REG - HydrogenOne Cap Gwth - Half-year Report
20/09/2023 07:00
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RNS Number : 9764M HydrogenOne Capital Growth PLC 20 September 2023
LEI: 213800PMTT98U879SF45
20 September 2023
HydrogenOne Capital Growth plc
Half-Yearly Report 2023
About us
HydrogenOne Capital Growth Plc ("HGEN", "the Company") is the first
London-listed 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, 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 is an Article 9 climate impact fund under the Sustainable
Finance Disclosure Regulation (the "SFDR").
· A unique offering to investors - leadership in a new green energy
technology sector from the first London listed hydrogen fund.
· Strong orientation to ESG mandates, investing capital in
low-carbon growth and enabling the avoidance of GHG emissions.
· Significant pipeline of >£500m of potential investments to
deliver 10-15% average NAV growth, including exits.
· First mover advantage in the hydrogen sector, which is
accelerating faster than anticipated with positive growth outlook.
· Investment Adviser's track record in energy and capital markets.
>£110m
Deployed in low-carbon growth for avoided GHG
£129.7m
Net Asset Value
SFDR Article 9
Climate impact fund
>83,000 tonnes
CO2e emissions avoided in half year to 30 June 2023
Highlights and key metrics
At a glance
Financial and operational
· NAV increased by 3.4% from £125.4 million at 31 December 2022 to
£129.7 million at 30 June 2023. NAV per share increased to 100.7p at 30 June
2023. The share price has declined by 19.7% in the same period. NAV increased
by 3.9% from £124.8 million at 30 June 2022;
· Positive progress on revenue growth from portfolio companies,
delivering an aggregate £52.0 million in total revenue in the 12-month period
to 30 June 2023, an increase of 170% compared to the 12 month period to 30
June 2022;
· The Company estimates the carrying value of the private portfolio
is at least 30% lower than comparable listed hydrogen companies, underlining
our focus on private assets and our robust valuation methodology;
· Investment activity centred on follow-ons, with one new
investment. During the six months ended 30 June 2023, the Company successfully
completed its first investment in a private hydrogen project (Thierbach
project in Germany) and made further investments in three Private Hydrogen
Assets in its portfolio, totalling £8.0 million;
· The portfolio weighted average discount rate at 30 June 2023 was
13.7% (30 June 2022: 12.4%) resulting in a 5.1 pence per share reduction in
NAV between 30 June 2022 and 30 June 2023;
· The Company has retained an uncommitted cash position of £8.9
million as at 30 June 2023, and £3.0 million of listed hydrogen companies at
the end of the period;
· A further investment has been completed post-period end in
NanoSUN for £1.0 million; and
· The fundamentals of the clean hydrogen sector continued to
strengthen, despite recent weak macro-economic conditions. The Company has
seen some £13 billion of investment in green hydrogen year-to-date, a 380%
increase over 2022 levels, underscoring the positive industry outlook and
supportive regulatory regimes for clean hydrogen.
Environmental, Social and Governance ("ESG")
· Classified as an Article 9 Fund under the SFDR;
· Introduction of 6 month reporting of key ESG metrics; 83,497
tonnes of Greenhouse Gas (tCO2e) emissions avoided in the six months ended 30
June 2023 and 134,076 tCO2e since IPO;
· 87.6% alignment with EU taxonomy for sustainable activities (the
"EU Taxonomy") assessment on Private Hydrogen Assets at 30 June 2023;
· £111million deployed in low-carbon growth (since fund
inception);
· Potential 592 MWh lifetime clean energy capacity in six months
ended 30 June 2023 and 227,292 MWh since IPO;
· 1,293 jobs supported; and
· Continued stewardship activity with portfolio companies to
further enhance ESG credentials and reporting, with 6 month reporting of key
metrics introduced.
At 30 June 2023 At 31 December 2022 % change(1,2)
NAV per Ordinary Share 100.70 p 97.31p 3.5%
NAV £129.7 m £125.4m 3.5%
Ordinary share price 63.70p 79.30p (19.7%)
Market capitalisation £82.1 m £102.2m (19.7%)
Share price premium/(discount) to NAV(1) (36.7%) (18.5%) (98.4%)
Ongoing charges 2.62% 2.51% 4.3%
Cumulative capital deployed in low-carbon growth since inception £111.1m £102.9m 8.0%
GHG emissions avoided 83,497 tCO(2)e 42,716 tCO(2)e n/a
The EU taxonomy alignment 89% 89% n/a
1 These are alternative performance measures
2 Total returns in sterling for the six months to 30 June 2023
Alternative Performance Measures ("APMs")
Alternative Performance Measures ("APMs"). The disclosures above are
considered to represent the Company's APMs. Definitions of these APMs and
other performance measures used by the Company, together with how these
measures have been calculated, can be found below.
Portfolio at a glance
Portfolio composition (as at 30 Jun 2023)
Name Percentage of NAV Portfolio theme
Sunfire 21% Supply chain
Elcogen 18% Supply chain
Strohm 15% Storage & Distribution
NanoSUN 10% Storage & Distribution
Cranfield Aerospace Solutions 9% Hydrogen applications
HiiROC 9% Supply chain
Bramble Energy 7% Supply chain
HH2E 4% Hydrogen production
Gen2 3% Hydrogen production
HH2E - Thierbach 1% Hydrogen production
Listed 2% Storage and Distribution
Listed 1% Supply chain
Portfolio segmentation by theme
Hydrogen production - 8%
Hydrogen applications - 9%
Supply chain - 56%
Storage & distribution - 27%
Portfolio segmentation by geography
UK - 53%
Germany - 27%
Netherlands - 15%
Scandinavia - 4%
Other - 1%
Chair's statement
On behalf of the Board, I am pleased to report on the six-month period ended
30 June 2023.
Simon Hogan Chairman
During the period, the Company has continued to deliver consistent growth in
the value of our private portfolio, through implementing our distinctive
strategy of investing in the clean hydrogen opportunities not readily
accessible elsewhere. With the majority of IPO funds now deployed, our
approach has focused on incremental investments in existing portfolio
companies, backing these management teams to deliver their growth plans, and
assessing new growth opportunities. ESG is fully embedded in our investment
decisions, and the Board is pleased to see the introduction of six-monthly ESG
reporting. The Company is dedicated to further developing and progressing our
ESG framework to achieve the highest reporting and performance levels.
The Company continues to see strong support for the energy transition from
governments around the world and views the policy focus in this area as a
catalyst for further growth. 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. Today the Investment Adviser is tracking over 170 completed
projects totalling 800MW globally. In addition, the Investment Adviser are
monitoring 13GW in projects that are under construction or advanced
development with investment in land, electrolysers and FEED studies. Some
4.5GW of this is under construction currently.
Overall, despite the uncertainty of the current economic environment, the
Board remains confident that the Company is investing in a sector with a
favourable outlook and believes in its growth potential as illustrated by the
strength of our current pipeline of private clean hydrogen investments.
So far 2023 has seen the continuation of the market uncertainties created by
the aftermath of COVID-19, and Russia's on-going invasion of Ukraine. This has
resulted in high energy price volatility and supply chain issues, putting
pressure on the economy, and contributing to inflation and higher interest
rates. The Investment Adviser is seeing fundamental shifts in energy policy in
many countries in response to this, in order to accelerate the transition to a
low carbon economy and improve energy security.
However, share prices of the innovative growth companies required to enable
this transition, including the Company's, have seen considerable pressure over
the first half of 2023. The global downturn has also affected our ability to
raise capital in 2023, having last completed an equity raise of £21 million
in April 2022.
The Board continues to monitor wider market events as they relate to the
Company, including the share price volatility in the market price of its
shares and the discount to NAV at which the shares have traded through 2023.
The Board is not aware of Company-specific factors that have led to the
prevailing discount to net asset value to which the Company's shares trade and
believes this is primarily driven by wider market events including the sudden,
material rise in interest rates and an unfavourable macroeconomic backdrop. We
are focused as a Board on improving the share price for our investors, and
believe that this can be achieved by crystalising value through third party
investment in portfolio companies, and asset sales, delivered to maximise NAV,
over time.
In a further parallel development, listed funds have come under scrutiny from
investors regarding the valuation of portfolios of private investments. The
Company applies a consistent approach to portfolio valuation, centred on
discounted cash flows, using the International Private Equity and Venture
Capital Valuation 2022 ("IPEV") Guidelines. Share prices in the listed markets
are reflected in the valuation of the Company through listed assets in the
portfolio. The details of these valuations are set out later in this report.
The resulting private valuation that has been set out in this report has an
implied forward revenue multiple of 4 times 2024 expected revenues, which is
some 30% lower than listed hydrogen sector multiples. This, the Company
believes, underscores the robust and conservative approach we are taking to
valuations.
The Board meets quarterly with the Company's Investment Adviser and holds
regular meetings to review all of the Company's investment valuations. The
Board also has regular contact with the Investment Adviser outside of formal
Board meetings. I and other Board members attended the Company's Capital
Markets Day earlier this year, and met some of our investors and analysts, and
the management teams of all the private companies that we have invested in.
The Investment Adviser has a dedicated investment team, and has the right to
be represented on all of the boards of the private assets.
The Board and Company is committed to the aim of the Company that seeks to
generate NAV returns of 10-15% over time, including proceeds from exits,
whilst investing in clean hydrogen for a climate positive impact.
