REG - Powerhouse Enrgy Grp - Audited Results for the Year Ended 31 Dec 2021
29/06/2022 07:00
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RNS Number : 5545Q Powerhouse Energy Group PLC 29 June 2022
29 June 2022
Powerhouse Energy Group plc
("Powerhouse" or the "Company")
Audited Results for the Year Ended 31 December 2021
Powerhouse Energy Group plc (AIM: PHE), the UK technology company
commercialising hydrogen production from plastic, is pleased to announce its
audited results for the year ended 31 December 2021.
FY2021 Summary
Technology and Innovation
* Continuing successful completion of tests using the Company's test unit at its
Thornton site in the northwest of England to support the Powerhouse plastics
to hydrogen technology.
* Strengthening of Powerhouse engineering capability by the acquisition of a 48%
stake in Engsolve Limited - a privately owned engineering solutions company.
* Updated technical assessment of Powerhouse's DMG technology by international
consultancy, DNV confirming its 2018 Statement of Feasibility.
* Independent "red flag" review undertaken by GHD Group for Peel NRE, on the
engineering proposals for Protos Plastics to Hydrogen, raising no technical
red flags.
* Chief Executive Officer's report describing plans for a £1.3m investment to
create a Global Technology & Innovation Centre by Q2 2023.
Commercial Development
* Continued support of Peel NRE's development of the first commercial scale
application of Powerhouse's technology at the Protos Energy Park in Cheshire,
UK.
* Submission by Peel NRE for planning permission for a second plastics to
hydrogen facility at Rothesay Dock, West Dunbartonshire in Scotland.
* Chief Executive Officer's Report describing proposals for the future
development of the Company.
* Signed Collaboration Agreement with development partner, Hydrogen Utopia
International Plc with prospect of a plastics to hydrogen project at Konin,
Poland.
Financial Performance
* Increased revenues in the year to £701k (2020: £100k) primarily due to
engineering support works provided to the Protos SPV.
* £9.6m of available cash at 31 December 2021 (2020: £3.4m).
* Successfully raised £10m pre-expenses from the market during the year.
* Provided a loan facility to the Protos SPV of £3.8m of which £1.15m had been
advanced prior to the year end.
Organisation and Growth
* Changes to the Board of Directors, including the Chairman, non-executive
Directors and resignation of the Chief Executive Officer.
* Post year end appointment of Paul Drennan-Durose as Chief Executive Officer.
* Post year end appointment to the Board of Chief Technical Officer and
non-executive Directors.
Keith Riley, Interim non-executive Chairman of Powerhouse Energy Group Plc
commented:
"During 2021, Powerhouse's prime focus was the continued support of its
plastics to hydrogen DMG Technology being implemented by Peel NRE at its
Protos Energy Park in the UK. The project missed some anticipated milestone
dates but continued to progress through the year and saw a restructuring and
strengthening of the project team, of which Powerhouse is an important member.
With our new CEO coming into post in 2022, I now look forward to seeing a
strengthening of the Powerhouse capabilities and its technology being
implemented."
Paul Drennan-Durose, Chief Executive Officer of Powerhouse Energy Group Plc,
commented:
"Governments and companies are expected to embrace reducing waste effectively,
and to play an increasingly active role in decarbonising the economy. These
expectations represent significant opportunities for Powerhouse as the
transition to net zero continues to evolve. The Company is encouraged by the
progress made in 2021 and, with a new and invigorated leadership team, we look
to the future with optimism."
The annual report and accounts for the year ended 31 December 2021 will be
sent to shareholders shortly and available to view on the Company's website:
https://www.powerhouseenergy.co.uk (https://www.powerhouseenergy.co.uk)
For more information, contact:
Powerhouse Energy Group plc powerhouse@tavistock.co.uk (mailto:powerhouse@tavistock.co.uk)
Paul Drennan-Durose
WH Ireland Limited (Nominated Adviser) +44 (0) 207 220 1666
James Joyce
Megan Liddell
Turner Pope Investments (TPI) Ltd (Joint Broker) +44 (0) 203 657 0050
Andrew Thacker
James Pope
Tavistock (Financial PR) powerhouse@tavistock.co.uk (mailto:powerhouse@tavistock.co.uk)
Simon Hudson
Nick Elwes
Heather Armstrong
About Powerhouse Energy Group plc
Powerhouse Energy has developed a proprietary process technology - DMG® -
which can utilise waste plastic, end-of-life-tyres, and other waste streams to
convert them efficiently and economically into syngas from which valuable
products such as chemical precursors, hydrogen, electricity, and other
industrial products may be derived. Powerhouse's technology is one of the
world's first proven, distributed, modular, hydrogen from waste process.
Powerhouse's process produces low levels of safe residues and requires a small
operating footprint, making it suitable for deployment at enterprise and
community level.
Powerhouse is quoted on the London Stock Exchange's AIM Market under the
ticker: PHE and is incorporated in the United Kingdom.
For more information see www.powerhouseenergy.co.uk
(http://www.powerhouseenergy.co.uk)
INTERIM CHAIRMAN'S STATEMENT
At time of writing this statement, I have been in the Chair at Powerhouse
Energy Group for a very short time, but having been involved with the first
application of its plastics-to-hydrogen DMG technology since October 2020, and
a non-executive director since September 2021, I feel more than qualified to
present this statement in support of our results for the year ending 31
December 2021.
Despite the difficulties caused by the Covid pandemic that impacted a good
part of the year and some major changes in Board members, including the
Chairmanship, the focus of the Powerhouse executive team was almost
exclusively in support of Peel NRE on the development at their Protos Plastics
Park in Cheshire, UK. The pathway of development of complex capital projects,
is rarely smooth, and Protos Plastics-to-Hydrogen has been no exception. A
change of project management and a realignment of the contracting strategy
meant that earlier target dates were not achieved,
Late 2021 saw a major reorganisation of the Peel project team, which
substantially increased its level of experience and professionalism. The fact
is that it took the project team most of the year to complete the
restructuring and prepare for engaging with the construction contractor
market. Powerhouse provided its full support to the team, as well as
strengthening its own engineering capability by the acquisition of 48% of the
share capital of Engsolve Ltd.
There is much more work involved in specifying the technical requirements,
tendering and contract negotiation, and putting into place the myriad of items
required for a project to proceed than most people realise. Powerhouse was,
and is, a key contributor to Peel NRE's Protos development, but is only one of
a number of organisations involved. To carry out these tasks and deliver them
comprehensively takes time and effort, and whilst there is disappointment in
missed targets, doing this properly also lays down a solid foundation for the
future. Once done, it can be reproduced and used again. The Powerhouse
engineering team has done its very best in supporting the Protos project,
which has now obtained robust, contractable offers for the construction of the
project from some very substantial contractors. It has been difficult
reporting to shareholders on this phase of the development, particularly due
to the sensitive commercial nature of the process being led by Peel NRE and
its project team.
The need to concentrate on Protos meant that development of Powerhouse's
business in other areas took a back seat. Even so, the Company continued to
work with its development partners and entered into a collaboration agreement
with Hydrogen Utopia International Plc ("HUI"). An application for approval of
an environmental impact assessment of a project in Konin, Poland was submitted
to the Polish authorities by HUI, response to which is still pending.
With the arrival of Paul Drennan-Durose as Chief Executive Officer, the
Company is now looking to expand its capabilities and activities. We welcome
Paul to the Company at a time when a transformation of the world's behaviour
towards the environment is being openly demanded by the people, placed at the
heart of the public agenda and economic players throughout the world.
Powerhouse has developed a technology that can make a significant contribution
to achieving net zero. This contribution will only be achieved, however, if we
build and develop the competence and capability of the Company to create a
high-performance, purpose-led culture. Paul outlines in his statement to this
Annual Report the measures he is taking to achieve that.
I look forward to the next stage of the evolution of the Company that will see
Powerhouse technology implemented and the business of the Company being able
to grow.
We would also like to take this opportunity to thank all our staff for their
continued efforts and hard work as well as all our investors and stakeholders
for their continued support.
Keith Riley
Interim Non-Executive Chairman
28 June 2022
CHIEF EXECUTIVE OFFICER'S REPORT
This is my first report as Chief Executive Officer of Powerhouse Energy Group,
having been appointed in February 2022.
In the period since my appointment as Chief Executive Officer, much has
already been started, completed and achieved. As set out in the Strategic
Report which follows this statement, this work will provide a foundation for
the establishment of a clear set of imperatives and direction for the Company.
Discovery, Engagement and Direction
My initial approach was to embark upon an intense discovery phase to fully
evaluate our business. Time has been invested with a wide and deep cross
section of stakeholders, starting with existing and potential partners and
players in our markets. Engagement with key collaboration partners during the
first weeks of appointment was a high priority. Meetings with Peel NRE's
leadership commenced on day two and have resulted in a refresh of previous
plans aimed at supporting Peel NRE delivering what could be the first
commercial project utilising Powerhouse's technology. Naturally, the Company
is supporting Peel NRE, and doing what it can to mitigate any risk of delay
Peel NRE has on this first project.
During this initial period, a comprehensive 360-degree understanding has been
developed by the team, and key imperatives and collaboration positions have
been re-established and prioritised. Many of these imperatives have already
been completed or initiated and included within a plan for relevant periods in
the near, mid, and longer terms. These are set out in the Strategic Report.
In parallel, we have also taken time to form a new strategy team, made up by
the nucleus of the leadership team, and a set of trusted advisors, including
the cementing of relationships with our Nominated Adviser, brokers, lawyers
and accountants. This new strategic team will be tasked to ensure that the
Company continues to deliver its stated objectives whilst also delivering
better communications and engagement with the Company's shareholders and the
market.
Evolving Strategy
In 2022, the new leadership team and the Board has started to build a robust,
flexible business model and three-year strategy, designed to meet the
challenges of each phase of the Company's evolution. The Company will
elaborate on this further later this year as the strategy is developed.
The Company must build trust from its key stakeholders. Relationships with our
customers and partners remain core to the Company's growth strategy. Our plan
is to launch in developed markets close to our operational base, developing
and testing repetitively and with rigor, cultivating close and strong
relationships with our customers and partners. As the dynamic of change is so
fast flowing in economies, Powerhouse has embarked on a process to reassess
its purpose, its values, its structure, its processes, and its markets.
Powerhouse understands that it must create value for all its stakeholders, and
it intends to deliver this through a refreshed strategy. Reducing energy
dependency, providing more effective solutions for increasing levels of
non-recyclable waste, creating more sources of newer non-fossil fuel energy
are all unmistakably of ever-increasing relevance. Powerhouse intends to play
a role in this transition.
The Strategic Report outlines the challenges met, and the progress made by the
team last year. Although early days for the new team, this is a good
opportunity to share some early assessments:
· Technology and Innovation - a renewed focus on improving the
technology readiness level and ensuring it is process capable.
· Commercial Development - support development of the first of a kind
commercial project, commit fully to early users and reduce dependencies by
building quality of choice in developer/channel partner pipeline and project
pipeline.
· Business Model Evolution - ensure the target business model of being a
prominent leader of technology innovation and an attractive licensing partner
is enabled.
· Go-to-market engagement
o Creation of a combined Marketing Centre & Global Technology and
Innovation Centre - to support the development of technology readiness levels,
expand the range of products the Company can offer, and lessen the risk of
impact to growth from delays the Company has experienced at its first of a
kind commercial site in the UK.
o Marketing Pillars - investing in developing a marketing pathway which
will underpin and support the commercialisation and scale up of the Company.
· Invest in Talent - enrich, invest and engage partners and talent at
all levels of the enterprise.
Board
The Board of Powerhouse has been through a period of significant change. We
are delighted to have welcomed some high calibre individuals to the board
including Gill Weeks OBE, Hugh McAlister and Paul Emmitt as well as Keith
Riley and myself. A brief biography on each is outlined below, and biographies
of all Directors are contained within the Directors Report within this
document.
Gill Weeks joined the Powerhouse in Board in January 2022 as a Non-Executive
Director and is a leader of compliance and regulatory teams in global
environmental business, advising on environmental law changes. Over the course
of her career Gill has developed expertise in public policy, environmental
law, stakeholder management, governance and risk, environmental science and
regulatory compliance and enforcement.
Hugh McAlister was appointed to the Powerhouse Board in February 2022 as a
Non-Executive Director and has over 40 years' stockbroking experience in the
City of London. Hugh has been the executive chairman of Novum Securities
Limited since 2018, having been its Chief Executive Officer for the previous
nine years. Prior to this, Hugh was a founding partner and head of trading a
Kaupthing Singer & Friedlander Capital Markets and Head of Pan European
Equities at Dresdner Kleinwort Benson.
Paul Emmitt joined Powerhouse in July 2021 and was appointed to the Board as
an Executive Director in March 2022. He will continue as CTO, leading the
management, planning, development, and operation of the DMG technology. Paul
is a Chartered Engineer, has an MBA in Engineering Management, and has over
twenty years of multi-sector engineering and operational management
experience. He is also the Managing Director of Engsolve Limited, the
engineering consultancy in which Powerhouse has a 48% stake.
I recently joined the Board of Powerhouse as Chief Executive Officer. I have
just spent over three years as the investor appointed Chief Executive Officer
of Heliex Power Limited, a private equity backed cleantech energy business.
Whilst there, I led the transformation of the start-up new technology company,
leading the roll-out of its technical development, and commercial market
recovery.
Keith Riley joined the Board as a Non-Executive Director in 2021 and stepped
in as Interim Non-Executive Chair on 27 June 2022. Mr Riley is also the
proprietor and Chief Executive Officer of Vismundi Limited, a consultancy
company providing services to the resources and waste management industry.
Prior to that, between 1993 and 2012 he worked for what is now known as Veolia
Environmental Services plc in a number of senior roles.
