VH Global Sustain. - Annual Financial Report
28/03/2023 07:00
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RNS Number : 3856U VH Global Sustainable Energy Oppt. 28 March 2023
VH Global Sustainable Energy Opportunities plc
(the "Company")
Annual results for the year ended 31 December 2022
The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO) is
pleased to report its annual results for the year ended 31 December 2022.
The Annual Report and Accounts for the year ended 31 December 2022 will be
made available on the Company's website at https://www.vh-gseo.com
(https://www.vh-gseo.com) .
Company highlights
- Net Asset Value of £457.2m as at 31 December 2022, up from 323.9m
as at 31 December 2021
- Net Asset Value ("NAV") per share of 108.2p as at 31 December 2022,
up from 104.0p as at 31 December 2021 and a total return on a NAV basis in the
year of 7.6%
- Profit before tax of £28.2m as at 31 December 2022, up from
£20.4m as at 31 December 2021
- Dividend coverage of 1.4x as at 31 December 2022, up from 1.0x at
31 December 2021
- Aggregate dividends of 5.13p per share declared relating to the
year ended 31 December 2022, exceeding the 5p target
- Target dividend of 5.52p per share for the year to December 2023, a
7.6% increase from the previous year
- Capital raised of £122m in July 2022 with proceeds substantially
deployed or committed into the Company's Enhanced Pipeline of Assets
- Actual clean energy generated 35,117 MWh and actual tonnes of
carbon avoided 14,349t
Bernard Bulkin, Chair of VH Global Sustainable Energy Opportunities plc,
commented:
"This has been another very busy year for the fund against a backdrop of
significant global economic challenges, in particular a growing energy crisis
exacerbated by Russia's invasion of Ukraine, and a sharp increase in the cost
of living that is severely affecting families and households. The current
environment presents a very compelling rationale for us to continue investing
in solutions that facilitate the energy transition, enable renewable energy
technologies, improve energy security and affordability, while having a
meaningful impact in the economies where we deploy capital.
"As with last year, the Company was able to go back to market in July 2022 to
raise additional funds. This has helped to ensure that GSEO has been
well-capitalised to deploy into its enhanced pipeline of assets, as it has
continued to do since IPO, to work towards its strategic goals. I am delighted
to welcome all the new shareholders to the register and would like to thank
existing shareholders for their continued support."
Anthony Catachanas Chief Executive Officer Victory Hill Capital Partners LLP
commented:
"This has been a year of continued progress for both Victory Hill and the VH
GSEO fund. We have continued bringing value to shareholders through the
expansion of further joint venture programmes with new developer/operators and
uncovering less obvious and lesser-known sources of investment returns to
deliver an increasingly compelling investment proposition, well-diversified by
both technology and geography.
"I am also extremely pleased at the way that we have been able to grow and
deepen the talent pool that we have at Victory Hill. Over the period, our
investment team has doubled in human capital terms, which has increased our
capacity to execute the investment strategy and monitor the Company's
portfolio as it continues to grow. Our commitment to further growth and
enhancement of Victory Hill's operation is already serving, and will continue
to serve, the Company and its shareholders well."
Analyst presentation
A presentation for analysts will be hosted by Victory Hill Capital Partners
LLP at 9.00 am today, Tuesday, 28 March 2023.
Please contact Ged Brumby at Edelman Smithfield via email at
ged.brumby@edelmansmithfield.com (mailto:ged.brumby@edelmansmithfield.com) for
further details.
The Company's LEI is 213800RFHAOF372UU580.
For further information:
Edelman Smithfield (PR Adviser)
Ged Brumby + 44 (0)7540 412 301
Kanayo Agwunobi +44 (0)758 101 0560
Victory Hill Capital Partners LLP (Investment Adviser)
Navin Chauhan info@victory-hill.com
(mailto:info@victory-hill.com)
Numis (Corporate Broker)
David Benda +44 (0)20 7260 1000
Matt Goss
G10 Capital Limited (AIFM)
Paul Cowland +44 (0)20 7397 5450
Apex Fund and Corporate Services (UK) Limited (Company Secretary)
ukfundcosec@apexfs.com (mailto:+ukfundcosec@apexfs.com)
About Victory Hill Capital Partners LLP
Victory Hill Capital Partners LLP ("Victory Hill") is authorised and
regulated by the Financial Conduct authority (FRN 961570).
Victory Hill is based in London and was founded in May 2020 by an
experienced team of energy financiers that have spun-out of a large
established global project finance banking group. The team have an established
track record built over six years while working together in their previous
roles and participating in over $37.1bn in sustainable energy project
transaction values, generating over 24.2 per cent. equity returns. In
addition, the team has also participated in more than $200bn in transaction
values across 91 conventional and renewable energy-related transactions in
over 30 jurisdictions worldwide, throughout their individual careers. The
average experience per individual is 22 years of relevant energy finance
experience.
The Victory Hill team deploys its experience across different financial
disciplines in order to assess investments holistically from multiple points
of view. The firm pursues operational stability and well-designed corporate
governance to generate sustainable positive returns for investors. It focuses
on supporting and accelerating the Energy Transition and the attainment of the
UN Sustainable Development Goals.
Victory Hill is a signatory of the United Nations Principles for Responsible
Investing (UN PRI), the United Nations Global Compact (UN GC) and is a formal
supporter of the Financial Stability Board's Task-Force on Climate-related
Disclosures (TCFD).
Annual General Meeting
The Company's Annual General Meeting will be held at the offices of Victory
Hill Capital Partners LLP at 4 Albemarle Street, London W1S 4GA on Tuesday, 25
April 2023 at 12.00 noon.
The Notice of the Annual General Meeting is set out in the Annual Report and
Accounts for the year ended 31 December 2022.
National Storage Mechanism
A copy of the Annual Report and Accounts will be submitted to the National
Storage Mechanism and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
HIGHLIGHTS
Market capitalisation Capital raised in 2022
£426.7m £122.0m
Dividend coverage(1) Dividend per share for FY 2022
1.4x 5.13p
NAV NAV per share(1)
£457.2m 108.2p
Total NAV return since IPO (Feb 2021)(1) Total NAV return for the year(1)
15.5% 7.6%
Number of sustainable energy assets globally Number of technologies(2)
28 5
Clean energy generated Tonnes of carbon avoided
35,117MWh 14,349t
1 Alternative performance measures are defined below
2 Terminal storage, solar PV & battery energy storage systems, solar PV,
hydro, flexible power with CCR
ABOUT THE COMPANY
Investment company with a specialist mandate to support the global energy
transition
VH Global Sustainable Energy Opportunities plc's (GSEO or the "Company",
"Investment Company") investment objective is to generate stable returns,
principally in the form of income distributions, by investing in a diversified
portfolio of global sustainable energy infrastructure assets, predominantly in
countries that are members of the EU, OECD, OECD Key Partner countries or OECD
Accession Countries.
The Company's investment policy states that it aims to achieve diversification
principally by making a range of sustainable energy infrastructure investments
across a number of distinct geographies and a mix of proven technologies that
align with the UN Sustainable Development Goals ('SDGs') where the investments
are a direct contributor to the acceleration of the energy transition towards
a net zero carbon world.
The Company's investments in proven technologies will include exposure to
power generation (renewable and conventional), biomass, transmission,
distribution, storage and waste-to-energy. These investments are in
operational, construction or 'ready-to-build' assets but will not include
assets that are under development or in pre-consent stage.
No investment is made in projects involving the extraction of fossil fuels or
minerals.
Chair's statement
Leading the energy transition and driving positive impact on the environment
and society
The Company focuses on investing in a diverse range of projects across the
energy value chain, including energy infrastructure such as renewable energy,
transmission and distribution, and energy storage that have a clear path to
commercialisation and scalability."
I am pleased to present the second Annual Report for VH Global Sustainable
Energy Opportunities plc (the "Company" or "GSEO") for the year ended 31
December 2022.
This year under review has continued to witness global economic challenges, a
growing energy crisis exacerbated by Russia's invasion of Ukraine, and a sharp
increase in the cost of living that is severely affecting families and
households. The current environment presents a very attractive opportunity for
the Company investing in solutions that facilitate the energy transition,
enable renewable energy technologies, improve energy security and
affordability, while having a meaningful impact in the economies where it
deploys capital.
The global energy transition is a critical and ongoing process that aims to
shift the world's energy systems away from fossil fuels and towards cleaner,
renewable sources. This transition is driven by a need to combat climate
change, reduce air pollution, and ensure energy security.
The use of renewable energy sources such as solar, wind, and hydropower is
central to the energy transition. These sources are abundant, sustainable, and
produce little or no greenhouse gas emissions. They also offer the potential
for significant cost reductions over time, making them increasingly
competitive with fossil fuels. However, the transition also involves the use
of other clean energy technologies such as natural gas with carbon capture and
re use, which can provide reliable and low-carbon energy.
The energy transition is also about more than just generating energy. It
involves a transformation of the entire energy system, including the way
energy is distributed, stored, and consumed. This includes the integration of
renewable energy into the grid, the development of energy storage solutions,
and the implementation of energy efficiency measures.
A successful capital raise in July 2022 helped to ensure that GSEO had funds
available to deploy into its enhanced pipeline of assets, as it has continued
to do since IPO, to work towards its strategic goals. We were also delighted
to welcome new shareholders to the register on this occasion.
GSEO represents the first publicly listed investment trust in the UK with a
global focus on the energy transition. The Company's ability to invest in a
range of technologies, across a broad geographical scope mitigates the risk of
weather patterns and prevents reliance on any single regulatory regime or
currency. We believe these characteristics help us with the objective to offer
shareholders attractive risk-adjusted returns combined with high impact,
through exposure to the global energy transition.
Financial performance
The Company's net asset value (NAV) per share performance was 108.2p as at 31
December 2022, an increase of 4.04% from the previous year. This increase was
notably driven by movements in valuation of the assets and foreign exchange,
albeit FX was a detractor in the final quarter of the year as sterling
strengthened against the basket of currencies in the portfolio, namely the US
dollar, Australian dollar and Brazilian real. However, due to the long-term
inflation-linked revenues stemming from investments, the Company does not
hedge the principal value of the investments.
The macroeconomic environment in the second half of 2022 was characterised by
rising inflation, interest rates, energy prices and changes in foreign
exchange rates. The asset value creation and inflation-linked revenues
mitigated any negative impact stemming from macroeconomic environment.
Higher interest rates had a limited impact on the Company's investment
performance given relatively low levels of gearing at mainly fixed rates
within the debt held at project level. As at the end of the financial year,
there is only 14% debt on the US terminal storage assets and no gearing at the
Company level. However, higher rates did impact valuations as applied to
projected future cashflows. The average discount rates for operational assets
as at the end of the year are 8.4% in the US, 8.6% in Australia, 10.5% for the
Brazilian hydro facility and 13.1% for the Brazilian solar PV assets. The UK
flexible power with CCR assets are in construction and therefore currently
held at cost.
GSEO's profit after tax for the year was £28.2 million (2021: £20.4 million)
resulting in earnings per share of 7.7 pence (2021: earnings per share of 10.5
pence). Removing unrealised movements on investments at fair value, the
adjusted profit before tax is £24.1 million (2021: loss of £1.7 million),
equivalent to 6.55 pence per share (2021: loss of 0.87 pence).
Cash received from the portfolio assets by way of distributions, which
includes interest and dividends, was £28.8 million during the year (2021:
£1.7 million). After operating and finance costs, cash flow from operations
of the Company was £22.0 million, covering the cash dividends paid for the
2022 financial year of 5.13p per share resulting in a normalised dividend
coverage of 1.4x. Details on the Company's overall financial and operational
performance can be found in the Investment Adviser's Report.
Dividend
The Board was pleased to declare total dividends of 5.13p per ordinary share
in respect of the 2022 financial year, with the fourth interim dividend paid
in March 2023.
In line with the Company's progressive dividend policy and based on projected
investment cash flows from the current portfolio as prepared by the Investment
Adviser and approved by the Board, the Company announced a dividend of 1.38p
per share with respect to the period from 1 October 2022 to 31 December 2022,
an increase of over 10% vs. the prior quarter, bringing the total dividend
declared for the financial year ending 31 December 2022 to 5.13p per ordinary
share, exceeding the dividend target of 5p per ordinary share. The Company is
targetting quarterly dividends of 1.38p or 5.52p in total for the 2023
financial year. The long-term sustainability of the Company's dividend remains
a priority for the Board.
The total NAV return including reinvestment of dividends in the financial year
is 7.6%. Since IPO, the total NAV return at 31 December 2022 is 15.5%.
Investment activity
The Company is dedicated to deploying capital towards sustainable energy
infrastructure that drive the global transition towards cleaner and more
sustainable sources of power. The Company focuses on investing in a diverse
range of projects across the energy value chain, including energy
infrastructure such as renewable energy, transmission and distribution, and
energy storage. We have a thorough due diligence process in place to ensure
that we invest in high-quality assets that have a positive impact on the
environment and society.
We are committed to supporting the growth and development of these assets
through active involvement in their strategic decision-making and providing
access to our network of industry experts and partners. We also strive to
promote sustainable business practices and to minimise the environmental
impact of our assets.
The Company believes that by deploying capital towards sustainable energy
infrastructure, we can make a meaningful impact on the global effort to combat
climate change while also generating attractive returns for our investors. We
are dedicated to investing in projects that provide long-term and stable cash
flows, while also contributing to the transition to a low-carbon economy.
Our investment strategy seeks to take advantage of the energy transition by
investing in a diverse portfolio of energy assets. Diversification is a key
part of the strategy. The Company's ability to invest in EU, OECD and OECD
Accession and Key Partner countries allows us to take advantage of reduced
correlation in energy and power prices. We also aim to minimise concentration
risk via investing across a large number of projects.
During the year under review, the Company announced investment commitments in
both new and existing projects. Investment activity during the course of the
year included:
• Nine solar PV sites across five Brazilian states were completed
following a period of construction. These sites represent a generation
capacity of 24.5MWp. All the sites have contract lengths of 20 years and are
inflation-linked.
• A further £28 million was committed in May to the second UK flexible
power plant as part of the Company's programme to support the UK's energy
transitions plans to net zero. This increases the total commitment to the
programme from £78 million to £106 million across two sites. In October,
the Company also signed a 15 year CO(2) Offtake Agreement for its first UK
flexible power plant with carbon capture. This 15-year term contract is
believed to be one of the first of its kind and contrasts with the 1-3 year
terms typically agreed.
• The completion of the acquisition of three solar PV sites of 5MW each
located in New South Wales, Australia was announced in October. This is part
of the existing £50 million commitment to its Australian solar PV with
battery storage assets. Construction has begun with completion and
commissioning still on track for Q2 2023.
• The last investment of the year was made on 7 December (first announced
in August), being the completion of the acquisition of a 198MW hydro facility
in Brazil, the portfolio's fifth programme. The acquisition of the Mascarenhas
Hydro Electric Facility (the "Brazilian hydro facility") in the state of
Espírito Santo, Brazil was for a total consideration of BRL 708 million,
which is subject to post-closing adjustments. In addition, BRL 425 million is
payable subject to the conditions established under the process of renewal of
the Brazilian hydro facility concession in H1 2027.
The Company continues to follow a low-gearing strategy in comparison to the
wider infrastructure peer group, with outstanding debt across the group
representing approximately 3% of NAV at 31 December 2022. This is markedly
lower than what is provided for in the Company's prospectus, whereby the
Company may make use of long-term limited recourse debt for investments and
not exceed 60% of the prevailing Gross Asset Value.
As at the end of the reporting period, the Company is 93% deployed or
committed. The Board is pleased with the timely deployment of capital into new
and follow-on investments during the year, which have been consistent with the
Company's targeted technologies and geographic markets. This success
demonstrates the Investment Adviser's ability to source and secure attractive
investments that meet the Company's investment strategy and objectives.
Corporate governance
The Board recognises the importance of strong corporate governance that meets
the requirements of the Listing Rules of the Financial Conduct Authority and
the Association of Investment Companies ('AIC') Code of Corporate Governance.
The Company aims to maintain an open dialogue with investors regarding its
strategic objectives, both financial and operational, and how they are
executed. During the period since IPO, the Investment Adviser and the
Company's corporate brokers engaged with shareholders through meetings
(including a well attended Capital Markets Day in November), market
announcements and diverse written materials.
Board composition is regularly discussed by the Board's Nomination Committee
to ensure that the Company's non-executive Directors have a diverse range of
relevant expertise and experience to apply to the oversight of the Company and
to engage effectively with the Investment Adviser. With that, and in a
post-period update, the Board was delighted to appoint Daniella Carneiro as an
independent non-executive Director of the Company. Born and educated in Brazil
and the UK, Daniella has over 30 years of global experience in project
development, governance, strategy, tax and M&A with major companies
including KPMG and Shell. She brings a depth of experience in key target
markets, especially Brazil, and a direct understanding of the local impact of
the Company's investments. Her experience will help strengthen the Board's
ability to ensure investments are aligned with the global transition to net
zero.
Share capital
In June 2022, the Company raised £122 million via an institutional placing
and retail offer. This was at an issue price of 110p per share, representing a
premium of 3.4% to the end of Q1 2022 NAV. The Board was pleased with the
result in what was a volatile period for public markets, notably the second
half of June. This highlights the growing demand for exposure to global
sustainable energy infrastructure and gives a strong endorsement of the
Company's strategy.
The fund raise underpinned the acquisition of the Brazilian hydro facility
which was one of the assets highlighted to investors in the Company's
prospectus as one of the 'enhanced pipeline' assets. The Board is delighted
with the Investment Adviser's ability to originate and gain exclusivity to
sustainable energy infrastructure assets resulting in efficient capital
deployment.
The Board would like to take this opportunity to thank our existing investors
for their continuing support and welcome new institutional and retail
investors to the Company's shareholder register.
Sustainability and ESG
Climate change and sustainability are two of the most pressing issues facing
our planet today. Climate change, caused by the release of greenhouse gases,
poses a significant threat to our environment and to human health and
well-being. It has the potential to cause widespread damage to ecosystems,
economies and communities around the world. Sustainability, on the other hand,
is the practice of meeting the needs of the present without compromising the
ability of future generations to meet their own needs. It is a holistic
approach to economic, social and environmental development that aims to create
a more equitable and resilient world.
Our goal is to make a positive impact as we deploy capital into sustainable
energy projects around the world, and ensure that ESG criteria are
incorporated into all of our investment decisions. This is reflected across
our investment philosophy and approach, including the selection of our
investment adviser, Victory Hill Capital Partners LLP (the "Investment
Adviser" or "Victory Hill"), which is dedicated to the energy transition. As a
signatory to the UN Principles for Responsible Investment and the Net Zero
Asset Managers Initiative, Victory Hill has integrated ESG risks as well as
opportunity assessments across every single stage of its investment process in
sustainable assets around the world, reflecting the sustainable culture of
both Victory Hill and the Company. GSEO has been proactively tracking metrics
such as carbon emissions avoided, renewable energy generated and life cycle
analysis, and continually seeks ways to improve its reporting and transparency
for investors.
The Board recognises that impact investing is also becoming increasingly
important for investors so we will be aiming to report in a transparent way,
making it easier for investors to assess and quantify the positive impact that
GSEO is having on communities around the world and the environment more
broadly. Furthermore, we intend to adopt reporting standards as they are
developed and adopted by the industry, such as those being developed by the
Task Force on Climate-related Financial Disclosures ('TCFD') and the
Sustainable Finance Disclosure Regulation ('SFDR').
The Company has sustainable investment as its objective. Article 9 Funds under
the Sustainable Finance Disclosure Regulation (SFDR) are products that have a
sustainable investment objective. As of 31 December 2022, 24% of the Company's
investments were aligned with EU Taxonomy economic activities. 25.9% of the
Company's investments were EU taxonomy eligible and undergoing technical
screening. The remaining 50.1% were invested in economic activities with a
different environmental objective or in activities not EU taxonomy eligible.
The disclosures related to TCFD and SFDR, and how they are incorporated,
including outputs, can be found in the dedicated Sustainability section below.
Principal risks and uncertainties
The Board and the Investment Adviser monitor and, where practicable, mitigate
a range of risks to GSEO's strategy.
These risks are expanded on in the principal risks and uncertainties section
below.