Our diversified approach to portfolio construction has provided resilience and
our investment case has been reinforced further by macro tailwinds and
supportive regulatory regimes in the clean hydrogen sector, particularly in
the EU and the USA. More than ever before, we remain confident that the
Company is investing in a sector with a favourable outlook and a substantial
growth potential. Macro events have refocused efforts on the need to reduce
global reliance on fossil fuels, with the Company well-positioned to continue
investing in low-carbon growth, aimed at reducing harmful emissions, improving
energy security and driving the energy transition.
Performance
During the period, the Company continued to selectively deploy capital into
the clean hydrogen sector, totalling £8.0 million in the first half of 2023.
The emphasis has been on follow-on investments in existing positions, with the
2021 IPO proceeds largely deployed. This comprised -
· One new private investment completed, at a green hydrogen
production project at Thierbach, in Germany, managed by HH2E AG. The Company
committed to invest £2.5 million (EUR 2.8 million) into further maturing this
project, ahead of final investment decision, alongside other institutional
investors and HH2E. To date, £1.9 million of this commitment has been drawn;
· The Company invested £2.9 million follow-on in hydrogen flight
innovator Cranfield Aerospace Solutions Ltd, alongside Safran Corporate
Ventures and the Strategic Development Fund;
· The Company invested £1.8 million follow-on in Sunfire AG, a
leading electrolyser developer and supplier; and
· The Company invested £1.5 million follow-on in NanoSUN, a
hydrogen technology, transportation and distribution business.
Including further follow-on investment completed post period end, the Company
has deployed a total of £112 million, or 88% of the net proceeds raised of
£126 million, into low-carbon growth companies.
At 30 June 2023, the Company's Private Hydrogen Assets comprised ten
investments in hydrogen assets in the UK and Europe with an aggregate value of
£117.5 million, as well as a small allocation to strategic listed hydrogen
companies.
Eight of the Company's private investments, representing 89% of its invested
portfolio by value, are revenue-generating, producing equipment and technology
solutions for clean hydrogen production. The aggregate revenue from these
investments was £52 million in the 12-month period to 30 June 2023, an
increase of 170% from the prior year.
The total NAV on 30 June 2023 was £129.7 million, including a £120.5 million
portfolio valuation, of which £3 million is in liquid, listed positions,
£8.9 million is in cash held by the Company with other net assets of £0.3
million.
At 30 June 2023, the NAV per share of the Company was 100.70 pence,
representing an increase of 3.87 pence per share (3.9%) in the 12 month
period. The increase was driven primarily by valuation uplifts to the
Company's portfolio of private investments, positively contributing 6.75 pence
per share to the NAV increase.
Despite this growth delivery from our Private Hydrogen Assets, the Company's
share price ended the period on a discount to NAV and in common with much of
the investment trust sector, in large part due to unfavourable macro-economic
conditions.
Earnings and dividend
The Company reported a gain after tax of £4.4 million for the period, equal
to 3.39 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.
ESG
Since our launch in 2021, we have set our focus for the Company 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.
Our commitment to positively contribute to climate change mitigation, whilst
integrating core ESG principles into our decision making and ownership
process, is at the core of everything that we do as a company. The Company is
classified as an Article 9 Fund, the highest classification under the SFDR
regulation. We are a signatory of the PRI, a United Nations supported network
of financial institutions that promote sustainable investments. In
collaboration with our portfolio companies, we will push forward with our
sustainable investment objectives as we continue to deploy capital in
low-carbon growth.
In addition to a 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 are pleased to be once again publishing the external reporting of the
Company's performance, including EU taxonomy alignment of our portfolio
companies and avoided GHG emissions disclosures, which can be found in the ESG
section of this report. This is the first interim report for the Company that
reports on this basis.
Events after the period end
The Company completed a £1.0 million follow-on investment in NanoSUN
alongside Westfalen and NanoSUN management.
Outlook
Our diversified portfolio approach has provided resilience and our investment
case has been reinforced further by macro tailwinds and supportive regulatory
regimes in the clean hydrogen sector, particularly in the EU and the USA.
There are considerable uncertainties on the near-term macro-economic outlook
and capital raising capacity of the listed funds sector. Nevertheless, we
remain confident that the Company is investing in a sector with a favourable
outlook and a substantial growth potential.
Whilst market sentiment is outside of our control, the Company anticipates the
continued solid performance of our portfolio, revenue growth and delivery of
key milestones will be catalysts for appreciation in our share price.
All of this underpins our target to deliver 10-15% annual NAV growth over
time, and I believe that our Investment Adviser, whose principals have over 60
years of combined specialist experience and track record, is well-placed to
deliver on these projected targets.
On behalf of the Board, I would like to thank all of our shareholders for
their support, as we continue to grow our unique and diverse portfolio of
leading clean hydrogen investments.
Simon Hogan
Chairman
19 September 2023
Investment Adviser's report
About the Investment Adviser
The Company's Alternative Investment Fund Manager ("AIFM"), Fundrock
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 and 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
The Investment Adviser recently published its annual review of the hydrogen
industry, The Bluffer's Guide to Hydrogen, which is available on the Company's
website, at
https://hydrogenonecapitalgrowthplc.com/the-hydrogen-market/hydrogen-sector-reports/.
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 40 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 to deliver
affordable, secure, and sustainable low-carbon energy, with clean hydrogen set
to play a vital role.
Alongside this, following Russia's invasion of Ukraine, consumers have seen a
significant increase in fossil fuel prices. 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.
2020 saw EU targets for hydrogen to meet 14% of Europe's energy needs by 2050.
In 2022, the EU reshaped its energy policy to the REPowerEU 2030 plan, which
calls for an implied over 300GW of clean hydrogen by 2030, compared to 80GW in
previous plans. Some EUR 5.4 billion in hydrogen subsidies have recently been
approved under Important Projects of Common European Interest ("IPCEI"), which
are expected to unlock a further EUR 8.8 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. The
EU's Hydrogen Bank will auction EUR 800 million of opex subsidy to green
hydrogen in 2023. There are additional sources of grant funding at a country
level in multiple EU countries.
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. 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.
As a further example, in 2019 the Netherlands set targets for 3GW to 4GW of
electrolysis by 2030 with multi-billion- Euro funding support announced by the
Netherlands government. The government is providing EUR 750 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. In May 2023, the Dutch government unveiled
a EUR 28 billion climate package, which included EUR 7.5 billion for green
hydrogen.
The Investment Adviser tracks deal flow in the hydrogen sector. So far in
2023, we have seen some £13 billion of industry investment in green hydrogen,
which is a 380% increase compared to full year 2022 levels. Notably, the July
2023 IPO of Thyssenkrupp Nucera, a Germany electrolyser business, raised over
EUR 500 million of fresh equity, with a valuation of some EUR 2.5 billion. In
Saudi Arabia, the world's largest green hydrogen project, at NEOM, reached
financial close, raising £6.6 billion for a 2+ GW project.
All of this underscores the positive industry outlook and supportive
regulatory regimes for clean hydrogen. This improving outlook for clean
hydrogen demand underpins the order books in many of the Company's
investments, particularly in supply chain sectors such as electrolysers, fuel
cells, storage and transportation businesses. Many of these businesses have
world‑wide customer bases for their products, and are attracting investment
from international financial and strategic investors.
We are tracking over 170 projects on line today around the world, totalling
800MW, then 13GW in over 140 projects that are under construction or advanced
development, with investment in land, electrolysers, FEED studies. Some 4.5GW
of this is under construction today, and a further 1,200GW in over 480
projects that have serious intent to build.
Investment portfolio
During the period, the Company has invested a total of £6.2 million into
three existing Private Hydrogen Assets, and committed £2.6 million into its
first investment in a private hydrogen project, the Thierbach project in
Germany. Of this commitment, £1.9 million has been invested at 30 June 2023.
The Company holds £3 million in 15 listed hydrogen companies world-wide.
These listed companies have been selected as having the best long term growth
potential and attractive valuations. The first half of 2023 has seen general
weakness in listed hydrogen companies, as a result of higher market interest
rates, which has limited investor appetite for earlier stage growth themes.
Uninvested funds of £8.9 million are currently held in uncommitted cash and
cash equivalents in the Company's Liquidity Reserve, ahead of investment.
The Investment Adviser believes that the performance of portfolio companies is
in line with expectations. NAV has increased by 3.4% to £129.7 million in the
first half of 2023. This has been driven by organic growth in private
portfolio companies, with some offset from weaker performance from listed
hydrogen companies, exchange rates and fund expenses.
Private portfolio companies generated some £52 million of revenues for the 12
months to Q2 2023, an increase of 170% from the 12 months to Q2 2022 on a
pro-forma basis. This has been delivered by the conversion of strong order
books into sales, particularly in supply chain and hydrogen distribution
equipment companies. The Investment Adviser expects continued strong organic
growth from the portfolio. In addition, the Investment Adviser anticipates
follow-on funding rounds from new investors in portfolio companies at higher
valuations, and exits from multiple portfolio positions via trade sales and
IPOs over time.
Valuation
As set out in note 4 of the Financial Statements, the Investment Adviser has
carried out fair market valuations of the Private Hydrogen Assets at 30 June
2023, 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.
All Private Hydrogen Assets at 30 June 2023 have been valued using either the
discounted cash flow ("DCF") methodology or a combination of the discounted
cash flow methodology and the Price of Recent Investment methodology as
described by the International Private Equity and Venture Capital Valuation
2018 ("IPEV") Guidelines.
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.