It is the intention of the Board for the interim Chair and myself, to evaluate
and re-assess the composition, scale and relevance of the Board ensuring its
alignment with the strategy being created and deployed in this phase of the
Company's evolution.
The outcome of these evaluations will include options for the Board to
consider and implement where appropriate.
It is intended that a permanent Chair will be recruited in quarter three of
2022.
Once this process is complete, the Board's focus will be on continuity,
stability, cost, and effectiveness.
Financial Results
The Company increased revenues in the year ended 31 December 2021 to £701k
(2020: £100k) primarily due to further engineering support works provided to
the Protos SPV. Once the project enters construction, it is currently intended
that Powerhouse enters an agreement with the Protos SPV for provision of
owner's engineer services.
The total loss for the year is £1.87m (2020: £15.83m). This substantial
reduction is due to a reduction in the impairment of goodwill to £nil (2020:
£14.2m). The carrying value of goodwill, which arose on the acquisition of
the Waste2Tricity Limited, is independently assessed on an annual basis, with
no impairment deemed to have arisen in 2021.
The loss per share for the year is 0.05p (2020: 0.57p) with the change
reflecting the reduction in the total loss detailed above.
Cash at year end amounted to £9.64m (2020: £3.46m). The Company raised an
additional £10m pre-expenses from the market during the year. The Company
also provided a loan facility to the Protos SPV of £3.8m of which £1.15m had
been advanced by the year end.
Market Outlook
There is no question that most stakeholders now expect companies to embrace
reducing waste effectively, and to play an active role in decarbonising the
economy. This shift in expectations represents significant opportunities for
Powerhouse. The transition to net zero continues to evolve, with different
economies moving at different speeds. The pace of change, and the level of
available capital to support decarbonisation, is vastly different in
developing and developed countries. Being quoted on the London Stock Exchange
means Powerhouse can benefit from a widely available pool of public capital,
in a market where investors have a proven track record of supporting companies
involved in the energy transition.
Russia's invasion of Ukraine, and the on-going appalling war, has seen the
launch of an economic conflict too. Western countries' dependence on Russian
energy is in the spotlight, and it is anticipated that companies and
governments will also be looking more broadly at their energy dependencies and
energy security strategies, as well as on their fossil fuel consumption.
This would suggest that a focus by Powerhouse on countries within closer
proximity to its UK base, would be an appropriate scalable market in terms of
available capital, motivation, and attractiveness for dealing with
unrecyclable waste and decarbonisation in those regions, and would avoid the
company overreaching in its commercialisation phases. However, we are
committed to serving all markets should the right opportunity present itself.
Engaging and Communicating with Shareholders
We must share that it is not lost on the new leadership team that the
engagement the Company has with its investor community is not where it needs
to be. As explained in the Chairman's Statement, much of the reason has been
the commercially delicate stage the Protos project has been in. The project
will shortly be through that stage and working with the Chairman, one of my
aims is to maintain more regular communications with shareholders without
overburdening them. The new implemented structure will foster strong, balanced
coordination of the Company's image and messaging to investors, and to other
key stakeholders. This is intended to help drive valuation, sales, and overall
image. Our investor community will be updated on this in short order.
Thank you
I would also like to take this opportunity to thank all the Powerhouse staff
and our associates at Engsolve for their continued efforts and hard work, and
our investors and stakeholders for their continued support. The Board believe
that Powerhouse is well placed and that we are implementing a strategy that is
not only appropriate but will enable the Company to take full advantage of the
significant opportunities that are available to deliver long term value.
Paul Drennan-Durose
Chief Executive Officer
28 June 2022
STRATEGIC REPORT
This Strategic Report addresses the Directors' management of the Company and
contains certain forward-looking statements. These statements are made by the
Directors in good faith based on the information available to them up to the
time of the report preparation and approval and such statements should be
treated with caution as they address uncertainties.
Business Descriptor
Powerhouse develops, designs, co-designs, integrates, delivers and licenses
technology and its know-how, its DMG solution. This has an advanced thermal
conversion technology at its centre, which converts calorific waste streams
into synthetic gas (syn-gas), a valuable product that can be used as an
intermediary for producing new high-value products such as hydrogen, or as a
fuel in its own right for power generation.
Powerhouse's central capability is its know-how in the integration of the
processes and technology, the application of the pyrolysis and gasification
processes involved, and the research and development of the complex variables,
which make it operationally and financially viable. This includes development
and testing of equipment, but also testing of assorted feedstock materials and
mixes, and in the process, calibration, and programming of control systems,
which maximise yield and process productivity.
The process can convert a wide range of end-of-life and other feedstocks,
including the Company's initial focus of end-of-life, non-recyclable waste
plastic, to produce a range of 'end of waste' products, including:
· Hydrogen
· Electrical power
· Thermal Energy
· Natural gas replacement
· Chemical feedstocks
· Biochar
Business Strategy
To position Powerhouse's technology as a converter of waste to wellness, and
to support its growth and scale-up, the Company has centred its main focus on
several key strategic imperatives:
1. Technology and Innovation
A successful year of tests, trials and development using the Company's test
unit at its Thornton site in the northwest of England, was completed in 2021.
Several developments are worthy of highlighting in this report:
The team has made noteworthy progress in enhancing the Hydrogen output of the
system, and there has been a tangible increase in evidence-based confidence
from the systematic testing of feedstocks in 2021 and in 2022, in the
generation of optimum levels of Hydrogen.
More understanding and control of the technology has been achieved which has
allowed in certain cases, optimized carbon retention in the residue (biochar).
This is a form of carbon sequestration.
The 2021 period is being followed by a doubling down on the Company's efforts
in 2022 and 2023.
In 2022, the new leadership team and the Board intend to have a robust
three-year strategy for technology development and a solid detailed level plan
every year. This is designed to meet the challenges of each phase of the
Company's evolution, truly generate continuous improvement, and maintain
relevance to its target markets.
Technology and System Readiness and Capability
The thrust of focus in 2022 is on the Company setting about applying more
rigour and scrutiny to delivering the technology and system readiness level of
the core technologies it is developing and adopting and ensuring that the
technology the Company is forming and integrating is process capable. This is
a critical foundation, necessary for minimising risk and optimising potential
when the Company rolls-out a full-scale commercial operation.
In quarter two of 2022, the Company initiated the formation of effective
engineering leadership structures for this next phase in its evolution. This
structuring includes, but is not restricted to, Powerhouse's CTO Paul Emmitt
being appointed to the Board to generate more positional authority and to
position technology and innovation at main Board level, given its criticality.
The Company has also embarked on a process of partnering meaningfully with
technologists, engineers, universities, and industrial partners for this next
phase.
The technological developments will be underpinned and supported by the
creation of a Global Technology & Innovation Centre. This will have
pyrolysis and gasification technology at its core, and the £1.3m turnkey
supply, installation and commissioning contract announced and awarded in June
2022 is intended to see the centre operational by Q2 2023. Funded by the
Company from current reserves, the Company is at the same time underway with a
search for a site for this in the UK. Doing so simultaneously with launching
the award for the long lead time equipment build is designed to reduce the
total operational completion timeframe.
The location profile brief has been defined and includes the environment it
will be situated in, its proximity to supply and manufacturing networks as
well as being located within reach of relevant technology and research
networks, and of course being easily accessible for customers in near to-door
as well as near to shore markets.
The centre will house up-scaled R&D facilities for testing capabilities in
a live environment. This will be the pre-commercial plant core and will
provide an environment to support the improvement of the technology readiness
level and demonstrate the process capability. At the same time, of course, it
will generate visibility and proof of scalability for the Company, and its
stakeholders.
Quarter two 2022 has already seen a new relevant relationship forged with the
Department of Mechanical, Aerospace and Civil Engineering at Manchester
University, which is collaborating with Powerhouse and one of the Company's
key vendors. This first venture together is to develop further the
understanding of the thermal transfer and fluid dynamic flows associated with
the reactions within the Thermal Combustion Chamber in the gasification
process. This project will have several phases extending throughout 2022.
Business Acquisition - Engsolve
In Q3 2021, the Company acquired a 48% stake in Engsolve Limited, a privately
owned engineering solutions company with significant experience in undertaking
engineering design and support, cost estimating and control, project
management and safety risk assessments across a range of industries including
energy from waste, renewables, and green energy. The shares were acquired for
a consideration of £99,990.
Engsolve has worked closely with the Company for more than four years and the
acquisition is intended to maintain Engsolve's continued support of the
Company's projects and developments and will ensure that their expertise
remains available going forward. This follows the appointment of Paul Emmitt,
Engsolve's Managing Director, to the position of Chief Technical Officer of
the Company.
Engsolve is a profit generating business and, as an associate of the Company,
its post-acquisition results are reflected in these accounts.
Technology Endorsement
The international consultancy DNV completed the assessment and updated report
on the enhanced technology design against their standards and provided a
positive technology endorsement in the third quarter of 2021. In addition to
this, as part of the Protos development work, an independent red flag review
was undertaken by GHD Engineering for Peel NRE which raised no technical red
flags.
The Company continues to actively ensure that the process is enhanced to be
compliant with established and emerging legislation.
Intellectual Property Management
The Company has initiated the development and formation of IP and has filed
patents pending in 2021 the operational conditions within the Powerhouse
Thermal Conversion Chamber at their centre. The leadership team have assessed
this as being low in value for the short term until patents are market
assessed and granted. However, it has identified that the Company can also
supplement this with the highly valuable technical, market and commercial
knowhow it has, and continues to create. This can be incorporated in new
future IP development and generation where possible.
The most important IP remains the chemical engineering model of the process to
create the clean gas - and Powerhouse maintain strict protocols to ensure this
information is protected, including limited access and isolated control over
the design documents, calculations, and process development models for the
process.
Through last year and into 2022, the technical development team of Powerhouse
has continued to assess and develop the DMG control system. This work was
further enhanced during the basic engineering phase where third party control
vendors and the Thermal Combustion Chamber (TCC) supplier engaged in the
progression of the system.
Further works on the development of patent protection had been undertaken in
the period, with patents now filed in Europe, Australia, Japan, Brazil,
Canada, USA, Indonesia, South Korea, GCC, Hong Kong and the United Kingdom.
Future Product Developments
In addition to developing the core technologies, the Directors recognise that
the evolving hydrogen and associated energy transition market offers
opportunities to develop other advanced complimentary technologies and
applications in future. The decision to invest in a Global Technology and
Innovation Centre, will permit the technical team to optimise the technology
development, and provide the platform to advance complimentary processes and
technologies in supporting this, and future value. This will ultimately
enhance the Powerhouse offering.
2. Commercial Development
UK - Planned first of a kind
In 2020's strategic report, the business model and arrangements of the
Company's potential first of a kind commercial project and pipeline for the UK
were the dominant feature and the subsequent focus of shareholders and
stakeholders.
Peel NRE is part of the Peel Group, one of the leading infrastructure,
transport, and real estate investors in the UK, with collective investments
owned and under management of more than c£5 billion.
The business model agreed by Powerhouse Energy with Peel NRE is unchanged, in
so much as that it will derive revenues in the UK principally from annual
licence fees payable by the plant owner in respect of each process application
of the Powerhouse technology. Under the UK Exclusivity Option Agreement Peel
NRE, on payment of £500,000 to Powerhouse, can also acquire the exclusive
rights to develop Powerhouse's technology in the UK.
In addition, Powerhouse can generate revenues in the project development stage
from the engineering services and technical assurance services for specific
client feedstock analysis and laboratory services, from engineering during
project development, and then from operational support services when plants
are in operation.
The first commercial scale application of Powerhouse technology is under
development at the Protos Energy Park, Ellesmere Port, Cheshire, UK by Peel
NRE, who owns that site. Peel NRE completing the construction of this first
commercial scale plant remains a key milestone and priority for the Company.
In 2021 these experienced delays to financial close which continued into 2022.
This was related to a combination of factors experienced by Peel NRE and the
Protos SPV which included contractor and vendor engagement, an amended
procurement strategy and planning delays associated with the development of
the engineering design.
A competitive tender process, including pre-qualification of potential
tenderers, was commenced by Peel NRE midway through February 2022 and Peel NRE
indicates that this is expected to complete in September 2022.
UK - Pipeline Development
Peel NRE's plan is that it will replicate the development model at the Protos
site, incorporating its 'Plastic Parks' vision where there is scope, coupled
with the community-based provision of hydrogen at various sites across the UK.
Each park/site is intended to have Powerhouse technology to divert
non-recyclable plastic from landfill and produce hydrogen and clean power.
Recently, Powerhouse introduced the concept of having two process streams at
future pipeline sites, doubling capacity and capability - which improved the
return on investment, sweated the land asset, and provided future system
redundancy for the plant operators and owners. Peel NRE has introduced this
into its rollout considerations, with the size of sites and local waste
volumes influencing the mix of sites between single and twin processes. It is
not planned to have twin processes until the single process configurations are
established and delivering repeatable performance and reliability.
Under the CA Business Planning, Peel NRE is maintaining a long-term plan of
more than seventy sites. These sites will be a mixture of Peel NRE developed
sites together with a pipeline of third-party sites enacted by Peel NRE on
tolling commercial terms or by capital sales on waste processing sites around
the UK. Each application of DMG will carry the Powerhouse licence fee.
The development counterparties vary and current interest in the pipeline
arises from waste management companies, councils, companies in the plastics
and consumer goods production sectors and developers.
In 2021 Peel NRE announced that it had submitted planning applications for the
second of its eleven primary target sites for a waste to hydrogen plant in the
UK. The second site is in Scotland, at Rothesay Dock on the north side of the
Clyde River, opposite Glasgow Airport. Peel NRE announced in June 2022 that
West Dunbartonshire council's planning board has approved planning consent for
that site.