The Company's ability to invest in a range of technologies, across a broad
geographical scope mitigates the risk of weather patterns and prevents
reliance on any single regulatory regime or currency. We believe these
characteristics help us with the objective to offer shareholders attractive
risk-adjusted returns combined with high impact."
Outlook
Looking forward, there are fresh challenges for investors, within the current
period of uncertain macroeconomic outlook and geopolitical tension. With the
portfolio benefitting from significant inflation protection via index-linked
revenues, the Board remains optimistic on the ability of the Investment
Adviser to continue to add growth to the portfolio through its asset value
creation strategy. Whilst the Board remains mindful of the construction
exposure in the portfolio, the Board believes new infrastructure must be built
in order to achieve the ambitious net zero targets, which in turn creates
additional capital growth as assets move through the stages of a project's
life cycle.
GSEO is well-positioned to capitalise on the global shift towards cleaner,
more sustainable sources of power. The demand for renewable energy is rapidly
increasing as countries and corporations commit to achieving net zero
emissions and governments implement policies to support the transition to a
low-carbon economy. We have a diversified portfolio of assets and projects
across technologies and geographies that allows the Company to participate in
multiple growth markets and provides a hedge against regulatory and
technological risks.
With the need for new sustainable energy infrastructure as urgent as ever to
meet global goals, and the strong pipeline of investment opportunities
identified by the Investment Adviser, the Company is well positioned to
continue growing, providing genuine positive impact, whilst delivering
attractive returns to investors. The current investment pipeline has a good
balance of opportunities across technologies and geographies, often involving
bilateral negotiations where the Investment Adviser has a particular strength
or relationship, which is advantageous to the Company. The Investment Adviser
maintains robust pricing discipline when conducting due diligence on any
opportunities within its target markets.
On behalf of the Board, I would like to thank shareholders for their continued
support and I am confident that GSEO's business model, which has successfully
prevailed in 2022, will enable the Company to continue to generates
sustainable returns and contribute towards a net zero carbon future.
Bernard Bulkin
Chair
27 March 2023
Investment Adviser's Report
Market developments / market backdrop in 2022
In 2022, the world experienced the first global energy crisis of this
millennium, precipitated by Russia's invasion of Ukraine, the effects of which
will not only be felt for the present day, but for decades to come. Russia's
actions have worsened the fundamentals of economic recovery emerging from the
post-pandemic times, straining global supply chains, creating a global energy
crisis, and by extension causing inflationary pressures and the sparks of a
global recession.
Russia has been one of the largest exporters of oil and gas in the world, and
the stoppage of its supply of oil and particularly natural gas as a result of
its decision and European sanctions are being felt in economies across Europe
and beyond, exposing nations of consumers to higher energy bills and supply
shortages. Governments in developed economies have sought to soften the blow
to consumers from the impact of this crisis to the tune of US$500bn, as well
as implementing other short term measures such as securing alternative fuel
supplies, relying more on coal and fuel oil generation, extending the lifetime
of nuclear power plants and accelerating the flow of new renewable projects in
their territories.
Clearly the focus for governments for much of 2022 has been energy security in
their national economies, and within this context the question is relevant as
to whether the energy crisis is a setback for the clean energy transition or
it will promote a hastening of it.
Some observers have blamed international climate policies and net zero targets
as contributing to the increase in energy prices during the crisis. However
the IEA in their 2022 Outlook report does not see evidence of this, and indeed
has concluded that regions with higher shares of renewable generation were
correlated with lower electricity prices on average, and demand side energy
efficiency schemes in homes and the grid provided some buffer to costs for
consumers.
We believe the question of whether the transition continues to be relevant for
society at large in light of the crisis has been comprehensively settled in
its favour. Fundamentally, the shape and behaviour of society's consumption of
energy is moving away from conventional fuel-based supply to electrification,
and this is aligned with the growth in the global implementation of renewable
power generation that has created a new energy economy.
Electricity's share of the world's final energy consumption has risen steadily
over recent decades and currently stands at 20%. As the pace of
climate-related energy transition picks up in future years, it will account
for around 50% of final energy use by 2050, according to the IEA. Given that
electricity delivers useful energy services better than other fuels, the
contribution of electricity is even higher than these numbers suggest.
In the view of Victory Hill, in this new energy economy the market for clean
technology will continue to be a major area for investment and international
competition, and secular events such as the cessation of exports of Russian
oil and gas in light of the Ukraine conflict is unlikely to stop this
momentum.
The IEA estimates in their 2022 Outlook report that, if the world is on track
to net zero emissions by 2050, and national policies in major energy markets
are leading the way, then annual clean energy investment will double to US$2
trillion by 2030, with the US Inflation Reduction Act of 2022 being in large
part responsible for increasing annual solar and wind capacity additions in
the US by 2.5 times current levels, with EV sales at seven times the size of
sales today. Meanwhile, according to IEA expectations, faster deployment of
renewables and efficiency improvements in the European Union are expected,
resulting in the reduction of EU natural gas and oil demand by 20% this
decade, and coal demand by 50%. It is expected that the push will be given
additional impetus by the need to find new sources of economic and industrial
advantage beyond Russian gas.
Victory Hill strongly believes that the successful implementation of energy
security as part of the transition will require real action which acknowledges
the following points, namely:
i. Vulnerabilities in the prevalence of highly concentrated clean
energy supply chains will need to be addressed. Demand for key minerals for
the production of clean energy technologies including wind and solar PV
generation and battery storage is set to rise sharply in the coming years,
more than doubling from today to 2030. High reliance on individual countries
such as China as a supplier of raw materials is a risk for the implementation
of the transition;
ii. During the transition, the functioning of clean and conventional
energy technologies will need to continue to provide uninterrupted supply of
energy to consumers, even though their proportions of supply will change over
time. According to the IEA, technologies such as gas-fired power plants will
be needed for peak electricity needs, and sophisticated refineries will be
required to provide cleaner fuels for transportation, and the removal of this
could have negative consequences for energy security.
"The shape and behaviour of society's consumption of energy is moving away
from conventional fuel-based supply to electrification, and this is aligned
with the growth in the global implementation of renewable power generation
that has created a new energy economy."
"Richard Lum, Co-Chief Investment Officer"
In Victory Hill's view, existing technologies deployed in a commercially
astute way can bring benefits to all parties involved without requiring the
government to provide underlying support with incentives and subsidies. Take
distributed generation, for example. With current costs for solar panels,
building small-scale solar PV plants at end users premises has become viable,
even when considering energy sales contracts that represent discounts in the
energy bills of these end users. With the current volatility in energy prices,
the demand for viable behind the meter (BTM) solutions will continue to
increase.
Apart from the impetus towards sustainable and secure energy systems, 2022 has
also brought back inflation concerns to the global economy. Driven by a
combination of unusual factors such as supply chain disruptions post COVID-19
and shocks due to geopolitical instability, inflation has become temporarily
uncontrollable for central banks. With the significant impact on cost of
living in many countries, demand for government intervention has led to
further fiscal pressures around the world which in turn will lead to
additional inflationary drive.
In an environment in which inflation is rampant and energy security concerns
are high, building sustainable energy infrastructure will be critical to
protect investors' wealth and to contribute to a more stable global economy.
How Victory Hill has addressed the transition in 2022
GSEO is at the forefront of the private initiative involvement in the energy
transition with a global focus to enable sustainable energy projects with
long-term equity capital. Victory Hill's global approach means our attention
will be centred around different themes depending on the geography, as each
market requires a different approach to the energy transition.
In the UK, we have progressed with GSEO's investments in grid balancing
initiatives. The advent of the Ukraine crisis combined with unseasonally low
wind yields has brought to prominence the importance of grid firming
activities provided in particular by gas-fired power plants in Q1 and Q2 of
2022. This has sent power prices skyrocketing and many renewable facilities
which do not have fuel costs to bear have benefitted from windfall pricing
exceeding their short run marginal costs for operating, when they are able to
generate.
The commercial structure of GSEO's investment in the UK CHP project will
ensure that we will benefit from higher commodity prices, when the first plant
comes online to generate power in Q2 2023, given the embedded power to gas
price hedge in the PPA. We remain confident that the Company's UK programme
will contribute meaningfully to the grid stability required given the
increased penetration of renewable power production in the market.
In the US and Mexico border, the need to maintain momentum in the clean-up of
Mexican fuel will remain as strong as ever. The Mexican government will
continue to push on the agenda to support state owned enterprises which
control the fuels value chain and the power generation segment. These entities
depend greatly on the ability to clean domestic fuel to avoid environmental
disasters associated with the burning of untreated indigenous fuel.
In Brazil, the commitment to renewable energy penetration will continue to go
from strength to strength. The incoming government has a strong commitment to
the environment which will continue to benefit the proliferation of
distributed generation solar PV plants. These plants will play a crucial role
in supplying the Brazilian economy with clean and affordable energy at a time
when electricity prices continue to cause a lot of pain on Brazilian
households.
The volatility caused by high commodity prices in the Australian energy market
is likely to persist over the short to medium term. Until such time that
sufficient renewable power, energy storage and gas-fired power generation
enter the grid at scale, the market will experience significant spikes in
power prices at peak times, as coal plants continue to run off production and
close. The global economic backdrop for GSEO's investments therefore remains
buoyant, with the opportunity to install battery storage onsite at the next
stage of development of Solar PV assets, ensuring that our investments will be
able to access the "duck curve" margin in energy arbitrage at peak times as
well as participate in the ancillary services market, including frequency
response.
Portfolio highlights
GSEO continued on its journey to enable sustainable energy projects in 2022.
In the US, we have increased the capacity of the Company's terminals to be
able to contribute to more cleaning of essential fuels used in Mexico. In
Brazil, nine solar projects have started injecting clean energy into the grid
and we have also completed the acquisition of a 198MW hydro power plant from
Energias de Portugal (EDP). The plant is operational and provides reliable and
clean energy to Brazil's economy. In Australia, we have added three solar
sites to the Company's Australian programme and continue to build storage
capacity for the assets already in operation.
In November, we held our first Capital Markets Day during which the operating
partners for each of GSEO's investment programmes presented their capabilities
and the impact of the projects they promote.
Portfolio performance
The Company's investment portfolio performance remained resilient during the
period, with limited financial impact from the effects of the COVID-19
pandemic and disruptions to the energy market due to the Russian invasion of
Ukraine. We remain diligent in minimising the Company's exposure to additional
macroeconomic factors such as supply chain disruption and energy availability.
Whilst inflation is one of these factors, it is worth highlighting over 90% of
the Company's revenue is inflation-linked with no caps.
Victory Hill places a considerable emphasis on monitoring and asset managing
GSEO's investment portfolio through our asset management function, not only to
protect the value of each investment but also to pursue opportunities to
create further value for stakeholders through our asset value creation
initiatives.
The operational assets within the portfolio provided key services to essential
industries and economies and continue to operate with minimal disruption.
Overall, the portfolio remains relatively insulated from negative
macroeconomic factors and therefore there has been no material impact to
performance.
Portfolio optimisation
Active management of assets is a key component of our strategy. In
collaboration with the Company's operating partners, we seek to maximise
earnings opportunities at the assets we invest in.
In the US, we have re-contracted with the main tenant PEMEX in June, with
improved contract terms for the Company, leading to significantly higher
profitability.
In the UK, we secured a long-term power offtake and gas supply contract with
Axpo and have worked with Axpo and the Company's operating partner to secure
excellent margin hedges for the power generation component of the project. We
have also secured highly attractive long-term contracts for the sale of
food-grade bottled CO(2) with an industrial gas specialist firm from Germany.
In Australia we launched the expansion of the Mobilong solar farm with the
addition of battery storage to turn this asset into a hybrid system and
optimize its commercial potential.
Construction part of portfolio / supply chain
UK: Construction of the first project has advanced through the past year. The
EPC contractor providing a full wrap on construction risk has readied the site
and major pieces of equipment have been delivered by the manufacturers for
containerisation. The power side of the facility is expected to be completed
in Q2 2023 and will start generating power and revenues. The carbon capture
facility requires subsequent installation over several months and the
fully-integrated facility is expected to be commissioned in Q4 2023.
Australia: During 2022, the main construction activity for the Mobilong
DC-coupled solar and battery storage hybrid system was the procurement of the
BESS. The equipment has been manufactured in China and has now been delivered
to site without supply chain disruption thanks to a successful proactive
procurement and engagement with the suppliers. The hybrid solar and storage
system is expected to be commissioned in Q2 2023. 2022 also saw the start of
construction for the three new sites acquired in New South Wales. The orders
were promptly placed to all suppliers to avoid potential supply chain
disruption and equipment is currently being manufactured. The solar farms are
expected to be commissioned in Q3 2023.
During 2022 we completed nine of the 18 solar distributed generation sites in
Brazil. All remaining sites are due to be completed in Q3 2023, two of which
are being relocated in Brazil to improve operational performance.
The NAV of the Company increased from £323.9m at 31 December 2021 to
£457.2m on 31 December 2022. The total NAV return including reinvestment of
dividends in the financial year is 7.6%. Since IPO, the total NAV return at
31 December 2022 is 15.5%. The key NAV drivers were:
• A gross equity raise of £122.1m (net £119.5m) on 1 July 2022.
• Total fund expenses for the year of £4.7m or 1.3% in ongoing charges
ratio have shown strong cost discipline in the period.
• A net increase in the value of investments of £16.2m, mainly as a
result of assets moving from construction to operational phase during the
year, with the main contributor being the US terminal storage assets and
strong cash flow generation from the investments in the US, Brazil and
Australia. Underlying contracts with third‑parties are inflation-linked,
therefore short‑term inflation volatility has increased the valuation of
operational assets. Assets in operation also benefited from operational
improvements during the year which have resulted in an increase in valuations
across the portfolio.
• The weakness of GBP to the basket of currencies, including the USD,
AUD, and BRL during the 12-month period to 31 December 2022, resulting in an
FX gain of £16.8m in aggregate.
As at year end, the Company had deployed 66% of its total commitment,
including the US terminal storage assets and the Brazilian hydro facility. 6%
of existing deployment relates to delays in the construction of the Brazilian
solar PV assets. The remaining committed funds are expected to be deployed
within the first six months of 2023.
Key sensitivities
The below chart illustrates the sensitivity of the Company's NAV per share to
changes in key input assumptions for assets in operation as at the year end.
In performing the sensitivity analysis, it is assumed that potential changes
occur independently of each other with no effect on any other assumption, and
that the number of investments in the portfolio remains static throughout the
modelled life.
Discount rate
A range of discount rates is applied in calculating the fair value of the
investments, considering risk free rates, country-specific and asset-specific
risk premia and betas. Discount rates for operational assets at 31 December
2022 are 8.4% in the US, 8.6% in Australia, 10.5% for the Brazilian hydro
facility and 13.1% for the Brazilian solar PV assets. A 1.0% increase
(decrease) in discount rates across the portfolio decreases (increases) NAV by
4.64p (5.36p).
Inflation
The sensitivity assumes a 1% increase or decrease in long-term inflation
relative to the base case of 2.0% for the US assets, 2.5% for the Australian
assets and 3.0% for the Brazilian assets for each year of asset life. A 1.0%
increase (decrease) in inflation rates across the portfolio increases
(decreases) NAV by 4.32p (4.41p).
Operating expense
The sensitivity assumes a 5% increase or decrease in operating expense
relative to respective contracts and budgets for each asset. A 5% increase
(decrease) in operating expenses across the portfolio decreases (increases)
NAV by 1.60p (1.55p).
Foreign exchange
The sensitivity assumes a 10% increase or decrease in foreign exchange
movements against the sterling.
The Company seeks to manage its exposure to foreign exchange movements by
hedging short-term distributions from non-sterling investments to maintain a
healthy dividend cover but, due to long-term inflation-linked revenues
stemming from these investments, the Company does not hedge the principal
value of the investments. A 10% increase (decrease) in foreign exchange rates
across the portfolio decreases (increases) NAV by 6.06p (7.40p).
Asset life
The sensitivity assumes a 1 year increase or decrease in asset life relative
to the base cases of 30 years for the US terminal storage assets, 25 years for
the Australian solar PV with battery storage assets, Brazilian solar PV assets
and Brazilian hydro facility. A 1 year increase (decrease) in asset lives
across the portfolio increases (decreases) NAV by 0.77p (0.76p).
Resource sensitivity
The portfolio has little resource risk sensitivity given the availability
based nature of the US terminal storage assets, the base load generation
profile of the Brazilian hydro facility, the UK flexible power with CCR
assets, and the addition of battery storage to the Australian solar PV assets
to mitigate solar intermittency risk.
Pipeline
We continue to originate sustainable energy opportunities globally, as was set
out in the announcements we made for the follow-on capital raise in early July
2022. Our focus for the deployment of capital from the first three raises to
date and from future raises will be on biomethane, geothermal, wind and
battery opportunities in a broad range of geographies, including UK, US and
South East Asia. We see great potential to continue to deliver on a portfolio
that is diversified by geography and by technology. Thanks to a very robust
pipeline, we are able to prioritise opportunities according to the shape of
the portfolio.
Outlook
Sustainable energy is here to stay and will become more and more a natural
choice for economic growth. A lot of exciting initiatives are taking place and
we will continue to see strong news flow in relation to innovative solutions.
However, the evolution that truly motivates us is the proliferation of
smaller-scale distributed sustainable energy projects directly contracted with
end users on a global scale. We call this trend the quiet revolution, as it
does not grab the same headlines as the large multi-billion dollar projects
being announced in the energy space day to day. The quiet revolution will
continue to gather pace and new opportunities in different markets will
emerge.
At Victory Hill Capital Partners LLP, we will continue to uncover unique
opportunities that will benefit from the macro trends affecting the global
economy. In the short to medium term, we expect to see political and economic
instability. However, investing in sustainable energy infrastructure will play
a great part in bringing stability back to the global economy.
Our robust pipeline continues to increase and we will continue to seek
opportunities to optimise our existing portfolio. With support from the
Company's shareholders, we expect to contribute in a material way to the
sustainability agenda.
Case study
Brazilian hydro facility
Asset profile:
Capacity:
198MW
Acquisition price:
BRL 708m
Location:
SE Brazil,
State of
Espirito Santo
Hydropower in Brazil
Brazil has one of the world's largest hydrological resources and is a global
leader in hydropower generation. The country has attracted large amounts of
capital investment in the hydropower sector making it one of the most
established and prominent hydropower markets in the world. In Brazil,
hydropower generation continues to have systemic importance. Hydropower plants
provide a reliable and continuous source of clean energy for a power system
which needs to meet ever growing demand.
This form of power generation can help firm and stabilise the grid in times of
increased supply volatility caused by the growing penetration of intermittent
solar and wind power generation in the energy system. The penetration of
intermittent renewables is still in its infancy in Brazil, yet it is the
fastest growing source of power generation. Hydropower will continue to play a
critical role in enabling further penetration of those intermittent yet
necessary technologies to achieve what could become one of the world's most
balanced and sustainable energy systems.
The hydropower sector in Brazil is underpinned by a unique regulatory
framework which seeks to mitigate hydrological resource risk for individual
hydropower generators. The framework pools hydrological resources into a
nationwide consortium of eligible hydropower generators of systemic
importance. Members of the hydropower consortium benefit from the output of
the whole pool of eligible hydropower generation irrespective of an individual
member's actual production. Therefore, the idiosyncratic risk of a single
hydro plant is mitigated by the output of the pool.
Facility features:
The facility is a run-of-river hydropower plant with a nameplate capacity of
198MW. It is located in the state of Espírito Santo and has been operational
since 1974. Since it was first commissioned, the hydro facility has been
maintained and managed to a very high standard. The energy regulator in Brazil
ranks over 140 hydro plants across the country based on a number of factors to
assess their quality of operation and has recently ranked this facility as a
top 10 hydro plant in Brazil.
This facility benefits from a portfolio of over 30 long-term inflation-linked
PPAs with creditworthy counterparts in the regulated utilities market
representing c. 85% of the plant's total revenues. It also has the potential
to commercialise power with large energy consumers in the self-consumption
("auto-consumo") segment of the energy market.
Value creation:
Victory Hill and our operating partner have agreed a commercialisation
strategy which is designed to capture additional value in the self-consumption
market. These self-consumption contracts are typically shorter-term and allow
us to capture some merchant exposure. Furthermore, the operating partner has
already identified some areas for operational improvements that should
contribute to generating additional value.