Our approach to valuation remains consistent and unchanged:
· Valuations updated for all Private Hydrogen Assets on a quarterly
basis, approved by the AIFM and Board
· The Private Hydrogen Assets are principally valued using either
the DCF method, or a combination of the DCF method and the Price of Recent
Investment. The valuations are also benchmarked against listed peer group
valuations
· Discount rates are calculated using market parameters for each
investment domicile. The portfolio average discount rate for 30 June 2023 was
13.7% compared with 13.0% at December 2022 and 12.4% at June 2022
· 30 June 2023 NAV was reduced by 5.1 pence per share compared to
31 December 2022, as a result of higher discount rates.
The Company notes that its NAV has been steadily increasing over the last
twelve months. This has been driven by organic growth in the Company's private
assets, despite headwinds from lower listed share prices in the portfolio and
higher discount rates. By contrast, the share prices of listed hydrogen
companies, which we track with the SOLGHYD index, have been volatile and
declining since Q3 2021. This decline is due to market allocation away from
early stage technology businesses as interest rates have risen, and a
correction to the high valuations seen in the market in 2020-21. The Company's
own share price has tracked this decline in listed hydrogen companies, and
listed funds in general, despite the growth in NAV. Despite this, the Company
assesses that the carrying value of its private assets is some 30% lower than
listed hydrogen companies, based on comparative revenue multiples.
Portfolio
Portfolio summary
Company Country of incorporation Value of investment £'000
Private hydrogen assets held by the Limited Partnership at 30 June 2023
Sunfire GmbH Germany 25,559
Elcogen plc United Kingdom 21,475
Strohm The Netherlands 18,440
NanoSUN Limited United Kingdom 12,555
Cranfield Aerospace Solutions Limited United Kingdom 10,422
HiiROC Limited United Kingdom 10,325
Bramble Energy Limited United Kingdom 8,439
HH2E AG Germany 4,453
Gen2 Energy Norway 3,999
Thierbach Germany 1,852
Total 117,519
Market value
Company Country of main listing £'000 % of net assets
Listed hydrogen assets held by the Company at 30 June 2023
SFC Energy AG-BR Germany 504 0.4%
Hydrogen-Refueling-Solutions SA France 339 0.3%
Doosan Fuel Cell Co Ltd South Korea 326 0.3%
Hexagon Purus ASA Norway 322 0.2%
Green Hydrogen Systems A/S Denmark 285 0.2%
S-Fuelcell Co Ltd South Korea 251 0.2%
McPhy Energy SA France 198 0.2%
Fuelcell Energy Inc United States 154 0.1%
AFC Energy plc United Kingdom 136 0.1%
Ceres Power Holdings plc United Kingdom 128 0.1%
Ballard Power Systems Inc Canada 118 0.1%
Aker Horizons AS Norway 107 0.1%
ITM Power plc United Kingdom 75 0.1%
Cell Impact AB Sweden 58 0.0%
Enapter AG Germany 14 0.0%
Total listed investments 3,013 2.3%
Private assets investment held by the Company at 30 June 2023
HydrogenOne Capital Growth Investments (1) LP United Kingdom 117,721 90.8%
Total Investments 120,734 93.1%
Cash 8,556 6.6%
Other net assets 430 0.3%
Total net assets 129,720 100.0%
All investments are in equity securities.
Our Portfolio
Word from the top
"We aim for replacing fossil fuels with renewables in all areas of life -
creating a sustainable future for generations to come. We deliver on our
purpose through developing, manufacturing and servicing high-quality
electrolysis solutions. By providing renewable hydrogen and syngas as
substitutes for fossil energy sources, we enable the transformation of
carbon-intensive sectors towards net zero."
Nils Aldag, CEO
Sunfire GmbH
www.sunfire.de (http://www.sunfire.de)
A German industrial electrolyser producer, which offers both pressure alkaline
(AEL) and solid oxide electrolysers (SOEC).
Total investment size £21.9 million
% of NAV 20%
Date of investment October 2021/March 2023
Why invested · Industry-leading electrolyser manufacturer, investing for growth
and technology development
· Material alkaline and solid oxide business, with revenues from a
growing international customer base in the global industrial electrolyser
market
· Strong product credentials backed by existing customer base and
generated by high quality in‑house engineering and product design
· 500MW / annum electrolyser production site in EU - with a further
extension to gigawatt-scale already in planning
Total Addressable Market >£40 billion (by 2030)
Value catalysts · >GW scale alkaline + SOEC manufacturing scale up
· Conversion of strong revenue growth to EBITDA to underpin
eventual exit for investors
Performance since investment · Sunfire continued to scale its alkaline electrolysis
manufacturing capacity in Germany and Switzerland.
· The company launched a new serial production facility in
Solingen, Germany with investment of EUR 30 million at the facility.
· Further expansion is underway at Solingen, taking Sunfire's total
capacity to 500MW of alkaline electrolysis by the end of 2023; and Sunfire
announced a strategic partnership with Vitesco Technologies, who will combine
Sunfire electrolysis cells into the stacks, that form the main element of
electrolysers.
· Sunfire announced a strategic partnership with Vitesco
Technologies, who will combine Sunfire electrolysis cells into the stacks,
that form the main element of electrolysers.
· The Bad Lauchstädt Energy Park, a consortium of Terrawatt,
Uniper, VNG Gasspeicher, ONTRAS, DBI and VNG, in Central Germany, took Final
Investment Decision on a 30MW green hydrogen facility with associated salt
cavern storage. The EUR210 million project will use Sunfire electrolysers, and
should replace grey hydrogen in the Leuna refinery and supply transport
customers, commencing in 2025.
· In August 2023, Sunfire received a purchase order for a 100 MW
pressurized alkaline electrolyzer. The supply agreement with a leading
European refinery marks a key milestone for Sunfire, supplying one of the
worlds largest electrolyser systems.
· Sunfire received €169 million funding under the EU IPCEI
scheme, to establish the first industrial series production of its solid oxide
and pressurized alkaline electrolysis technologies.
Word from the top
"We believe the fuel of the future is green hydrogen and our technology is a
key enabler in making this transition affordable for everyone. We develop and
manufacture the world's most efficient solid oxide technology, allowing our
customers and partners to deliver emission-free electricity, green hydrogen
and energy storage solutions. This investment from HydrogenOne will enable us
to continue to develop our cutting-edge technology, grow our customer base and
revenues, and scale production to drive net-zero ambitions forward."
Enn Õunpuu, CEO
Elcogen plc
www.elcogen.com (http://www.elcogen.com)
Fuel cell and electrolyser manufacturer with presence in Estonia and Finland
Total investment size £20.5 million
% of NAV 17%
Date of investment May 2022
Why invested · Industry-leading innovator and supplier of solid oxide cells and
stacks, with manufacturing facilities in Finland and Estonia, ready for
expansion
· High end offering based on advanced solid oxide (SO) technology
with low operating temperatures and superior economics
· Developed a reversible ceramic technology that converts hydrogen
into emission-free electricity and vice versa
· Over 10-year track record
· Over 60 established industrial customers worldwide
Total Addressable Market >£40 billion (by 2030)
Value catalysts · Brownfield expansion of existing Tallinn plant
· Construction of greenfield plant in Tallinn
Performance since investment · Brownfield expansion increased, which has doubled cells capacity
to 95,000/year
· Site selection and detailed design for new production site in
Tallinn for annual capacity 360MW cells / 200MW stacks (SOEC mode)
· Elcogen signed a memorandum of understanding with Korea
Shipbuilding and Offshore Engineering, a member of Hyundai Heavy Industries
Group, one of the world's largest shipbuilders, and the Germany based
Fraunhofer Institute for Ceramic Technologies and Systems. The MOU covers
close R&D collaboration in green hydrogen elcogen.com production and
emission-free power generation systems
Word from the top
"Strohm is moving quickly along a steep growth path, growing our revenue
3-fold year on year, while expanding our product offering. Where we recently
announced our first offshore hydrogen project, we see tremendous potential in
the hydrogen market as well as carbon capture and storage where recent policy
announcement underpin the broad consensus of carbon capture being a
fundamental long term part of the journey to achieve the Paris obligations.
Our technology provides the most optimal solution for both hydrogen and carbon
dioxide transfer due the combination of total lack of corrosion, fatigue,
lower cost and smaller footprint."
Martin van Onna, CEO
Strohm Holding B.V
www.strohm.eu (http://www.strohm.eu)
The Netherlands-based hydrogen pipeline company
Total investment size £9.5 million
% of NAV 15%
Date of investment August & December 2022
Why invested · Industry leaders in offshore hydrogen and CO2 pipelines, where we
see significant market growth
· Thermoplastic Composite Pipe ("TCP") has c.50% less greenhouse
gas emissions than metal. Can transfer up to nine times the amount of hydrogen
energy compared to a cable.
· 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)
Value catalysts · Material growth in CO2 and H2 businesses
· Conversion of strong revenue growth to EBITDA 2024+
Performance since investment · Strohm delivered a major milestone by completing its plant
expansion in the Netherlands. The new facility can produce 140km of
thermo-composite plastic ("TCP") pipeline per year, a three-times increase on
previous levels.
· Strohm was awarded its second contract for TCP pipeline for
deployment in Guyana. This is the largest contract ever secured by Strohm.