International Development
Development activities by the Company in territories outside of the UK have
focused on developing project, regional and territory-by-territory partnership
agreements to roll out Powerhouse's technology.
The Company has previously stated that the pipeline from these activities was
embodied in collaboration or project agreements, country agreements and
memoranda of understanding. And that the project or collaboration agreements
allow developers access to initial limited information to undertake project
screening. The work in these phases has included supporting the review of
feedstock alternatives, offtake, and environmental constraints.
This process had not developed consistent traction. The recruitment of a UK
based Business Development Manager was completed in late 2021. The appointment
of a new CEO in February 2022 has generated a new sense of direction and
purpose for this resource. Pipeline opportunities are being qualified, with
in-person visits to perspective clients in close to door/shore markets such as
UK and Ireland, and in far from shore markets such as Australia completed in
Quarter two 2022. These are aimed at understanding client needs, perspective
project status, and assessing the probability and prospects from the existing
pipeline.
A modification of the go-to-market approach will be implemented in quarter
three.
Why? The transition to net zero is already uneven with different parts of the
world economy moving at different tempos. The pace of change will be vastly
different between developing and developed countries. But all markets will
require unprecedented investment in decarbonisation technology. In response to
the energy shock caused by the war in Ukraine, many European countries are
looking more urgently for new sources of energy and more broadly at their
dependencies on other nations. This is a market where the offtakes from the
technology Powerhouse is developing are of increasing relevance.
The Company will of course develop relationships with existing partners in
other territories and cultivate these for more mid to longer term pipeline
conversion. It will naturally continue to centre its initial focus on the UK's
first of a kind commercial site, which will generate validation and consensus
with Peel NRE, supporting the conversion of their pipeline with the next site
being the Rothesay Dock site in West Dunbartonshire, Scotland. This first
commercial site will also provide supportive validation and consensus as
Powerhouse builds pipeline elsewhere.
The progress of our go-to-market approach includes a reliance on growing an
effective, relevant network of license distributors, developers, contractors,
and other partners across target geographies.
The intent is that each of these markets will ultimately have its own, growing
pipeline of opportunities, developed, and managed by a professional team and
with a growing, local network of partners to support development,
construction, and operations & maintenance.
3. Business Model Evolution
Through its arrangement with Peel in the UK, PHE extracts its share of value
primarily from delivered projects through licence fees per system delivered
and operational.
This follows an early establishment of roles with Peel acting as Developer and
PHE as technology provider. This was also a reflection of the relative
strengths of the two businesses at the time the arrangements were made, when
PHE had limited funding and accordingly a limited ability to resource and
deliver multiple projects through development.
In last year's report, it was explained that just as it has under the
arrangements with its UK development partner, Powerhouse intends to license
the use of its technology to project owner companies which will operate plants
using technology it provides and integrates. The Company held this out as its
business model.
The Company's new CEO's focus has been on how best to maximise shareholder
value. A range of evaluations conducted included one of the business models.
This demonstrated that the type of model that had been adopted by the Company
has relevance and value, but conversely, that it can create a prominent level
of dependency on developer partners, or even sole dependency where exclusivity
rights to, for example, a territory, have been granted. It can generate a loss
of traction where delays develop and can confine Powerhouse to a smaller-part
player, with a low influence level over the pace of progression of the
project, its financing or achieving key value points within the gated process.
These assessments have also shown clearly that Powerhouse's technology value
to a project is represented in the value of the outputs the technology can
produce (i.e., hydrogen, syngas, power, heat) or, to a lesser extent, the
costs that can be avoided (e.g., waste disposal to landfill or incineration).
Fresh financial modelling revealed the level of, for example, potential
development revenues, project management incomes, as well as build and
technical support revenues the Company could generate if it adopted a more
flexible business model, including considering being, for example,
co-developer, developer, or project lead.
In doing so, these assessments have established that the target business model
of being a prominent leader of technology innovation and an attractive
licensing partner, is likely to be more effectively realised and achieved by a
more flexible model in the initial stages of commercialisation and scale-up by
the company. Naturally, this would include Powerhouse creating an investor
grade, qualified and well-integrated group of partners, who could deliver a
deep and wide range of roles and activities essential to the integration of
Powerhouse's technologies into its plants of the future.
The Board is currently exploring this evolution of its current business model
for its effectiveness and how best to structure this, to serve as part of a
market entry strategy, validating and demonstrating with clients and markets
the value and credibility of the plants and the technology, generating
consensus and subsequently further pipeline opportunities.
It is envisaged that that this could see a switch to development and
operational fees dominating revenue streams, and as scale-up evolves that
Powerhouse subsequently migrates more to generating revenues from its
technology, integration, and engineering know-how, as client's take-over
operations or fund the project pipeline.
4. Go-to-market engagement
Marketing Centre
Within the Commercial development imperative referred to earlier in this
report, the Company has outlined how it will enrich its global network of
partners and clients, and the Company has also outlined how it is considering
adapting its current business model. The Company is clear that there is a
strong market, and that scale-up will be supported by a range of imperatives,
which includes proof of operation and scalability.
As reported above, in Q2 of 2022, the Company deployed its own capital to
invest up to £1.3 million in the supply, installation, and commissioning of
equipment, which has a pre-commercial scale thermal gasification technology at
its centre. This will form the nucleus of a Global Innovation and Technology
Centre.
This is designed to achieve several outcomes. Firstly, as mentioned earlier,
it will support a doubling down on the development of the readiness of the
technologies the Company is leading the development of, and to deliver and
demonstrate process capability.
It is also intended to mitigate any risk of impact to growth. Specifically,
from interruptions the Company may experience with in-operation development on
a commercial scale facility at its first of a kind site, until a repetitive
consistent performance and reliability is established and assured
consistently. At the same time, it will lessen any impact on growth from risks
of delays the Company has experienced on reaching Financial Close at its first
of a kind commercial site in the UK. The Company has the quality of using the
centre as a market reference site when operational.
Importantly, however, it as well as supporting the development and further
proving Powerhouse's proposition and offering, it will also be a marketing
centre, serving as a focal point to grow the pipeline with prospective
partners and clients, providing proof that a larger scale technology operation
can perform, and is scalable.
Marketing Pillars
Finally, we are commencing investing in developing a marketing pathway which
will underpin and support the commercialisation and scale up of the Company.
This will include investment in appropriate professional marketing resources
and collateral.
5. Invest in Talent
As well as enriching its network of partners, the Company also intends to
enrich and invest in its talent. 2021 saw growth in our technical team, and
the addition of a business development manager. In 2022, we are restructuring
and investing in replacing two engineering personnel with more seasoned
engineering talent. This will underpin the Technology and Innovation
imperative.
The Company will also be recruiting a Financial Controller by the end of 2022;
will see migration from outsourced functions, providing the Company with
greater control over financial functions including accounting records and
timely production of financial and management information, to enable more
accurate decision making, governance and reporting to investor markets.
Board Strengthening
There has been a high level of attrition at Board level historically and up to
present day. The Board's strategy has been to keep the composition of the
Board and related corporate governance issues under constant review. The aim
is to ensure that the Directors have the right mix of skills, experience, and
qualifications to carry out their duties in a way which ensures the Company's
future success. The appointment of a new Non-executive Chairman in Q3, to
replace Russell Ward, will continue with the work he had started on supporting
the CEO in the aim of ensuring that the relevance, composition, and scale of
the Board is appropriate for the forthcoming stage of its evolution.
Financial Strategy
At 31 December 2021, the Company had £9.6m of available cash with commitments
forward, outside of normal operational spend, only in respect of the Protos
short term loan facility. The Company considers the impacts of forward plans
by producing regular forecasts, considering forward running costs of the
business.
Under the Protos short term loan facility of £3.8m, the Company had lent
£1.15m as at 31 December 2021, excluding accrued loan interest. During 2022,
the amount drawn down under the facility has increased to £1.89m.
In 2022, the Company has committed £1.3m for the supply, installation, and
commissioning of equipment in respect of its planned Global Technology and
Innovation Centre.
The Company will consider alternative financing routes for project initiatives
and will explore appropriate ways to invest funds in the development of
projects internationally. The Company is prepared to function as developer or
as co-developer in key markets, where appropriate, to accelerate progress.
Whilst the use of future fund raises where appropriate will also be
considered, there are no firm plans to do so at this time.
2022 Key Performance Indicators
The Board of Powerhouse remains focused on the first application for DMG. The
principal Key Performance Indicator for 2022 is to support Peel NRE, and its
SPV team to complete the procurement and construction phase, generate
investment committee sign off at Peel NRE and reach financial close, leading
to proving the process in operation.
The Company intends to build the Global Technology and Innovation Centre in
early 2023, and the technical team will complete the key imperatives within
the Technology and Innovation detailed plan for the year.
The Company puts safety to the fore in our activities and for 2022 our target
will be to operate without harm and to ensure that our operating systems and
process are developed with safety of all as the prime concern. Continued
incident free activity is a key performance indicator for 2022.
CORPORATE SOCIAL RESPONSIBILITY
Our Commitment
The Company cares profoundly about the environment and is committed to
addressing two of the world's current challenges in the eradication of
unrecyclable plastic waste and the production of hydrogen energy to replace
diesel in heavy goods vehicle use improving air quality around our
communities.
The Company is committed to operating with an inclusive, transparent, and
respectful culture and places particular emphasis on operating to the highest
ethical and environmental standards and our applications target the best
achievable energy efficiency.
The Directors take personal ownership of the policies and maintenance of the
necessary exacting standards of business conduct throughout the organisation
and for delivering these Corporate Social Responsibilities.
Health and Safety
Powerhouse cares profoundly about the health and safety of our employees,
customers and the communities who could be affected by our activities and aims
to protect them from any foreseeable hazard or danger arising from our
activities or our products. To this end in 2020 and 2021 the Company completed
a series of safety related studies and reviews, including hazard and
operability studies, quantified risk assessments and layer of protection
analysis using external experts to review the product risk and the application
on sites such as Protos. In all instances the findings of the safety risk
assessments have demonstrated that the risk arising from the DMG technology is
well within acceptable tolerable risk levels. In 2022 and 2023 the Company
will revisit these assessments to identify any changes that have been
introduced which may represent new or variants of risk.
The Directors recognise that the key to successful health and safety
management requires an effective policy, organisation, and arrangements which
reflect the commitment of senior management. The Chief Executive Officer will
implement the Company's health and safety policy and ensure that the Company
Health and Safety (HSE) management system and safety standards are all
maintained, monitored, and improved where necessary.
The Company's research and development activities and activities at Protos
were delivered HSE incident free in 2021.
Environment Policies
The Company's Environmental Policy recognises the importance of our technology
from a global challenge perspective. The Company will regularly evaluate the
environmental impact of its activities, products, and services, taking all
actions necessary to continually improve the Company's and its products'
environmental performance.
Product Emissions in Operation
The Company is committed to providing a solution for utilising problem waste
streams with its current UK focus being to use non-recyclable plastics within
its technology to produce hydrogen as a clean fuel for buses and trucks which
minimise emissions and to comply with all relevant environmental legislation,
regulations, and other environmental requirements. The Company passionately
believes that its process is a far better alternative to incineration and / or
landfill.
The application of the Company's technology in waste to hydrogen plants
produces residues in two forms, a char like solid residue and waters with
hydrocarbon content. During the last period progress has been made on the
characterisation and utilisation of the residue (Biochar) and we are confident
that we can develop it into a saleable product for a given feedstock mix. This
work will continue through 2022. Similarly, once the Protos plant is in
operation, the technical development team is looking to implement further
cleaning processes to treat and use the emitted water to return into the
process.
Under the Powerhouse Environmental Policy, Powerhouse has committed to
improving the product emission performance, and Directors are confident
that the technology performance in this area will be improved, and we will
report annually on this matter.
Stakeholder Engagement
Recruitment and employee management are undertaken in line with the Company
Employment Policy which has committed to a working environment with equal
opportunities for all, without discrimination and regardless of sex, sexual
orientation, age, race, ethnicity, nationality, religion, or disability.
Furthermore, the Company has committed to continuous development schemes and
will support employees to attain the best for themselves and the Company
through personal assessment, training, and mentoring.
Powerhouse recruited a Chief Executive Officer in February 2022. During 2021,
the Company recruited a Chief Technical Officer and a Business Development
Executive.
The Board is mindful of the duties of Directors under S.172 of the Companies
Act 2006. The Directors believe strongly in the importance of solid and
exemplary corporate governance to help achieve our corporate goals. The Board
takes its accountability to each of Powerhouse's stakeholder groups very
seriously.
The Directors have committed to promoting a company culture that treats
everyone fairly and with respect and this commitment extends to all principal
stakeholders including shareholders, employees, consultants, suppliers,
customers, and the communities where it is active.
All Directors are encouraged to act in a way they consider, in good faith, to
be most likely to promote the success of the Company for the benefit of its
shareholders. In doing so, they each have regard to a range of matters when
making decisions for the long-term success of the Company.
PRINCIPAL RISKS AND UNCERTAINTIES
The Company is subject to various operational risks and the following issues
are particularly relevant to the Company's business activities:
Business Risk
Technology Risk
The Company continues to manage technology risks within the detailed
Technology Management Program. The risks are identified from our test and
design activities, tests on potential waste materials and the residues
arising. The strategy of selecting proven components with extensive operating
hours in similar service in other plants significantly reduces the risk
profile for its DMG system. The Directors' objective is to reduce technology
risk wherever practical, however the risk of the first application will remain
with the project SPV until the Protos plant is commissioned.
