Investment Third-party pricing (with adjustment) n/a
NanoSUN Limited United Kingdom 10,100 Price of recent Investment Third-party pricing (with adjustment) n/a
Cranfield Aerospace Solutions Limited United Kingdom 5,600 Price of recent Investment Third-party pricing (without adjustment) n/a
HH2E AG Germany 5,165 Price of recent Investment Third-party pricing (without adjustment) n/a
GEN2 Energy AS Norway 3,336 Price of recent Investment Third-party pricing (without adjustment) n/a
5. INVESTMENT ADVISER FEE
Six months ended 30 June 2022
Revenue Capital Total
£'000 £'000 £'000
Investment Adviser fee 206 - 206
At 30 June 2022 an amount of £27,741 was payable to the Investment Adviser in
respect of the Investment Adviser fee. Additionally, the Company has agreed
with the Investment Adviser that the costs and expenses of the IPO would be
capped at 2% of the gross proceeds received, with any cost above this amount
to be paid by the Investment Adviser by way of rebate of its adviser fee. At
30 June 2022, £145,042 in respect of excess issue costs is due to be received
from the Investment Adviser.
Investment Adviser fee
The Company has entered into an Investment Adviser Agreement dated 5 July 2021
between the Company, the AIFM and the Investment Adviser (the "Investment
Adviser Agreement"), pursuant to which the Investment Adviser has been given
responsibility for investment advisory services in respect of any Private
Hydrogen Assets the Company invests in directly and the Listed Hydrogen Assets
(including Listed Hydrogen Assets forming part of the Liquidity Reserve and
uninvested cash) in accordance with the Company's investment policy, subject
to the overall control and supervision of the Board and the AIFM.
Under the Investment Adviser Agreement, the Investment Adviser receives from
the Company, quarterly in advance, an advisory fee equal to:
i. 1.0% of the Net Asset Value per annum of the Listed Hydrogen Assets up
to £100 million:
ii. 0.8% of the Net Asset Value per annum of the Listed Hydrogen Assets from
£100 million (save that the Investment Adviser has agreed to reduce this fee
to 0.5% in respect of the Liquidity Reserve pending its re-investment in
Private Hydrogen Assets for 18 months following Admission, being to and
including 30 January 2023);
iii. 1.5% of the Net Asset Value per annum of any Private Hydrogen Assets held
by the Company directly (i.e. not held by the Limited Partnership or any other
undertaking advised by the Investment Adviser where the Investment Adviser is
receiving a separate advisory fee); and
iv. for so long as the Company is not considered a 'feeder fund' for the
purposes of the Listing Rules, 1.5% per annum of the Net Asset Value of the
Private Hydrogen Assets held by the Limited Partnership.
The Limited Partnership has entered into a Limited Partnership Investment
Adviser Agreement dated 5 July 2021 (the "Limited Partnership Investment
Adviser Agreement") between the General Partner (in its capacity as general
partner of the Limited Partnership), the AIFM and the Investment Adviser,
pursuant to which the Investment Adviser has been given responsibility for
investment advisory services in respect of the Private Hydrogen Assets in
accordance with the investment policy of the Limited Partnership, subject to
the overall control and supervision of the General Partner and the AIFM.
Under the Limited Partnership Investment Adviser Agreement, the Investment
Adviser, if the Company was considered a 'feeder fund' for the purposes of the
Listing Rules by virtue of additional investors co-investing via the Limited
Partnership in the future, shall receive from the Limited Partnership an
advisory fee equal to 1.5% per annum of the Net Asset Value of the Private
Hydrogen Assets held by the Limited Partnership, payable quarterly in advance.
Advisory fees paid or payable by the Limited Partnership are reflected through
the NAV of the Limited Partnership.
No performance fee is paid or payable to the Investment Adviser under either
the Investment Adviser Agreement or the Limited Partnership Investment Adviser
Agreement but the principals of the Investment Adviser are, subject to certain
performance conditions being met, entitled to carried interest fees from the
Limited Partnership. Refer to 'Carried Interest Partner Fees' section below.