ESG impact:
Since the commissioning of the facility, a thriving local community has
emerged that is now permanently established and supports the economic
ecosystem around the hydro facility and the region. The direct impacts of this
facility are readily identifiable with 22 full-time jobs, an expected 944,472
MWh of clean, affordable and reliable energy generation which avoids an
estimated 91,578t of CO(2) per year.
The river itself, its fauna, flora, banks and sediments are key to the
livelihoods of the local communities that rely on them for fishing,
irrigation, transportation and other activities. As a result we are undergoing
a series of initiatives to improve the social and environmental impacts of the
facility. For example, we are seeking to achieve certification of the facility
under the IHA (International Hydropower Association) Hydropower Sustainability
Standard. We are also working with our operating partner to develop community
outreach programmes to improve the dialogue with local communities and ensure
that our investment activity remains sensitive to the needs of local
stakeholders.
Our operating partner:
Paraty Energia Ltda. is a fast growing energy development and
commercialisation company established in early 2020. The company is
headquartered in Sao Paulo and is 100% founder-owned and counts over 50
members of staff as at 31 December 2022. Paraty is an active participant in
the Brazilian energy sector specialising in energy trading, project advisory
and operations. The company has a strong operating track record in the
Brazilian energy sector, underpinned by a deep understanding of the Brazilian
energy regulatory framework.
Programme updates
Brazilian solar PV assets: Of these assets, nine sites have been generating
clean and affordable energy as we reached the end of 2022. The sites are
located in remote areas of Brazil, in the states of Para, Paraiba, Rio Grande
do Norte, Rio de Janeiro, Sao Paulo and Sergipe. The states in the northeast
region have predominantly agricultural economies with large rural areas which
tend to be poorly served in terms of energy supply. While the sites are
contracted with top tier customers the communities in these remote locations
derive a direct benefit from the power generated by our plants, reiterating
the importance of this programme not only in terms of returns but also with
regards to the socioeconomic impact it can have.
Of the remaining nine sites that were expected to be generating power in 2022,
one has reached operational phase in early 2023. The other eight have
experienced significant delays caused by global supply chain issues. These
issues predominantly stemmed from widespread Covid-19 outbreaks in China,
consequently impacting equipment importation schedules into Brazil and
severely impacting the business of the selected engineering procurement and
construction company (EPC) that was appointed to those sites. Both Victory
Hill and our operating partner have since identified new EPC candidates to
finalise the development. Furthermore, two of these sites are being relocated
in Brazil to improve operational performance.
Victory Hill continues to work with our operating partner and advisers in
Brazil to resolve these delays and enforce contractual rights. In this
respect, the Company has benefited from the operating partner's local
presence, strong operational competence, and Victory Hill's proactive
engagement in mitigating further project delays. The combined efforts to
manage and resolve construction delays in country should ensure that the
remainder of the sites in the program will be completed in Q3 2023.
Australian solar PV with battery storage assets: Starting with a
high-dependency on coal-fired generation, Australia is experiencing a fast and
disorderly transition with the accelerated decommissioning of coal-powered
units, the quick penetration of intermittent renewable energy generation in
certain parts of the network and the slow deployment of grid-firming
technologies to help stabilise the market with this increased structural
volatility. In 2022, the increase in commodity prices culminated and the
regulator had to intervene in the market at the end of Q2 2022 to stabilise
trading and prices. This programme in Australia is building a portfolio of
decentralised hybrid solar and battery assets providing additional renewable
energy and energy storage capacity, both critically needed by the energy
system in Australia. Coupling both technologies should allow optimisation of
each technology to better serve the needs of the Australian market in its
transition and generate differentiated returns for GSEO. This portfolio is
being implemented in the distribution network, therefore avoiding curtailment
risk from the congestion on the already stressed high voltage network and
providing further relief in a system already stressed. We are working closely
with the network operators in South Australia, Queensland and New South Wales
for the deployment of this portfolio. The battery system is currently being
added at the South Australia site and completion is expected in Q2 2023. Three
additional ready-to-build sites were acquired in New South Wales and
construction of the solar farms promptly commenced. Three new solar farms are
expected to be completed in Q3 2023 and in the meantime our operating partner
is conducting development work to study implementation of co-located battery
storage on each site.
UK flexible power CCR assets: The UK's success in asset industries, subsidies
and financing towards large scale deployment of renewable infrastructure can
be a point of national pride. More renewable generation capacity will be
needed to continue the transition and this high penetration of intermittent
renewable energy generation in the system is putting the power system under
high stress while commodity price volatility that same year further deepened
the issue in 2022. The UK flexible power with CCR assets bring a net zero
solution to firming the grid beyond the capacity of typical battery systems,
thanks to a highly efficient and flexible gas-fired generation capacity with
carbon capture and reuse technology on site. Construction of the first site
has steadily progressed in 2022. Major pieces of equipment are already on site
being readied for first power and first revenues in Q2 2023. The carbon
capture and reuse system is expected to be installed and commissioned within
the months following first power. The full commissioning of the integrated
plant is expected in Q4 2023. Over the past year a 15-year power offtake and
gas supply agreement was signed with Axpo and a first batch of sparkspread
hedges were secured, locking in healthy margins for the project. In addition,
a 15-year offtake agreement for food-grade CO(2) was also signed on attractive
terms with an industrial gas specialist group. Our operating partner Landmark
Power Holdings has advanced the development of the second project representing
around three times the size of the first project and which is currently under
due diligence.
US terminal storage assets: In Mexico, vehicles are burning fuel with high
sulfur content, resulting in the creation of significant PM2.5 air pollution
and causing health problems, particularly in highly populated areas such as
Mexico City. The same fuel is also being used in power generation close to
large populated areas where the power is being consumed. The US terminal
assets aim to reduce the environmental and health threats that high sulfur
fuels have on human health by reducing the availability of high sulfur fuel
oil for domestic consumption in Mexico and displacing it with cleaner less
pollutive products, reducing PM2.5, SO(2), and NO(2) emissions. The US
terminal assets provide an aggregation point and facilitate the transfer of
high sulfur oil currently produced at a surplus in the Mexican fuel market. As
a result of the terminals' proximity, northbound flows are destined for
greater and more efficient refining capacity in the United States. Once
refined the PM2.5 contribution of the fuels is reduced materially to levels
experienced in Europe and the United States. Since its acquisition in 2021, we
have been working closely with our operating partner Motus Energy LLC to
expand the storage capacity of the terminals.
Expansion of Terminal 2 has been completed. In Q3 2022 a 150,000 bbls tank
capacity was commissioned, and an additional 5 tanks totalling 190,000 bbls of
capacity were commissioned during Q4 2022, reaching a total storage capacity
of 640,000 bbls. The new capacity has been allocated to new and existing
tenants. Additionally, two 15,000 bbls tanks were commissioned and signed
with an existing tenant in Terminal 1, bringing the total combined capacity of
the programme to 895,000 bbls.
Victory Hill Capital Partners LLP
27 March 2023
Key Performance Indicators
The Company sets out below its financial, operational and climate-related KPIs
which it uses to track the performance of the Company over time against the
objectives, as described in the Strategic Report. Although the Company is not
required to report under the recommendations of the TCFD, many of those
recommendations are followed in order to enhance the Company's disclosures.
The Board believes that the KPIs detailed below provide shareholders with
sufficient information to assess how effectively the Company is meeting its
objectives. Prior year KPIs have not been provided as the portfolio is in its
initial build out phase and prior year comparatives are potentially
misguiding. The Board monitors these KPIs on an ongoing basis.
Financial KPIs
NAV per share (%)
+4.04%
Definition
NAV divided by number of shares outstanding as at 31 December 2022.
Commentary
The NAV has increased to 108.2p since 31 December 2021. Alternative
performance measures are defined below.
Share price (%)
-5.61%
Definition
Closing share price as at 31 December 2022.
Commentary
The share price has decreased to 101.0p since 31 December 2021.
Total NAV return since IPO (%)
15.5%
Definition
A measure of performance that includes both income and capital returns. This
takes into account capital gains and any dividends paid out by the Company
since IPO in February 2021.
Commentary
Total return reflects continued underlying delivery to shareholders.
Alternative performance measures are defined below.
Ongoing charges ratio (%)
1.30%
Definition
Annualised ongoing charges (i.e. excluding investment costs and other
irregular costs) divided by the average published undiluted NAV in the period,
calculated in accordance with AIC guidelines.
Commentary
The Company has incurred less ongoing charges than anticipated. Alternative
performance measures are defined below.
Dividend per share (pence)
5.13p
Definition
Aggregate dividends declared per share in respect of the financial year.
Commentary
The Company's target was to pay a dividend of 5.00 pence per ordinary share in
respect of the year to 31 December 2022. With the declaration of the interim
dividend of 1.38 pence per ordinary share on 22 February 2023, the total
dividend per share for 2022 is 5.13 pence per ordinary share, exceeding the
dividend target for the year.
Total NAV return for the year
7.6%
Definition
A measure of performance that includes both income and capital returns. This
takes into account capital gains and any dividends paid out by the Company
during the year.
Commentary
Total return reflects continued underlying delivery to shareholders.
Alternative performance measures are defined below.
operational KPIs
Weighted average project life (years)
27.3
Definition
Weighted average number of years which are assumed to be the remaining project
life of operational assets in the Company's investment portfolio.
Commentary
Useful life is applied as an assumption in determining the investment
valuation of operational assets.
Largest investment as a % of NAV
23.2%
Definition
Value of largest investment divided by NAV at period end.
Commentary
The largest investment within the Company's portfolio is the US terminal
assets.
Largest 3 investments as a % of NAV
54.5%
Definition
Value of the three largest investments divided by the NAV at period end.
Commentary
The three largest investments are the US terminal assets, Brazilian solar PV
and the Brazilian hydro asset.
climate-related KPIs
Total renewable energy generated (MWh)
35,117
Definition
Underlying portfolio energy generated from renewable assets in KWh.
Commentary
The portfolio's generation for 2022 in MWh, equivalent of the annual
electricity use of approximately 9,000 UK homes.(1)
Total avoided carbon emissions (tonnes CO(2)e)
14,349
Definition
A measure of our success in investing in projects that have a positive
environmental impact and reduce energy usage, equivalent to removing about
7,000 average sized cars from UK roads.
Commentary
The portfolio's total avoided emissions in tCO(2)e from displacing fossil fuel
derived electricity.(2)
Weighted average carbon intensity per $1m invested (tonnes CO(2)e / $m)
96.01
Definition
Portfolio's exposure to carbon-intensive companies, expressed in tonnes
CO(2)e/$m revenue.
Commentary
The calculation covers operational scope 1 and 2 emissions which includes
imported electricity to solar farms. Emissions from assets under construction
are not factored into the calculations.
1 Average electricity consumption in the UK of 3898 kWH from UK BEIS Energy
Consumption in the UK 2022 report
https://www.gov.uk/government/statistics/energy-consumption-in-the-uk-2022
2 c.7,000 cars calculated based on the UK emission factor of
0.26kgCO(2)e/mile. Car emission factor is defined in the website
https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2022
(https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2022)
Stakeholder Engagement
Overview
This section of the annual report covers the Board's considerations and
activities in discharging their duties under section 172 of the Companies Act
2006, in promoting the success of the Company for the benefit of the members
as a whole.
Stakeholders are integral to the long-term success of the Company. The
Directors recognise that, both individually and collectively as the Board,
their overarching duty is to act in good faith and in a way that is most
likely to promote the success of the Company. As set out in section 172 of the
Companies Act 2006, the Directors act for the benefit of shareholders and in
the interests of stakeholders as a whole, having regard, amongst other
matters, to:
• the likely consequences of any decision in the long term;
• the need to foster the Company's business relationships with suppliers,
customers and others;
• the impact of the Company's operations on the community and the
environment;
• the desirability of the Company maintaining a reputation for high
standards of business conduct; and
• the need to act fairly between shareholders of the Company.
All Board discussions include consideration of the longer-term consequences of
any key decisions and their implications for the relevant stakeholders.
Stakeholders
A company's stakeholders are normally considered to comprise its shareholders,
employees, customers, suppliers, as well as the wider community in which the
company operates and impacts. The Company is different in that as an
investment trust it has no employees and, in terms of suppliers, it receives
professional services from a number of different providers, principal amongst
them being the Investment Adviser.
Through regular engagement with its stakeholders, the Board aims to gain a
rounded and balanced understanding of the impact of its decisions.
The Company recognises the importance of maintaining high standards of
business conduct and seeks to ensure that these are applied in all of its
business dealings and in its engagement with stakeholders. These engagement
mechanisms are kept under review by the Directors and are discussed on a
regular basis at Board meetings to ensure that they remain effective. The
importance of stakeholders is taken into account at every Board meeting, with
discussions involving careful consideration of the longer-term consequences of
any decisions and their implications for stakeholders. Details of how the
Board seeks to understand the needs and priorities of the Company's
stakeholders and how these are taken into account during all its discussions
and as part of its decision-making are set out overleaf.
Key decision made during the year
Placing of ordinary shares
On 9 June 2022, the Company published a Prospectus in respect of an initial
placing, initial open offer, initial offer for subscription and initial
intermediaries offer of new ordinary shares in the Company, together with the
implementation of a 12-month Share Issuance Programme.
On 9 June 2022, the Company also published a Circular and Notice of General
Meeting to shareholders regarding the Share Issuance Programme. The Circular
provided details around the potential investment opportunities which the
Investment Adviser had identified and the pipeline assets, and the
shareholders voted overwhelmingly in favour of the resolutions at the General
Meeting held on 28 June 2022. Pursuant to this Share Issuance Programme, gross
proceeds of £122 million were raised by way of an issue of 110,909,091 new
ordinary shares at a price of 110 pence per share. Further information on the
Share Issuance Programme is set out in the Circular, which is available on the
Company's website, and details of the share issuance are included below.
Stakeholder Importance How the Company engages
Shareholders Continued shareholder support and engagement are critical to the existence of The Board welcomes shareholders' views and is committed to maintaining open
the Company and the delivery of its long-term strategy. The Board and the and transparent channels of communications with them. The Board is responsible
Investment Adviser give a high priority to ensuring that shareholders for the content of communication regarding corporate issues and for conveying
understand the Company's strategy and goals and can monitor its performance its views to shareholders. It aims to ensure that shareholders are provided
through the robust corporate governance processes established by the Company. with sufficient information to understand the risk/reward balance to which
they are exposed by investing in the Company. The channels of engaging with
shareholders include:
Publications
The Annual and Half-Yearly Reports are made available on the Company's
website. These reports provide shareholders with a clear understanding of the
Company's portfolio and financial position. In addition to the Annual and
Half-Year Reports, the investor presentations made by the Investment Adviser
and any prospectuses and circulars issued by the Company are also available on
the Company's website. The Company provides regular updates on portfolio
acquisitions, capital raises and any other relevant matter by way of market
announcements.
Annual General Meeting
All shareholders are encouraged to attend and vote at the AGM and at any
general meetings of the Company, during which the Board and the Investment
Adviser are available to discuss issues affecting the Company and answer any
questions. The Investment Adviser attends the AGM and provides a presentation
on the Company performance and its future outlook. The Company values any
feedback and questions it may receive from shareholders ahead of and during
the AGM and takes action, as appropriate.
Shareholder meetings
The Investment Adviser, along with the Broker, regularly meets with the
Company's shareholders to provide Company updates and to foster regular
dialogue. Feedback from all shareholder meetings and investors' views are
shared with the Board on a regular basis. During the year, the Company held a
Capital Markets Day in November where the Investment Adviser and the Chair
presented and the other Board members were also present on the day, engaging
directly with shareholders. The event gave shareholders the opportunity to ask
questions to the Board, the Investment Adviser as well as all of the operating
partners from around the world that were also presenting.
Shareholder concerns
Shareholders wishing to communicate directly with the Board or the Investment
Adviser to raise any issues or concerns, should contact the Company Secretary
at the registered office address. The Chair and the other Directors are
available throughout the year to meet with shareholders to understand their
views on the Company's performance and governance where they wish to do so.
Relations with shareholders are also considered as part of the annual Board
evaluation process.
Investor relations updates
The Board regularly monitors the shareholder profile of the Company. With the
majority of shareholders being a combination of institutional investors and
private client brokers, the Board receives regular updates on investors' views
and attitudes from the Company's Broker and the Investment Adviser. The
results of these meetings are reported to the Board as part of the formal
reporting undertaken by both the Investment Adviser and Brokers. The details
of substantial shareholdings in the Company are included below.
Investment Adviser The Investment Adviser's performance is critical for the Company to achieve The Board believes that maintaining a close and constructive working
positive and consistent long-term returns in line with its investment relationship with the Investment Adviser is crucial to promoting the long-term
objective. success of the Company in an effective and responsible way. Representatives of
the Investment Adviser attend Board meetings and provide reports on the
current and future activities, portfolio investments, performance, operational
and administrative matters. An open discussion regarding such matters is
encouraged, both at Board meetings and by way of ongoing communication between
the Board and the Investment Adviser, facilitating a positive environment for
constructive challenge and cooperative development of solutions. Board members
are encouraged to share their knowledge and experience with the Investment
Adviser and they recognise that the long-term health of the Investment Adviser
is in the interests of shareholders as a whole.
The Board, through the Management Engagement Committee, keeps the ongoing
performance of the Investment Adviser under continual review and conducts an
annual appraisal to consider its terms of engagement. Details regarding the
continuing appointment of the Investment Adviser are set out below.
Other key service providers As an investment company, all services are outsourced to third party service The Board believes that strong relationships with its other key service
providers. The Board is conscious that it is critical to foster good working providers, namely the AIFM, the Company Secretary, the Administrator, the
relationships with them. Depositary, the Broker and the Registrar, are important for the long-term
success of the Company. The Board maintains regular contact with its key
external providers and receives regular reporting from them, both through the
Board and Committee meetings, as well as outside of the regular meeting cycle.
Their advice, as well as their needs and views, are routinely taken into
account.
Through its Management Engagement Committee, the Board formally assesses their
performance, fees and continuing appointment at least annually to ensure that
the key service providers continue to function at an acceptable level and are
appropriately remunerated to deliver the expected level of service. The Audit
Committee also reviews and evaluates the control environment in place at each
key service provider.
Lenders Availability of funding and liquidity are crucial to the Company's ability to The Company does not make use of structural debt in order to achieve its yield
take advantage of investment opportunities as they arise. and total return targets. To date, the portfolio has been fully equity funded
allowing for efficient asset acquisition. Once assets have been acquired and
are operational, the Investment Adviser, through its extensive international
network of funding partners, seeks the most efficient debt funding on a
non-recourse basis. Any leverage is therefore currently held at asset level
only.
Society and the environment It is of utmost importance to the Company that it positively impacts local As an investor in sustainable energy, the Company's assets have an impact on
communities through its sustainable environmental initiatives, investment in the environment. The Company has a Sustainability Framework which is published
areas undergoing regeneration and local employment practices. on the Company's website and our approach to ESG is set out below. The Board
seeks to understand the impact of projects on local communities in accordance
with the SDG investment mandate and has appointed an additional board member
with experience and understanding of the impact of projects in Brazil.
Principal Risks and Uncertainties
The Board, through delegation to the Audit Committee, has undertaken a robust
assessment and review of the emerging and principal risks facing the Company,
together with a review of any new risks which may have arisen during the year,
including those that would threaten its business model, future performance,
solvency or liquidity. These risks are formalised within the Company's risk
matrix, which is regularly reviewed by the Audit Committee. As part of its
risk management process, the Audit Committee seeks to identify emerging risks
to ensure that they are effectively managed as they develop and recorded in
the risk matrix.
During the year under review, the Directors have not identified, nor been
advised of, any failings or weaknesses which they have determined to be of a
material nature. The principal risks and uncertainties which the Company faces
are set out below. The Directors do not consider the likelihood or impact of
the below risks to have changed in the year.
Information about the Company's internal control and risk management
procedures are detailed in the Corporate Governance Statement below. The
principal financial risks and the Company's policies for managing these risks,
and the policy and practice with regard to the financial instruments, are
summarised in note 12 to the financial statements.