Throughout 2021 and the current year, engineering design contractors and
independent experts including DNV have reviewed the design. The feedback from
these reviews has allowed the removal of some of the risk issues completely
and the refinement of other matters. The design has been validated by
commissioning experiences that Powerhouse and our specialist suppliers have
experienced, and further challenged by the independent reviews that have been
undertaken by the FEED contractor, specialist consultants such as DNV and GHD
addressing the chemical engineering, gas, and hydrogen activities.
A key aspect in risk reduction is process development. The inception of the
Global Technical and Innovation Centre ("GTIC") will focus on improving the
technology readiness level of the technologies Powerhouse is developing and
adopting and allow the development and integration of technologies to further
enhance its offering whilst reducing overall risk.
The GTIC will allow the technical team to focus on specific aspects arising
from risk assessments and an active technical risk register. It will also
commence development of in-house technologies to reduce any risks posed by
third party systems within the process.
In conjunction with the development of the GTIC, we will continue to build on
the initial work with Manchester University by taking the initial
computational fluid dynamic output and begin a program of works with the
University to optimize the internals of the TCC. The aim of this works will be
to gain a better understanding of the intricacies of gas flow but also allow
us to build additional IP relating directly to the TCC design.
The Protos final contractor selection to be made in 2022 by Peel NRE's SPV for
the Protos site, will allow the final detailed design to be completed and the
control system logarithm functionality to be defined. This design detail, and
the commissioning and testing program will allow the closure, or mitigation,
of detail design related risks noted as outstanding against the risk
management program that was assessed by DNV during the second stage of their
Technology Validation process.
Research and Development Activity Risk
Throughout 2021 and into 2022, research and development has continued using
the demonstration unit at Powerhouse's Thornton, Cheshire site. The test time
has been utilised to further refine the feedstock/output model along with
allowing the testing of numerous potential feedstock sources. All testing,
maintenance and modifications to the unit are undertaken after
formal design and functional safety reviews with all activities being subject
to risk assessments in accordance with the Company Health & Safety
Management processes.
Powerhouse operates its research and development laboratory equipment and
testing programme in accordance with the Company Health and Safety Management
system.
The Research and Demonstrator rig has been optimised further during the year
and has resulted in a design package that has allowed the placement of the
order for a larger feedstock testing unit to be sited at the new Global
Testing and Innovation Centre, as reported above. The design, fabrication,
construction, and commissioning of the new equipment will follow all required
external and internal Health, Safety and Environmental guidelines.
Competition Risk
In quarter two 2022, the Company commenced an in-depth re-assessment of
competitive technologies to maintain a current and forward-looking vision of
the landscape it operates within.
Powerhouse remains well-placed to address current and future waste market
potential. As an innovator at the leading edge of integrating associated
technologies and advanced gasification technologies, Powerhouse can pursue and
deliver on UK and international opportunities in line with the Company's
focused strategy.
Market Adoption Risk
In the UK, Peel NRE, as our main collaboration partner, has been leading the
commercial engagement for waste plastic and hydrogen, and contract
negotiations with waste suppliers available to the first of a kind plant they
are developing plant.
The Company acknowledges that once this facility at the Protos Park is
operating successfully, commercial scale-up can be achieved.
The Company also has a collaboration with Hydrogen Utopia International Plc
(HUI). It is pursuing a project at Konin in Poland. To date, the project is
reported to be on programme, but is at risk of delay and other negative
impacts due to the situation regarding Ukraine.
Reliance on client parties
The Company depends on key developers and counterparties for its business
pipeline. The failure of a key business partner, supplier, subcontractor,
financer, or other provider could materially affect the operational and
financial effectiveness of the Company. Ensuring ongoing professional
collaborative relationships with our early-stage clients is mission critical.
Central to achieving our strategy is winning and successfully delivering
projects and supplying our technology services, and the product ecosystem.
Winning new, and retaining and converting, existing client pipeline continues
to be critical for the future success of the business.
To mitigate some of this risk, the Company has also signalled and recently
launched several imperatives to begin to limit dependency on any one or
similar number of projects and development partners. The Company aims to build
and create a quality of pipeline choice, whilst having a professional
supportive collaborative position with key partners.
Intellectual Property and Know-How Risk
The Company undertakes reasonable endeavours to protect its know-how and has
filed patents in 2021 to generate IP. However, any patents and other IP may
not prevent competitors from independently developing or selling products and
services like or duplicative of those filed.
If the Company can generate and protect IP, the value of the brand and other
intangible assets may be increased, and our business positively affected. In
addition to the IP patents, the Company possesses a wide-ranging level and
breadth of proprietary know-how that drives our capabilities and excellence.
The Directors are aware of the risks of IP leakage and, through our IP
attorneys, are maintaining and monitoring compliance of any potentially
conflicting technologies as well as maintaining protection around the freedom
to operate worldwide. The Company follows a dual route of IP protection via a
suite of patents and maintaining control of disclosure over the design
documents, calculations, and chemical engineering models for the process
through systems management.
All contracts robustly define the IP and Employees are trained to limit data
made available to third parties
Finally, the GTIC and material partner collaborations are designed to form a
platform which will support building further know-how and IP potential for the
Company.
Employee Risk
Attracting and retaining the best, skilled people at all levels of the
business is critical. This is particularly the case in ensuring the Company
has access to a diverse range of views and relevant experience, and in
attracting specific expertise at both board, managerial and operational levels
where the market may be highly competitive.
As the Company evolves, this risk will take more prominent focus with the
Board. Employees should not become a hurdle to progress for the Company.
The Board is also aware that the value of the Company is inherently embedded
in its employees and the remuneration committee has made commitments to make
Powerhouse an attractive workplace, both in terms of suitably attractive
packages but also commitment to development through training and compliance
and other Employees benefits.
As part of the Covid-19 measures all employees were supported to ensure that
their home working facilities were compliant and, as the Directors are also
aware of the pressures on employees, that well-being support and instruments
were introduced.
Supply Chain Risk
As a hangover from the pandemic, global shortages in raw material shortages,
supplier capacity constraints, supplier production disruptions, supplier
quality and sourcing issues or price increases are widespread and touching a
wide range of industries.
It is not beyond the realms of possibility that this could increase aspects of
the technology, or development and operating costs, and adversely impact the
competitive positions of the Company's products or service. The reliance on
its development partners, and their reliance on contractors, third-party
suppliers and manufacturers, and raw material markets exposes enterprises like
Powerhouse to volatility in the prices and availability of such items. A
disruption in deliveries, including as a result of catastrophic events or war,
could have an adverse effect on our ability to meet our development partner's
commitments to customers or increase operating costs.
It is however also anticipated that the prices of offtakes such as gas, power,
heat, and hydrogen produced by Powerhouse will see increases in the same
environment.
Financial Risk
Capital management
In January 2021, the Company raised £10 million before expenses by way of a
fund raise. This was primarily intended to support the delivery of the Protos
project, evidenced by the provision of the £3.8m loan facility to the Protos
SPV.
Due to changes in the Protos contracting strategy, the facility was not fully
utilised during 2021 and has been made available until August 2022 in keeping
with updated cashflows for the project development phase. Powerhouse had a
cash balance of £9.6 million at 31 December 2021.
Whilst this is a healthy position, until the Company can secure forward
revenues in excess of its running costs, this amount will deplete over time.
The Company produces regular cashflows to assess plans forward and the use of
its cash resources based on business strategy. The Company assesses investment
opportunities, either in its technology development or in project engagement,
on their individual merits but also in terms of how funds can be used to
generate future revenues in line with Business Strategy.
To enhance financial control procedures and to strengthen the oversight and
monitoring and control of financial performance and cash, the Company will
bring activities which are outsourced currently, in-house and will recruit a
Financial Controller who will report to the CFO. The Company will also invest
in an upgraded finance software system appropriate for this current and
immediate stage in its evolution.
The Company manages its capital according to budgets with the aim of ensuring
it can continue as a going concern. Capital sources include debt and equity
instruments.
Board members review cash balances available for ongoing spend on a weekly
basis against budget and income forecasts in assessing needs forward and
timing for any future equity raises.
Other financial risks are considered as follows:
Foreign Currency Risk
The execution of the first project does not expose the Company to any foreign
currency risk and the Company does not hold any cash in foreign currencies.
Foreign currency value fluctuations are therefore insignificant. In future, as
international contracts are signed, the Board will examine the currency risk
exposure of each project and protect any revenues and expenses against
currency volatility.
Interest Rate Risk
The Company does not have any corporate or project related debt outstanding,
so the Board considers that there is currently no material risk of any
exposure to interest rate variations.
Credit risk
The Company has provided a loan facility and billed for engineering services
to the Protos SPV during the year and into 2022. Amounts due will be dealt
with as part of the funding arrangements for the project during 2022. The
Company has exposure on these amounts should the project fail to reach a
financial close, although security is in place in the event of a default in
repayment.
Other Financial Risk
The Company considers price risk and liquidity risk to be negligible in
relation to their performance and financial position at this early stage of
its development, except as referenced elsewhere in this report.
Before entering any contract, partnership, or collaboration arrangements for
service providers to Powerhouse, the Board ensures that steps are taken to
confirm the ability to deliver of any contractor or partner to avoid business
disruption.
External Risks
The Company is subject to various risks originating from external events
including political, economic, legal, business, and financial conditions. The
assessment of these risks, their evaluation and mitigation are essential parts
of the Company's planning and internal control system.
Projects that utilise the Company's technology are subject to price risk in
respect of project build and operational costs and market risks in respect of
commodity pricing relating to project outputs. As the Company's ability to
generate revenues is dependent upon projects materialising, the Company is
indirectly exposed to these risks. The Company is actively involved with its
customers in assisting management of these risks.
The following risk factors, which are not exhaustive, are particularly
relevant to our current business activities:
COVID-19
Since 2020, the engineering development work avoided significant interruption.
In 2022, as the different regions of the UK moved more into the phases of
'living with Covid-19', more normalised operations were established within
society, and in our business environment. Despite this, the flow through
impact of Covid-19 on global supply chain is still prevailing. The Company and
its collaboration partner in the UK, Peel NRE, and the SPV team on the Protos
project, monitor the supply chain related effects of the pandemic on the
project (including cost volatility), and on the business. They deploy
appropriate risk mitigation strategies where possible.
The Company continues to closely monitor the coronavirus situation, are
following health authority and government guidelines. The Company is prepared
to take further action to deal with any situational changes.
Implications of the war in Ukraine
The Company does not consider there to be a direct impact on its assets and
liabilities as a result of the war in Ukraine. The Company notes that the
situation is impacting commodity pricing, exchange rates and the supply chain,
as well as the possibility of an economic downturn. The Company will continue
to monitor events and potential impacts on the business and relating projects,
mitigating where appropriate and possible.
Regulatory and Compliance Risk
The international markets available to Powerhouse expose the Company to risk
across a spectrum of different political and regulatory regimes with different
risk profiles.
The steps being taken to adopt a more strategic and tactical development of
territories and markets by the Company of late reduces this risk and allows
the Company to focus on aligning with relevant markets where there is existing
or potential market fit and attractiveness, which includes the political,
regulatory and compliance elements.
STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 31 December 2021
31 December 31 December
Note 2021 2020
£ £
Revenue 2 701,435 100,000
Cost of sales (599,914) (99,868)
Gross Profit 101,521 132
Administrative expenses 4 (2,147,476) (1,477,415)
Acquisition costs (11,735) (303,224)
Share of associate 5 50,062 -
Goodwill impairment 6 - (14,192,699)
Operating loss (2,007,628) (15,973,206)
Net finance income/(cost) 7 10,987 (3,032)
Loss before taxation (1,996,641) (15,976,238)
Income tax credit 8 126,145 138,497
Total comprehensive loss (1,870,496) (15,837,741)
Loss per share (pence) 9 (0.05) (0.57)
Diluted loss per share (pence) 9 (0.05) (0.57)
All activities are in respect of continuing operations and there are no other
items of comprehensive income.
The notes numbered 1 to 30 are an integral part of the financial information.
STATEMENT OF FINANCIAL POSITION
As At 31 December 2021
Note 2021 2020
£ £
ASSETS
Non-current assets
Intangible fixed assets 10 43,554,498 43,519,582
Tangible fixed assets 11 33,092 53,020
Investments in subsidiary undertakings 12 1 2
Investments in associated undertakings 12 140,540 49
Total non-current assets 43,728,131 43,572,653
Current Assets
Loans receivable 13 1,165,286 -
Contract costs 14 - 14,550
Trade and other receivables 15 963,648 200,310
Corporation tax recoverable 16 155,227 138,497
Cash and cash equivalents 17 9,637,460 3,464,475
Total current assets 11,921,621 3,817,832
Total assets 55,649,752 47,390,485
LIABILITIES
Current liabilities
Creditors: amounts falling due within one year 18 (563,781) (509,194)
Total current liabilities (563,781) (509,194)
Total assets less current liabilities 55,085,971 46,881,291
Creditors: amounts falling due after more than one year 19 - (23,455)
Net assets 55,085,971 46,857,836
EQUITY
Share capital 22 22,900,856 21,689,288
Share premium 23 61,291,710 52,594,934
Merger relief reserve 23 36,117,711 36,117,711
Accumulated deficit 24 (65,224,306) (63,544,097)
Total surplus 55,085,971 46,857,836
The financial statements of Powerhouse Energy Group Plc, Company number
03934451, were approved by the Board of Directors and authorised for issue on
28 June 2022 and signed on its behalf by:
Paul Drennan-Durose
Director
The notes numbered 1 to 30 are an integral part of the financial information.