Carried Interest Partner Fees
Pursuant to the terms of the Limited Partnership Agreement dated 5 July 2021
as amended and restated on 26 November 2021 (the "Limited Partnership
Agreement"), the Carried Interest Partner is, subject to the limited partners
of the Limited Partnership receiving an aggregate annualised 8% realised
return (i.e. the Company and, in due course, any additional co-investors),
entitled to a carried interest fee in respect of the performance of the
Private Hydrogen Assets.
Subject to certain exceptions, the Carried Interest Partner will receive, in
aggregate, 15% of the net realised cash profits from the Private Hydrogen
Assets held by the Limited Partnership once the limited partners of the
Limited Partnership (i.e. the Company and, in due course, any additional
co-investors) have received an aggregate annualised 8% realised return. This
return is subject to a 'catch-up' provision in Carried Interest Partner's
favour. Any realised or unrealised carried interest fee paid or payable to the
Carried Interest Partner is reflected through the NAV of the Limited
Partnership. During the period carried interest fees of £753,213 were accrued
as payable to the Carried Interest Partner.
20% of any carried interest received (net of tax) will be used by the
principals of the Investment Adviser to acquire Ordinary Shares in the market.
Any such acquired shares will be subject to a 12-month lock-up from the date
of purchase.
General Partner's priority profit share
Under the Limited Partnership Agreement, the General Partner of the Limited
Partnership shall be entitled to a General Partner's Profit Share ("GPS"). The
GPS for each accounting period shall be an amount equal to 1.5% of the
prevailing NAV of the Limited Partnership. For so long as the Company is the
sole limited partner of the Limited Partnership, the GPS shall be distributed
to the Company rather than the General Partner. The Company is currently the
sole limited partner of the Limited Partnership. Therefore, under the
Investment Adviser Agreement, the investment adviser fee in relation to the
Private Hydrogen Assets held by the Limited Partnership is settled by the
Company which for the period totaled £444,856. During the period the Limited
Partnership did not call any GPS from the Company as the net effect of the
calling and distributing GPS from/to the Company is £nil.
6. OTHER EXPENSES
For the
six months ended
30 June 2022
£'000
Administration & Secretarial Fees 93
AIFM Fees 40
Directors' Fees 84
Custodian Charges 24
Brokers Fees 30
Registrar's Fees 9
Legal Fees 12
Audit Fees 47
D& O Insurances 24
PR & Marketing 57
Other expenses 55
Total revenue expenses 475
Expenses charged to capital:
Capital transaction costs -
Total expenses 475
During the period, the auditors received £159,000 (including VAT of £12,000)
for non-audit services in respect of the Company's equity raise, which have
been treated as a capital expense and included in 'share issue costs'
disclosed in the Statement of Changes in Equity. This service is required by
law or regulation and is therefore a permissible non-audit service under the
FRC Ethical Standard.
7. TAXATION
During the period, the auditors received £159,000 (including VAT of £12,000)
for non-audit services in respect of the Company's equity raise, which have
been treated as a capital expense and included in 'share issue costs'
disclosed in the Statement of Changes in Equity. This service is required by
law or regulation and is therefore a permissible non-audit service under the
FRC Ethical Standard.
7. TAXATION
Analysis of charge in the period
For the six months ended 30 June 2022
Revenue Capital Total
£'000 £'000 £'000
Withholding tax expense - - -
Total tax charge for the period - - -
8. TRADE AND OTHER RECEIVABLES
As at As at
31 December
30 June
2021
2022
£'000
£'000
Prepayments 8 24
Other receivables 155 159
Total 163 183
9. TRADE AND OTHER PAYABLES
As at As at
31 December
30 June
2021
2022
£'000
£'000
Amounts falling due within one year:
Accrued expenses 228 246
Total 228 246
10. SHARE CAPITAL
As at 30 June 2022 As at 31 December 2021
Nominal value of shares (£) Nominal value of shares (£)
Allotted, issued and fully paid: No. of shares No. of shares
Shares in issue at the beginning of the period 107,350,000 1,073,500.00 - -
Allotted upon incorporation
Ordinary Shares of 1p each - - 1 0.01
Management Shares of £1.00 each - - 50,000 50,000.00
Allotted/redeemed following admission to LSE
Ordinary Shares issued 21,469,999 214,700 107,349,999 1,073,499.99
Management Shares redeemed - - (50,000) (50,000.00)
Closing balance 128,819,999 1,288,200 107,350,000 1,073,500.00
The Company is permitted to hold Ordinary Shares acquired by way of market
purchase in treasury, rather than having to cancel them. Such Ordinary Shares
may be subsequently cancelled or sold for cash. No Ordinary Shares have been
repurchased during the period.