Risk Description of risk Risk impact Mitigation
1. Risks relating to the Company
Reliance on Investment Adviser The Company relies on the Investment Adviser for the achievement of its The departure of some key individuals or all of Victory Hill's investment The Investment Adviser consists of five managing partners supported by six
investment objective. professionals could prevent the Company from achieving its investment investment professionals. Overall the Investment Adviser has 19 full-time
objective. staff, which include the investment, finance, legal & compliance and
investor relations teams. A collegiate approach is taken to investment
There can be no assurance that the Directors will be able to find a advisory activities with the team having a broad range of skills to support
replacement adviser if Victory Hill resigns. the pursuance of the Company's investment objective.
If a successor cannot be found, the Company may not have the resources it The performance of the Company's Investment Adviser is closely monitored by
considers necessary to manage the portfolio or to make investments the Board.
appropriately and, as a result, there may be a material adverse effect on the
performance of the Company's NAV, revenues and returns to shareholders. In addition, at least once a year the Management Engagement Committee performs
a formal review process to consider the ongoing performance of the Investment
Adviser and makes a recommendation on the continuing appointment of the
Investment Adviser to the Company.
The initial term of the Investment Advisory Agreement is five years.
Reliance on third party service providers The Company has no employees and the Directors have all been appointed on a Service provider control failures may result in operational and/or The Board oversees and keeps under review the provision of services by each of
non-executive basis. Therefore, the Company is reliant upon its third party reputational problems and may have an adverse effect on the Company's NAV, the Company's service providers on an ongoing basis.
service providers for the performance of certain functions. revenues and returns to shareholders.
The Management Engagement Committee performs a formal review process to
consider the ongoing performance of its service providers.
Currency risks The Company will make investments which are based in countries whose local When foreign currencies are translated into Sterling there could be a material Investments are held for the long term.
currency may not be Sterling and the Company may make and/ or receive payments adverse effect on the Company's profitability, the NAV and the price of
that are denominated in currencies other than Sterling. shares. The Company intends to enter into hedging arrangements for periods of up to 12
months to hedge against short-term currency movements.
Currency risk is taken into consideration at the time of investment and is
included in the Investment Adviser's assessment of minimum hurdle rate from
investments.
2. Risks relating to the portfolio investment strategy
Illiquidity of investments The Company's investments in Sustainable Energy Infrastructure Investments are Shareholder returns could be materially negatively impacted should the Company The Company is expected to hold most of its investments on a long-term basis.
illiquid and may be difficult to realise at a particular time and/or at the be required to realise them in the near term (requirement for early The Investment Adviser and the Board will monitor the position on a regular
prevailing valuation. liquidity). basis.
3. Risks relating to investments
Construction risks Construction project risks associated with the risk of inaccurate assessment Failure to complete projects in accordance with expectations could adversely The Investment Adviser monitors construction carefully and reports frequently
of a construction opportunity, delays or disruptions which are outside the impact the Company's performance and shareholder returns. to the Board and the AIFM.
Company's control, changes in market conditions, and the inability of
contractors to perform their contractual commitment. The Investment Adviser undertakes extensive due diligence on construction
opportunities and seeks to have appropriate insurances in place to mitigate
any costs relating to delays. In addition, the Investment Adviser seeks to
utilise EPC contractors that can provide single point, lump sum turnkey
arrangements wherever possible.
Due diligence Due diligence may not identify all risks and liabilities in respect of an Failure to identify risks and liabilities may impact the profitability or The senior management team at the Investment Adviser has extensive experience
investment. valuation of the investment. in executing strategies similar to that of the Company.
Where appropriate, due diligence conducted by the Investment Adviser may be
supplemented, for example, by independent legal, tax, accounting, commercial
and technical advisers.
Demand, usage and throughput risks Residual demand, usage and throughput risk can affect the performance of The actual return to shareholders may be materially lower than the target The Investment Adviser performs extensive due diligence on the project
infrastructure investments. total return. economics vs. alternative energy options before entering into a project.
Furthermore, project revenues are largely contracted for the medium to long
term.
The Investment Adviser constantly reviews assumptions made regarding the
demand, usage and throughput vs. actual results.
Meteorology risks Dependency on meteorology, meteorology forecasts and other feedstocks may have The actual return to shareholders may be materially lower than the total The Investment Adviser performs extensive due diligence on meteorology and
a negative impact on the performance of the Company's investments. target return. other feedstocks before entering into a project. This includes long-term
climate changes to weather patterns.
The Investment Adviser regularly reviews meteorology and feedstock factors and
will action any potential remedies.
Counterparty risks Counterparties defaulting on their contractual obligations, suffering an The failure by a counterparty to make contractual payments or perform other Due diligence on counterparty risk is performed before entering into projects
insolvency event or causing reputational damage. contractual obligations or the early termination of the relevant contract due and counterparty risk is monitored on a regular basis.
to the insolvency of a counterparty may have an adverse effect on the
Company's NAV, revenues, returns to shareholders and reputation.
Uninsured loss The risk that an investment may be destroyed or suffer material damage, and The actual return to shareholders may be materially lower than the target An independent insurance adviser is appointed for each project to review
and damage the existing insurances may not be sufficient to cover all the losses and total return. project risks in conjunction with the Investment Adviser and to ensure that
damages. appropriate insurance arrangements are in place.
Insurance requirements are reviewed on an ongoing basis.
Curtailment risks Investments may be subject to the risk of interruption in grid connection or In such cases, affected investments may not receive any compensation or only Extensive due diligence is performed on each project before investment.
irregularities in overall power supply. limited compensation.
The Investment Adviser regularly reviews curtailment risks.
Commodity The operation and cash flows of certain investments may depend upon prevailing The actual return to shareholders may be materially lower than the target The Company intends to mitigate these risks by entering into (i) hedging
price risks market prices for electricity and fuel, and particularly natural gas. total return. arrangements; (ii) extendable short, medium and long-term contracts; (ii)
fixed price or availability based asset-level commercial contracts.
4. Risks relating to the Company's shares
Discount to NAV The share price may not reflect the underlying NAV. Lack of liquidity in the Company's shares could negatively impact on The Board, Broker and Investment Adviser monitor the discount or premium to
shareholder returns. NAV at which the shares trade.
Discount management provisions being unable to be satisfied may result in a
significant share price discount to NAV. If, in any rolling 3-month period, the ordinary shares have, on average,
traded at a discount in excess of 5% to the Net Asset Value per ordinary
share. The Company intends to use 50% of net cashflows to repurchase ordinary
shares, subject always to the impact that such repurchase may have on the
ability of the Company to meet its Target Total Return (which includes the
target dividend) or other economic factors that the Board consider it prudent
to take into account at the relevant time.
5. Risks relating to regulation
Regulation The Company is exposed to the risk that the competent authorities may pass The actual return to shareholders may be lower than the target total return. The Company aims to hold a diversified portfolio of Sustainable Energy
legislation that might hinder or invalidate rights under existing contracts as Infrastructure Investments and so it is unlikely that all assets will be
well as hinder or impair the obtaining of the necessary permits or licences impacted equally by a single change in legislation.
necessary for Sustainable Energy Infrastructure Investments in the
construction phase. The Investment Adviser endeavours to ensure that the vast majority of
contracts are not in receipt of government subsidies, thus mitigating exposure
to policy risks linked to contract pricing.
There is also strong public demand for support of the renewables market to hit
'net zero' carbon emission targets.
The Investment Adviser monitors the position and provides regular reports to
the Board on the wider macro environment.
6. Operational risks
Operation and management risks of the portfolio Poor management or operational performance of an asset by the Company's The actual return from single portfolio assets may be lower than the target Operating partners operate to an annual budget and a series of key performance
of assets operating partners and selected operations and maintenance providers. total return for the asset. indicators.
The Investment Adviser monitors the performance vs. annual budget and KPIs on
a monthly basis. On an annual basis the operating partners are subject to an
annual performance review across operational, ESG and financial KPIs.
The Investment Adviser provides quarterly reports to the Board on asset-level
performance.
Valuation risks Valuation of the portfolio of assets is based on financial projections and Actual results may vary significantly from the projections, which may reduce The Company has adopted a valuation policy which was disclosed in the
estimations of future results. the profitability of the Company leading to reduced returns to shareholders Company's prospectus.
and a fall in the Company's NAV.
Fair value for each investment is calculated by the Investment Adviser.
However, if considered necessary and appropriate, the Board may appoint an
independent valuer.
The Investment Adviser has significant experience in the valuation of energy
assets.
The Investment Adviser has an independent valuation working group to perform
and challenge valuations. In addition, the Investment Adviser partnership
committee reviews and challenges valuations.
The Board and the AIFM review the valuations provided quarterly by the
Investment Adviser. As part of the annual audit, the Company's auditor reviews
the valuations.
7. Climate-related risks
Physical risks Longer-term changes in climate patterns, e.g., reduction or increase in wind Reduction in output from assets leading to reduced income stream. This risk The Company is investing in a diversified portfolio of energy transition
levels, decrease solar optimal days impacting renewable output and associated may increase over the long term in the absence of climate mitigation(1). infrastructure by geography, technology and capability. These investments are
earnings. targeted at the energy transition to net zero. This will provide a buffer
against variable weather patterns across the portfolio.
Increased occurrence of extreme weather events such as cyclones, storms,
flooding and heatwaves causing damage to assets, disruption to feedstocks, The Company also mitigates risk through project revenues being contracted for
value chain, outputs and associated earnings. the medium and long term.
At the asset level, weather conditions are monitored and many of the renewable
projects have battery storage capabilities to optimise energy input to the
grid. Meteorology and feedback due diligence is undertaken before investment
and reviewed regularly.
All assets have crisis management and business continuity plans to respond to
disruptions. The assets are also required to have continuous improvement
management systems to build capability and capacity in the local teams and
operations.
Increased insurance premium for assets in high-risk locations. Increased cost of doing business. When making investments, the due diligence process accounts for climate change
risk and impacts.
The Investment Adviser employs an insurance specialist when making investments
and seeks to have appropriate contractual indemnities and insurance provisions
in place to mitigate any costs relating to delays or operation disruption.
Insurance requirements are reviewed on an ongoing basis.
Transition risks Market shifts may dampen ability to engage investors on a broader portfolio of Reduced access to capital. The Company is expected to hold most of its investments on a long-term basis,
energy transition projects than a traditional European renewable focus and the Board and the Investment Adviser monitor the position on a regular
including different geographies and new technologies, e.g., carbon capture and basis.
reuse.
The senior management team at the Investment Adviser has extensive experience
in executing strategies similar to that of the Company.
Policy shift may introduce regulation around climate change, e.g., increased Increased cost of doing business. The Company is supportive of the policy aims of the Disclosure Regulation and
disclosure, taxes etc.
will comply with and monitor changes.
Reduced access to capital.
The Company engages with partners and stakeholders to gather data and drive
action to improve ESG management and support disclosure and policy
requirements. This includes monthly metric reporting on climate-related KPIs,
including energy used and generated, mitigation actions for risks and impacts,
as well as any energy reduction projects. IFC performance standards are used
to guide these interactions.
The Company's investment strategy targeting the energy transition is aligned
with global policy movements on climate change which would limit impact.
Risk management
The risk management framework established by the Board has been designed to
identify, evaluate and mitigate the significant risks faced by the Company. A
risk management framework can only provide reasonable, not absolute,
assurance. The Board has contractually delegated the management of the
investment portfolio, the registration services, administrative services and
other services to third party service providers and reliance is therefore
placed on the internal controls of those service providers. Risk assessments
are performed on a regular basis and this is facilitated through the use of a
detailed risk assessment programme which categorises the risks identified and
the controls in place to mitigate those risks.
Risk appetite
The Board's risk appetite is aligned with the Company's investment objective
and policy for which the Board has ultimate responsibility. The investment
objective and the investment policy of the Company are noted above.
Identification and management of risks is integrated into the Investment
Adviser's investment process.
Emerging risks
As part of its risk assessment, the Board, via the Audit Committee, considers
the emerging risks and any such risks identified are included in the detailed
risk assessment programme.
Climate risk and TCFD
Climate risk and TCFD disclosures are included below.
Going Concern and Viability Statement
Going concern
The Directors have reviewed the financial position of the Company and its
future cash flow requirements, taking into consideration current and potential
funding sources, investment into existing and near-term projects and the
Company's working capital requirements.
The Directors, in their consideration of going concern, have reviewed the
financial position and comprehensive future cash flow models for the Company
prepared by the Company's Investment Adviser, taking into consideration
current and potential funding sources, investment into existing and near-term
projects and the Company's working capital requirements. Furthermore, the
Directors have considered a worst case scenario in which the Company is
assumed to meet all of its remaining investment commitments within the next 12
months, in addition to dividend payments and ongoing operating expenses. Even
in this unlikely scenario, the Company has sufficient headroom to meet all
expected cash outflows with its existing cash balances. Based on these
forecasts and the assessment of principal risks described in this report, that
it is appropriate to prepare the financial statements of the Company on the
going concern basis.
The Directors believe that there are currently no material uncertainties in
relation to the Company's ability to continue for a period of at least 12
months from the date of the approval of the financial statements and,
therefore, has adopted the going concern basis in the preparation of the
financial statements.
Viability statement
In accordance with Principle 21 of the AIC Code, the Directors have assessed
the prospects of the Company over a period longer than 12 months required by
the relevant "Going Concern" provisions. The Directors have considered the
nature of the Company's assets and liabilities, and associated cash flows, and
have determined that five years, up to 31 December 2027, is the timescale over
which the performance of the Company can be forecast with a material degree of
accuracy and therefore is the appropriate period over which to consider the
viability.
The Investment Adviser has considered the sensitivity of the financial
projections to a range of key assumptions, such as a reduction in cash flows
from portfolio companies, delays in construction, cost overruns, no debt
availability, and an inability for the Company to raise additional equity. The
results of this stress testing showed that the Company would be able to
withstand the impact of these scenarios occurring over the five-year period.
The Directors confirm they have carried out a robust assessment of the
emerging and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency, liquidity, and
dividend cover for a five-year period. The Directors' assessment has been made
with reference to the principal risks and uncertainties and emerging risks
summarised above and how they could impact the prospects of the Company.
As an Investment Company, part of the Company's objective is to produce stable
dividends while preserving the capital value of its investment portfolio.
Following regular pipeline updates from the Investment Adviser, the Directors
believe that the Company is well placed to manage its business risks
successfully over both the short and long term period, the Directors have a
reasonable expectation that the Company will be able to continue in operation
and to meet its liabilities as they fall due for a period of at least five
years.
Approval of the Strategic Report
The Strategic Report was approved by the Board of Directors and signed on its
behalf by:
Bernard Bulkin
Chair
27 March 2023
Our Approach to ESG
VH Global Sustainable Energy Opportunities plc, through its energy
infrastructure asset investments, seeks to accelerate the energy transition to
a low carbon future, aligned with the UN Sustainable Development Goals
The Company's energy transition investment strategy is coupled with our local
stewardship approach so that we can drive environmental impact while improving
local environmental and community outcomes and maximise value. Through 2022 we
have strengthened our sustainability and ESG due diligence, asset management
and disclosure processes to help meet our aims."
According to the International Energy Agency (IEA), the SDGs that are directly
impacted by energy are: the achievement of universal access to energy (SDG 7),
the reduction of the severe health impacts of air pollution (SDG 3) and
tackling climate change (SDG 13). Other SDGs are also impacted by investment
in sustainable energy globally including the promotion of decent working
environments and economic growth, industry, innovation, and infrastructure as
well as partnerships for the goals (SDGs 8, 9 and 17).
Company investments are technology agnostic and aim to address specific energy
transition challenges such as imbalances and structural gaps in OECD Accession
and OECD Key Partner countries' energy markets. Investments in renewable
energy generation support SDG 13 on climate action through grid
decarbonisation and SDG 7 by providing affordable energy access. The strategic
US terminal storage assets support SDG 3 on health and wellbeing through
displacing air pollution and associated health impacts. The UK flexible power
with CCR assets which are under construction will provide grid balancing
services that supports renewable energy grid penetration while capturing
carbon dioxide.
The Company takes a life cycle approach to managing its energy generation
assets to understand environmental impact including scope 3 and embodied
emissions as well as the social opportunities and impacts in the supply chain.
The value chain is a strategic consideration in the US terminal storage assets
as the investment facilitates the displacement of high sulfur fuel oil from
the Mexican market.
The sustainability-focused investment strategy delivers positive environmental
and social benefits, and through active ownership of the assets, that ensures
good management practices, local environmental and social value is also
created. The Company's relationship with operating partners is a central facet
to delivering the energy transition investment strategy.
Through 2022 the Company continued to successfully deploy capital and manage
investments in a range of sustainable energy infrastructure assets aligned
with the company's investment strategy as detailed on page 18 in the full
Annual Report and Financial Statements.
The sustainability impact delivered from 1 January to 31 December 2022
included:
35,117 MWh
of renewable energy generation
(equivalent to powering over 9000 average UK homes with clean energy)
14,349 tonnes
of avoided carbon emissions
(equivalent to removing from over 7,000 average UK petrol cars per year)
20,613 tonnes
of sulfur dioxide emissions displaced
The Company's sustainable investment strategy is delivered through a robust
governance framework which ensures oversight and accountability, risk based
social and environmental due diligence, prioritisation of material risks and
opportunities, and engagement with stakeholders and operating partners to
mitigate impacts and drive continuous improvement.
ESG governance
The Company governance structure and composition is described in the Corporate
Governance Structure below and the Company group structure on pages 16 and
17 of the full Annual Report and Financial Statements.
The Company's independent Board has a dedicated board member with oversight
responsibility for ESG and sustainability issues. The Board reviews principal
risks including ESG and climate-related risks.
The Investment Adviser, Victory Hill, has been appointed by the independent
Board to advise on investments and perform asset management activities. As
part of that role, Victory Hill has oversight of the development and
implementation of ESG policies, processes and resourcing to support the
Company investment process and asset management.
Oversight is accomplished through several Investment Adviser administered
committees. The Investment Committee ensures inclusion of ESG due diligence in
the investment process as described on page 15 in the full Annual Report and
Financial Statements. The Committee also plays an important role in overseeing
stewardship activities and ensuring stewardship priorities are adhered to at
an asset level.
The Risk, Operations and Compliance Committee ensures principal ESG risks,
including climate related physical and transition risks, are identified and
controls implemented. The ESG working group advises on ESG strategy and
monitors and tracks the ESG performance of investments. The ESG working group
provides input as required into other Investment Adviser committees including
the Partnership Committee, Risk, Operations and Compliance Committee and
Investment Committee.
The Investor Adviser's sustainability policy and investment process as
described on page 15 in the full Annual Report and Financial Statements
underpin the Company's commitments to sustainable investments. The policy sets
out commitments to track environmental and social performance of investments.
ESG materiality, risk management and due diligence processes identify ESG
issues and incorporate actions into the Company's assets and operating
partners' business practices through a continuous improvement management
cycle.
The Investment Adviser has appointed a dedicated head of sustainability to
support the investment and asset management teams in embedding ESG policy and
strategy. Every member of the investment and asset management teams is
responsible for implementing the Company investment policy and the stewardship
of assets during the investment evaluation, execution, and asset management
phases of the investment life cycle. Team training is undertaken to ensure
that team members have the appropriate knowledge to carry out their
responsibilities. Diversity, equality and inclusion are also important
elements of governance and resourcing of stewardship activities with the
recognition that a diverse workforce brings different backgrounds and ideas
and strengthens decision-making.
Adherence to the investment policy and sustainability policy, and
contributions to initiatives that support sustainability are considered in
individual staff members' performance assessments, which directly impact
overall remuneration. Individuals' participation in professional development
and training is provided and encouraged to enhance our ESG capabilities
continually.
An external assurance firm is used to verify that investments are aligned with
the core SDGs and the energy transition and whether the project also "does no
significant harm" to the other 11 SDGs. This process includes reviewing
material issues and potential supply chain risks. The external assurance firm
was also tasked in 2022 to review eligibility against the EU Taxonomy of
sustainable economic activities and undertake technical screening to achieve
alignment.