STATEMENT OF CASHFLOWS
For The Year Ended 31 December 2021
Note 2021 2020
£ £
Cash flows from operating activities
Operating Loss (2,007,628) (15,973,206)
Adjustments for:
Share based payments 34,829 40,634
Amortisation 5,049 2,170
Depreciation 28,824 2,311
Goodwill impairment - 14,192,699
Share of associate result (50,062) -
Provision against investments 49 -
Changes in working capital:
Decrease/(Increase) in contract costs 14,550 99,868
Decrease/(Increase) in trade and other receivables (763,338) (143,504)
Increase/(Decrease) in trade and other payables 55,015 (171,998)
Tax credits received 118,927 195,708
Net cash used in operations (2,563,785) (1,755,318)
Cash flows from investing activities
Purchase and hive up of subsidiary - 1,934
Purchase of interest in associate 12 (99,990) -
Loans advanced 13 (1,150,000) -
Purchase of intangible fixed assets 10 (39,965) (45,238)
Purchase of tangible fixed assets 11 (8,896) (5,852)
Net cash flows from investing activities (1,298,851) (49,156)
Cash flows from financing activities
Proceeds from issue of shares 10,063,802 5,170,314
Payments of principal under leases 21.3 (23,882) (1,913)
Net finance costs 7 (4,299) (3,032)
Net cash flows from financing activities 10,035,621 5,165,369
Net increase/(decrease) in cash and cash equivalents 6,172,985 3,360,895
Cash and cash equivalents at beginning of year 3,464,475 103,580
Cash and cash equivalents at end of year 9,637,460 3,464,475
The notes numbered 1 to 30 are an integral part of the financial information.
STATEMENT OF CHANGES IN EQUITY
For The Year Ended 31 December 2021
Ordinary share capital Share premium Merger Accumulated deficit
£ Deferred shares £ relief £ Total
£ reserve £
£
Balance at 1 January 2020 9,808,942 3,113,785 48,778,651 - (61,714,360) (12,982)
Transactions with equity parties:
- Share issues in lieu of services 261,141 - 9,757 - - 270,898
- Share issues on exercise warrants 318,219 - 38,963 - - 357,182
- Share issues to acquire W2T 7,187,201 - - 50,310,410 - 57,497,611
- Share issues in year 1,000,000 - 4,000,000 - - 5,000,000
Share based payments - - - - (184,695) (184,695)
Share issue costs - - (232,437) - - (232,437)
Reserve transfer- goodwill impairment - - - (14,192,699) 14,192,699 -
Total comprehensive loss - - - - (15,837,741) (15,837,741)
Balance at 31 December 2020 18,575,503 3,113,785 52,594,934 36,117,711 (63,544,097) 46,857,836
Transactions with equity parties:
- Share issues on exercise warrants 24,477 - 174,603 - - 199,080
- Share issues to exercise options 278,000 - 253,982 - - 531,982
- Share issues in year 909,091 - 9,090,909 - - 10,000,000
Share based payments - - - - 190,287 190,287
Share issue costs - - (822,718) - - (822,718)
Total comprehensive loss - - - - (1,870,496) (1,870,496)
Balance at 31 December 2021 19,787,071 3,113,785 61,291,710 36,117,711 (65,224,306) 55,085,971
The following describes the nature and purpose of each reserve within equity:
Deferred shares: Represents the combined total of all deferred
shares (0.5p, 4p and 4.5p)
Share premium: Amount subscribed for share capital in excess
of nominal value
Merger relief reserve: Amount subscribed for share capital in excess of
nominal value where merger relief applies (Note 1.1)
Accumulated deficit: Accumulated deficit represents the cumulative losses of
the company and all other net gains and losses and transactions with
shareholders not recognised elsewhere
The notes 1 to 30 are an integral part of the financial information.
NOTES TO THE ACCOUNTS
For The Year Ended 31 December 2021
1. accounting policies
Powerhouse Energy Group Plc is a company incorporated in England and Wales.
The Company is a public limited company quoted on the AIM market of the London
Stock Exchange. The address of the registered office is 15 Victoria Mews, Mill
Field Road, Cottingley Business Park, Bingley BD16 1PY. The principal activity
of the Company is to continue the development of its technology and to support
its customers in order to achieve its full commercial roll-out. The following
accounting policies have been applied consistently in dealing with items which
are considered material in relation to the financial information.
1.1. Basis of preparation
This financial information is for the year ended 31 December 2021 and has been
prepared in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board (IASB), as
adopted for use in the United Kingdom (UK) and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS (except as
otherwise stated). These accounting policies and methods of computation are
consistent with the prior year, unless otherwise stated. There were no
retrospective adjustments required either on 1 January 2020 or in the
corresponding amounts for the period ended 31 December 2020 due to the
transition to UK-adopted IFRS.
The Company's only UK subsidiaries are non-trading and not material. There are
also long-term restrictions on the operations of the Company's subsidiaries in
the US and Switzerland. With these restrictions in place, the Company is also
unable to exert control over the subsidiaries. As such the Company has claimed
exemptions applicable to it under Companies Act section 405 (2) and 405 (3b)
and IFRS 10 to not present any Consolidated financial statements for the year
ended 31 December 2021. Investments in subsidiaries that are not consolidated
are carried at cost less any provision for impairment.
The acquisition of Waste2Tricity Limited during 2020 was transacted by way of
a share for share exchange and qualifies for merger relief, meaning that no
share premium is recorded on the issue of the consideration shares. The excess
of the fair value of consideration shares over their nominal value has been
recorded in a merger relief reserve.
Associates are entities which the Company has significant influence but not
control or joint control as defined under IAS 28. This is generally the case
where the Company holds between 20% and 50% of the voting rights. Investments
in associates are accounted for using the equity method of accounting.
Under the equity method of accounting, investments are initially recognised at
cost and adjusted thereafter to recognise the Company's share of the
post-acquisition profits or losses of the investee in the Income statement.
Dividends received or receivable from associates and joint ventures are
recognised as a reduction in the carrying value of the investment.
When the Company's share of losses in an equity-accounted investment exceeds
or equals its interest in the equity, the Company does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the
other entity. Unrealised gains on transactions between the Company and its
associates and joint ventures are eliminated to the extent of the Company's
interest in these entities. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment in the asset transferred.
Accounting policies of the equity accounted investees are changed where
necessary to ensure consistency with the policies adopted by the Company. The
carrying value of equity accounted investments is tested for impairment in
accordance with the policy described in Note 1.18 (ii).
The Company has one associate, Engsolve Limited, the interest in which was
acquired during the year.
Other investments, which are not publicly traded, are initially measured at
cost and subsequently measured at cost less accumulated losses.
1.2. Judgements and estimates
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts in the financial statements.
Areas involving a higher degree of judgements or complexity, or areas where
assumptions or estimates are significant to the financial statements such as
the exercise to assess the fair value of goodwill, share based payments (share
options and warrants) and going concern are disclosed within the relevant
notes.
1.3. Going concern
The financial statements have been prepared on a going concern basis. The
Company has a total comprehensive loss of £1.87m (2020: £1.65m after
excluding £14.19m of goodwill impairment) and net operating cash outflows of
£2.56m (2020: 1.76m). However, the Directors believe the going concern basis
to be appropriate for the following reasons.
As at the balance sheet date, the Company has available cash of £9.64m (2020:
£3.46m) which is considered by the Directors to be sufficient to enable the
Company to continue in operational existence for the foreseeable future by
meeting its liabilities as they fall due for payment.
The Directors' views are based upon working capital projections which take
into account the intended uses of the funds in hand over the next 12 months.
In the event that the Protos project did not proceed then the Company would
need to consider alternative ways to commercialise the DMG technology,
including the potential introduction of third-party developers. However, the
Directors do not see that this would impact the going concern basis on which
these accounts are drawn up.
The Directors have assessed the effects on the business arising from Covid-19
and from Brexit in respect of potential tariff charges and do not consider
these to impact the going concern basis on which these accounts are drawn
up.
1.4. Foreign currency translation
The financial information is presented in sterling which is the Company's
functional currency.
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are revalued to the
exchange rate at date of settlement or at reporting dates (as appropriate).
Exchange gains and losses resulting from such revaluations are recognised in
the Statement of Comprehensive Income.
Foreign exchange gains and losses are presented in the Statement of
Comprehensive Income within administrative expenses.
1.5. Revenue
(i) Engineering services
The Company provides engineering services for the application of the DMG
Technology, the intellectual property which the Company owns. Revenue from
providing services is recognised in the accounting period in which services
are rendered. For fixed-price contracts, revenue is recognised based on the
actual service provided to the end of the reporting period as a proportion of
the total services to be provided to the extent to which the customer receives
the benefits. This is determined based on the actual labour hours spent
relative to the total expected labour hours.
Where contracts include multiple performance obligations as specified by the
work scope, the transaction price will be allocated to each performance
obligation based on estimated expected cost-plus margin.
Estimates of revenues, costs or extent of progress toward completion of
services are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in
the period in which the circumstances that give rise to the revision become
known by management.
In case of fixed-price contracts, the customer pays the fixed amount based on
a payment schedule. If the services rendered by the Company exceed the
payment, a contract asset is recognised. If the payments exceed the services
rendered, a contract liability is recognised.
If a contract includes an hourly fee, revenue is recognised in the amount to
which the Company has a right to invoice.
(ii) Exclusivity fees
Where the Company grants a developer exclusive rights to utilise its
technology in a particular territory for an exclusivity fee, the fee is
recognised in the income statement over the agreed exclusivity period.
1.6. Leases
For any new contracts entered into, the Company considers whether a contract
is, or contains, a lease. A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset for a period of time in
exchange for consideration'. To apply this definition the Company assesses
whether the contract meets three key evaluations which are whether:
(i) the contract contains an identified asset which is either explicitly
defined in the contract or implicitly specified by being identified at the
time the asset is made available to the Company;
(ii) the Company has the right to obtain substantially all of the economic
benefits from use of the asset throughout the period of use, considering its
rights within the defined scope of the contract;
(iii) the Company has the right to direct the use of the identified asset
throughout the period of use.
Where the above evaluations are met, at lease commencement date, the Company
recognizes a right of use asset and a lease liability on the balance sheet.
The right of use asset is measured at cost, which is made up of the
measurement of the initial lease liability, any direct initial costs incurred
by the Company, an estimate of any costs to dismantle and remove the asset at
the end of the lease, and any lease payments made in advance of the lease
commencement date.
The Company depreciates right of use assets on a straight-line basis from the
lease commencement date to the earlier of the end of the useful life of the
right of use asset or the end of the lease term. The Company assesses the
right of use asset for impairment when such indicators exist.
At the commencement date the Company measured the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the
Company's incremental borrowing rate. For the assessment of the lease entered
into in 2020 the Company applied a rate of 7.5%.
Subsequent to initial measurement the liability will be reduced for payments
and increased for interest. It is remeasured to reflect any reassessment or
modification or is there are any changes to the repayment schedule.
1.7. Finance income and expenses
(i) Income
Interest income is calculated by applying the effective interest rate to the
gross carrying amount of a financial asset except for financial assets that
subsequently become credit impaired. For credit impaired financial assets, the
effective interest rate is applied to the net carrying amount of the financial
asset (after deduction of the loss allowance).
(ii) Expense
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments through the expected life of the financial
liability, or, where appropriate, a shorter period, to the net carrying amount
on initial recognition.
1.8. Income tax expense
The tax expense for the period comprises current and deferred tax.
UK corporation tax is provided at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantively enacted
by the balance sheet date.
Deferred tax is recognised in respect of all temporary differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more tax in the future or a right
to pay less tax in the future have occurred at the balance sheet date.
Temporary differences are differences between the Company's taxable profits
and its results as stated in the financial statements that arise from the
inclusion of gains and losses in tax assessments in periods different from
those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised
only to the extent that, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying temporary differences can be
deducted.
Deferred tax is measured at the average tax rates that are expected to apply
in the periods in which the temporary differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted by
the balance sheet date. Deferred tax is measured on a non-discounted basis.
1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation.
Cost represents the cost of acquisition or construction, including the direct
cost of financing the acquisition or construction until the asset comes into
use.
Depreciation on property, plant and equipment is provided to allocate the cost
less the residual value by equal instalments over their estimated useful
economic lives of 3 years, once the asset is complete.
The expected useful lives and residual values of property, plant and equipment
are reviewed on an annual basis and, if necessary, changes in useful life or
residual value are accounted for prospectively.
1.10. Intangible assets
Goodwill represents the future economic benefits arising from a business
combination that are not individually identified and separately recognised.
Goodwill is carried at cost less accumulated impairment losses. Refer to note
1.18 for impairment testing procedures. Goodwill impairment losses are not
reversible as explained in note 1.18 (ii).
Exclusivity rights acquired in a business combination that qualify for
separate recognition are recognised as intangible assets at their fair value
and subsequently assessed for impairment loss.
Costs associated with patent applications are capitalised in the year of spend
and amortised over their estimated useful lives of 20 years on a straight-line
basis commencing from the date of patent application. Any cost associated with
the upkeep of a patent is amortised over the remaining useful life of that
patent.
An internally generated intangible asset arising from development is only
recognised where all of the following have been demonstrated: (i) the
technical feasibility of completing the asset; (ii) the intention to complete
the asset and the ability to use or sell it; (iii) the availability of
resources to complete the asset; and (iv) the ability to reliably measure the
cost attributable to the asset during its development.
Research and development
In all other instances research and development expenditure is recognised as
an expense as incurred. Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period.
1.11. Other non-current assets
Other non-current assets represent investments in subsidiaries. The
investments are carried at cost less accumulated impairment. Cost was
determined using the fair value of shares issued to acquire the investment.
Financial assets
The Company classifies financial assets as loans and receivables within
current assets, except for maturities greater than 12 months after the balance
sheet date. These are classified as noncurrent assets. Assets are initially
recognised at fair value plus transaction costs. Loans and receivables are
subsequently carried at amortised cost using the effective interest rate
method.