Each Ordinary Share held entitles the holder to one vote. All shares carry
equal voting rights and there are no restrictions on those voting
rights.
11. RETURN PER ORDINARY SHARE
Return per share is based on the weighted average number of Ordinary Shares in
issue during the six months ended 30 June 2022 of 116,839,502.
For the six months ended 30 June 2022
Revenue Capital Total
£'000 £'000 £'000
Loss/(gain) for the period (£'000) (661) 1,794 1,133
Return per Ordinary Share (0.57)p 1.54p 0.97p
There is no dilution to return per share as the Company has only Ordinary
Shares in issue.
12. NET ASSET VALUE PER ORDINARY SHARE
As at As at
30 June 31 December
2022 2021
Net Asset Value (£'000) 124,767 102,786
Ordinary Shares in issue 128,819,999 107,350,000
NAV per Ordinary Share 96.85p 95.75p
There is no diluted Net Asset Value per share as the Company has only Ordinary
Shares in issue.
13. RELATED PARTY TRANSACTIONS AND MATERIAL CONTRACTS
Directors
Fees are payable to the Directors at an annual rate of £65,000 to the
Chairman, £55,000 to the Chairman of the Audit and Risk Committee and
£45,000 to the other Directors with the exception of Mr Bucknall who is not
remunerated for his role as a Non-Executive Director. These fees were
effective from the date of appointment of each Director being 20 May 2021 for
Mr Hogan and Mrs Schipstra, 8 February 2022 for Mrs Rotheroe and 20 May 2022
for Mr Bucknall. Details of the Directors remuneration paid during the period
is given in note 6. At the period end, the Directors had the following
holdings in the Company:
Ordinary Shares at Ordinary Shares at
30 June 31 December
2022 2021*
Simon Hogan 40,000 40,000
Afkenel Schipstra 10,100 10,100
Abigail Rotheroe(1) 10,000 -
David Bucknall(2) - -
(1)Mrs Rotheroe was appointed as a Non-Executive Director on 8 February 2022
(2)Mr Bucknall was appointed as a Non-Executive Director on 20 May 2022
*Audited
Mrs Caroline Cook retired as a Director of the Company on 7 April 2022, at
which date Mrs Cook held 20,100 Ordinary Shares. Mr Roger Bell retired as a
Director of the Company on 4 May 2022, at which date Mr Bell held no Ordinary
Shares.
Investment Adviser
Fees payable to the Investment Adviser are shown in the Statement of
Comprehensive Income. Fees details of the Investment Adviser are shown in note
5. At 30 June 2022, the principals of the Investment Adviser, Dr JJ Traynor
and Mr R Hulf, each held 100,000 Ordinary Shares of the Company (31 December
2021: same). Transactions between the Company and the Investment Adviser
during the period are disclosed in note 5.
INEOS Energy
The Relationship and Co-Investment Agreement dated 19 June 2021 between INEOS
UK E&P Holdings Limited ("INEOS Energy"), the Investment Adviser, the
Company and the General Partner (acting in its capacity as the general partner
of the Limited Partnership), pursuant to which the parties agreed that: (i)
INEOS Energy would subscribe for and/or shall procure that its associates
shall subscribe for at least 25 million Ordinary Shares in the IPO; (ii) such
Ordinary Shares subscribed by INEOS Energy would be subject to a 12 month
lock-up from the date of purchase pursuant to which INEOS Energy agreed that
it will not sell, grant options over or otherwise dispose of any interest in
any such Ordinary Shares purchased by them (subject to the usual carve-outs);
(iii) INEOS Energy was entitled to nominate one Non-Executive Director for
appointment to the Board; (iv) prior to making any co-investment opportunity
in relation to a Private Hydrogen Assets that is a project to any limited
partner of the Limited Partnership, the Company and the Investment Adviser
will give INEOS Energy a right of first refusal to acquire up to 100% of such
co-investment opportunity (provided that the 'related party transaction'
requirements set out in the Listing Rules are complied with); (v) INEOS Energy
are provided with certain information rights relating to Private Hydrogen
Assets and co-investment opportunities; and (vi) INEOS Energy shall be
entitled to second one or more employees to the Investment Adviser from
time-to-time. INEOS Energy has agreed that all transactions between INEOS
Energy and its associates and any member of the Company and Group and/or the
Investment Adviser are conducted at arm's length on normal commercial terms.