Operating partners are required to have SPE‑level ESG processes to manage
and mitigate asset associated environmental and social issues. This is
identified in an asset‑specific sustainable action plan (SAP) which includes
expectations for dedicated resourcing for ESG issues, management systems such
as ISO 14001 and 4500, key performance indicator reporting and target setting.
Limited assurance was obtained on core ESG data submitted by operating
partners in 2022.
The Investment Adviser updated its operating policy handbook during 2022 to
reflect the expanding business. ESG policies covered are shown in the table
below. Operating partners are expected to have corresponding commitments.
Stakeholder engagement
The Company's investment strategy includes alignment with SDG 17 'Partnership
for the Goals' recognising that the SDGs can only be met if all stakeholders
work together to mobilise financial resources globally. This is the Company's
approach to investment. The values of honesty and integrity, transparency and
partnership are integral to stakeholder engagements.
Applying a value chain view to investment impacts on the Company's
stakeholders is an important element of the Investment Adviser's ESG risk
identification and management process. ESG opportunities, risks and impacts on
both the company and from company activities on stakeholders are in scope.
Key performance indicators and the requisite focus on sustainable value
creation are communicated to operating partners through contractual
requirements and instructed in the asset agreed SAP. The SAP is based on the
external SDG assessment, due diligence and materiality analysis.
Strengthening operating partners governance frameworks, implementing
management systems including local stakeholder engagement, and enhancing data
reporting processes were identified in the asset SAP's for 2022.
Our stakeholders
Investors
• The Company invests capital to deliver projects that facilitate the
energy transition to net zero while managing ESG impacts.
Partners
• The Company collaborates closely with delivery partners and suppliers
to ensure quality, reliable and sustainable assets that deliver on the energy
transition to net zero.
Communities and customers
• The Company provides energy infrastructure to enable affordable energy
access.
• The Company measures and manages project economic, environmental and
social impact.
• The Company is committed to acting with cultural and local awareness
and integrity.
Employees
• The commitment, quality and integrity of staff of the Investment
Adviser drives the Company's success.
• The Investment Adviser's sustainable development culture ensures a
diverse and inclusive workplace focused on health and wellbeing with continual
investment in capabilities through training, learning and development.
Environment
• The Company drives responsible business practices beyond commercial
objectives across geographic footprint and focused on the SDGs.
• The Company measures the carbon and environmental footprint of its
investments.
• The Company seeks to make a positive contribution in operating regions.
Material topics
The diverse nature of the portfolio is reflected in a varied range of
operational priorities. The systemic issues identified for the energy sector
include energy generated, greenhouse gas emissions produced and avoided,
pollutant air emissions produced and avoided, supply chain management and
climate risk. See The Task Force on Climate-Related Financial Disclosures
(TCFD) below for further information on climate-related risks and metrics.
Topics that may be identified as material are explained in the table below.
Impact Description of company action
Greenhouse gas emissions The Company will report GHG emissions and avoidance and put in place reduction
measures where necessary aligned with net zero goals.
Climate physical risk and vulnerability The Company will assess asset vulnerability to climate related physical risks
and implement appropriate adaptation measures.
Energy The Company will manage and report on energy consumption and generation from
non-renewable and renewable sources.
Air pollution The Company will measure and reduce air pollution from operations where
applicable.
Hazardous substances The Company will disclose and mitigate the production or use of substances
that can pose human health and environmental harm.
Water use and discharges The Company will use water efficiently and disclose the quantity and method of
withdrawal and responsible disposal.
Waste The Company will implement a waste management hierarchy to promote reuse,
recycling, and responsible disposal to minimize environmental impact.
Material sourcing and efficiency The Company will account for the environmental and social impacts of the
products and materials procured and their efficiency in use with the aim of
limiting impacts in the value chain.
End of life management The Company will take a life cycle approach to management and consider the
disposal and recyclability of equipment and plant at the end of life.
Biodiversity and habitat The Company will take a do no significant harm approach to biodiversity and
habitat and manage any impacts to ecologically rich areas from operations.
Health and safety The Company will manage hazards and risks to those that interact with the
assets through operational health and safety policies, management plans,
training, and reporting processes.
Employment The Company will engage employees through policies and benefits to support
retention, and provide jobs and build capacity locally.
Inclusion and diversity The Company will put in place policies and plans to promote diversity of
boards and employees, equal opportunity and anti- discrimination, and
reporting progress.
Forced or compulsory labour The Company will implement processes to prevent, identify and manage modern
slavery risks to operations and value chains.
Community development The Company will take an active role in the local communities to mitigate any
negative impacts and leave a positive legacy.
ESG oversight and resourcing The Company will appropriately resource to manage ESG related issues with
effective reporting to the Board.
Cybersecurity and data protection The Company will protect information technology from unauthorized use or
attacks, and protect customer privacy and their data from misuse and theft.
Whistle-blower protection The Company will implement procedures to enable stakeholders to raise issues
such as unethical and dangerous practices, and to protect those who do raise
these issues.
FINANCE STABILITY BOARD TASK FORCE ON
CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
The Company is not required to disclose under TCFD however it is the Company's
intention to include in its annual financial report climate-related
disclosures in accordance with the ethos of the TCFD recommendations and it is
committed to strengthening disclosures over time. As 2022 is the baseline year
for operational data, climate-related targets will be based on this
performance and will be published through the Net Zero Asset Managers
Initiative (NZAMI). The Company is also developing its scenario capabilities
and aims to provide quantitative analysis in the future.
Governance pillar
An orderly energy transition towards climate change goals is the key
opportunity for the Company. The Company's strategy is to target direct
investments in energy infrastructure assets that support the SDGs,
specifically those that address themes that include climate change, energy
access, energy efficiency and market liberalisation. Climate change issues are
therefore intrinsically considered by both the Board and the Investment
Adviser.
The GSEO Board has oversight of the business model and strategy. The Board's Audit Committee, which is comprised of four independent Directors,
meet at least twice a year and has responsibility for reviewing the Company's
It meets at least four times a year and is responsible for the ongoing process risk management systems. The Committee reviews and updates the Company's risk
of identifying, carrying out a robust assessment of, and managing and register which includes climate-related issues.
mitigating the principal risks faced by the company.
Louise Kingham CBE, is the Board member with responsibility for ESG and
sustainability matters for the Company.
The Board has oversight of the Investment Adviser and the AIFM.
The Investment Adviser (together with the AIFM) has responsibility for The Risk, Operations and Compliance Committee ensures risks are identified and
implementing the Company's investment strategy, managing the Company control measures are put in place to mitigate the risk
investments and reporting to the Board.
There are three relevant subcommittees at the Investment Adviser level which
address climate-related issues.
The ESG working group gives recommendations on ESG integration into the
investment strategy and asset management throughout an asset's life. This
includes appropriate ESG target setting, monitoring and reporting.
The Investment Adviser and AIFM investment committees evaluate investment
opportunities aligned with the SDGs with the purpose of accelerating the
energy transition towards a net zero carbon world. An external assurance
consultant is used to advise on this project selection following a robust due
diligence process.
The Investment Adviser works closely with operating partners through regular Operational carbon footprints are calculated including life cycle analysis of
meetings and monthly reports covering climate-related issues. energy generation projects to understand their contribution to the Company net
zero target.
Actions are put in place to reduce operation emissions and other environmental
impacts, including understanding supply chain and value chain impacts.
Operating partners confirm their compliance with relevant policies.
For construction assets, operating partners are required to ensure ESG
management practices are aligned with the Investment Adviser's sustainable
development culture.
Strategy pillar
The Company's investment policy is to deploy the Company's funds into a
diversified portfolio of global sustainable energy infrastructure assets that
support the attainment and pursuit of the SDGs where energy and energy
infrastructure investments are either a direct contributor to the acceleration
of the energy transition towards a net zero carbon world or can be categorised
into one or more of the four "Investment Pathways" that constitute its
investment themes. These Investment Pathways are:
Pathway I - Addressing climate change
The objective is to reduce the impact of greenhouse gases (GHGs) through
investing in renewable energy technologies and fuel sources. As such, the
Company will invest a large portion of its deployable capital into renewable
energy infrastructure assets involved in power generation, energy storage, and
alternative fuel sources.
Pathway II - Energy access
Energy is vital for our quality of life but globally there is not universal
access. According to the UN, 800 million people are without electricity or
power, and 2.6bn people have no access to clean fuels for cooking. Growth in
access to energy, which also adheres to other SDGs such as Climate Change, is
a key challenge for governments, investors and businesses alike. There is an
acknowledgement that a level of pragmatism is required in meeting SDG
policies. Traditional non-renewable energy sources are likely to continue
playing a role in the energy mix of world economies. Investment in distributed
technologies that generate electricity at or near where it is used such as
solar panels or combined heat and power with carbon capture technology will
enable this access.
Pathway III - Energy efficiency
Energy efficiency reduces GHGs and reduces demand for energy imports into
domestic markets, thereby lowering the cost of energy to households,
businesses and the economy overall. Energy efficiency may also be achieved at
the grid and national levels through investment in some of the following
areas, which the Company may consider as part of its investment focus:
1. Power interconnectors
2. Grid resilience and frequency response
3. Investment in ageing grid systems which were developed as
one-way transmission systems.
Pathway IV - Market liberalisation
SDG 7, speaks of ensuring universal access to affordable, reliable and modern
energy supply. The liberalisation of energy markets is the first stage in the
development and modernisation process of an energy market.
The Company's investments inherently improve environmental performance; for
example, in Brazil, investment in a portfolio of solar PV assets will
accelerate the growth of a sustainable energy system by improving and securing
localised access to clean energy and helping to lower Brazilian energy prices.
The UK flexible power with CCR assets will use a less pollutive fuel in
natural gas, as well as reduce emissions through efficient carbon capture and
reuse technologies. The Company's energy infrastructure assets are long term
in nature.
The Company has aligned its time horizons with the NZAMI which supports the
goal of net zero GHG emission by 2050 where:
• Long term time horizon 2050 (25-30 years)
• Mid term time horizon 2030 (10-15 years)
• Short term time horizon 2025 (3-5 years).
Risk management
The Company's principal risk management process, as well as the risk and
opportunity-based approach to ESG management described above, is how the
relevant climate risks and opportunities are identified. These risks are
outlined in the table below. This is considered within the selection and
screening of energy infrastructure investments. The risk management process
considers type of infrastructure and geographic risks. Local partners are
engaged to assess environmental management practices and processes, and to
broaden understanding of stakeholder perspectives.
In 2022 the Investment Adviser contracted an expert third party sustainability
consultant to conduct physical climate risk and vulnerability assessments
(CRVA) for each of the Company's investments.
The CRVA was conducted in accordance with the criteria of the EU Commission
Delegated Regulation (EU) 2021/2139 which form the Technical Screening
Criteria of the EU Taxonomy. Specifically, to accord with the requirements of
Appendix A of the above regulation, the Generic Criteria for Do No Significant
Harm to Climate Change Adaptation.
The CRVA was carried out using climate projections across different
Representative Concentrations Pathways used by the Intergovernmental Panel on
Climate Change (IPCC) fifth assessment report (AR5).
Climate modelling of regional impacts on the locations where each of the
Company's assets are situated was used. The impacts of these changes were
interpreted in order to understand the physical hazards the assets might
experience over their lifetime. The sustainable energy infrastructure
investments considered under the CRVA have expected lifespans greater than 10
years.
Vulnerability of the assets to projected climate-related hazards was
considered based on asset design standards, site locations and risk to
climate-related impacts as well as historic climate-related issues which may
have been experienced in the region. The Company also considers the type of
asset and whether it will be impacted by changes in weather (e.g., wind and
solar power), supply chain disruption (e.g., energy supply), and market
demands.
Adaptation solutions were identified based on the outputs of the CRVA. These
adaptations show how the resilience of the asset is improved to withstand such
vulnerabilities. The most common hazards identified was the potential for
wildfire or flood. All assets have appropriate drainage designed and in some
cases enhanced to move excess water away from sites. All sites also have
appropriate firefighting equipment installed.
There is uncertainty in terms of how climate change will impact individual
operations as well as the impact of global efforts to achieve an orderly
energy transition. Initially the company has taken a qualitative approach to
identifying climate-related physical and transition risks and opportunities.
As the Company matures, it aims to develop understanding of the potential
financial impacts under different transition scenarios from these physical and
transition risks on global assets. Generally the Company's financial
materiality threshold for climate-related risks and opportunities is 3% NAV
after considering risk mitigation. However, the unpredictability of
climate-related weather events means that the Company takes a more cautious
approach to asset management and insurance to mitigate this in the longer
term.
For transition risks, the Company's investment process selects projects that
align to the energy transition to net zero. Various parameters are considered
including policy and regulatory changes and stringency, technology and energy
mix, energy demand and capacity changes and associated costs or profits to the
business.
Investments are considered under several scenarios relevant to the Company's
diverse energy infrastructure investments including:
• IEA World Energy Model Net Zero Energy 2050
• IEA World Energy Model Stated Policies Scenario
• UNPRI Inevitable Policy Response
• Network for Greening the Financial System (NGFS) climate scenarios
• IPCC Shared Socioeconomic Pathways (SSP) 1, 2 and 5
• IPCC Representative Concentration Pathways (RCP)
Risk Potential impact Mitigation
Physical risks
Longer term changes in climate patterns, e.g., reduction or increase in wind Reduction in output from assets leading to reduced income stream. This risk The Company invests in a portfolio of energy transition infrastructure assets,
levels, drought, decrease in solar optimal days impacting renewable output and may increase over the long term in the absence of climate mitigation. diversified by geography, technology and capability. These investments are
associated earnings. targeted at the energy transition to net zero. This will provide a buffer
against variable weather patterns across the portfolio.
Increased occurrence of extreme weather events such as cyclones, storms,
flooding and heatwaves causing damage to assets, disruption to feedstocks, The Company also mitigates risk through project revenues being contracted for
value chain, outputs and associated earnings. the medium- and long-term.
At the asset level weather conditions are monitored and many of the renewable
projects have battery storage capabilities to optimise energy input to the
grid.Meteorology and feedback due diligence is undertaken before investment
and reviewed regularly.
All assets have crisis management and business continuity plans to respond to
disruptions. The assets are required to have continuous improvement management
systems to build capability and capacity in the local teams and operations.
Increased insurance premium for assets in high-risk locations. Increased cost of doing business. When making investments the due diligence process accounts for climate change
risk and impacts.
The Investment Adviser employs an insurance specialist when making investments
and seeks to have appropriate contractual warranties, indemnities and
insurance provisions in place to mitigate any costs relating to delays or
operation disruption. Insurance requirements are reviewed on an ongoing basis.
Transition risks
Market shifts may dampen ability to engage investors on a broader portfolio of Reduction in the availability of capital to invest in energy transition There is strong public demand for support of the renewable energy market
energy transition projects than a traditional European renewable focus projects. towards net zero carbon emission targets.
including different geographies and new technologies e.g., carbon capture and
reuse. The Company is expected to hold most of its investments on a long-term basis
and the Board and the Investment Adviser monitor the position on a regular
basis.
The senior management team of the Investment Adviser has extensive experience
in executing strategies similar to that of the Company.
Policy shift may introduce regulation around climate change e.g., increased Increased cost of doing business. The Company is supportive of the policy aims of disclosure regulation and will
disclosure, taxes etc.
comply with it and monitor changes.
Reduction in the availability of capital to invest in energy transition
projects. The Company, via the Investment Adviser, engages with partners and
stakeholders to gather data and drive action to improve ESG management and
support disclosure and policy requirements. This includes monthly metric
reporting on climate-related KPIs including energy used and generated,
mitigation actions for risks and impacts, as well as any energy reduction
projects.
The Company investment strategy targeting the energy transition is aligned
with global policy movements on climate change which would limit impact.
Transition opportunities
Decarbonisation policy and market shifts will drive new renewable energy, new Increased availability and deal origination as well as capital directed A pipeline of investments is constantly being identified and refreshed, with
fuels and energy storage opportunities. This is aligned with the Company's towards energy transition opportunities in support of the Company's investment the Investment Adviser regularly reporting to the Board on this pipeline.
strategy to invest in energy transition infrastructure. strategy.
Increased need for global energy access from a mix of sources as developing
countries expand grid access to populations.
Increased investment in energy efficiency grid infrastructure leading to Reinforcement of intangible benefits such as reputation, brand and goodwill, The Investment Adviser uses the extensive experience of its senior management
increase in opportunities for investment. together with employee, partner and stakeholder engagement. team in executing strategies similar to that of the Company to raise funds and
successfully invest.
Market liberalisation in developed and developing economies is creating Access to new markets leading to an enhanced competitive position and improved The Investment Adviser has engaged globally with various companies and
opportunity for market share in renewable and alternative energy opportunities resource efficiency reducing operating costs. investors to support expansion of the Company and sustainable energy
in new geographies. infrastructure investments.
Decentralisation of energy generation creating new opportunities for Enhanced competitive position reflecting shifting preferences and increased A pipeline of investments is constantly being identified, with the Investment
investment in renewable and other sustainable energy infrastructure. revenues through new solutions, access to new markets, diversification, Adviser regularly reporting to the Board on this pipeline.
resilience planning, relationships.
The risks and opportunities to a project's underlying strategy have been
considered qualitatively under different physical and transition climate
scenarios as described above. This was considered over a longer-term time
horizon of 25-30 years to understand the resilience of the Company's position.
The table below shows the assessed risk to investment opportunities by asset
class in different energy transition scenarios described above and the
physical climate risk under different RCPs. This assumes no adaptation
measures. The CRVA identified good mitigation measures for assets so under
business-as-usual scenarios the assets have appropriate adaptation in place
for worst case physical climate risks.
The analysis of the Company's business strategy under different scenarios took
into consideration the current geographic locations of assets and critical
Tier 1 supply chain companies such as solar panel manufacturers. The Company's
business strategy supports a transition scenario.
The financial impact and resilience of the Company's investment strategy to
different climate scenarios is inherent in the Investment Adviser's financial
modelling processes. It is the Company's objective to accelerate an orderly
transition via its investments. It is also expected that the investments would
be resilient in case of a failure to achieve the energy transition. The
Investment Adviser's financial and valuation models include the impact of
different variables such as energy demand and future mix, key commodity
prices, and demographic shifts such as population growth. The models are also
geographically tailored, as the national mandated targets for renewable and
other energy source penetration in the energy mix, as well as carbon reduction
policies of the investment country and region are critical in understanding
investment impact and suitability.
Metrics and targets
The Company's goal is to enable the transition to net zero through its
strategic focus on sustainable energy assets that align with the SDGs. The
Company aims to meet the Paris Agreement target and achieve net zero carbon
emissions in its portfolio by 2050.
The Company reports on energy generation, consumption and associated carbon
emissions. In 2022 the Investment Adviser became signatory to the NZAMI and
commissioned an external adviser to develop a road map towards a 2050 net zero
goal with a target for the Company portfolio. The carbon intensity of the
Company's portfolio is low. The Company predicts the majority of emissions
that will require reduction by 2050 will be Scope 3. The Company will publish
its net zero 2050 target and associated road map for operational assets in
2023 which we will be updated based on 2022 baseline emissions.
The Company takes a life cycle approach to understand carbon impact and
footprint of each of the renewable power generation investments and the future
carbon capture project. The Company conducted a life cycle assessment (LCA) of
embodied emissions of the energy generation assets in the portfolio. This data
was first published in the 2021 annual report. This analysis was updated with
the acquisition of the Mascarenhas Brazilian hydro facility at the end of 2022
and is included in the table below. This analysis was completed by a third
party sustainability expert with the methodology described below.
The data was calculated on a 25-year life cycle and includes import and export
data that is indicative of full life emissions avoided. The LCA process for
each asset was completed using actual and predicted asset data as far as
possible supported with data derived from the EcoInvent 3.8 database. This
approach enabled the embodied CO(2)e emissions within each asset to be
calculated. These include emissions associated with raw material extraction,
manufacture, transport, construction, operations and decommissioning and
recycling. The objective was to understand the true avoided emissions for each
asset and account for emissions associated with the development of each asset.
The avoided emissions calculations take in to account local factors such as
carbon intensity of the energy type being replaced at a local level and local
irradiance levels. The expected decarbonisation of traditional baseload energy
supply aligned with country commitments towards net zero by 2050 was also
factored in. The calculations therefore accounted for expected decarbonisation
trajectory of grid supplied energy and the CO(2)e avoided figures at all
phases of the asset life cycle for each country in which assets are located.