1.12. Contract costs
The Company recognises costs incurred in fulfilling contracts with customers
that are directly associated with the contract as an asset if those costs are
expected to be recoverable. Contract costs are amortised on a basis consistent
with the transfer of goods and services to which the asset relates.
1.13. Trade and other receivables
Trade receivables are initially recognised at fair value. Subsequently they
are carried at amortised cost less any provision for impairment.
1.14. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits and are
recognised and subsequently carried at fair value. For the purpose of
presentation in the statement of cashflows, cash and cash equivalents include
cash on hand, deposits held at call with financial institutions, other short
term, highly liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities in the
balance sheet.
1.15. Trade and other payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Trade and other
payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method.
1.16. Financial assets and liabilities
i) Financial assets
Loans receivable, where forward receivables comprise solely of payments of
principal and interest, are measured at amortised cost. Interest income from
these financial assets is included in finance income using the effective
interest rate method.
ii) Financial liabilities
Loans payable are financial obligations arising from funding received and used
to support the operational costs of the Company. These are initially
recognised at fair value. Loans are subsequently carried at amortised cost
using the effective interest method.
1.17. Adoption of new and revised standards
(i) New and amended standards adopted by the Company
New and amended standards for the current period and effective from 1 January
2021 have been applied by the Company, including:
Covid-19 Related Rent Concessions (Amendment to IFRS 16)
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39 and
IFRS 7)
There are no transition adjustments relating to the adoption of these
standards.
(ii) Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2021 reporting periods and have not been
adopted early by the Company. These standards are not expected to have a
material impact on the entity in the current or future reporting periods and
on foreseeable future transactions.
1.18. Impairment
(i) Goodwill
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired.
(ii) Other assets
At each balance sheet date, the carrying amounts of assets are reviewed to
determine whether there is any indication that those assets have suffered an
impairment loss. An impairment loss is recognised whenever the carrying amount
of an asset or its cash generating unit exceeds its recoverable amount.
Impairment losses recognised in respect of cash generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash
generating units and then to reduce the carrying amount of the other assets in
the unit on a pro-rata basis. A cash generating unit is the group of assets
identified on acquisition that generate cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The
recoverable amount of assets or cash generating units is the greater of their
fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For an asset that does
not generate largely independent cash inflows, the recoverable amount is
determined for the cash generating unit to which the asset belongs.
(iii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, an impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
1.19. Share based payments
Share based payments are made to employees and third parties and all are
equity settled.
(i) Third party provision of services
a) Via issue of shares
Contractors receive remuneration in the form of share-based payments, whereby
services are provided and settled by the issue of shares. The cost of equity
settled transactions is determined at the fair value of the services provided,
based upon invoiced amounts or formal agreements in place with suppliers.
b) Via issues of share warrants
The Company also issues share warrants to third parties in relation to
services provided by suppliers. The cost of equity settled transactions is
determined at the fair value of the services provided, based upon invoiced
amounts or formal agreements in place with suppliers. Where no fair value of
services can be directly obtained, the fair value at the grant date is
determined using the Black and Scholes valuation model. At each reporting date
the Company revises its estimates of the number of options that are likely to
be exercised with any adjustment recognised in the income statement.
(ii) Directors and employees
c) Via issues of share options
The Company has issued share options to Directors and employees through
approved and unapproved option plans. The fair value of options issued is
determined at the date of grant and is recognised as an expense in the Income
Statement. The fair value at the grant date is determined using the Black and
Scholes valuation model. At each reporting date the Company revises its
estimates of the number of options that are likely to be exercised with any
adjustment recognised in the income statement.
Where share-based payments give rise to the issue of new share capital, the
proceeds received by the Company are credited to share capital and share
premium when the share entitlements are exercised.
1.20. Employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are included within
creditors in the balance sheet.
For defined contribution pension plans, the company pays contributions to
publicly or private administered pension insurance plans on a mandatory,
contractual or voluntary basis. The Company has no further payment obligations
once the contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the
future payments is available.
The Company does not contribute to any defined benefit pension plans.
1.21. Segmental reporting
An operating segment is a component of the Company:
• that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses relating to
transactions with other components of the Company);
• whose operating results are reviewed regularly by the Company's
chief decision maker to make decisions about resources to be allocated to the
segment and assess its performance; and
• for which discrete financial information is available.
The Company considers it has one business segment, being a UK based
development company intending to license its technology to projects in the UK
and internationally.
2. Revenue
2021 2020
£ £
Engineering and related services 628,859 100,000
Exclusivity fees 71,829 -
Other 747 -
701,435 100,000
During the year, the Company billed for engineering work carried out on
projects. All of the revenue generated has arisen in the UK.
3. Employee costs
2021 2020
£ £
Directors' fees 274,575 332,746
Wages and salaries 178,710 11,473
Social security costs 48,835 35,659
Pensions 3,960 17,000
506,080 396,878
The number of average monthly employees (including Directors) are as follows:
2021 2020
Management 7 6
Operations 3 -
Total 10 6
The total number of employees as at 31 December 2021 (including Directors) was
9 (2020: 11) comprising 5 in management and 4 in operations (2020: 8 in
management, 3 in operations). All Directors are classed as management.
4. Administrative expenses
Included in administrative expenses are: 2021 2020
£ £
Lease charges - 14,250
Research and development costs 585,195 407,071
Amortisation 5,049 2,170
Depreciation 4,199 259
Depreciation - right of use asset 24,625 2,052
Share based payments 34,829 40,634
Foreign exchange (gains)/losses (429) -
Auditor's remuneration for audit services:
Fees payable to the Company's auditor for the audit of the Company's annual 25,000 20,000
financial statements
Fees payable to the Company's auditor and their associates for other services: 1,000 1,000
Non-audit fees paid to auditors
Taxation advisory and compliance services 10,000 13,850
Other services - 5,000
There are no other fees paid to the Company's auditor other than those
disclosed above.
5. Share of associate
2021 2020
£ £
Share of profits 50,062 -
50,062 -
The Company acquired a 48.39% stake in Engsolve on 12 August 2021 as explained
in note 12. The above result represents the Company's share of the associate's
profits arising since acquisition. The Company's share of the associate's tax
is included in the tax charge (see note 8).
6. Goodwill impairment
2021 2020
£ £
Goodwill impairment - 14,192,699
- 14,192,699
In 2020, Goodwill of £57,152,699 was recognised on the acquisition and hive
up of Waste2tricity Limited. An independent fair value assessment is
commissioned by the Directors on the carrying value at each balance sheet date
as explained in note 10. Impairments are made based upon the results of those
assessments.
7. Net finance income/(cost)
2021 2020
£ £
Loan interest receivable 15,286 -
Other interest receivable 47 83
Bank and other interest payable (4,346) (3,115)
10,987 (3,032)
8. Income tax and deferred tax
As the Company incurred a loss, no current tax is payable (2020: £nil). In
addition, as there is no certainty about future profits from which accumulated
tax losses could be utilised, accordingly no deferred tax asset has been
recognised. The Company submitted a claim for research and development tax
credits during the year amounting to £135,657 (2020: £138,497) which
has been recognised in the accounts. Accumulated tax losses amount to an
estimated £17.0 million (2020: £12.9 million) and reflect tax losses
submitted in tax returns and arising during the period less any relief taken
for research and development credits. The tax credit rate is lower (2020:
lower) than the standard rate of tax. Differences are explained below.
Current tax 2021 2020
£
£
Loss before taxation 1,996,641 15,976,238
Tax credit at standard UK corporation tax rate of 19% (2019: 19%) 379,362 3,035,485
Effects of:
Goodwill impairment not deductible for tax purposes - (2,696,613)
Expenses not deductible for tax purposes (9,837) (63,003)
Allowable deduction on exercise of share options 445,750 -
Research and development tax credits claimed 135,657 138,497
Deferred tax asset not recognised (824,787) (275,869)
Income tax credit 126,145 138,497
9. Loss per share
2021 2020
Total comprehensive loss (£) (1,870,496) (15,837,741)
Weighted average number of shares 3,918,497,299 2,782,088,358
Loss per share in pence (0.05) (0.57)
Diluted loss per share in pence (0.05) (0.57)
For the year ended 31 December 2021, 1,062,692 of the options in issue and
9,090,910 of the warrants in issue were excluded from the diluted loss per
share calculation due to being anti-dilutive.
For the year ended 31 December 2020, 6,000,000 of the options in issue and
376,839,329 of the warrants in issue were excluded from the diluted loss per
share calculation due to being anti-dilutive.
There have been no shares issued since the year end.
10. Intangible fixed assets
Goodwill Exclusivity rights Patent costs Total
£ £ £ £
Cost
At 1 January 2020 - - 16,514 16,514
Additions - hive up of W2T 57,152,699 500,000 - 57,652,699
Additions - - 45,238 45,238
At 31 December 2020 57,152,699 500,000 61,752 57,714,451
Accumulated amortisation & impairment
At 1 January 2020 - - - -
Amortisation charge for the year - - 2,170 2,170
Impairment charge for the year 14,192,699 - - 14,192,699
At 31 December 2020 14,192,699 - 2,170 14,194,869
Carrying amount
At 31 December 2020 42,960,000 500,000 59,582 43,519,582
Cost
At 1 January 2021 57,152,699 500,000 61,752 57,714,451
Additions - - 39,965 39,965
At 31 December 2021 57,152,699 500,000 101,717 57,754,416
Accumulated amortisation & impairment
At 1 January 2021 14,192,699 - 2,170 14,194,869
Amortisation charge for the year - - 5,049 5,049
At 31 December 2021 14,192,699 - 7,219 14,199,918
Carrying amount
At 31 December 2021 42,960,000 500,000 94,498 43,554,498
Goodwill acquired in 2020 arose on the acquisition and hive up of
Waste2Tricity Limited. It was considered attributable to the Company's DMG
technology, which is intended to be licensed on a project-by-project basis to
generate income to the Company over the lifetime of each project.
The recoverable amount of goodwill at the balance sheet date was assessed via
independent third-party valuation. For 2021, the Valuer assessed goodwill
above its carrying value resulting in no impairment (2020: £14.2m). The
valuer took note of the ICAEW Corporate Finance Faculty Best Practice
Guideline April 2008 and applied a discounted cashflow approach, supported by
the International Private Equity and Venture Capital Guidelines of December
2018.
The key assumptions made by the valuer were:
the expected roll out of the technology over 5 years following the delivery of
the Protos project based on probability adjusted scenarios;
that the roll out will not be significantly impacted by competing
technologies;
that the Company and roll out developer have the capability to scale up where
necessary to deliver the assumed roll out pipeline;
the expected operating life of projects from which the Company will earn
licence revenues;
the expected licence fees arising per project based upon agreements with Peel
NRE;
the expected cost of services to support annual licence fee income estimated
by the Company based upon current draft project agreements;
applying a discount rate to cashflow of 10% assessed by review of market
survey reports of discount rates for projects within similar and competing
sectors which was considered to provide a reasonable estimate of a weighted
average cost of capital for a company benefiting from the assumed roll out.
Changes to the above assumptions would impact the valuation assessment.
The Directors believe that key sensitivities in the valuation are as follows:
(i) The probability adjusted roll out scenario assumed by the
valuer. The valuer attributes probabilities to different roll out scenarios
based upon a review of information provided by the Company and Peel NRE. This
takes account of expected timelines and the average number of systems expected
to be deployed at each site. The rollout assumptions made by the valuer
averages out at 17.85 systems (2020: 16 systems). Based upon the valuer's
assumptions, an incremental system would increase or decrease the valuation by
c £2.3m.
(ii) The discount rate applied to the cashflows. An increase in the
discount rate of 1% would impact the Valuer's valuation assessment by £4.4m
(2020: £4.1m).
(iii) Inflation - an increase in the inflation assumption above that
assumed in the valuer's model would result in adjustment to the licence fees
and result in an increase the valuer's valuation.
The Directors have not accounted for the possibility of any onerous
obligations arising within the service contracts from which licence fees will
be earnt as there is no reason to expect that these will arise at this stage
in the business life cycle.
Exclusivity rights arose on the acquisition and hive up of Waste2Tricity
Limited. They are subject to an Option Agreement between the Company and Peel
NRE. No impairment is considered to have arisen.
11. Tangible fixed assets
Right of use asset Property, plant and equipment Fixtures and Total
Land and buildings fittings
£ £ £ £
Cost
At 1 January 2020 - 6,868 - 6,868
Additions 49,250 5,852 - 55,102
At 31 December 2020 49,250 12,720 - 61,970
Accumulated depreciation
At 1 January 2020 - 6,639 - 6,639
Charge for the year 2,052 259 - 2,311
At 31 December 2020 2,052 6,898 - 8,950
Carrying amount
At 31 December 2020 47,198 5,822 - 53,020
Cost
At 1 January 2021 49,250 12,720 - 61,970
Additions - 7,693 1,203 8,896
At 31 December 2021 49,250 20,413 1,203 70,866
Accumulated depreciation
At 1 January 2021 2,052 6,898 - 8,950
Charge for the year 24,625 3,807 392 28,824
At 31 December 2021 26,677 10,705 392 37,774
Carrying amount
At 31 December 2021 22,573 9,708 811 33,092
12. Investments
2021 2021 2021 2020 2020 2020
£ £ £ £ £ £
Subsidiaries Associates Other Subsidiaries Associates Other
Cost or carrying value at 1 January 48,947,156 49 - 48,947,155 - -
Additions - 99,990 - 57,497,611 49 -
Goodwill recognised - - - (57,152,699) - -
Distributions - - - (344,911) - -
Share of associate's net result - 40,550 - - - -
Transfers - (49) 49 - - -
Disposals (1) - - - - -
Cost or carrying value 31 December 48,947,155 140,540 49 48,947,156 49 -
Provision at 1 January (48,947,154) - - (48,947,154) - -
Additions - - (49) - - -
Disposals - - - - - -
Accumulated impairment (48,947,154) - (49) (48,947,154) - -
Carrying value 1 140,540 - 2 49 -
(i) Subsidiaries
Investments relate to costs of investments in subsidiary undertakings, namely
in Powerhouse Energy, Inc, Pyromex AG and Powerhouse Energy UK Limited.