At the IPO, INEOS Energy subscribed for and received 25 million Ordinary
Shares of the Company. At 30 June 2022, INEOS Energy held 25 million Ordinary
Shares of the Company (31 December 2021: 25 million Ordinary Shares).
David Bucknall is currently Chief Executive Officer of the INEOS Energy group
of companies and was appointed as the Board representative of INEOS Energy on
20 May 2022 pursuant to the Relationship and Co-Investment Agreement entered
into between, inter alia, INEOS Energy and the Company at the Company's
launch.
Alternative Investment Fund Manager
Sanne Fund Management (Guernsey) Limited is appointed to act as the Company's
and the Limited Partnership's Alternative Investment Fund Manager (the "AIFM")
for the purposes of the UK AIFM Rules. The AIFM and the Company have delegated
the provision of Portfolio Advisory services to the Investment Adviser. The
AIFM, Company Secretary and Administrator are part of the same Apex Group
Limited.
Under the AIFM Agreement between the AIFM and the Company dated 5 July 2021,
and with effect from Admission, the AIFM shall be entitled to receive from the
Company a fee of 0.05% of Net Asset Value per annum up to £250 million, 0.03%
of Net Asset Value per annum from £250 million up to £500 million and 0.015%
of Net Asset Value per annum from £500 million, in each case adjusted to
exclude any Net Asset Value attributable to any Private Hydrogen Assets held
through the Limited Partnership and subject to a minimum annual fee of
£85,000.
Under the AIFM Agreement between the AIFM and the Limited Partnership dated 5
July 2021, the AIFM receives from the Limited Partnership a fee of 0.05% of
the net asset value of the Limited Partnership per annum up to £250 million,
0.03% of the net asset value of the Limited Partnership per annum from £250
million up to £500 million and 0.015% of the net asset value of the Limited
Partnership per annum from £500 million, subject to a minimum annual fee of
£25,000. AIFM fees paid or payable by the Limited Partnership are reflected
through the NAV of the Limited Partnership.
The AIFM is also entitled to reimbursement of reasonable expenses incurred by
it in the performance of its duties.
Administration and Company Secretarial services fee
The Company has entered into an Administration and Company Secretarial
Services Agreement dated 5 July 2021 (the "Administrator and Company Secretary
Agreement") between the Company and Sanne Fund Services (UK) Limited (the
"Company Secretary and Administrator") pursuant to which the Company Secretary
and Administrator has agreed to act as Company secretary and administrator to
the Company.
Under the terms of the Administration and Company Secretarial Services
Agreement, the Company Secretary and Administrator receives a fee from the
Company of 0.06% of Net Asset Value per annum up to £250 million, 0.05% of
Net Asset Value per annum from £250 million up to £500 million and 0.025% of
Net Asset Value per annum from £500 million and subject to a minimum annual
fee of £135,000 plus a further £10,000 per annum to operate the Company's
Liquidity Reserve.
Under the terms of the Limited Partnership Administration Agreement 5 July
2021, pursuant to which the Company Secretary and Administrator has agreed to
act as administrator to the Limited Partnership, the Company Secretary and
Administrator receives an annual fee from the Limited Partnership of £62,500
and of £15,000 in respect of the General Partner. Administration fees paid or
payable by the Limited Partnership are reflected through the NAV of the
Limited Partnership. For so long as the Company is the sole Limited Partner,
the administration fee in respect of the General Partner shall be allocated
settled by the Company rather than the General Partner.
Custodian fee
The Company has entered into a Custodian Agreement between the Company and The
Northern Trust Company (the "Custodian") dated 23 June 2021 (the "Custodian
Agreement"), pursuant to which the Custodian has agreed to act as custodian to
the Company.
The Custodian is entitled to a minimum annual fee of £50,000 (exclusive of
VAT) per annum. The Custodian is also entitled to a fee per transaction taken
on behalf of the Company.