However, a declining grid carbon intensity has not been carried through for
Brazil as the grid has established low carbon intensity and Brazil is not
considered aligned to net zero by 2050. The Brazilian calculations therefore
do not account for the type and carbon intensity of electricity generation
being displaced by the solar PV assets, nor the benefits of distributed power
generation. A reduction in electricity losses along transmission and
distribution lines means the remote solar PV assets in Brazil will provide a
more efficient and cleaner source of energy locally, supporting future growth
and energy access. The Company is tracking progress on carbon emission payback
as calculated in the LCA. Considering the estimated and actual energy
generation and associated avoided emission calculations the 'payback' period
for the Australian solar PV with battery storage assets has reduced to 4.2
years. The Brazilian hydro facility was commissioned in 1974 and has a short
'payback' period for its embodied emissions which means the facility is
providing zero emission electricity into the grid.
Energy generation assets carbon life cycle analysis
Units UK Australia Brazil (solar) Brazil (hydro) Portfolio
Embodied emissions Kg CO(2)e 1,321,045 79,655,870 114,276,353 175,381,510 370,634,778
Operational emissions Kg CO(2)e 93,210,017 1,133,373 12,867,804 1,865,990 109,077,184
Total life cycle emissions Kg CO(2)e 94,531,062 80,789,243 127,144,157 177,247,500 479,711,962
Emissions avoided Kg CO(2)e 246,557,717 321,997,694 197,048,974 9,157,834,560 9,923,438,946
Net emissions avoided over lifetime Kg CO(2)e 152,026,655 241,208,451 69,904,817 8,982,453,050 9,443,726,984
Average savings per annum Kg CO(2)e 9,862,309 12,879,908 7,881,959 91,578,346 122,202,521
CO(2) Payback Year 9.6 6.4 16.1 1.9 4
2022 emissions data
The Company strategy is focused on supporting climate action by accelerating
the energy transition through its investments in climate resilient energy
infrastructure. The management of investment impacts including measuring an
asset's carbon footprint and taking action to decarbonise is an important
element in the company's climate action approach.
As the first full year for the Company's operational assets, 2022 is the
baseline year for data collection. This data will inform specific actions to
meet net zero targets. The table below covers the Company's scope 1, scope 2
and scope 3 emissions from the operational assets including the Australian
solar PV assets, Brazilian solar PV assets which commissioned in 2022 and USA
terminal storage assets.
Data collection and calculations were completed in line with the Company's
basis of ESG reporting document which is informed by the GHG protocol and
Global Reporting Initiative guidance. Assets under construction or were
acquired with fewer than 6 months data were not included in the reporting
scope for assurance.
All sites provide operational data however gaps remain in calculating scope 3
emissions due to difficulties sourcing data from the asset value chain, for
example destinations of freight for the US terminal storage assets. For the
solar PV assets the scope 3 emissions from transmission and distribution
(T&D) are accounted for.
The FY22 social metrics and scope 1, 2 and 3 emissions within this report
annotated with a ± symbol have been independently assured through a limited
assurance engagement conducted in accordance with the International Standard
on Assurance 3000 (ISAE 3000) and International Standard on Assurance 3410
"Assurance engagements on greenhouse gas statements" (ISAE 3410).
Portfolio energy use and GHG emissions for 2022
Scope Energy use GHG emissions
(KWh)
(tonnes CO(2)e)
Scope 1 21,729,405 3,950(±)
Scope 2 2,492,317 909(±)
Total Operational (scope 1&2) 24,221,722 4859(±)
Scope 3 7,103(±)
Avoided emissions 14,349(±)
GHG emissions scope definitions and methodology
The Company collects GHG emission data monthly from its wholly owned
operational subsidiaries and reports totals annually. The Company is
strengthening its reporting process to include construction assets in future
reports. Figures reported currently only include operational assets where
indicated.
The Company uses the following standards to report its GHG emissions: the
World Business Council for Sustainable Development (WBCSD) and the World
Resources Institute (WRI) GHG Protocol as of 31 December 2014, the GHG
Protocol Scope 2 Guidance, and the Carbon Disclosure Standards Board. The
Company defines its emissions boundary as those under majority ownership
(+50%). The Company assets are wholly owned by the company and therefore 100%
of emissions reported are under the Company's financial control.
The operational carbon footprint of assets is calculated from absolute energy
consumption reported by the assets.
Scope 1 comprises direct emissions from Company owned and controlled plant and
equipment, including natural gas, propane, diesel and automotive fuel.
Scope 2 comprises indirect emissions from purchased renewable and
non-renewable electricity using location based calculation method.
Scope 3 comprises indirect emissions from non-Company owned and controlled
plant and equipment, including rail and truck fuel freight inbound to the
storage terminal, waste, water use and fuel and energy related activities not
included in scope 1 and 2.
Regional and country specific emission factors are used to calculate GHG
emissions provided through the data collection software Diligent (previously
Accuvio). These factors can be accessed on the Diligent ESG reporting system
and included IEA, UK BEIS, US EPA and Australian National Greenhouse
Accounting factors.
Avoided emissions from renewable energy generated by solar PV assets are
calculated using WRI/WBCSD guidelines for quantifying GHG reductions from
grid-connected electricity projects accounting for T&D losses.
Under the TCFD asset managers are required to provide the weighted average
carbon intensity for the investment strategy. This metric with other carbon
footprinting metrics using formula provided by the TCFD are included in the
table below.
The source of operational emissions includes imported electricity from the
grid, fuel used in asset owned vehicles and natural gas for heating and
operations.
TCFD carbon footprinting and exposure metrics
Portfolio's exposure to carbon-intensive companies, expressed in tonnes 68 tCO(2)e/$M
CO(2)e/$M revenue
The absolute greenhouse gas emissions associated with a portfolio, expressed 1,710 tCO(2)e
in tonnes CO(2)e
Total carbon emissions for a portfolio normalized by the market value of the 3 tCO(2)e/$M
portfolio, expressed in tonnes CO(2)e/$M invested
Carbon footprinting and exposure metrics for the portfolio operating assets
were calculated using formula recommended by the TCFD for asset owners and
asset managers published in 'Implementing the Recommendations of the Task
Force on Climate-related Financial Disclosures', June 2017, section D
supplemental guidance for the financial sector.
Operational ESG Progress
Environmental
Through asset ownership and active engagement with operating partners the
Company is committed to minimising the environmental footprint of its assets
by reducing resource consumption. 2022 is the baseline year for data
collection and targets will be set and reported on in 2023.
The table below provides absolute figures of the material environmental
metrics. Water is used in some operational processes, however no assets in
2022 were located in regions of water stress. Waste was produced due to
construction activities predominantly. Minimal waste is produced during normal
operations. A recycling company is used to remove waste from the US terminal
storage assets.
Renewable energy generated from the solar PV assets is a key impact metric for
the Company strategy. Over 35,000 megawatt hours were produced in 2022 the
equivalent to powering over 9000 average sized UK homes. This data is
collected at the site level and assurance provided at the portfolio level.
Metric Unit Australia Brazil USA Portfolio
Water used megalitres n/a n/a 45 45
Waste produced tonnes n/a n/a 31 31
Renewable energy MWh 22,853 12,265 n/a 35,118(±)
GHG emissions avoided tonnes CO(2)e 13,204 1,145 n/a 14,349(±)
Nitrous Oxides (NOx) avoided tonnes n/a n/a 2,048 2,048(±)
Sulfur Oxides (SOx) avoided tonnes n/a n/a 20,613 20,613(±)
Particulate Matter (PM) 10 avoided tonnes n/a n/a 1,049 1,049(±)
Particulate Matter (PM) 2.5 avoided tonnes n/a n/a 770 770(±)
Pollutant emissions factors published by 'European Monitoring and Evaluation
Programme / European Environment Agency Air Pollutant Emission Inventory
Guidebook 2019' for both HSFO and ULSD are used to calculate avoided NOx, SOx
and PM emissions, using 'Heavy Fuel Oil' as the base fuel for HSFO and
emissions through 'Diesel Large SUV Euro 6' as the base fuel for ULSD.
There were no chemical spills, wildlife fatalities, habitat loss or
environmental fines or findings of noncompliance at Company assets in 2022.
For greenhouse gas emissions calculations and carbon intensity metrics see the
TCFD section above.
The avoided emissions calculated and reported from displacing the HSFO from
the Mexican market, the strategic aim of the US terminal storage assets, focus
on beneficial air emissions reductions including SOx, NOx and PM. This is
calculated by comparing the emissions from combusting HSFO compared to those
from ULSD combustion where there is a reduction. The quantity of PM removed
was the equivalent of removing over 6 million average cars from the Mexican
roads.
The Company reports on these pollutants because of the benefits to human
health and the environment from their removal. This includes a reduction in
acid rain and associated respiratory diseases and ill health.
Social
The assets do not employ site workers, however the operating partner does. The
social data reported and assured below includes operating partner contracted
workers who interact with site operations and work directly on site. This is
reported as full time equivalent (FTE) for the financial year 2022. This
excludes temporary workers and managerial employees working elsewhere on
several assets.
The Brazilian solar PV assets were excluded from the social metric limited
assurance as no employees were employed by the operating partner of the assets
during financial year 2022. The Brazilian sites were under construction in
2022 with workers employed by the engineering, procurement and construction
(EPC) company. These EPC number have been reported for information but have
not fallen within the scope of limited assurance.
One worker on the Australian solar PV with battery storage assets was employed
on site during 2022 half the year for the EPC and half for the operating
partner and is reflected in the data. Figures have been reported at asset and
portfolio level.
Employee metrics for 2022
Metric Unit Total portfolio Brazil Australia USA Australia
EPC & operating partner EPC contractors Operating partner workers(±)
Gender Diversity
Male % (Average number FTE for FY2022) 89 88 100 93(±) 100(±)
Female 11 12 0 7(±) 0(±)
Other 0 0 0 0(±) 0(±)
Employee turnover % 3 0 0 29(±) 0(±)
Total number of employees FTE 209 185 1 22 1
± Social data under limited assurance.
Health and safety metrics for 2022
Metric Unit Portfolio Brazil Australia USA
EPC & operating partner EPC Operating partner Operating partner
Health and Safety
Total number Number of incidents 2 1 1(±) 0(±)
of incidents(1)
Total Case injury Total number of recordable injuries x 200,000/ annual hours worked 1 1 0(±) 0(±)
rate (TCIR)(2)
(1) Incidents are all operational incidents including near misses, accidents
and injuries.
(2) TCIR is a work related illness or injury as defined by the RIDDOR -
Reporting of Injuries, Disease and Dangerous Occurrences Regulations.
Health and safety
Health and safety of asset workers is a priority for the Company. The Company
expects all sites to have policies and management systems in place to drive
continuous improvement in health, safety and environmental management. In
2022, 100% of assets had health and safety policies in place.
Due to the diverse businesses and technologies in the Company, material health
and safety hazards and actions will vary. The total case injury rate (TCIR)
for the operational assets was zero for 2022. Including the unassured
construction sites, the TCIR was 1.
Health and safety data is reported monthly, and incidents reported within 24
hours of the event. The terminal storage asset which has the highest number of
workers on site recorded no accidents for the second year. There were two
health and safety incidents reported in the portfolio during 2022. There was a
near miss event with a small operational fire at one of the Australian solar
PV with battery storage assets in January. This did not result in injury so is
not included in the TCIR calculation. A root cause investigation was carried
out to discover the fault and as a result all connectors on site were replaced
as a precautionary measure. The incident tested the incident response
capabilities of the operating partner and installed protection and control
functionality of the site. The incident resulted in immaterial downtime for
the plant.
A minor injury occurred in June at one of the Brazilian solar PV assets when a
construction worker injured himself having misused some equipment resulting in
3 missed work days. The developer partner carried out a root cause
investigation and ensured appropriate training and personal protective
equipment was available on site.
The Company aims for zero incidents and is working with all operators to
ensure asset appropriate health and safety management systems are in place,
for example the US terminal storage assets are working towards ISO 45001
certification.
Diversity
SDG 5 on gender equality recognises the importance of equal female
participation in decision making to achieve the SDGs. The Company recognises
the benefits of a diverse workforce to drive creativity, innovation and for
cultural sensitivity across a global portfolio. The Company, through its
investments, is committed to providing equal opportunities for all employees
irrespective of race, colour, religion or belief, ethnic or national origins,
gender, age, family status, sexual orientation, disability, or political
opinion.
The Investment Adviser has an equality and diversity and inclusion policy
which applies to all aspects of employment, including recruitment and
selection, appraisal, training and promotion, pay and conditions and to any
dealings with customers and clients. Selection for employment, promotion,
training or any other benefit will be based on aptitude and ability. All
operating partners are required to have a comparable policy that addresses
equal opportunities and anti-discrimination. This was self assessed in 2022.
The Company recognises that gender diversity is low within its
operating-partners - this is due to the energy industry traditionally being
male dominated but also low employment requirements in the solar industry. A
solar PV asset typically has one caretaker that undertakes regular maintenance
on site. Employee turnover was high for the US terminal storage asset and
attributed to natural attrition due to the change in management when the asset
was bought. This will continue to be monitored.
The Company board had a 50% gender split in 2022.
Supply chain
Risks in the supply chain are mitigated by selecting reputable suppliers and
using appropriate contract language in service and supplier contracts. For
potentially high-risk suppliers, for example, PV panel manufacturers operating
in China, the Investment Adviser has engaged with operators and suppliers to
understand any exposure to human rights issues such as child labour. The
Investment Adviser engaged operating partners through 2022 to support roll out
of a supplier code of conduct that addresses ESG expectations where one does
not currently exist.
Governance
There were no grievances or whistleblowing reports in 2022. All operating
partners continued to implement anti-bribery and corruption and whistleblowing
policies and processes in 2022.
Brazil hydro facility ESG case study:
Developing a sustainability action plan
The Company strategy post-investment looks beyond the asset's core energy
transition activity to take account of how the asset is operated. Managing
practices should ensure that the asset contributes to a sustainable future by
being inclusive, efficient and clean. The purpose of an asset Sustainability
Action Plan (SAP or plan) is to articulate mutually agreed actions to achieve
sustainable management practices. A plan for Mascarenhas, the Brazilian hydro
facility, was developed with Paraty Energia the operating partner.
Mascarenhas is a 198MW run of river Hydro Electric Plants (HPP) on the Doce
River in Espirito Santo, in the Southeast region of Brazil. The acquisition's
energy transition and sustainability aims are to maintain and develop the
project's renewable energy generation of the asset. The facility activity
results in GHG emission reductions by avoiding the dispatch of energy produced
by fossil-fuelled thermal plants to the grid and supporting new renewable
generation by providing baseload power. The facility also helps avoid energy
import from other states into the project state improving energy efficiency of
local electricity provision.
The facility promotes environmental sustainability by reducing local air
pollution that may otherwise be emitted and contributes to sustainable
development by hiring local labour, paying municipal taxes and environmental
and stakeholder engagement through programmes.
The hydro facility became operational in 1974 and so the aim of the SAP is to
create improvement on the existing social and environmental baseline.
Potential environmental and social issues identified during a materiality
analysis comprised sedimentation management, watershed management such as
afforestation, community development and livelihood opportunities, water
quality and pollution management including cumulative impacts of other
activities upstream.
The operating partner agreed to an action plan which commits the asset to
obtaining certification against the International Hydropower Association (IHA)
sustainability standard within 3 years. This includes completing an
environmental and social baseline study in the first year to identify
opportunities for adding value.
The aim is to preserve the facility's existing environmental and social value
while creating additional value through active ownership and stewardship of
the investment.
Membership and signatories
The Investment Adviser was accepted as a signatory to the UK stewardship code
in 2022 reflecting its commitment to active ownership and ensuring assets are
managed responsibly aligned with the SDGs. The Investment Adviser was also
accepted as a member of the Global Impact Investing Network (GIIN) and the Net
Zero Asset Managers Initiative (NZAMI).
THE EU SUSTAINABLE FINANCE DISCLOSURE REGULATION (SFDR) 2019/2088
SFDR was introduced by the European Commission as part of a package of
legislative measures arising from the European Commission's action plan on
sustainable finance. The Company has sustainable investment as its objective
as described on page 4 in the full Annual Report and Financial Statements.
Article 9 funds under SFDR are products that have a sustainable investment
objective.
SFDR imposes mandatory ESG disclosure obligations for asset managers and other
financial markets participants with Article 9 funds. The aim is to standardise
disclosures on how ESG factors are integrated into investment decision
processes and how risks and impacts of those investments are managed in the
European Union.
SFDR requires disclosure of information on its website, in the pre-contractual
information and in the periodic information provided to investors. In
anticipation of these requirements the Investment Adviser published a
Principal Adverse Sustainability Impact Statement (PAIS) on the company
website covering preliminary information
from 2021. This document can be found on the Investment Adviser's website
www.victory-hill.com. The disclosure will be updated this year to reflect 2022
data as described in this report.
The Investment Adviser considers principal adverse impacts of its investment
advice on investment decisions and asset management. The material issues that
may impact infrastructure investments and conversely the impacts they may have
on stakeholders and the environment will vary depending on asset
characteristics and geographic location. The material principal adverse
impacts and associated indicators measured may be specific to individual
assets and may vary across the Portfolio. The Company considers the systemic
ESG risks associated with infrastructure projects as described above.
The company's SFDR Annex V disclosure can be found on page 141 of the full
Annual Report and Financial Statements.
DIRECTORS' REPORT
The Directors are pleased to present their report for the year ended 31
December 2022. In accordance with the Companies Act 2006 (as amended) (the
"Act"), the Listing Rules and the Disclosure Guidance and Transparency Rules,
the Corporate Governance Statement, Directors' Remuneration Report, Reports
from the Audit Committee and Management Engagement Committee, and the
Statement of Directors' Responsibilities should be read in conjunction with
one another, and the Strategic Report. As permitted by legislation, some of
the matters normally included in the Directors' Report have instead been
included in the Strategic Report, as the Board considers them to be of
strategic importance.
Directors
The Directors in office at the date of this report are as shown on page 75 of
the full Annual Report and Financial Statements. Details of the Directors'
terms of appointment can be found in the Corporate Governance Statement and
the Directors' Remuneration Report.
Corporate governance
The Corporate Governance Statement below forms part of this Directors' report.
Dividends
On 5 May 2022, the Company declared an interim dividend of 1.25p per ordinary
share in respect of the period from 1 January 2022 to 31 March 2022, which
was paid on 10 June 2022 to shareholders on the register as at 13 May 2022.
On 5 August 2022, the Company declared an interim dividend of 1.25p per
ordinary share in respect of the period from 1 April 2022 to 30 June 2022,
which was paid on 16 September 2022 to shareholders on the register as at 19
August 2022.
On 4 November 2022, the Company declared an interim dividend of 1.25p per
ordinary share in respect of the period from 1 July 2022 to 30 September 2022,
which was paid on 16 December 2022 to shareholders on the register as at 18
November 2022.
Post year end, on 22 February 2023, the Company declared an interim dividend
of 1.38p per ordinary share in respect of the period from 1 October 2022 to 31
December 2022, which will be paid on 31 March 2023 to shareholders on the
register as at 3 March 2023. Of this amount, 0.24p per share was designated as
an interest distribution.
Therefore, the total dividends paid by the Company in respect of the year
ended 31 December 2022 were 5.13p per ordinary share, exceeding the dividend
target of 5p per share.
Dividend policy
The Board expects that dividends will constitute the principal element of the
return to the holders of ordinary shares. The Company is targeting quarterly
dividend payments of at least 1.38p or 5.52p(1) in total per ordinary share
for the financial year ending 31 December 2023, in line with its progressive
dividend policy.
Subject to market conditions and the level of the Company's net income, it is
intended that dividends on the shares will be payable quarterly, all in the
form of interim dividends (the Company does not intend to pay any final
dividends). Subject to satisfying the requirements for investment trust
status, the Board reserves the right to retain within a revenue reserve a
proportion of the Company's net income in any financial year, such reserve
then being available at the Board's absolute discretion for subsequent
distribution to shareholders, subject to the requirements of the
IT Regulations. The dividend policy is subject to an annual vote at each AGM.