Powerhouse Energy, Inc is incorporated in California in the United States of
America and the Company holds 100 per cent of the common stock and voting
rights of the subsidiary. Pyromex AG is based in Zug, Switzerland and the
Company holds 100 per cent of the shares and voting rights of the subsidiary.
Powerhouse Energy UK Limited is a wholly owned UK based dormant company.
The registered address of Powerhouse Energy Inc is 145 N Sierra Madre Blvd
Pasadena, CA 91107, USA.
The registered address of Pyromex AG is Chollerstrasse 3, CH-6300, Zug,
Switzerland.
The registered address of Powerhouse Energy UK Limited is 15 Victoria Mews,
Mill Field Road, Cottingley Business Park, Bingley BD16 1PY.
Waste2Tricity Limited, which was acquired in 2020, was incorporated in the UK
and on 1 January 2021 the Company owned 100 per cent of its common stock and
voting rights. It was dissolved on 1 June 2021.
(ii) Acquisition of interest in Engsolve Limited
On 12 August 2021, the Company acquired 48.39% of the share capital of
Engsolve Limited for cash consideration of £99,990. Engsolve Limited is
incorporated and operates in the UK. Summary financial information of Engsolve
Limited at acquisition and balance sheet dates is provided below:
12 Aug 2021 31 Dec 2021
£ £
Summarised balance sheet
Fixed assets 6,965 7,848
Cash and cash equivalents 221,037 317,423
Other current assets 117,268 99,845
Current liabilities (142,939) (138,981)
Net assets 202,331 286,135
Company share 48.39% 48.39%
Share of net assets 97,902 138,452
Summarised income statement - post acquisition
Revenue 402,122
Profit from continuing operations 83,804
Profit from discontinued operations -
Other comprehensive income -
Total comprehensive income 83,804
Company share of pre-tax profit 50,062
Company share of tax (9,512)
Dividends received -
The Company incurred advisory costs associated with the acquisition which have
been expensed in the year.
(iii) Other investments
During 2021, the Company's investment in Waste2Tricity International
(Thailand) Limited was transferred into a new Thailand based entity, Altec
Energy Limited ("Altec"). The Company has not taken part in fund raises
investment made by Altec subsequent to its formation such that the Company's
interest has reduced to 33.8% as at 31 December 2021 and to 30.4% since year
end. Due to the passive nature of the Company's involvement, the interest is
held in other investments.
13. Loans receivable
2021 2020
£ £
Loans advanced 1,150,000 -
Accrued interest 15,286 -
1,165,286 -
On 12 May 2021, the Company agreed to provide a loan facility for up to £3.8m
to Protos Plastics to Hydrogen No 1 Limited, the Peel NRE special purpose
vehicle and owner of the development of the Protos plant. The loan is provided
to support the plant construction and secure long lead time items and project
design services. The loan facility was made available for an initial 6-month
period, accruing interest daily at the Bank of England base rate plus 2%. The
availability period for the facility has subsequently been extended to 31
August 2022.
14. Contract costs
2021 2020
£ £
Contract costs - 14,550
- 14,550
Contract costs assets relate to costs arising on engineering contracts where
the company has not yet completed performance obligations which are typically
met by the submission of reports, the transfer of data or on longer contracts
via the completion of milestones in accordance with the relevant contract.
15. Trade and other receivables
2021 2020
£ £
Trade receivables 447,967 -
Other receivables 177,513 158,126
Prepayments and accrued income 338,168 42,184
963,648 200,310
16. Corporation tax
2021 2020
£ £
Corporation tax recoverable 155,227 138,497
155,227 138,497
17. Cash and cash equivalents
2021 2020
£ £
Cash balances 9,637,460 3,464,475
9,637,460 3,464,475
18. Trade and other payables: amounts falling due within one year
2021 2020
£ £
Trade payables 144,105 121,152
Lease liability 23,455 23,881
Other creditors and accruals 238,955 334,609
Other taxes 156,642 29,552
Pensions payable 624 -
563,781 509,194
19. Trade and other payables: amounts falling due after one year
2021 2020
£ £
Lease liability - 23,455
- 23,455
20. Financial assets and financial liabilities
Financial assets 2021 2020
£ £
Financial assets at amortised cost:
- Trade receivables 447,967 -
- Other financial assets at amortised cost 1,165,286 -
- Cash and cash equivalents 9,637,460 3,464,475
11,250,713 3,464,475
Financial liabilities 2021 2020
£ £
Liabilities at amortised cost
- Trade payables 144,105 121,152
- Other creditors 238,955 334,609
- Payroll taxes 156,642 29,552
- Pensions payable 624 -
- Lease liabilities 23,455 47,336
563,781 532,649
21. Leases
The Company has leased offices at the location of its research facility with
the lease reflected in the accounts as a right of use asset and a lease
liability. Payments are fixed and at the balance sheet date the lease has a
further 11 months left to run. Information about leases for which the Company
is a lessee is presented below:
21.1 Amounts recognised in the balance sheet
Right of use assets relate to leased properties that do not meet the
definition of investment property and are presented within tangible fixed
assets per Note 11.
2021 2020
£ £
Right of use assets
Balance at 1 January 47,198 -
Additions to right of use assets - 49,250
Depreciation charge for the year (24,625) (2,052)
Balance at 31 December 22,573 47,198
2021 2020
Future minimum rentals payable are as follows: £ £
Amounts payable:
Within one year 24,310 26,520
Later than one year and not later than five years - 24,310
Total gross payments 24,310 50,830
Impact of finance expenses (855) (3,494)
Carrying value of liability 23,455 47,336
21.2 Amounts recognised in income statement
2021 2020
£ £
Depreciation charge 24,625 2,052
Interest on lease liabilities 2,638 296
Expenses relating to short term leases - 14,250
27,263 16,598
21.3 Amounts recognised in statement of cashflows
2021 2020
£ £
Interest on lease liabilities 2,638 296
Repayment of lease principal 23,882 1,913
Expenses relating to short term leases - 14,250
Total cash outflow for leases 26,520 16,459
22. Share capital
(i) Number of shares
0.5 p Ordinary 0.5 p Deferred shares 4.5 p Deferred shares 4.0 p Deferred shares
shares
Shares at 1 January 2020 1,961,788,425 388,496,747 17,373,523 9,737,353
Issue of shares 1,753,312,268 - - -
Shares at 31 December 2020 3,715,100,693 388,496,747 17,373,523 9,737,353
Issue of shares 242,313,442 - - -
Shares at 31 December 2021 3,957,414,135 388,496,747 17,373,523 9,737,353
(ii) Value in £
0.5 p Ordinary shares 0.5 p Deferred shares 4.5 p Deferred shares 4.0 p Deferred shares Share Capital
£ £ £ £ £
At 1 January 2020 9,808,942 1,942,483 781,808 389,494 12,922,727
Issue of shares 8,766,561 - - - 8,766,561
At 31 December 2020 18,575,503 1,942,483 781,808 389,494 21,689,288
Issue of shares 1,211,568 - - - 1,211,568
At 31 December 2021 19,787,071 1,942,483 781,808 389,494 22,900,856
All ordinary shares of the Company rank pari-passu in all respects.
The deferred shares do not carry any voting rights or any entitlement to
attend general meetings of the Company. They carry only a right to participate
in any return of capital once an amount of £100 has been paid in respect of
each ordinary share.
On 29 January 2020, the Company issued 52,228,139 ordinary shares of 0.5p each
in the Company ("Ordinary Shares") to various service providers for the
settlement of fees. Of these new Ordinary Shares, 47,732,518 were issued at
0.5p and 4,495,621 were issued at 0.717p in accordance with terms agreed.
On 29 January 2020, the Company issued 5,500,000 ordinary shares of 0.5p each
in the Company further to the exercise of warrants for proceeds amounting to
£27,500.
On 28 February 2020, the Company issued 25,440,350 ordinary shares of 0.5p
each in the Company further to the exercise of warrants for proceeds amounting
to £127,202.
On 19 March 2020, the Company issued 3,750,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£18,750.
On 7 April 2020, the Company issued 7,800,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£39,000.
On 16 April 2020, the Company issued 2,500,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£12,500.
On 22 April 2020, the Company issued 5,500,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£27,500.
On 27 May 2020, the Company issued 4,100,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£20,500.
On 9 June 2020, the Company issued 2,003,502 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£10,017.
On 23 June 2020, the Company issued 1,750,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£8,750.
On 10 July 2020, the Company issued 5,300,000 ordinary shares of 0.5p each in
the Company further to the exercise of warrants for proceeds amounting to
£26,500.
On 26 June 2020, the Directors of the Company issued a circular to
shareholders detailing the proposed acquisition of the whole of the share
capital of Waste2Tricity Limited on a share for share basis. The acquisition
was approved by shareholders at a General Meeting held on 14 July 2020 and the
Company issued 1,437,440,277 ordinary shares of 0.5p on 15 July 2020 to
complete the transaction.
On 15 September 2020, the Company issued 200,000,000 ordinary shares of 0.5p
each in the Company at a price of 2.5p each, totalling £5,000,000 before
issue costs.
On 21 January 2021, the Company issued 181,818,182 ordinary shares of 0.5p
each ("Ordinary shares") in the Company at a price of 5.5p each amounting to
£10,000,000 before issue costs. The Company also granted 9,090,910 warrants
to subscribe for Ordinary Shares at the issue price of 5.5p to its broker.
On 26 January 2021, the Company issued 4,895,260 ordinary shares of 0.5p each
in the Company further to the exercise of warrants for proceeds amounting to
£122,382.
On 9 February 2021, the Company issued 6,000,000 ordinary shares of 0.5p each
in the Company further to the exercise of options for proceeds amounting to
£36,000.
On 24 February 2021, the Company issued 1,600,000 ordinary shares of 0.5p each
in the Company further to the exercise of options for proceeds amounting to
£12,000.
On 4 March 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in
the Company further to the exercise of options for proceeds amounting to
£45,000.
On 17 March 2021, the Company issued 500,000 ordinary shares of 0.5p each in
the Company further to the exercise of options for proceeds amounting to
£3,000.
On 19 April 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in
the Company further to the exercise of options for proceeds amounting to
£36,000.
On 22 July 2021, the Company issued 8,000,000 ordinary shares of 0.5p each in
the Company further to the exercise of options for proceeds amounting to
£48,000.
On 19 August 2021, the Company issued 13,500,000 ordinary shares of 0.5p each
in the Company further to the exercise of options for proceeds amounting to
£81,000.
On 7 October 2021, the Company issued 7,000,000 ordinary shares of 0.5p each
in the Company further to the exercise of options for proceeds amounting to
£42,000.
On 9 December 2021, the Company issued 7,000,000 ordinary shares of 0.5p each
in the Company further to the exercise of options for proceeds amounting to
£42,000.
23. Other reserves
Merger relief Share premium account
reserve £
£
As at 1 January 2020 - 48,778,651
Issue of shares 50,310,410 4,048,720
Share issue costs - (232,437)
Reserve transfer - goodwill impairment (14,192,699) -
At 31 December 2020 36,117,711 52,592,934
Issue of shares - 9,519,495
Share issue costs - (822,719)
At 31 December 2021 36,117,711 61,291,710
24. Accumulated deficit
2021 2020
£ £
As at 1 January (63,544,097) (61,714,360)
Loss for the year (1,870,496) (15,837,741)
Share based payments 190,287 (184,695)
Reserve transfer - goodwill impairment - 14,192,699
At 31 December (65,224,306) (63,544,097)
25. Share based payments
The expense recognized for share-based payments during the year is shown in
the following table:
2021 2020
£ £
Share based payment charge recognised in Income Statement
Expense arising from equity-settled share-based payment transactions:
- Share options for Directors and employees 34,829 8,399
- Shares issued for third party services - 32,235
Total share-based payment charge in Income Statement 34,829 40,634
Share based payment charge recognised in Share Premium Account
- Warrants for third party services 419,138 84,532
Total share-based payment charge in Share Premium Account 419,138 84,532
Total share-based payment charges recognised 453,967 125,166
Other share-based payment movement
Exercise of share options by Directors and employees (186,982) -
Exercise of warrants for third party services (76,698) (38,963)
Shares issued for third party services - (270,898)
Total share-based payment 190,287 (184,695)
There were no liabilities recognised in relation to share based payment
transactions.
25.1 Share options for Directors and employees
The Company has put in place various options schemes for Directors and
employees as follows:
On 8 December 2014, the Company granted 11,000,000 options over ordinary
shares to the Board. The options may be exercised between the grant date and
the tenth anniversary of the grant date and will lapse if not exercised during
that period.
On 7 March 2016, the Company granted 15,000,000 options over ordinary shares
to the Board. The options may be exercised between the grant date and the
fifth anniversary of the grant date and will lapse if not exercised during
that period.
On 6 March 2018, the Company granted 32,100,000 options over ordinary shares
to employees, including a Board member, under the Powerhouse Energy Group PLC
2018 EMI Option Scheme. The options vest to the employees over a period of 24
months and are exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised during that
period. These options had all been exercised or forfeited by 31 December 2019.
On 6 March 2018, the Company granted 60,000,000 options over ordinary shares
to Board members under the Powerhouse Energy Group PLC 2018 non-employee Share
Option Plan. The options vest to the Board members over a period of 24 months
and are exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised during that
period.