Registrar fee
The Company utilises the services of Computershare Investor Services plc (the
"Registrar") as registrar to the transfer and settlement of Ordinary Shares.
Under the terms of the Registrar Agreement dated 5 July 2021, the Registrar is
entitled to a fee calculated based on the number of shareholders, the number
of transfers processed and any Common Reporting Standard on-boarding, filings
or changes. The annual minimum fee is £4,800 (exclusive of VAT). In addition,
the Registrar is entitled to certain other fees for ad hoc services rendered
from time to time.
14. SUBSIDIARY AND RELATED ENTITIES
Subsidiary
The Company owns 100% of HydrogenOne Capital Growth (GP) Limited.
Effective ownership Country of ownership Principal activity Issued share capital Registered
address
Subsidiary name
HydrogenOne Capital Growth (GP) Limited 100% United Kingdom General partner of HydrogenOne Capital Growth Investments (1) LP £1 6th Floor,
125 London Wall, London, EC2Y 5AS
Related entities
The Company holds Private Hydrogen Assets through its investment in the
Limited Partnership, which has not been consolidated as a result of the
adoption of IFRS 10: Investment entities exemption to consolidation. There are
no cross guarantees amongst related entities. Below are details of the
unconsolidated Private Hydrogen Asset held through the Limited Partnership.
Name Purpose of the entity Country of Incorporation Value of Investment Total assets as at 30 June 2022 Registered address
£'000 £'000
Sunfire GmbH Electrolyser producer Germany 20,659 147,836 Gasanstaltstraße 2
01237 Dresden, Germany
Elcogen Group plc Solid oxide fuel cell supply United Kingdom 20,659 26,400 HIghdown House, Yeoman Way, Worthing, West Sussex,
BN99 3HH
HiiROC Limited Supplier of clean hydrogen production technology United Kingdom 13,000 33,863 22 Mount Ephraim, Tunbridge Wells, Kent, TN4 8AS
Bramble Energy Limited Printed Circuit Board fuel cell solutions United Kingdom 12,000 33,923 6 Satellite Business Village, Fleming Way, Crawley, England, RH10 9NE
NanoSUN Limited Supplier of mobile hydrogen storage and refueling systems United Kingdom 10,100 15,148 Abraham Heights Farm, Westbourne Road, Lancaster, LA1 5EF
Cranfield Aerospace Solutions Limited Aviation design and maintainance United Kingdom 5,600 6,737 Hanger 2, Cranfield Airport, Cranfield, Bedfordshire, MK43 0AL
HH2E AG Supplier of green electrolysis and energy storage facilities Germany 5,165 6,625 HRB 167243, Kaiser-Wilhelm-Straße 93, 20355 Hamburg
GEN2 Energy AS Green Hydrogen development Norway 3,336 11,304 Raveien 205, 3184 Borre, Norway
The maximum exposure to loss from the unconsolidated entities is the carrying
amount of the financial assets held.
During the period the Company did not provide financial support and has no
intention of providing financial or other support to the subsidiary and the
unconsolidated Private Hydrogen Assets held through the Limited Partnership.
16. POST BALANCE SHEET EVENTS
On 27 July 2022, an investment of £8,500,000 was made to the Limited
Partnership in respect of Strohm Holding B.V., an unlisted thermoplastic
composite pipe supply company. This was purchased by the Limited Partnership
for EUR 10,000,000 on 11 August 2022.
17. STATUS OF THIS REPORT
These Half-yearly financial statements are not the Company's statutory
accounts for the purposes of section 434 of the Companies Act 2006. They are
unaudited. The unaudited Half-yearly Financial Report will be made available
to the public at the registered office of the Company.
The report will also be available in electronic format on the Company's
website
https://hydrogenonecapitalgrowthplc.com/
(https://hydrogenonecapitalgrowthplc.com/)
The information for the year ended 31 December 2021 has been extracted from
the last published audited financial statements, unless otherwise stated.
The audited financial statement has been delivered to the Registrar of
Companies. KPMG Channel Islands Limited reported on those accounts and their
report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under sections 498(2) or 498(3) of
the Companies Act 2006.
The Half-yearly Financial Report was approved by the Board on 16 September
2022.
For further information contact:
Secretary and registered office:
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
The Half-yearly financial report will be 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)
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