The Company may, at the discretion of the Board, and to the extent possible,
pay all or part of any future dividend out of capital reserves.
The Company may offer with the prior authority of shareholders and subject to
such terms and conditions as the Board may determine, shareholders (excluding
any holder of treasury shares) the opportunity to elect to receive ordinary
shares, credited as fully paid, instead of the whole, or some part, of any
dividend. The ability to issue ordinary shares in lieu of cash would provide
the Company with the flexibility to retain cash where to do so would benefit
the Company.
The Board may designate part of each dividend paid by the Company insofar as
it represents "qualifying interest income" received by the Company as interest
distributions for UK tax purposes. It is expected that a variable proportion
of the Company's distributions will take the form of interest distributions.
Prospective investors should note that the UK tax treatment of the Company's
distributions may vary for a shareholder depending upon the classification of
such distributions. Prospective investors who are unsure about the tax
treatment that will apply in respect of any distributions made by the Company
should consult their own tax advisers.
Share capital structure
Issue of shares
A Prospectus was issued by the Company on 9 June 2022 in respect of an Initial
Placing, Initial Open Offer, Initial Offer for Subscription and Initial
Intermediaries Offer of new ordinary shares in the capital of the Company,
together with the implementation of a 12-month Share Issuance Programme.
Pursuant to the Circular published by the Company on 9 June 2022, at the
General Meeting held on 28 June 2022, the shareholders approved the
resolutions in respect of the Share Issuance Programme and the dis-application
of pre-emption rights when allotting those shares.
Pursuant to the authorities granted under the Share Issuance Programme, the
Company issued 110,909,091 ordinary shares at an issue price of 110 pence per
share on 29 June 2022, with an aggregate nominal value of £1,109,090.91,
raising gross proceeds of £122 million. This comprised 70,388,725 ordinary
shares pursuant to the Open Offer, 2,307,719 ordinary shares pursuant to the
Excess Application Facility, 10,865,507 ordinary shares pursuant to the Offer
for Subscription, 1,867,895 ordinary shares pursuant to the Intermediaries
Offer and 25,479,245 Shares under the Placing. The shares were issued to
institutional investors and professionally advised private investors and
admitted to trading on the Premium Segment of the London Stock Exchange's Main
Market on 1 July 2022. This share issuance was made at a price of not less
than the net asset value per share at the time of issue plus an amount to
cover the cost. The authorities granted under the Share Issuance Programme
will expire on 8 June 2023.
Purchase of shares
At the AGM held on 27 April 2022, the Company was granted authority to
purchase up to 14.99% of its ordinary share capital in issue, amounting to
46,707,310 ordinary shares. This authority will expire at the conclusion of,
and renewal will be sought at, the next AGM of the Company. Shares bought
back by the Company may be held in treasury, from where they could be reissued
at or above the prevailing net asset value quickly and cost effectively, or
cancelled, at the discretion of the Board. This provides the Company with
additional flexibility in the management of its capital base. The Company did
not purchase any of its ordinary shares during the year, nor did any nominee
or third-party with the Company's assistance acquire any shares on behalf of
the Company. No shares were held in treasury during the year or at the year
end.
Current share capital
As at 31 December 2022, and at the date of this report, the Company's issued
share capital comprised 422,498,890 ordinary shares, each of £0.01 nominal
value. At general meetings of the Company, ordinary shareholders are entitled
to one vote on a show of hands and, on a poll, to one vote for every ordinary
share held. At 31 December 2022, and at the date of this report, the total
voting rights in the Company were 422,498,890.
Significant shareholders
As at 31 December 2022, the Company had been notified of the following
disclosable interests in the share capital of the Company:
Shareholder Number of % of total voting rights
shares
Quilter Plc 48,198,710 11.41
Sarasin & Partners LLP 38,076,617 9.01
Witan Investment Trust plc 25,350,000 6.00
Newton Investment Management Limited 24,262,428 5.74
Courtiers Asset Management Limited 20,045,000 4.74
Since 31 December 2022, the Company has been notified that Stichting Juridisch
Eigendom Privium Sustainable Impact Fund holds 3.04% of the Company's shares.
The Company has not been informed of any other changes to the notifiable
interests between 31 December 2022 and 27 March 2023, being the last
practicable date prior to the publication of this report.
Shareholder rights
The following information is disclosed in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and
DTR 7.2.6 of the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules:
• the Company's capital structure and voting rights and details of
the substantial shareholders in the Company are set out above;
• an amendment to the Company's articles of association and the
giving of powers to issue or buy back the Company's shares requires an
appropriate resolution to be passed by shareholders. Proposals to grant powers
to the Board to issue and buy back shares are set out in the Notice of AGM;
and
• there are no restrictions concerning the transfer of securities in
the Company; no restrictions on voting rights; no special rights with regard
to control attached to securities; no agreements between holders of securities
that may restrict their transfer or voting rights, as known to the Company;
and no agreements which the Company is party to that might affect its control
following a successful takeover bid.
Requirements of the listing rules
Listing Rule 9.8.4 requires the Company to include specified information in a
single identifiable section of the Annual Report or a cross reference table
indicating where the information is set out. The information required under
Listing Rule 9.8.4(7) in relation to allotments of shares is set out above.
The Directors confirm that no additional disclosures are required in relation
to Listing Rule 9.8.4.
Independent professional advice, insurance and indemnity
Details regarding independent professional advice, insurance and indemnity are
set out in the Corporate Governance Statement below.
Energy and carbon reporting, including greenhouse gas emissions
The Company's environmental statements are set out above.
Management arrangements
Alternative investment fund manager (AIFM)
G10 Capital Limited is the Company's AIFM. It is regulated in the conduct of
investment business by the FCA. The AIFM is, for the purposes of the
Alternative Investment Fund Manager Directive (AIFMD) and the rules of the
FCA, a 'full scope' UK alternative investment fund manager with a Part 4A
permission for managing AIFs, such as the Company.
The Company and the AIFM have entered into an agreement (the "AIFM Agreement")
under which the AIFM has agreed to provide the Company with portfolio
management and risk management services. Under the AIFM Agreement, the AIFM
receives a fee of £5,000 per month, payable monthly in advance, and £1,000
in respect of any investment committee meeting the AIFM was required to attend
in excess of five investment committee meetings during a year. No performance
fee is payable to the AIFM.
The AIFM Agreement may be terminated on four months' written notice, or such
shorter period of written notice as the other party may accept.
Investment Adviser
The Company and the AIFM have appointed Victory Hill Capital Partners LLP as
the Investment Adviser to the Company to provide certain services in relation
to the Company and its portfolio. Under the terms of the Investment Advisory
Agreement, the Investment Adviser, inter alia, is responsible for sourcing
investment opportunities in line with the Company's investment policy and the
monitoring and asset management of the Company's portfolio. Details of the
Investment Adviser's activity and the Company's performance in the period
under review have been included in the Strategic Report.
Under the terms of the Investment Advisory Agreement, the Investment Adviser
is entitled to a fee payable monthly in arrears calculated as below.
The investment advisory fees shall be an amount calculated at the rate of:
a) 1% on the first £250 million of net asset value;
b) 0.9% on net asset value in excess of £250 million and up to and
including £500 million; and
c) 0.8% on net asset value in excess of £500 million.
Furthermore, if in any fee period, the annual fee paid to the Investment
Adviser exceeds:
a) £3.5 million, the Investment Adviser shall apply 8% of the annual
fee, subject to a maximum amount of £400,000, to subscribe for or acquire
ordinary shares of £0.01 each in the capital of the Company.
b) £2.5 million, the Investment Adviser shall apply 2% of the annual fee
to be paid as a charitable donation aimed at promoting sustainable energy, as
selected by the Investment Adviser, provided that if, following the Investment
Adviser's reasonable endeavours, a suitable charity cannot be found, this 2%
portion of the annual fee (net of any applicable taxes) will be applied to the
subscription for or acquisition of ordinary shares.
No performance fee is payable to the Investment Adviser.
The Investment Advisory Agreement may be terminated on 12 months' written
notice, provided that such notice may not be served before 2 February 2025.
The Investment Advisory Agreement may be terminated with immediate effect on
the occurrence of certain events, including insolvency or in the event of a
material and continuing breach.
Other service providers
Details of the terms of engagement between the Company and its other key
service providers are set out in the Prospectus issued by the Company on 9
June 2022.
Continuing appointment of the Investment Adviser
The Board keeps the performance of the Investment Adviser under continual
review. The Management Engagement Committee conducts an annual review of the
Investment Adviser's performance and makes a recommendation to the Board about
its continuing appointment. It is considered that the Investment Adviser
has executed the Company's investment strategy according to the Board's
expectations. Accordingly, the Directors believe that the continuing
appointment of Victory Hill Capital Partners LLP as the Investment Adviser of
the Company, on the terms agreed, is in the best interests of the Company and
its shareholders as a whole. Further details are set out in the Report from
the Management Engagement Committee below.
Financial risk management
Information about the Company's financial risk management objectives and
policies is set out in note 12 to the financial statements.
Going concern
The going concern statement can be found above.
Auditor
The Directors confirm that, so far as they are each aware, there is no
relevant audit information of which the Company's auditor is unaware; and each
Director has taken all the steps that ought to have been taken as a Director
to make themselves aware of any relevant audit information and to establish
that the Auditor is aware of that information.
BDO LLP has expressed its willingness to continue in office as the Auditor and
resolutions for its re-appointment and to authorise the Audit Committee to
determine its remuneration will be put to shareholders at the forthcoming
Annual General Meeting.
Post balance sheet events
The post balance sheet events can be found in note 20 to the financial
statements.
Annual General Meeting
The Notice of the AGM to be held on 25 April 2023 (the "Notice") is set out on
pages 155 to 160 of the full Annual Report and Financial Statements.
Shareholders are being asked to vote on the following matters:
• the receipt and adoption of the Strategic Report, Directors'
Report, Auditor's Report and the audited Financial Statements for the year
ended 31 December 2022;
• the approval of the Directors' Remuneration Report;
• the approval of the Company's dividend policy and authorisation of
the Directors to declare and pay all dividends of the Company as interim
dividends;
• the election/ re-election of Directors;
• the re-appointment of BDO LLP as Auditor and authorisation of the
Audit Committee to determine the remuneration of the Auditor;
• the granting of authorities in relation to the allotment of
shares;
• the dis-application of pre-emption rights for certain issues of
shares;
• the purchase by the Company of its own shares; and
• holding of general meetings on 14 clear days' notice.
Resolutions 1 to 12 will be proposed as Ordinary resolutions and Resolutions
13 to 16 will be proposed as Special resolutions.
Authority to issue shares
Resolutions 11 and 12, ordinary resolutions as set out in the Notice, if
passed, will renew the Directors' authority to allot shares in accordance with
statutory pre-emption rights. These resolutions will authorise the Board to
allot:
• ordinary shares generally and unconditionally in accordance with
section 551 of the Act up to an aggregate nominal value of £422,498.89,
representing approximately 10% of the Company's issued share capital
(excluding treasury shares) as at the date of the Notice of AGM or, if
changed, the number representing 10% of the issued share capital of the
Company at the date at which this resolution is passed (Resolution 11); and
• further ordinary shares generally and unconditionally in
accordance with section 551 of the Act up to an additional aggregate nominal
value of £422,498.89, representing approximately 10% of the Company's issued
share capital (excluding treasury shares) as at the date of the Notice of AGM
or, if changed, the number representing 10% of the issued share capital of the
Company at the date at which this resolution is passed (Resolution 12).
If both these resolutions are passed, shareholders will be granting the
Directors authority to allot up to 20% of the Company's issued share capital.
The Board believes that passing of Resolutions 11 and 12 is in the
shareholders' interests as the authority is intended to be used for funding
investment opportunities sourced by the Investment Adviser, thereby mitigating
any potential dilution of investment returns for existing shareholders, and
the Directors will only issue new ordinary shares at a price above the
prevailing NAV per ordinary share. If only Resolution 11 is passed and
Resolution 12 is not passed, Directors will only be granted authority to allot
up to 10% of the existing issued ordinary share capital of the Company. These
authorities, if given, will lapse at the conclusion of the 2024 AGM of the
Company.
The Directors do not currently intend to allot shares other than to take
advantage of opportunities in the market as they arise and only if they
believe it would be advantageous to the Company's shareholders to do so.
Authority to dis-apply pre-emption rights
Resolution 13, a special resolution, is being proposed to authorise the
Directors to disapply the statutory pre‑emption rights of existing
shareholders in relation to the issue of shares under Resolution 11, for cash
or the sale of shares out of treasury up to an aggregate nominal amount of
£422,498.89, being approximately 10% of the Company's issued share capital
(excluding treasury shares) as at the date of the Notice of AGM or, if
changed, 10% of the issued share capital immediately upon the passing of this
resolution.
Resolution 14, a special resolution, is being proposed to authorise the
Directors to disapply the statutory pre‑emption rights of existing
shareholders in relation to the further issue of shares under Resolution 12,
for cash or the sale of shares out of treasury up to an aggregate nominal
amount of £422,498.89, being approximately 10% of the Company's issued share
capital (excluding treasury shares) as at the date of the Notice of AGM or, if
changed, 10% of the issued share capital immediately upon the passing of this
resolution.
In respect of any authority granted under Resolutions 13 and 14, shares would
only be issued at a price above the prevailing NAV per share, intended to at
least cover the costs and expenses of the relevant issuance of shares. The
Directors will only issue shares on a non-pre-emptive basis if they believe it
would be in the best interests of the Company's shareholders. If both these
resolutions are passed, shareholders will be granting the Directors authority
to allot up to 20% of the Company's issued share capital on a non-pre-emptive
basis. The Board believes that in order to have the maximum flexibility to
raise finance to enable the Company to take advantage of suitable
opportunities, the passing of Resolutions 13 and 14 is in the shareholders'
interests. These authorities, if given, will lapse at the 2024 AGM of the
Company. No shares were held in treasury during the year or as at the date of
the Notice.
Authority to purchase the Company's own shares
The Act allows companies to hold shares acquired by way of market purchases as
treasury shares, rather than having to cancel them. This gives the Company the
ability to re-sell shares quickly and effectively thereby improving liquidity
and providing the Company with additional flexibility in the management of its
capital base.
At the Annual General Meeting held on 27 April 2022, the Company was granted
authority to purchase up to 14.99% of the Company's shares in issue amounting
to 46,707,310 shares. No shares were bought back by the Company during the
year pursuant to this authority.
Resolution 15, a special resolution, as set out in the Notice, if passed, will
renew the Directors' authority to purchase up to 63,332,583 shares (being
14.99% of the issued share capital as at 27 March 2023), or if less, 14.99%
of the issued share capital immediately following the passing of the
resolution. In accordance with the Listing Rules of the FCA, the price paid
for shares will be not less than £0.01 per share, and not more than the
higher of: (i) 105% of the average of the mid-market quotations of the shares
for the five business days before the shares are purchased; and (ii) the
higher of the price of the last independent trade and the highest current
independent bid for the shares on the trading venue where the purchase is
carried out.
The Company may use this authority to address any significant imbalance
between the supply and demand for the Company's shares and to manage the
discount at which the ordinary shares trade, and where the Directors consider
it to be in the best interests of shareholders and the Company. Shares will be
repurchased only at prices below the prevailing NAV per ordinary share and
will be cancelled or placed into treasury at the determination of the
Directors. The authority, if given, will lapse at the conclusion of the
Company's next AGM after the passing of this resolution (which must be held no
later than 30 June 2024).
Shareholders should note that the purchase of ordinary shares by the Company
is at the absolute discretion of the Directors and is subject to the working
capital requirements of the Company and the amount of uncommitted cash
resources available to the Company to fund such purchases. Accordingly, no
expectation or reliance should be placed on the Directors exercising such
discretion on any one or more occasions. However, the Directors believe that
the flexibility for the Company to be able to make such purchases may be
beneficial to shareholders in certain circumstances and, accordingly, is
seeking authority for the Company to make market purchases of its own shares.
Notice period for general meetings
Under the Act, the notice period of general meetings (other than an AGM) is 21
clear days' notice unless the Company: (i) has gained shareholder approval for
the holding of general meetings on 14 clear days' notice by passing a special
resolution at the most recent AGM; and (ii) offers the facility for all
shareholders to vote by electronic means. The Company would like to preserve
its ability to call general meetings (other than an AGM) on less than 21 clear
days' notice.
The shorter notice period proposed by Resolution 16, a special resolution,
would not be used as a matter of routine, but only where the flexibility is
merited by the business of the meeting and is thought to be in the interests
of shareholders as a whole. The approval will be effective until the date of
the AGM to be held in 2024.
Board recommendation
The Directors consider each resolution being proposed at the AGM to be in the
best interests of the Company and shareholders as a whole and they unanimously
recommend that all shareholders vote in favour of them, as they intend to do
in respect of their own shareholdings (which represent approximately 0.09% of
the Company's issued ordinary shares as at 27 March 2023).
By order of the Board
Apex Fund and Corporate Services (UK) Limited
Company Secretary
27 March 2023
CORPORATE GOVERNANCE STATEMENT
This Corporate Governance Statement forms part of the Directors' Report.
Introduction
In this Corporate Governance Statement, the Company reports on its compliance
with the AIC Code of Corporate Governance (the "AIC Code"), sets out how the
Board and its Committees have operated during the past year and describes how
the Board exercises effective stewardship over the Company's activities in the
interests of shareholders. The Board is accountable to shareholders for the
governance of the Company's affairs and is committed to maintaining the
highest standard of corporate governance for the long‑term success of the
Company.
The Company reviews its standards of governance against the principles and
recommendations of the AIC Code, as published in 2019. The Board considers
that reporting against the principles and recommendations of the AIC Code
provides better information to shareholders as it addresses all the principles
set out in the UK Code of Corporate Governance (the "UK Code"), as well as
setting out additional principles and recommendations on issues that are of
specific relevance to investment companies, and is endorsed by the FRC. The
terms of the FRC's endorsement mean that AIC members who report against the
AIC Code fully meet their obligations under the UK Code and the related
disclosure requirements contained in the Listing Rules of the FCA. A copy of
the AIC Code can be found at www.theaic.co.u (http://www.theaic.co.uk) k
(http://www.theaic.co.uk) . A copy of the UK Code can be obtained at
www.frc.org.uk (http://www.frc.org.uk) .
Statement of compliance
Pursuant to the Listing Rules of the FCA, the Company is required to provide
shareholders with a statement on how the main and supporting principles set
out in the AIC Code have been applied and whether the Company has complied
with the provisions of the AIC Code. The Board recognises the importance of a
strong corporate governance culture and has established a framework for
corporate governance which it considers to be appropriate to the business of
the Company as an investment trust.
The UK Code includes provisions relating to:
• the role of the chief executive;
• executive directors' remuneration; and
• the need for an internal audit function.
The Company is an externally managed investment company, with all its
day-to-day management and administrative functions outsourced to third
parties. The Board considers that the above provisions are not relevant to the
Company, being an externally managed investment company. The Company has
therefore not reported further in respect of these provisions.
The Board has reviewed the principles and recommendations of the AIC Code and
considers that it has complied throughout the year, except that the Chair of
the Board was also the Chair of the Remuneration Committee during the year.
Following the year end, Daniella Carneiro was appointed to the Board as a
non-executive Director. She took on the role of the Chair of the Remuneration
Committee with effect from 21 February 2023. Therefore, the Company is now
also compliant with this provision of the AIC Code.
As the Board consists of only non-executive Directors who work collaboratively
in their decision-making process, it does not consider it necessary to appoint
a senior independent director.
Leadership
The Board of Directors
Under the leadership of the Chair, the Board is collectively responsible for
the effective stewardship of the Company's affairs and the long-term success
of the Company, generating value for shareholders and contributing to the
wider society. It establishes the purpose, values and strategic aims of the
Company and satisfies itself that these and its culture are aligned. The Board
ensures that the necessary resources are in place for the Company to meet its
objectives and fulfil its obligations to shareholders within a framework of
high standards of corporate governance and effective internal controls. The
Directors are required to act with integrity, lead by example and promote this
culture within the Company.
At the date of this report, the Board consisted of five non-executive
Directors. The Board believes that its composition is appropriate for an
investment company of the Company's nature and size. All of the Directors are
independent of the Investment Adviser and the AIFM, and are able to allocate
sufficient time to the Company to discharge their responsibilities
effectively.