· Strohm was selected as partner for the Hydrogen Offshore
Production for Europe ("HOPE") project. HOPE is an important milestone in the
industry trend to produce green hydrogen offshore. The project is planned to
be 10MW (4 tonnes of hydrogen per day), installed off the port of Ostend, in
Belgium. The project has been selected by the European Clean Hydrogen
Partnership, under which it has been awarded a EUR20 million grant. HOPE is
being coordinated by Lhyfe, and implemented by eight European partners: Alfa
Laval, Plug Netherland, Strohm, EDP NEW, ERM, CEA, POM-West-Vlaanderen and DWR
eco;
· Strohm, alongside BW Offshore, Switch2, MARIN and TU Delft, have
received a EUR3 million grant from the Dutch government for project OFFSET -
an industrial scale floating green hydrogen and ammonia project, based on the
proven concept of a floating production and offloading vessel ("FPSO"). The
objective of the OFFSET project will be to demonstrate a decrease in the cost
of green fuel production and thereby increase its accessibility.
Word from the top
"NanoSUN's mission is to accelerate the adoption of hydrogen fuel as key
element of the transition to clean energy. Our strategy is to bridge the gap
between low-cost, green sources of hydrogen and hydrogen vehicles by providing
operators with safe, low-cost and convenient refuelling products and
services."
Neil Tierney, CEO
NanoSUN Limited
www.nanosun.co.uk (http://www.nanosun.co.uk)
UK-based developer of hydrogen distribution and mobile refuelling equipment
Total investment size £10.5 million
% of NAV 10%
Date of investment December 2021 and February 2023
Why invested · NanoSUN technology allows for shipping of clean hydrogen from
production sites to customers, both cheaply and safely.
· Provides flexible and low-cost connection between hydrogen
customers such as truck stops, and concentrated hydrogen supply sources
· Flat-bed solution with 60% lower cost than alternative systems
· Accelerating large-scale roll out of fleets of hydrogen buses,
trucks, vans and forklifts
· High quality order book with clients such as Westfalen, and
Octopus Hydrogen.
Total Addressable Market £800 million (2025 UK/EU) to >£20 billion (2030 globally)
Value catalysts · Continued roll out and delivery of Pioneer units to hydrogen
refuelling customers, driving financial growth
· Germany distribution agreement pending
· Pathway to market entry across Europe, in Asia and US
Performance since investment · NanoSUN continued deliveries of new Pioneer Mobile Refuelling
Stations to customers, including this year four units to Octopus Hydrogen in
the UK and eight units to Westfalen in German.
· Westfalen and NanoSUN have deployed Pioneer Mobile Hydrogen
Refuelling Station in German city Brühl, in the Cologne area, to fuel Solaris
Hydrogen City Buses with RVK. The filling station was developed in cooperation
between Westfalen Group and NanoSUN. The system will avoid emissions of 393
tons of CO2 and 0.55 tons of Nox per year. Filling a fuel cell bus with the
Pioneer system less than 20 minutes.
· NanoSUN appointed Dr. Graham Cooley, who was previously the CEO
of ITM Power Ltd, as Chairman of the Board. Dr. Meike Schaeffler, from NanoSUN
investor Westfalen, was appointed as a Board Member. Neil Tierney, who is the
founder of ONZO, a home energy management company that was later acquired by
SSE and GEO, and who has had senior roles at UBCO and PURE Electric, focusing
on lightweight electric vehicles, was appointed as CEO.
Word from the top
"Phase 1 of Cranfield Aerospace Solutions' zero emissions aircraft roadmap is
"Project Fresson" - the conversion of a Britten-Norman Islander 9-seat
aircraft from conventional fossil fuel to that of gaseous hydrogen propulsion.
This development is set to deliver the world's first fully certified, truly
green, passenger-carrying aircraft using hydrogen fuel cell technology. The
end solution will deliver emissions-free commercial air travel and is planned
to be certified for passenger flight in 2026."
Paul Hutton, CEO
Cranfield Aerospace Solutions Limited
www.cranfieldaerospace.com (http://www.cranfieldaerospace.com)
UK-based passenger flight innovator, powering turboprop flight with hydrogen
Total investment size £8.5 million
% of NAV 8%
Date of investment March 2022 and April 2023
Why invested · Cranfield is a technology leader in delivering hydrogen powered
turboprop flight ("Project Fresson")
· 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 powered fuel cells supplying electricity to
DC motors for rotational power
Total Addressable Market US$51 billion (by 2035)
Value catalysts · Test flight 2024/25
· Commercial certification 2026
Performance since investment · The company achieved the key Critical Design milestones for
Project Fresson.
· Continued to increase growth outlook for the business by signing
a multiple number of potential commitments for modification kits to convert
Britten-Norman Islanders to hydrogen-electric power. The company has also made
significant progress on enlarging the market for its technology development
through application to cargo UAV applications.
· As previously announced, Cranfield Aerospace Solutions and
Britten-Norman have been in merger discussions, which remain ongoing. The
original timetable to deliver this merger in mid 2023 has now been extended.
· Cranfield welcomed Evolito, a ground-breaking UK technology
innovator onboard as the motor & inverter supplier for its
hydrogen-powered aircraft demonstrator, and;
· Cranfield celebrated 75 years of continuous Design Approvals,
which have enabled the company to deliver world-leading complex modifications
and underpin its future as a global leader in the development of
zero-emissions aircraft.
Word from the top
"HiiROC's technology brings a truly differentiated proposition to the hydrogen
story. We will produce low cost, zero emission hydrogen, delivered to
customers on a modular, scalable basis at the point of demand, avoiding
transportation and storage costs. We're building the infrastructure and
working with our strategic partners to allow deployment of the initial pilot
units in selected industry segments."
Tim Davies, CEO
HiiROC Limited
www.hiiroc.com
UK-based thermal plasma electrolysis developer, with proprietary technology
for low-cost, zero-emission hydrogen, also enabling flare/waste gas mitigation
and CO2 reduction using biomethane.
Total investment size £10.0 million
% of NAV 8%
Date of investment November 2021
Why invested · Proprietary technology to convert natural gas, flare gas and
biomethane into hydrogen and solid carbon black
· Multiple applications across all sectors of hydrogen use from
blending in natural gas grids to industrial decarbonisation to transport
· Opportunity to support methane reduction targets through the
global imperative to halt gas flaring and venting
· Industrial off-takers of the product such as Centrica, Hyundai
and CEMEX also on the shareholder register
· Highly scalable modular solution, producing 100kg / day of
hydrogen from a single unit through to large plants capable of 100's of tonnes
/ day of hydrogen, alongside carbon black
Total Addressable Market >£40 billion (by 2030)
Value catalysts · Demonstrators deployed in 2022 and 2023, across a range of
hydrogen use cases
· Commercial roll-out of HiiROC units
Performance since investment · Since investment, HiiROC has completed its demonstrator unit (in
2022) and the deployment of its first pilot (in 2023) with further units
expected through the coming year.
· HiiROC continues to deploy demonstrator units in order to
validate its technology and achieve certification.
· With UK Government grant support, HiiROC and Centrica, won the
first UK project to inject hydrogen at Brigg Gas Fired Power station, as part
of the Net Zero Technology Centres £8 million Open Innovation Programme.
Word from the top
"At Bramble Energy we aim to enable the transition from diesel to hydrogen by
providing high-performance, affordable technology solutions. PCBFC™ is the
first of our platform technologies to reach the market and we continue to
develop core offerings in sensing and electrolysis."
Dr Tom Mason, CEO
Bramble Energy Limited
www.brambleenergy.com
UK-based fuel cell and portable power solutions company
Total investment size £10.0 million
% of NAV 7%
Date of investment February 2022
Why invested · Pioneering revolutionary fuel cell design and manufacturing
techniques
· Novel printed circuit board design PCBFC™ - low cost, scalable
and recyclable fuel cell modules
· Leading global automotive businesses working closely with Bramble
to scale up product offering
· Developing high-power density, mobility fuel cell systems
Total Addressable Market >£100 billion (by 2030)
Value catalysts · Business strategy pivoted towards the mobility technology
development based on a number of approaches from the automotive and power
train segments.
· Mobility technology development and testing of PCBFC™ by end
users in automotive
Performance since investment · Moved into better equipped facility in 2022 as part of scaling up
power output of units to 30kw-100kw
· With funding from the Advanced Propulsion Centre UK (APC) as part
of the UK government's Automotive Transformation Fund (ATF) Feasibility Study
Round 3, the PCBFC™ Range Extender feasibility study will develop a robust
and detailed business case to manufacture Bramble Energy's printed circuit
board fuel cell (PCBFC™) for the automotive sector in the UK.
· Bramble Energy has secured £12 million UK Government funding to
provide fuel cell technology to hydrogen buses. Bramble Energy's innovative,
low-cost printed circuit board fuel cell ("PCBFC") technology will power an
all-new hydrogen double-decker bus, which will be developed in conjunction
with consortium partners Equipmake, Aeristech and the University of Bath.
Word from the top
"HH2E is a new green energy company in Germany established to change the game
of energy. HH2E's technology mix can turn a fluctuating input of solar or wind
energy into a constant supply of green hydrogen, heat, and carbon-free
electricity at competitive prices to serve local industries and communities."
Alexander Voigt, Founder of HH2E AG
HH2E AG
www.hh2e.de
German green hydrogen project developer with a focus on industrial customers
Total investment size £5.1 million
% of NAV 4%
Date of investment May 2022
Why invested · A prominent leader in Germany focused on green hydrogen and
battery storage project development.