On 23 April 2021, the Company granted 1,773,239 share options in ordinary
shares of 0.5p each in the Company to two Directors of the Company in lieu of
part or all of their fees to which they are entitled. The options have an
exercise price of 6.3p each and lapse 3 years from the date of grant.
The movement of share options in the year are as follows:
2021 2021 2020 2020
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 75,000,000 0.77 75,000,000 0.77
Granted during the year 1,773,239 6.3 - -
Forfeited during the year (5,110,547) 2.55 - -
Exercised during the year (55,600,000) 0.62 - -
Outstanding at 31 December 16,062,692 1.33 75,000,000 0.77
Exercisable at 31 December 16,062,692 1.33 75,000,000 0.77
The weighted average remaining contractual life for the share options
outstanding as at 31 December 2021 was 5.3 years (2020: 6.1 years)
1,773,239 share options were granted during the year (2020: Nil).
The range of exercise prices for options outstanding at the year-end was 0.6p
to 6.3p (2020: 0.6p to 2.5p).
The number of options outstanding at 31 December 2021 and the movements in the
year are as follows:
Date of Granted Share price on grant Exercised Forfeited At 31 Dec Exercise price Exercise period
grant 2021
8 Dec 6,000,000 1.875p - (3,000,000) 3,000,000 2.5p 9 Dec 2014 until 8 Dec 2024
2014
7 Mar 9,000,000 0.55p (7,600,000) (1,400,000) - 0.75p 8 Mar 2016 until
2016 7 Mar 2021
6 Mar 60,000,000 0.57p (48,000,000) - 12,000,000 0.6p 7 Mar 2018 until
2018 6 Mar 2028
22 Apr 1,773,239 5.58p - (710,547) 1,062,692 6.3p 23 Apr 2021 until
2021 22 Apr 2024
Total 76,773,239 (55,600,000) (5,110,547) 16,062,692
Of the 1,062,692 options granted on 22 April 2021 which were outstanding on 31
December 2021, 481,337 have been forfeited since the year end.
The estimated fair value of the options issued was calculated by applying the
Black-Scholes option pricing model. The assumptions used in the calculation
were as follows:
8 December 2014 6 March 2018 22 April 2021
Options in issue 31 December 2021 3,000,000 12,000,000 1,062,692
Exercise price 2.5p 0.6p 6.3p
Expected volatility 127.56% 70.00%** 214.8%**
Contractual life 10 years 10 years 3 years
Risk free rate 2% 1.49% 0.15%
Estimated fair value of each option 1.79p 0.32p* 3.87p*
* the calculation applies a 25% discount for small companies
** expected volatility based on historic volatility at the point of grant.
25.2 Warrants for third party services
The Company has issued warrants in respect of services provided by consultants
as part of their service arrangements. It has also issued warrants to
participating shareholders in respect of certain fund raises. No share-based
payment charge is recognised for warrants issued to participating shareholders
as they are outside of the scope of IFRS 2.
Details of warrants which have been issued during the year are as follows:
On 15 September 2020, the Company granted 5,395,260 warrants to the Company's
broker as part of its service arrangement in relation to the fund raise
arising on that date. The options may be exercised between the grant date and
the third anniversary of the grant date and will lapse of not exercised during
that period. At the date of grant the share price was 3.3p and the warrants
have an exercise price of 2.5p per share.
On 21 January 2021, the Company granted 9,090,910 warrants to the Company's
broker as part of its service arrangement in relation to the fund raise
arising on that date. The options may be exercised between the grant date and
the third anniversary of the grant date and will lapse of not exercised during
that period. At the date of grant the share price was 8.6p and the warrants
have an exercise price of 5.5p per share.
Warrants in respect of services provided:
The movement of warrants issued for share-based payments in the year are as
follows:
2021 2021 2020 2020
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 5,395,260 2.5 17,740,350 0.5
Granted during the year 9,090,910 5.5 5,395,260 2.5
Forfeited during the year - - - -
Exercised during the year (4,895,260) 2.5 (17,740,350) 0.5
Outstanding at 31 December 9,590,910 5.3 5,395,260 2.5
Exercisable at 31 December 9,590,910 5.3 5,395,260 2.5
The weighted average remaining contractual life for the share warrants
outstanding as at 31 December 2021 was 2.1 years (2020: 2.7 years)
The weighted average fair value of share warrants granted in the year was 4.6p
(2020: 1.57p).
The range of exercise prices for warrants outstanding at the year-end was 2.5p
to 5.5p (2020: 2.5p).
The number of warrants, which have been included for share-based payment
purposes, outstanding at 31 December 2021 and the movements in the year are as
follows:
Date of grant Granted Share price Exercised Forfeited At 31 Dec Exercise Exercise
on grant 2021 price period
15 Sep 2020 5,395,260 3.3p (4,895,260) - 500,000 2.5p 16 Sep 2020 until 15 Sep 2023
21 Jan 2021 9,090,910 8.6p - - 9,090,910 5.5p 22 Jan 2021 until
21 Jan 2024
Total 14,486,170 (4,895,260) - 9,590,910
The Company is required to assess the fair value of instruments issued in
respect of services received, with such value charged to the Income Statement.
The estimated fair value of the warrants issued during the year was calculated
by applying the Black-Scholes option pricing model. The assumptions used in
the calculation were as follows:
Warrants issued for services 15 Sep 2020 21 Jan 2021
In issue 31 December 2021 500,000 9,090,910
Exercise price 2.5p 5.5p
Expected volatility* 92.10% 161.6%
Contractual life 3 years 3 years
Risk free rate 0.07% (0.07%)
Estimated fair value of each option 1.57p 4.6p
* expected volatility based on historic volatility at the point of grant.
Warrants issued to participating shareholders
Warrants issued to participating shareholders are outside the scope of IFRS 2
and no share-based payment charges have been recognised on them. On initial
recognition the warrants' cost was deducted from equity as it represents the
cost of shares issued to investors. As the agreements had a fixed-for-fixed
requirement, they are also recognised as equity at the same time. As such,
there is £nil net impact on equity and has not been included in the statement
of changes in equity.
The number of warrants issued to participating shareholders, which have not
been included for share-based payment purposes, outstanding at 31 December
2021 and the movements in the year are as follows:
Date of grant Granted Share price on grant Exercised Forfeited At 31 Dec 2021 Exercise price Exercise period
15 Sep 2020 371,510,069 3.3p - - 371,510,069 2.75p 16 Sep 2020 until 15 Sep 2022
Total 371,510,069 - - 371,510,069
The estimated fair value of the warrants issued was calculated by applying the
Black-Scholes option pricing model. The assumptions used in the calculation
were as follows:
Warrants issued to participating shareholders 15 Sep 2020
In issue 31 December 2021 371,510,069
Exercise price 2.75p
Expected volatility* 106.20%
Contractual life 2 years
Risk free rate 0.04%
Estimated fair value of each option 1.46p
* expected volatility based on historic volatility at the point of grant.
All warrants
The number of all warrants outstanding at 31 December 2021 and the movements
in the year are as follows:
Date of Granted Share price on grant Exercised Forfeited At 31 Dec 2021 Exercise price Exercise period
grant
15 Sep 2020 5,395,260 3.3p (4,895,260) - 500,000 2.5p 16 Sep 2020 until
15 Sep 2023
15 Sep 2020 371,510,069 3.3p - - 371,510,069 2.75p 16 Sep 2020 until 15 Sep 2022
21 Jan 2021 9,090,910 8.6p - - 9,090,910 5.5p 22 Jan 2021 until
21 Jan 2024
Total 385,996,239 (4,895,260) - 381,100,979
25.3 Share issue third party services
In 2020, the Company issued shares to settle services to some of its service
providers. The fair value of the share-based payments charge was based on
invoiced amounts or amounts agreed to be paid under a formal agreement of the
Company.
26. Material risks
The Company is subject to various risks relating to political, economic,
legal, social, industry, business and financial conditions. Risk assessment
and evaluation is an essential part of the Company's planning and an important
aspect of the Company's internal control system. The Company's approach to
these risks is detailed in the Strategic Report.
27. Directors' remuneration and share interests
The Directors who held office at 31 December 2021 had the following interests,
including any interests of a connected party in the ordinary shares of the
Company:
Number of ordinary shares Percentage of
of 0.5p each voting rights
Keith Riley 12,128,986 <0.5
James John Pryn Greenstreet 1,840,000 <0.1
The remuneration of the Directors of the Company paid or payable for the year
or since date of appointment, if later, to 31 December 2021 is:
2021 2021 2021 2021 2021 2020
£ £ £ £ £ £
Salary/Fee Pension Share based payments Other Total Total
Tim Yeo 92,444 - - 35,500 127,944 27,004
David Ryan 97,996 - - - 97,996 196,856
William Cameron Davies 7,500 - - - 7,500 54,421
Nigel Brent Fitzpatrick - - - - - 26,868
James John Pryn Greenstreet 30,000 - - - 30,000 31,061
Allan Vlah 15,000 - 22,500 - 37,500 13,306
Kirsten Gogan 23,468 - - - 23,468 7,500
Keith Riley 8,167 - - - 8,167 -
Mark Berry - - 17,500 - 17,500 1,129
Total 274,575 - 40,000 35,500 350,075 358,145
Total remuneration includes share-based payments arising from the issue of
options amounting to £40,000 (2020: £8,399). There have been no awards of
shares to Directors under long term incentive plans during the year.
The Directors' social security costs for the year amounted to £29,965 (2020:
£34,282) resulting in a total remuneration expense of £380,040 (2020:
£392,427).
Prior to their resignations from the Board, Tim Yeo, William Cameron Davies,
James John Pryn Greenstreet, Allan Vlah, Kirsten Gogan and Mark Berry had
service contracts that could be terminated by the provision of three months'
notice. David Ryan had a service contract that could be terminated by the
provision of six months' notice.
James John Pryn Greenstreet and Keith Riley have service contracts which can
be terminated by providing three months' written notice.
Rivermill Partners Limited, a company wholly owned by Tim Yeo and his
associates, provided executive corporate management services during the year
the value of which is included in the above remuneration. These services are
contracted for on an annual basis as required.
Share options held by the Directors who served during the year are as follows:
Options at Forfeited Exercised Options at 31/12/21 Exercise price Earliest and latest date of exercise
1/1/21
Options granted 8 Dec 2014
Nigel Brent Fitzpatrick 3,000,000 (3,000,000) - - 2.5p 9/12/14- - 8/12/24
James John Pryn Greenstreet 3,000,000 - - 3,000,000 2.5p 9/12/14 - 8/12/24
Options at Forfeited Exercised Options at 31/12/21 Exercise price Earliest and latest date of exercise
1/1/21
Options granted 7 March 2016
Nigel Brent Fitzpatrick 5,000,000 - (5,000,000) - 0.75p 8/3/16 - 7/3/21
James John Pryn Greenstreet 4,000,000 (1,400,000) (2,600,000) - 0.75p 8/3/16 - 7/3/21
Options at Forfeited Exercised Options at 31/12/21 Exercise price Earliest and latest date of exercise
1/1/21
Options granted 6 March 2018
William Cameron Davies 15,000,000 - (15,000,000) - 0.6p 1/10/18 - 6/3/28
Nigel Brent Fitzpatrick 12,000,000 - (12,000,000) - 0.6p 7/3/18 - 6/3/28
James John Pryn Greenstreet 12,000,000 - - 12,000,000 0.6p 7/3/18 - 6/3/28
David Ryan 21,000,000 - (21,000,000) - 0.6p 7/3/18 - 6/3/28
Options granted 22/4/21 Forfeited or not vested Exercised Options at 31/12/21 Exercise price Earliest and latest date of exercise
Options granted 22 April 2021
Mark Berry 998,098 (516,761) - 481,377 6.3p 23/4/21 - 22/4/24
Allan Vlah 775,141 (193,786) - 581,355 6.3p 23/4/21 - 22/4/24
Highest Paid Director
Tim Yeo was the highest paid Director in the year. There were no shares
received or receivable by him in respect of qualifying services under long
term incentive schemes.
28. Related parties
Rivermill Partners Limited, a corporate management services company, wholly
owned by Tim Yeo and his associates, was a related party for the period during
which Tim Yeo was a Director of the Company. During that period, Rivermill
provided executive corporate management services amounting to £48,000 and the
Company agreed a future termination settlement of £5,500 (2020: £7,800).
Engsolve Limited, an engineering solutions company, was a related party until
30 June 2021 due to a Director's family member being part of its key
management personnel, and from 12 August 2021 when the Company acquired 48.39%
of its share capital. Engsolve provided engineering services to the Company
during the year amounting to £621,968 (2020: £249,555). Amounts outstanding
at year end for services provided and included in these accounts amounted to
£41,058 (2020: £43,841).
29. Events after the reporting period
On 28 February 2022, the Company announced that it had agreed to extend the
availability period for the £3.8m Loan Facility it had made available to
Protos Plastics to Hydrogen No 1 Limited, the Peel NRE special purpose vehicle
and owner of the development of the Protos plant, the first proposed
commercial application of the Company's DMG technology. The loan facility,
provided to support the Protos plant development and construction and
initially made available during 2021 for a 6-month period, had been previously
extended until 28 February 2022. Loans made under the facility amount to
£1.89m (£1.15m at 31 December 2021) and accrue interest daily set at the
Bank of England base rate plus 2%.
On 24 May 2022, the Company announced its plan to create a UK based Global
Technology and Innovation Centre (GTIC) which is expected to open in 2023. The
Company has contracted £1.3m for the supply, installation and commissioning
of equipment for the facility amounting to £1.3m.
30. Ultimate controlling party
There is no controlling party of the Company.
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