· HH2E has secured attractive German brownfield sites close to
hydrogen offtake with grid connections capable of 1GW capacity
· Provides HGEN with investment rights in multiple large-scale
green hydrogen based decarbonization projects
· The battery and alkaline electrolyser combination enables
near-constant production using the cheapest hours of renewable electricity
supply
Total Addressable Market >£100 billion (based on German government forecasts for green hydrogen
demand by 2045)
Value catalysts · First hydrogen projects Thierbach and Lubmin expected to reach
Final Investment Decision in 2023/24, for mid-decade commercial launch
Performance since investment · HH2E has continued to develop green hydrogen projects, with
Thierbach and Lubmin close to completing their FEED studies and submitting
planning/permit applications. HH2E announced its second major green hydrogen
production project in Germany, a 100MW facility at Thierbach. HGEN committed
£2.5 million (EUR 2.8 million) alongside other institutional investors and
HH2E for engineering and commercial works. A Final Investment Decision is
planned for the end of 2023 subject to a series of commercial targets being
fulfilled.
· Advanced offtake negotiations with customers in the mobility and
industrial/wholesale gas segments, with a potential value of several hundred
million euros, are underpinned by favourable regulatory developments. HH2E
agreed to purchase of 120MW of alkaline electrolyser equipment from NEL ASA
earlier in 2023 and has reserved long-lead components with other major
equipment manufacturers to supply its first projects.
· A further pipeline of projects is being developed by HH2E across
northern and eastern Germany.
Word from the top
"We target to develop, build, own and operate large scale facilities for
production of zero emission green hydrogen and develop an integrated hydrogen
value chain. Norway, our home market, has a strong advantage for hydrogen
production with both cheap and base load renewable energy available, and our
large-scale facilities allows for economies of scale while transporting the
volumes to Europe."
Jonas Meyer, CEO
Gen2 Energy
www.gen2energy.com
Norwegian green hydrogen project developer
Total investment size £3.5 million
% of NAV 3%
Date of investment March 2022
Why invested · The leading Norwegian green hydrogen project developer, with
clear plans to convert low-cost hydroelectric power to hydrogen, for export
and domestic use.
· Up to 700MW green hydrogen projects in Norway, with expected
production in 2025-2027
· Specialist in low-cost 24/7 hydroelectric power
· Co invested with Norwegian LNG and ship operators that provides
input to the Gen2 hydrogen export solution
· HGEN has follow-on investment rights in multiple project SPVs
Total Addressable Market >£100 billion
Value catalysts · Final investment decision for first hydrogen project in Mosjøen
in 2024
Performance since investment · Gen2 Energy continued to mature their projects throughout the
year, with core focus on the c.120MW green hydrogen plant at Nesbruket in
Mosjøen.
· Major milestones in the project includes the unanimous approval
of detail zoning plan in the municipality, and completion of FEED study with
Wood Group, making it the most mature large-scale green hydrogen project in
Norway. The company made a strategic investment in UMOE Advanced Composite,
worlds largest producer of glass fibre containers for transport of hydrogen.
In addition, the two companies signed a purchase and collaboration agreement
for development of seaborn transport of hydrogen.
· In relation to the potential expansion of the first project,
Nesbruket 2, the company signed a collaboration agreement with Norsk e-Fuel, a
producer of e‑fuel based on hydrogen and CO2. The collaboration agreement
includes the intent of building an industrial supply chain for green hydrogen,
common access to additional land and joint infrastructures for green
industrial processes in Mosjøen.
· Over the last year, Gen2 Energy grew its project portfolio to
925MW, with the most proposal of a new project in Åfjord.
· Gen2 Energy and Provaris Energy Ltd signed a collaboration
agreement, to study producing and supplying compressed green hydrogen from the
Gen2 Energy hydrogen project in Åfjord, Norway, to European ports, using
Provaris' marine storage and shipping solutions. Provaris has developed a
portfolio of hydrogen shipping and storage solutions, including two sizes of
GH2 Carriers (H2Neo 26,000m3 and H2Max 120,000m3) and a floating storage
(H2Leo), with a design capacity range of 300 - 600 tonnes hydrogen. The H2Neo,
which is intended to be utilised in the Åfjord project, was granted Design
Approval based on an extensive FEED package in December 2022, with final
construction approval targeted for early 2024.
Word from the top
"Domestic green hydrogen production is essential to secure cost-competitive
energy supply and deliver energy sovereignty and decarbonisation. Building a
plant in Thierbach (Saxony), on the site of a former coal power station, is a
tangible step towards sustainable green energy in Germany."
Mark Page, CFO HH2E AG and Managing Director HH2E Thierbach
Thierbach project
Green hydrogen production project in Germany
Total investment size £2 million
% of NAV 1%
Date of investment January 2023
Why invested · First direct project investment by the Company
· Large-scale green hydrogen production opportunity with leading
players in the mobility sector, energy and industrial consumers as potential
offtakers
· The technology mix and design developed by the operator (HH2E AG)
enables constant production of cost-competitive green hydrogen without a
permanent supply of power
Total Addressable Market Via pipeline connections Thierbach will be able to serve the German market
(value >£100bn) but its customers will be mainly based in central/eastern
Germany
Value catalysts · Confirmation of key regulatory dimensions (e.g. RED II, GHG
certificates, pipeline admixture)
· Final Investment Decision - end 2023
· Phase 1 (100MW): c.6,000 tonnes green H2 pa ~ 60,000tpa avoided
GHGs
Performance since investment · Preliminary Investment Decision (PID) approved by the consortium
of HH2E, Foresight and HydrogenOne. Detailed technical planning will complete
in Q4, stakeholder engagement, planning/permit applications are advanced.
· Extensive engagement with key component suppliers and offtakers
as well as a sourcing exercise to secure RED II compliant energy supply.
· Thierbach has been included in the draft plan for the German
national hydrogen backbone network and the Company is in advanced discussions
on timelines.
Listed Hydrogen Assets portfolio
The Company holds investments in 15 global hydrogen sector listed equities
with an average market capitalisation of £1.5 billion with minimum market
capitalisation of £100 million. The aggregate investment in these listed
companies was £7.4 million at the time of investment. These companies are key
players in the electrolysis, fuel cell and clean hydrogen projects sectors.
During the six months ended 30 June 2023, one listed holding has been sold at
a small loss.
Post period end acquisition
In July 2023, the Company has made a follow-on investment of £1.0 million
into NanoSUN.
Net assets
Net assets increased from £125.4 million at 31 December 2022 to £129.7
million at 30 June 2023. The increase is principally due to an uplift in the
value of the Private Hydrogen Assets of £6.4 million.
The net assets of £129.7 million comprise £120.7 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
£8.6 million, and other net assets of £0.4 million.
The Limited Partnership's net assets of £117.7 million comprise £117.5
million portfolio value of investments, cash balances of £0.3 million, and
other net liabilities of £0.1 million.
Cash
At 30 June 2023, the Group had a total cash balance of £8.9 million,
including £8.6 million in the Company's balance sheet and £0.3 million in
the Limited Partnership, which is included in the Company's balance sheet
within 'investments held at fair value through profit or loss' (31 December
2022: £19.7 million).
The Company had cash and cash equivalents of £8.9 million, and £3.0 million
of listed hydrogen companies at the end of the period, and remains well funded
for its day-to-day activities.
Gain for period
The Company's total gain before tax for the period ended 30 June 2023 is £4.4
million, generating gains of 3.39 pence per Ordinary Share.
In the period to 30 June 2023, the gains on fair value of investments were
£5.1 million.
The expenses included in the income statement for the year were £0.8 million,
in line with expectations. These comprise £0.1 million Investment Adviser
fees and £0.7 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 2023 was
2.62% (30 June 2022: 2.46%). 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
19 September 2023
Environmental, social and governance ("ESG")
ESG highlights:
HGEN is a climate impact fund with an ESG policy integrated into investment
decisions and asset monitoring;
The Company is classified as an Article 9 Fund under the SFDR and EU Taxonomy
Regulation; and
Continued stewardship activity with portfolio companies to further enhance ESG
credentials and reporting.
Our Impact:
£111.1 million
(FY22 £102.9 million) deployed to date in low-carbon growth;
83,497 tCO2e
(FY22 42,716 tCO2e) emissions avoided in HY23 (99.7% by NanoSUN and 0.1% by
Elcogen) and 134,076 tCO2e since IPO (29% by Sunfire, 70% by NanoSUN and 2% by
Elcogen)*;
592 MWh
Potential (FY22 201,000 MWh) lifetime clean energy capacity in HY23 and
227,292 MWh since IPO*;
0.2 MW
(FY22 3.4 MW) of units sold (fuel cells and electrolysers) in HY23 and 4 MW
since IPO - all adjusted for the Company's shareholding*;
1,293
(FY22 1,135) jobs supported;
Displace fossil fuels
Most of the Company's investments either directly or indirectly displace
fossil fuels, making a clear contribution to achieving the Paris Accord's
target of limiting global temperature rises to below 2 degrees and ideally
limiting them to 1.5 degrees
* note - Sunfire was unable to provide data for HY22 so these
figure is expected to increase in future periods
GHG emissions (tCO2e) HY 23 FY 22
Scope 1 14 48
Scope 2 19 28
Scope 3 92 134
Carbon footprint (tCO2e / EUR m investments value) 1.1 1.9
GHG Intensity of Portfolio Companies (KG / EUR m revenue) 31.0 823.4*
Avoided emissions (tCO2e) 83,497** 42,716
Avoided cumulative (tCO2e) 134,076 50,579
EU Taxonomy alignment 87.6% 89%
Hazardous waste (tonnes / EUR m investment cost) 0.03 N/A
Energy consumption (GWh / EUR m revenue / per high impact climate sector) 0.15 N/A
Methodology
The greenhouse gas emissions have been calculated in accordance with the
Greenhouse Gas Protocol equity share approach and presented in line with
guidance from the EU Sustainable Finance Disclosure Regulation. This means
that the aggregate of each portfolio company's scopes are presented (as
opposed to being disclosed in the Fund's scope 3 category 15). Each portfolio
company has been engaged during to develop a greenhouse gas inventory. This
process includes the identification of appropriate data sources for each
inventory item. Data has been collected, reviewed and processed to calculate
the emissions by an external provider. In line with expectations there are
limitations to data (gaps or quality), these are addressed in accordance with
the Greenhouse Gas Protocol via the use of estimates and each portfolio
company receives feedback on data quality based on relevance, completeness,
availability, consistency, transparency and accuracy.
Estimates form a necessary part of the greenhouse gas emission process and
emission factors are central to this. Primarily the UK Department for
Environment Food and Rural Affairs ("DEFRA") emission factors have been used
or, where more appropriate, the Intergovernmental Panel on Climate Change
("IPPC") emission factors can be relied upon. Both of these sources are
recognised by the Greenhouse Gas Protocol.
Avoided emissions have been calculated on a consequential basis using the
International Financial Institution Framework for a Harmonised Approach to
Greenhouse Gas Accounting. The membership behind this approach includes the
United Nations Climate Change Secretariat, the World Bank, the European
Investment Bank, and many others constituting 25 financial institutions. This
standard also produces and updates a data set on grid emissions for many
countries, this has been used as a key input into the estimation process. In
accordance with the framework, portfolio companies who provide products (e.g.
fuel cells or electrolysers) take the expected lifetime emissions of those
products as sold. During the year, no projects were operationally producing
hydrogen yet as they are still under development, when they do the annual
avoided emissions from the hydrogen produced will be reported.
* In the prior period one portfolio company that is pre-revenue
actually recorded c.£16k of revenue which significantly impacted this metric,
removing that outlier gives a comparable of 40KG/£m.
** The HY23 is more than double the FY22 because of an increase in
sales from Elcogen. The sales from Sunfire have not been included in the HY23
as they could not provide data so these figures are expected to increase in
future reporting periods.
Governance
Investment objective and policy
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 ESG principles into its decision making and ownership
process.
Investment policy
The Company will seek to achieve its investment 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,
the GCC and Asia Pacific, comprising:
i. assets that produce clean hydrogen;
ii. large scale energy storage assets;
iii. carbon capture, use and storage assets;
iv. hydrogen distribution infrastructure assets;
v. assets involved in hydrogen supply chains, such as electrolysers and
fuel cells; and
vi. 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.
Private Hydrogen Assets
The Company invests in unquoted Hydrogen Assets, which may be operational
companies or hydrogen projects (completed or under construction) ("Private
Hydrogen Assets"). 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 observes 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 HydrogenOne
Capital Growth Investments (1) LP (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 also invests 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 is 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$100 million. The
Company's approach is to be a long-term investor and will not ordinarily adopt
short-term trading strategies. As the allocation to Private Hydrogen Assets
grows the Listed Hydrogen Assets are expected to include strategic equity
holdings derived from the listing of operational companies within the Private
Hydrogen Assets portfolio over time.
The Company observes 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;
· the portfolio of Listed Hydrogen Assets will typically comprise
no fewer than 10 Listed Hydrogen Assets at times when the Company is
substantially invested;
· each Listed Hydrogen Asset must derive at least 50 per cent. of
revenues from hydrogen and/or related technologies; and
· once fully invested, the target allocation to Listed Hydrogen
Assets will be approximately 10 per cent or less of Gross Asset Value, subject
to a maximum allocation of 30 per cent of Gross Asset Value.
Cash
During the initial Private Hydrogen Asset investment period after a capital
raise and/or a realisation of a Private Hydrogen Asset, the Company intends to
hold the relevant net proceeds of such capital raise/realisation in cash (in
accordance with the Company's cash management policy set out below) pending
subsequent investment in Private Hydrogen Assets.
Investment restrictions
The Company, in addition to the investment restrictions set out above, 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
i. in a way which is consistent with its object of spreading investment
risk; and
ii. 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 is 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 per cent 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 a special purpose vehicle ("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
SPV or any such intermediate holding entities (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 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. In particular, 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. 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 2023 ("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 2023
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 above.
Principal risks and uncertainties
The principal risks and uncertainties facing the Company are summarised below:
Principal Risks and Uncertainties
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.
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.
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.
Risks include refinancing risk, exposure to interest rate risk due to
fluctuations in the prevailing market rates, covenant breaches and possible
enhanced loss on poor performing assets.
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.
In addition, the long-term profitability of hydrogen investments will be
partly dependent upon the efficient operation and maintenance of the assets.
Inefficiency, or limitations in the skills, experience or resources of
operating companies, may reduce revenue. As a result, profitability of the
Company may be impaired leading to reduced returns for Shareholders.
Performance
Underperforming investment or investment strategy can lead to underperformance
to the Company's target return and ultimate investment objective.
Future acquisitions and capital raises
Ongoing capital raises are intended. The Company's share price trading at an
excessive discount to its net asset value may mean it is difficult to raise
further capital through share issues for both onward investment and the
continued running and management of the Company.
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.
Investments in Private Hydrogen Assets are illiquid in nature and may take a
longer period of time to realise in order to fund the Company's operations or
meet its expenses. The Company may be forced to sell liquid assets to meet its
expenses at a time when valuations are low.
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.
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. A further rise in interest rates will lead to
an increase in the Discount Rate applied to the Private Hydrogen Assets'
valuation, leading to a reduction in the Company's net asset value.
Key person
The Investment Adviser is a newly formed Company, 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.
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 in a drop in
returns from the Company's investments.
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 2022 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 56 to 58). 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.
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
impact to the Company and portfolio of investments from the economic
conditions such as higher interest rates and inflationary pressures and market
volatility arising from the ongoing 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 £8.6 million
(31 December 2022: £18.2 million) as well as £3.0 million in Listed Hydrogen
Assets at 30 June 2023 (31 December 2022: £3.7 million). The Company and
Group's net assets at 30 June 2023 were £129.7 million (31 December 2022:
£125.4 million) and total expenses for the period ended 30 June 2023 were
£3.4 million (30 June 2022: £2.7 million), which represented approximately
2.6% (30 June 2022: 2.5%) of the average net assets value of the Company in
the six months to 30 June 2023 of £128.0 million (30 June 2022: £110.7
million).
Following the declaration of the Company's Net Asset Value as at the 30 June
2023 on the 7 August 2023, the Company's share price was 54.4p representing a
46.0% discount to the Net Asset Value (31 December 2022: discount of 18.5%).
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 Board has considered the long-term
prospects of the Company and has no reason to believe that the continuation
vote will fail.
Based on the foregoing, the Directors have adopted the going concern basis in
preparing the Financial Statements. The Directors have a reasonable
expectation that the Company and Group have adequate operational resources to
continue in operational existence for at least twelve months from the date of
approval of these Financial Statements.
Board of Directors
19 September 2023
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 and its
subsidiary undertakings;
· 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
19 September 2023
Financial statements
Condensed parent and consolidated statement of comprehensive income
For the six months ended 30 June 2023
For the six months ended 30 June 2023 (unaudited) For the six months ended 30 June 2022 (unaudited)
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 5,070 5,070 - 1,794 1,794
Gains/(losses) on currency movements - (5) (5) - - -
Gross investment gains - 5,065 5,065 - 1,794 1,794
Income 114 - 114 20 - 20
Total gain 114 5,065 5,179 20 1,794 1,814
Investment Adviser fee 5 (82) - (82) (206) - (206)
Other expenses 6 (730) - (730) (475) - (475)
(Loss)/profit before finance costs and taxation (698) 5,065 4,367 (661) 1,794 1,133
Finance costs - - - - - -
Operating (loss)/profit before taxation (698) 5,065 4,367 (661) 1,794 1,133
Taxation 7 - - - - - -
(Loss)/profit for the period (698) 5,065 4,367 (661) 1,794 1,133
Return per Ordinary Share (basic and diluted) 11 (0.54)p 3.93p 3.39p (0.57)p 1.54p 0.97p
There is no other comprehensive income and therefore the 'Profit/(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.
The accompanying notes form part of these financial statements.
Condensed parent and consolidated statement of financial position
At 30 June 2023 and 31 December 2022
31 December
30 June 2023 2022
(Unaudited) (Audited)
Notes £'000 £'000
Assets
Non-current assets
Investments held at fair value through profit or loss 4 120,734 106,673
Current assets
Cash and cash equivalents 8,556 18,192
Trade and other receivables 8 615 641
Total current assets 9,171 18,833
Total assets 129,905 125,506
Current liabilities
Trade and other payables 9 (185) (153)
Total liabilities (185) (153)
Net assets 129,720 125,353
Equity
Share capital 10 1,288 1,288
Share premium account 124,928 124,928
Capital reserve 6,412 1,347
Revenue reserve (2,908) (2,210)
Total equity 129,720 125,353
Net asset value per Ordinary Share 12 100.70P 97.31p
Approved by the Board of Directors and authorised for issue on 19 September
2023 and signed on their behalf by:
Simon Hogan
Chairman
HydrogenOne Capital Growth plc is incorporated in England and Wales with
registration number 13340859.
The accompanying notes form part of these financial statements.
Condensed parent and consolidated statement of changes in equity
For the six months ended 30 June 2023 (Unaudited)
Share
Share premium Capital Revenue
Capital account reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000
Opening balance as at 1 January 2023 1,288 124,928 1,347 (2,210) 125,353
Profit/(loss) for the period - - 5,065 (698) 4,367
Closing balance as at 30 June 2023 1,288 124,928 6,412 (2,908) 129,720
For the six months ended 30 June 2022 (Unaudited)
Share
Share premium Capital Revenue
Capital account reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'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
The accompanying notes form part of these financial statements.
Condensed parent and consolidated statement of cash flows
For the six months ended 30 June 2023
For the six For the six
months ended months ended
30 June 2023 30 June 2022
(Unaudited) (Unaudited)
£'000 £'000
Cash flows from operating activities
Income 114 20
Management expenses (812) (681)
Foreign exchange gains/(losses) (5) -
Decrease in trade and other receivables 26 20
Increase/(decrease) in trade and other payables 32 (18)
Net cash flow used in operating activities (645) (659)
Cash flows from investing activities
Purchase of investments (9,103) (24,345)
Sale of investments 112 -
Net cash flow used in investing activities (8,991) (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 (9,636) (4,156)
Cash and cash equivalents at start of period 18,192 34,019
Cash and cash equivalents at end of period 8,556 29,863
The accompanying notes form part of these financial statements.
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.
FundRock Management Company (Guernsey) Limited acts as the Company's
Alternative Investment Fund Manager ("AIFM").
Apex Listed Companies Services (UK) Limited (the "Company Secretary and
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 is 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 acquires 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$100 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 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 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.
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 2023, 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 2022. 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 2022. The audited annual accounts for
the year ended 31 December 2022 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 economic conditions and market volatility arising from the war in
Ukraine are given above.
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 year ended 31 December 2022.
Comparatives
Comparative information is included for the six months ended 30 June 2022 and
as at 31 December 2022.
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
30 June 2023 31 December 2022
As at £'000 £'000
Investments held at fair value through profit or loss
Listed Hydrogen Assets 3,013 3,667
Limited Partnership 117,721 103,006
Closing valuation of financial assets at fair value through profit or loss 120,734 106,673
(b) Movements in valuation
Year ended
Six months ended 31 December
30 June 2023 2022
£'000 £'000
Opening valuation of financial assets at fair value through profit or loss 106,673 68,830
Opening unrealised (gain)/loss on Investments (1,426) 1,608
Opening cost of financial assets at fair value through profit or loss 105,247 70,438
Additions, at cost - Listed Hydrogen Assets 74 137
Additions, at cost - Limited Partnership 9,029 36,581
Disposals at cost - Listed Hydrogen Assets (142) (1,909)
Cost of financial assets at fair value through profit or loss at the end of 114,208 105,247
the period/year
Unrealised losses on investments - Listed Hydrogen Assets (4,608) (4,022)
Unrealised gains on investments - Limited Partnership 11,134 5,448
Closing valuation of financial assets at fair value through profit or loss 120,734 106,673
(c) Gain/(loss) on investments
Year ended
Six months ended 31 December
30 June 2023 2022
£'000 £'000
Movement in unrealised loss - Listed Hydrogen Assets (586) (2,794)
Movement in unrealised gain - Limited Partnership 5,686 5,828
Realised (losses)/gains on investments - Listed Hydrogen Assets (30) 143
Total gain on investments 5,070 3,177
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 2023.
(December 2022: no transfers).
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 2023
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Listed Hydrogen Assets 3,013 - - 3,013
Limited Partnership - - 117,721 117,721
Total 3,013 - 117,721 120,734
31 December 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Listed Hydrogen Assets 3,667 - - 3,667
Limited Partnership - - 103,006 103,006
Total 3,667 - 103,006 106,673
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 2023 is
£117,721,000 (31 December 2022: £103,006,000). The movement on the Level 3
investments during the period is shown below:
31 December
30 June 2023 2022
£'000 £'000
Opening balance 103,006 60,597
Investment in Limited Partnership 9,029 36,581
Unrealised gains on investment in Limited Partnership 5,686 5,828
Closing balance 117,721 103,006
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 ten Private Hydrogen Assets (31
December 2022: nine).
The following table reconciles the fair value of the Private Hydrogen Assets
and the NAV of the Limited Partnership.
31 December
30 June 2023 2022
£'000 £'000
Investment in Private Hydrogen Assets 117,519 103,115
Plus(minus): net current assets/(liabilities) 202 (109)
NAV of the Limited Partnership 117,721 103,006
The Level 3 Private Hydrogen Assets at 30 June 2023 have been valued using
either the DCF methodology or a combination of the DCF and Price of Recent
Investment methodology, as outlined in note 3. The key inputs considered in
the valuation are described in note 15.
Name Country of Value of Primary Significant unobservable inputs Range input
valuation
Incorporation Investment
technique
£'000
Sunfire GmbH Germany 25,559 DCF Discount rates 12.5%-12.9%
Elcogen Group plc United Kingdom 21,475 DCF Discount rates 12.6%-13.4%
Strohm Holding BV The Netherlands 18,440 Weighted Discount rates applied in full 12.9%-13.8%
DCF and Price DCF valuation
of recent Weighting between Price of
Investment Recent Investment and DCF (14%)
valuation
NanoSUN Limited United Kingdom 12,555 DCF Discount rates 15.3%-15.9%
Cranfield Aerospace Solutions Limited United Kingdom 10,422 DCF Discount rates 15.2%-16.0%
HiiROC Limited United Kingdom 10,325 DCF Discount rates 15.0%-15.3%
Bramble Energy Limited United Kingdom 8,439 DCF Discount rates 13-2%-13.9%
HH2E AG Germany 6,305 DCF Discount rates 14.3%-14.8%
GEN2 Energy AS Norway 3,999 DCF Discount rates 13.3%-14.0%
HH2E Werk Thierbach GmbH Germany 1,852 Price of recent investment Third-party pricing (without adjustment) n/a
The following table shows the Directors best estimate of the sensitivity of
the Level 3 Private Hydrogen Assets to changes in the principle unobservable
input, with all other variables held constant.
Effect on fair value of investments £'000
Unobservable input Possible reasonable change in input 30 June 2023 31 December 2022
Discount rates applied in full DCF valuation +1% (14,716) (6,515)
-1% 18,133 7,815
Weighting between Price of Recent Investment and full DCF valuation plus one calendar quarter of tapering from Price of Recent Investment to full (975) (324)
DCF valuation
minus one calendar quarter of tapering from Price of Recent Investment to full 2,926 286
DCF valuation
The European Central Bank ('ECB') and the Bank of England ('BOE') base rates
at 30 June 2023 were 4.0% and 5.0% respectively (31 December 2022: 2.5% and
3.5% respectively). We anticipate that the terminal base rate hikes (based on
independent research) could reach 4.5% for ECB and 5.5% for BOE. As such, we
have performed sensitivities of +/- 1% on the discount rate assumptions.
The valuations are weighted towards the full DCF valuation based on the time
since the price of recent investment until the full DCF valuation is applied
(typically the valuations are tapered from the price of recent investment to
the full DCF valuation over four calendar quarters after the price of recent
investment). Accordingly, we have applied a sensitivity of +/- one calendar
quarter of this weighting as this is deemed the most likely period by which
the tapering may be delayed or brought forward.
For those investments that have been fair valued using the price of a recent
investment based on unadjusted third-party pricing information, the Company is
not required to disclose any quantitative information regarding the
unobservable inputs as they have not been developed by the Company and are not
reasonably available to the Company.
5. Investment adviser fee
For the six months ended 30 June 2023 For the six months ended 30 June 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment Adviser fee 82 - 82 206 - 206
At 30 June 2023 an amount of £13,000 was receivable from the Investment
Adviser in respect of the Investment Adviser fee (31 December 2022: 12,554
payable). Additionally, the Company 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 2023, £74,322 in respect of
excess issue costs is due to be received from the Investment Adviser (31
December 2022: £111,432).
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 £116,065 (31 December
2022: £nil) 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 totalled £803,722 (30 June 2022: £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 (30 June 2022: £nil).
6. Other expenses
For the six For the six
months ended months ended
30 June 2023 30 June 2022
£'000 £'000
Administration & Secretarial Fees 105 93
AIFM Fees 54 40
Directors' Fees 96 84
Custodian Charges 25 24
Brokers Fees 36 30
Registrar's Fees 8 9
Website Fees 25 8
Legal Fees 13 12
LSE Fees 16 7
Audit Fees 77 47
D & O Insurances 24 24
PR & Marketing 152 57
Printing Fees 32 3
Other expenses 67 37
Total revenue expenses 730 475
Expenses charged to capital:
Capital transaction costs - -
Total expenses 730 475
During the period to 30 June 2023, KPMG LLP UK received £12,000 (including
VAT of £2,000) for non-audit services in relation to the share issuance
Circular and Prospectus published in September 2022 (the "share issuance
Circular and Prospectus").
Non-audit service costs applicable to the share issuance Circular and
Prospectus have been treated as an other debtor and will be reclassified and
included in share issue costs disclosed in the Statement of Changes in Equity
when shares are issued; or reclassified as abort costs in the Statement of
Comprehensive Income should no shares be issued at the share issuance Circular
and Prospectus expiry date.
During the period to 30 June 2022, the auditors received £159,000 (including
VAT of £12,000) for non-audit services in respect of the Company's equity
raise, which were 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 June 2023 For the six months ended June 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Withholding tax expense - - - - - -
Total tax charge for the period - - - - - -
8. Trade and other receivables
As at 30 June As at 31 December
2023 2022
£'000 £'000
Prepayments 115 37
Other receivables 500 604
Total 615 641
Other receivables includes £500,000 in respect of costs applicable to the
share issuance Circular and Prospectus published in September 2022 and
expiring in September 2023 (31 December 2022: £470,000). These costs will be
reclassified and included in 'share issue costs' disclosed in the Statement of
Changes in Equity when shares are issued or reclassified as abort costs in the
Statement of Comprehensive Income should no shares be issued at the Circular
and Prospectus expiry date.
9. Trade and other payables
As at 30 June As at 31
2023 December 2022
£'000 £'000
Amounts falling due within one year:
Accrued expenses 185 153
Total 185 153
10. Share capital
As at 30 June 2023 As at 31 December 2022
Nominal value Nominal value
of shares of shares
Allotted, issued and fully paid: No. of shares (£) No. of shares (£)
Shares in issue at the beginning of the period 128,819,999 1,288,199.99 107,350,000 107,350,000
Allotted/redeemed following admission to LSE
Ordinary Shares issued - - 21,469,999 214,699.00
Closing balance 128,819,999 1,288,199.99 128,819,999 1,288,199.99
During the six months ended 30 June 2023 no shares were issued. During the
year ended 31 December 2022, 21,469,999 shares were issued by way of a Placing
at an issue price of 100 pence per Ordinary Share.
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 2023 of 128,819,999.
For the six months ended 30 June 2023 For the six months ended 30 June 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) for the period (£'000) (698) 5,065 4,367 (661) 1,794 1,133
Return per Ordinary Share (0.54)p 3.93p 3.39p (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
2023
2022
£'000 £'000
Net Asset Value (£'000) 129,720 125,353
Ordinary Shares in issue 128,819,999 128,819,999
NAV per Ordinary Share 100.70p 97.31p
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
During the period, fees were payable to the Directors at an annual rate of
£68,250 to the Chairman, £57,750 to the Chairman of the Audit and Risk and
Valuation Committees and £47,250 to the Chair of the Management Engagement
and Remuneration Committees. Mr Bucknall is not remunerated for his role as a
Non-Executive Director. These fees were effective from the 1 January 2023.
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
Ordinary Shares at at 31 December
30 June 2023 2022
Simon Hogan 40,000 40,000
Afkenel Schipstra 10,100 10,100
Abigail Rotheroe 10,000 10,000
David Bucknall - -
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 2023, the principals of the Investment Adviser, Dr JJ Traynor
and Mr R Hulf, each held 100,000 Ordinary Shares of the Company (31 December
2022: 100,000). 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 2023, INEOS Energy held 25 million Ordinary
Shares of the Company (31 December 2022: 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
FundRock Management Company (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 has delegated the
provision of portfolio management services to the Investment Adviser. The
AIFM, Company Secretary and Administrator are part of the same Apex Group.
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 Apex Listed Companies 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 £147,695 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 £69,151
and of £16,596 (excluding VAT) 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 as at 30 June
2023 and 31 December 2022.
Effective Country of Issued share Registered
Subsidiary name ownership ownership Principal activity capital address
HydrogenOne Capital Growth (GP) Limited 100% United Kingdom General partner £1 6th Floor,
of HydrogenOne Capital Growth Investments (1) LP 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.
30 June 2023
Value of
Purpose of Country of investment Registered
Name the entity Incorporation £'000 address
Sunfire GmbH Electrolyser producer Germany 25,559 Gasanstaltstraße 2
01237 Dresden,
Germany
Elcogen Group plc Solid oxide fuel cell supply United Kingdom 21,475 Highdown House,
Yeoman Way, Worthing,
West Sussex,
BN99 3HH
Strohm Holding BV Supplier of thermoplastic composite pipe The Netherlands 18,440 Monnickendamkade 1,
1976 EC IJmuiden
NanoSUN Limited Supplier of mobile hydrogen storage and refueling systems United Kingdom 12,555 Abraham Heights Farm,
Westbourne Road,
Lancaster, LA1 5EF
Cranfield Aerospace Solutions Limited Aviation design and maintenance United Kingdom 10,422 Hanger 2, Cranfield
Airport, Cranfield,
Bedfordshire,
MK43 0AL
HiiROC Limited Supplier of clean hydrogen production technology United Kingdom 10,325 22 Mount Ephraim,
Tunbridge Wells, Kent,
TN4 8AS
Bramble Energy Limited Printed Circuit Board fuel cell solutions United Kingdom 8,439 6 Satellite Business
Village, Fleming Way,
Crawley, England,
RH10 9NE
HH2E AG Supplier of green electrolysis and energy storage facilities Germany 6,305 HRB 167243, Kaiser-
Wilhelm-Straße 93,
20355 Hamburg
GEN2 Energy AS Green Hydrogen development Norway 3,999 Raveien 205, 3184 Borre,
Norway
HH2E Werk Thierbach GmbH Green Hydrogen development Germany 1,852 HRB 40987, Kaiser-
Wilhelm-Straße 93,
20355 Hamburg
31 December 2022
Name Purpose of Country of Value of Registered
the entity Incorporation investment address
£'000
Sunfire GmbH Electrolyser producer Germany 21,763 Gasanstaltstraße 2 01237
Dresden, Germany
Elcogen Group plc Solid oxide fuel cell supply United Kingdom 20,430 Highdown House,
Yeoman Way, Worthing,
West Sussex, BN99 3HH
HiiROC Limited Supplier of clean hydrogen production technology United Kingdom 12,914 22 Mount Ephraim,
Tunbridge Wells, Kent,
TN4 8AS
Strohm Holding BV Supplier of thermoplastic composite pipe The Netherlands 11,606 Monnickendamkade 1,
1976 EC IJmuiden
NanoSUN Limited Supplier of mobile hydrogen storage and refueling systems United Kingdom 11,519 Abraham Heights Farm,
Westbourne Road,
Lancaster, LA1 5EF
Bramble Energy Limited Printed Circuit Board fuel cell solutions United Kingdom 10,032 6 Satellite Business
Village, Fleming Way,
Crawley, England, RH10
9NE
Cranfield Aerospace Solutions Limited Aviation design and maintenance United Kingdom 6,296 Hanger 2, Cranfield
Airport, Cranfield,
Bedfordshire, MK43 0AL
HH2E AG Supplier of green electrolysis and energy storage facilities Germany 5,134 HRB 167243, Kaiser-
Wilhelm-Straße 93,
20355 Hamburg
GEN2 Energy AS Green Hydrogen development Norway 3,421 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.
15. Post balance sheet events
The Company completed a £1.0 million follow-on investment in NanoSUN,
alongside Westfalen and NanoSUN management.
16. 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/
The information for the year ended 31 December 2022 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 19 September
2023.
Other information
Alternative Performance Measures ("APM")
APMs are often used to describe the performance of investment companies
although they are not specifically defined under IFRS. APM calculations for
the Company are shown below.
(Discount)/Premium
The amount, expressed as a percentage, by which the share price is less than/
more than the Net Asset Value per Ordinary Share.
31 December
30 June 2023 2022
NAV per Ordinary Share (pence) a 100.70 97.31
Share price (pence) b 63.70 79.30
Discount (b÷a)-1 (36.7)% (18.5)%
Ongoing charges
A measure, expressed as a percentage of average net assets during the period,
of the regular, recurring annual costs of running an Investment Company.
For the six months ended 30 June 2023 2022
Average NAV a 127,965,802 110,669,477
Annualised expenses b 3,358,733 2,721,440
Ongoing charges (b÷a) 2.62% 2.46%
The ongoing charges percentage is on a consolidated basis and therefore takes
into consideration the expenses of the Limited Partnership as well as the
Company and is calculated in accordance with the methodology set out by the
AIC.
The recurring expenses of the Company and Limited Partnership charged in the
six months to 30 June 2023 have been annualised for the ongoing charges
calculation.
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into the Ordinary Shares of the Company on the ex-dividend date.
Six months to 30 June 2023 Page Share price(1) NAV(2)
Opening at 1 January 2023(p) a n/a 79.30 97.31
Closing at 30 June 2023(p) b ● 63.70 100.70
Total return (b÷a)-1 (19.7)% 3.5%
1 Share price total return is based on an opening share price of
79.3p.
2 NAV total return is based on an opening NAV 97.31p per Ordinary
Share.
n/a = not applicable.
Notes
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
Barclays Bank PLC - Corporate Broker +44 20 7623 2323
Dion Di Miceli BarclaysInvestmentCompanies@barclays.com
Stuart Muress
Buchanan Communications - Financial PR Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham Email: HGEN@buchanancomms.co.uk (mailto:HGEN@buchanancomms.co.uk)
Henry Wilson
George Beale
About HydrogenOne Capital Growth plc:
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). The Company is an Article 9 climate impact fund with an ESG policy
integrated in investment decisions and asset monitoring.
The Company's Investment Adviser, HydrogenOne Capital LLP (FRN: 954060), is an
appointed representative of Thornbridge Investment Management LLP (FRN:
713859) which is authorised and regulated by the Financial Conduct Authority.
END
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