The Directors possess a wide range of business and financial expertise
relevant to the direction of the Company and consider that they commit
sufficient time to the affairs of the Company. All Directors act in a
non-executive capacity. Brief biographical details of the Directors, including
details of their significant commitments, can be found on page 75 of the full
Annual Report and Financial Statements.
The Directors have appointment letters which do not provide for any specific
term. Other than their letters of appointment as Directors, none of the
Directors has a contract of service with the Company nor has there been any
other contract or arrangement between the Company and any Director at any time
during the year.
The Board has agreed a procedure for the induction and training of new Board
appointees and training requirements are dealt with as required.
Information regarding the annual evaluation of the Board, its Committees, the
individual Directors and the Chair; diversity policy; composition of the
Board; tenure of the Directors; and the Directors' election/re-election is set
out in the Report from the Nomination Committee below.
The Chair
The Chair leads the Board and is responsible for its overall effectiveness in
directing the Company. He demonstrates objective judgement, promotes a culture
of openness and debate, and facilitates effective contributions by all
Directors. In liaison with the Company Secretary, he ensures that the
Directors receive accurate, timely and clear information.
The Chair was independent of the Investment Adviser at the time of his
appointment and is deemed by his fellow Board members to continue to be
independent in character and judgement and to have no conflicting
relationships. He considers himself to have sufficient time to commit to the
Company's affairs. The role and responsibilities of the Chair of the Board are
clearly defined and set out in writing, a copy of which is available on the
Company's website.
Matters reserved for the Board
The Company's investment policy and strategy are determined by the Board. The
Board is responsible for investment decisions, other than to the extent
delegated to the AIFM and/or the Investment Adviser, and the appointment,
supervision and monitoring of the Company's service providers, including
amongst others, the AIFM and the Investment Adviser. The Board establishes the
Company's borrowing policy, dividend policy, approves public documents such as
the annual and interim reports and financial statements, and corporate
governance matters. A formal schedule of matters reserved for decision by the
Board has been adopted. This is available on the Company's website.
Board committees
During the year, the Company had four Committees in operation, namely, the
Audit Committee, the Management Engagement Committee, the Nomination Committee
and the Remuneration Committee. The terms of reference of the Committees are
available on the Company's website. Daniella Carneiro was appointed to all the
Board committees with effect from 21 February 2023.
Audit Committee
The Company has established an Audit Committee which is chaired by Margaret
Stephens and consists of Richard Horlick, Louise Kingham and Daniella
Carneiro. The Board considers that the members of the Audit Committee have the
recent and relevant financial experience and the Committee as a whole has
competence relevant to the sector in which the Company operates. The Audit
Committee includes individuals with substantial experience of the financial
matters of listed companies and the energy infrastructure sector. This blend
of skills and experience enables the Committee to fulfil its responsibilities
effectively.
The report of the Audit Committee is set out below.
Management Engagement Committee
The Company has established a Management Engagement Committee which is chaired
by Richard Horlick and consists of Bernard Bulkin, Louise Kingham and Daniella
Carneiro. With effect from 14 March 2023, Margaret Stephens was appointed as
a member of the Committee and, as a result, the Management Engagement
Committee now comprises all Directors. The Committee meets at least once a
year to review the performance of the AIFM and the Investment Adviser under
the AIFM Agreement and the Investment Advisory Agreement, respectively. In
addition, the Management Engagement Committee reviews the performance, terms
of appointment and fees payable to the other key service providers of the
Company, and makes recommendations to the Board regarding the continuing
appointment of the Investment Adviser, the AIFM and the other service
providers.
The report of the Management Engagement Committee is set out below.
Nomination Committee
The Company has established a Nomination Committee which is chaired by Bernard
Bulkin and comprises all Directors. The Committee reviews the Company's
succession plan, and identifies and nominates candidates for the office of
director of the Company. It also reviews the results of the annual evaluation
process of the Board, its Committees, the Directors and the Chair, and makes
recommendations to the Board in respect of the election/re-election of the
Directors.
The report of the Nomination Committee is included below.
Remuneration Committee
The Company has established a Remuneration Committee which consists of all of
Directors. During the year under review, the Remuneration Committee was
chaired by Bernard Bulkin. With effect from 21 February 2023, the Committee is
chaired by Daniella Carneiro. The Remuneration Committee's principal duties
are to consider the levels of Directors' fees and to make recommendations in
respect of the Directors' remuneration policy and implementation thereof.
The Directors' Remuneration Report is included on pages 91 to 94 of the full
Annual Report and Financial Statements.
Meetings held during the year
The Company has six scheduled Board meetings a year, with additional meetings
arranged as necessary.
At each Board meeting, the Directors follow a formal agenda which is
circulated in advance by the Company Secretary. The Investment Adviser, the
Administrator and the Company Secretary regularly provide the Board with
financial information, including an annual expenses budget, together with
briefing notes and papers in relation to changes in the Company's economic and
financial environment, statutory and regulatory changes and corporate
governance best practice.
The number of scheduled Board and Committee meetings held during the year
ended 31 December 2022 and the attendance of the individual Directors is shown
below:
Board Audit Management Engagement Committee Nomination Remuneration
Committee
Committee
Committee
Number entitled to attend Number attended Number entitled to attend Number attended Number entitled to attend Number attended Number entitled to attend Number attended Number entitled to attend Number attended
Bernard Bulkin(1) 9 9 - - 1 1 2 2 1 1
Richard Horlick 9 9 3 3 1 1 2 2 1 1
Louise Kingham 9 9 3 3 1 1 2 2 1 1
Margaret Stephens(2) 9 8 3 3 - - 2 2 1 1
In addition to the above, four ad hoc meetings of the Board or its committees
were held to deal with approval of documentation and administrative matters in
respect of the quarterly interim dividends, annual and interim reports.
1 not a member of the Audit Committee
2 not a member of the Management Engagement Committee as at 31 December 2022
Independent professional advice, insurance and indemnity
The Board has formalised arrangements under which the Directors, in the
furtherance of their duties, may seek independent professional advice at the
expense of the Company. The Company also maintains directors' and officers'
liability insurance, which includes cover of defence expenses. The Company's
Articles of Association provide the Directors of the Company, subject to the
provisions of UK legislation, with an indemnity in respect of liabilities
which they may sustain or incur in connection with their appointment. Apart
from this, there are no qualifying third party indemnity provisions in force.
Conflicts of interest
It is the responsibility of each individual Director to avoid an unauthorised
conflict arising. Directors must request authorisation from the Board as soon
as they become aware of the possibility of an interest that conflicts, or
might possibly conflict, with the interests of the Company (a "situational
conflict"). The Company's Articles of Association authorise the Board to
approve such situations, where deemed appropriate.
The Board is responsible for considering Directors' requests for authorisation
of conflicts and for deciding whether or not the situational conflict should
be authorised. The factors to be considered will include: whether the
situational conflict could prevent the Director from properly performing their
duties; whether it has, or could have, any impact on the Company; and whether
it could be regarded as likely to affect the judgement and/or actions of the
Director in question. When the Board is deciding whether to authorise a
situational conflict, only Directors who have no interest in the matter being
considered are able to take the relevant decision, and in taking the decision,
the Directors must act in a way they consider, in good faith, will be most
likely to promote the Company's success. The Board are able to impose limits
or conditions when giving authorisation if they think this is appropriate in
the circumstances. The Directors must also comply with the statutory rules
requiring the Directors to declare any interest in an actual or proposed
transaction or arrangement with the Company.
The Company Secretary maintains the Register of Directors' Conflicts of
Interests which is reviewed at each Board meeting, to ensure that authorised
conflicts remain appropriate. The Directors advise the Company Secretary and
Board as soon as they become aware of any conflicts of interest. Directors who
have conflicts of interest do not take part in discussions which relate to any
of their conflicts.
Risk management and internal control review
Overview
The Directors acknowledge that they have overall responsibility for the
Company's risk management and internal control systems and for reviewing their
effectiveness.
An ongoing process, in accordance with the FRC Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting, has been
implemented for identifying, evaluating and managing the principal and
emerging risks faced by the Company. This process has been in place throughout
the year ended 31 December 2022 and up to the date the financial statements
were approved and is regularly reviewed by the Board, through the Audit
Committee. Key procedures established with a view to providing effective
financial control have also been in place for the year under review and up to
the date the financial statements were approved.
The risk management process and systems of internal control are designed to
manage rather than eliminate the risk of failure to achieve the Company's
investment objective. It should be recognised that such systems can only
provide reasonable, not absolute, assurance against material misstatement or
loss.
Financial and other aspects of internal control
The Company has contractually delegated the management of the investment
portfolio, the registration services, administration services and other
services to third party service providers and reliance is therefore placed on
the internal controls of those service providers. The internal financial
control systems aim to ensure the maintenance of proper accounting records,
the reliability of the financial information upon which business decisions are
taken, reports are published and the assets of the Company are safeguarded.
The key procedures include review of management accounts, monitoring of
performance at quarterly Board meetings, segregation of the administrative
function from investment management, maintenance of appropriate insurance and
adherence to physical and computer security procedures. The internal controls
at the service providers are reviewed by the Audit Committee.
The Board has undertaken a review of the effectiveness of the Company's risk
management and internal control systems as they have operated over the year
and up to the date of the approval of the Annual Report. There were no matters
arising from this review that required further investigation and no
significant failings or weaknesses were identified.
Internal control assessment process
Robust risk assessments and reviews of internal controls are undertaken
regularly in the context of the Company's overall investment objective.
The Board, through the Audit Committee, has categorised risk management
controls under the following key headings: risks relating to the Company
(including reliance on third party service providers); portfolio investment
strategy; risks relating to making investments; risks relating to the
Company's shares; risks relating to regulation; accounting, operational and
financial reporting; governance; and climate-related risks. In arriving at its
judgement of what risks the Company faces, the Board has considered the
Company's operations in the light of the following factors:
• the nature and extent of risks which it regards as acceptable for
the Company to bear within its overall business objective;
• the threat of such risks becoming reality;
• the Company's ability to reduce the incidence and impact of risk
on its performance; and
• the cost to the Company and benefits related to the review of risk
and associated controls of the Company.
A risk matrix is in place against which the risks identified and the controls
to mitigate those risks can be monitored. The risks are assessed on the basis
of the likelihood of them happening, the impact on the business if they were
to occur and the effectiveness of the controls in place to mitigate them. This
risk register is reviewed at least every six months by the Audit Committee and
at other times as necessary.
The majority of the day-to-day management functions of the Company are
sub-contracted, and the Directors therefore obtain regular assurances and
information from key third party suppliers regarding the internal systems and
controls operating in their organisations. In addition, each of the third
parties is requested to provide a copy of its report on internal controls each
year, where available, which is reviewed by the Audit Committee.
Relations with shareholders
Details regarding the Company's engagement with its shareholders are set out
above.
Report of the Audit Committee
I am pleased to present the report of the Audit Committee (the "Committee")
for the year ended 31 December 2022.
Composition
The composition of the Committee is set out above in the Corporate Governance
Statement and details of how its performance evaluation has been conducted are
included in the report of the Nomination Committee below.
Meetings
The Committee met three times during the year under review. The Directors'
attendance is set out above in the Corporate Governance Statement.
Role of the Audit Committee
The primary responsibilities of the Committee are:
• monitoring the integrity of the financial statements of the
Company, any formal announcements relating to the Company's financial
performance, and reviewing significant financial reporting judgements
contained therein;
• advising the Board on whether the annual report and financial
statements, taken as a whole, are fair, balanced and understandable, and
provide the information necessary for shareholders to assess the Company's
position and performance, business model and strategy;
• reviewing the Company's internal financial controls and internal
control and risk management systems, and monitoring their ongoing
effectiveness;
• considering reports from any independent valuer appointed by the
Company to value its investments;
• reviewing and monitoring the external auditor's independence and
objectivity;
• reviewing the effectiveness of the external audit process, taking
into consideration relevant UK professional and regulatory requirements;
• conducting the tender process and making recommendations to the
Board about the appointment, re-appointment and removal of the external
auditor, and approving the remuneration and terms of engagement of the
external auditor; and
• developing and implementing policy on the engagement of the
external auditor to supply
non-audit services, ensuring there is prior approval of non-audit services,
considering the impact this may have on independence, taking into account the
relevant regulations and ethical guidance in this regard, and reporting to the
Board on any improvement or action required.
Activities of the Audit Committee
During the year under review, the Audit Committee:
• conducted a review of the internal controls and risk management
systems of the Company and its third party service providers;
• conducted regular reviews of the Company's risk register;
• reviewed the interim and annual valuation reports of the Company's
portfolio prepared by the Investment Adviser. In doing so, the Audit Committee
monitored the effectiveness of the Company's valuation policies and methods;
• reviewed the disclosures made in the annual and interim reports in
relation to internal controls and risk management, viability, going concern
and related parties;
• reviewed the Company's annual and interim financial statements and
recommended these to the Board. In particular, the Committee advised the Board
that taken as a whole, the Annual Report is fair and balanced and provides the
information necessary for shareholders to assess the Company's position and
performance, business model and strategy;
• agreed the plan with the Auditor in respect of the review of the
Interim Report for the period ended 30 June 2022 and the statutory audit of
the Annual Report for the year ended 31 December 2022, including the principal
areas of focus;
• reviewed and agreed the audit fees for the statutory audit of the
Company and for the interim review for 2022;
• received and discussed with the Auditor its report on the results
of the review of the interim financial statements and the year-end audit;
• discussed and considered the Auditor's performance, objectivity
and independence and the effectiveness of the external audit; and
• reviewed whether an internal audit function would be of value and
concluded that this would provide minimal added comfort at considerable extra
cost to the Company. The existing system of monitoring and reporting by
third-party service providers remains appropriate. The Committee keeps the
need for an internal audit function under periodic review.
Financial statements and significant accounting matters
The Audit Committee has taken into account the most significant risks and
issues, both operational and financial, which are likely to impact the
Company's financial statements. It considered the following key issues in
relation to the Company's financial statements during the year and post year
end:
Valuation of investments
The Audit Committee monitored the integrity of the financial information
published in the Interim and Annual Reports and considered whether suitable
and appropriate estimates had been made in respect of areas which could have a
material impact on the financial statements. It actively engaged with the
Investment Adviser and the Administrator to assess these significant estimates
and the systems and processes in place to form these estimates. The Committee
considered the valuation of investments to be a risk which could materially
impact the financial statements for the year ended 31 December 2022.
Assumptions applied to derive the valuation of investments are selected and
recommended by the Investment Adviser. These include discounts rates, power
prices, energy yield, inflation rates, asset life, operating expenses,
taxation rates and capital expenditure. Valuation methodology and assumptions
are discussed in detail within note 7 to the financial statements. The
Committee considered the subjectivity and appropriateness of the assumptions
used to determine the valuation of investments, held through VH GSEO UK
Holdings Limited, which could affect the NAV of the Company. These were
discussed with the Investment Adviser and the Auditor. The Committee reviewed
the valuation reports from the Investment Adviser, including the underlying
assumptions, and concluded that the valuation of the Company's portfolio at
the year end was appropriate.
Going concern and viability statement
The Committee considered the Company's financial requirements for the next 12
months and concluded that it had sufficient resources to meet its commitments.
Consequently, the financial statements have been prepared on a going concern
basis. The Committee also considered the longer-term viability statement
within the Annual Report, covering a five-year period, and the underlying
factors and assumptions which contributed to the Committee deciding that five
years was an appropriate length of time to consider the Company's long-term
viability. The Company's Going Concern and Viability Statements can be found
above.
Internal controls
The Audit Committee carefully considered the internal control systems by
monitoring the services and controls of its third party service providers. It
reviewed and, where appropriate, updated the risk matrix in respect of the
significant risks facing the Company and the controls in place to mitigate
those risks. The Company receives reports on internal controls from key
service providers during the year, when available, and no significant matters
of concern have been identified.
ESG Assurance Review
In respect of the Annual report and financial statements for the year ended 31
December 2022, the Audit Committee received the ESG assurance report from BDO
LLP, as a form of non-audit services, which is elaborated below.
Audit fees and non-audit services
The Audit Committee reviewed the audit plan and fees presented by the Auditor
and considered its report on the financial statements. Total audit fees for
the Company in respect of the year under review amounted to £170,000 (period
ended 31 December 2021: £110,000).
The Audit Committee has put a policy in place on the supply of any non-audit
services provided by the Auditor. Such services are considered on a
case-by-case basis and may only be provided to the Company if approved by the
Audit Committee, the provision of such services is at a reasonable and
competitive cost, and does not constitute a conflict of interest or potential
conflict of interest which would prevent the Auditor from remaining objective
and independent. BDO LLP was paid fees in respect of the following non-audit
services in the year:
Non-audit service provided Year ended Period ended 31 December 2021
31 December 2022
Audit of Initial Accounts N/A £60,000
Review of Interim Report £50,000 £5,000
ESG Assurance Review £47,500 N/A
Where non-audit services are provided by the Auditor, full consideration of
the financial and other implications on the independence of the Auditor
arising from any such engagement are considered before proceeding. During the
year, the Committee approved the provision of ESG Assurance Review services to
be provided by BDO LLP. While this is a non-audit service, the Audit Committee
considered that given BDO LLP's comprehensive knowledge about the Company
being its statutory Auditor, they were best placed to provide this assurance
to the Company in respect of its reporting on ESG matters.
The Audit Committee has considered the non-audit work of the Auditor during
the period and does not consider that this compromises its independence. The
Committee periodically monitors the ratio of non-audit to audit services to
ensure that any fees for permissible non-audit services do not exceed 70% of
the average audit fees paid in the last three years. Details of the Auditor's
remuneration are set out in note 5 to the financial statements.
Effectiveness of external audit
The Audit Committee reviews the effectiveness of the external audit process on
an annual basis. During the year, the Committee met key members of the senior
audit team at BDO LLP as part of the annual reporting process. It received a
presentation of the audit plan from the Auditor in respect of the year under
review and a presentation of the results of the audit following completion of
the main audit testing.
The Chair of the Committee liaises with the lead audit partner, to discuss any
issues arising from the audit as well as its cost effectiveness. The Committee
also met with the lead audit partner and the key individuals of the senior
audit team prior to the finalisation of the audit of the Annual Report and
financial statements for the year ended 31 December 2022, without the
Investment Adviser being present, to discuss how the external audit was
carried out, the findings from such audit and whether any issues had arisen
from the Auditor's interaction with the Company's various service providers.
Following its review, the Audit Committee concluded that the Auditor has
demonstrated a good understanding of the structure and operations of the
Company and had identified and focused on the areas of significant financial
reporting risk. The external audit process was considered to have been
effective.
Independence and objectivity of the Auditor
BDO LLP was selected as the Company's external independent Auditor at the time
of the Company's launch in 2021 following a formal tender process and review
of the Auditor's credentials. The continuing appointment of the Auditor is
reviewed annually by the Audit Committee, which gives consideration to the
Auditor's fees and independence, along with the matters raised during each
audit.
The Audit Committee has considered the independence and objectivity of the
Auditor and has conducted a review of non‑audit services which the Auditor
has provided during the year under review. The Committee receives an annual
assurance from the Auditor that its independence is not compromised by the
provision of such non‑audit services. The Committee is satisfied that the
Auditor's objectivity and independence is not impaired by the performance of
these non-audit services and that the Auditor has fulfilled its obligations to
the Company and its shareholders.
In accordance with the statutory requirements relating to the appointment of
auditors, the audit will be put out to tender within 10 years of the initial
appointment of BDO LLP.
Re-appointment of the Auditor
Following consideration of the performance of the Auditor, the services
provided during the year and a review of its independence and objectivity, the
Committee has recommended to the Board the re-appointment of BDO LLP as
Auditor to the Company. The Auditor has indicated their willingness to
continue in office. Accordingly, resolutions to re-appoint BDO LLP as Auditor
to the Company and authorising the Audit Committee to determine their
remuneration will be proposed at the Annual General Meeting.
Fair, balanced and understandable
The Audit Committee has concluded that the Annual Report for the year ended 31
December 2022, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company's
position and performance, business model and strategy. It reached this
conclusion through a process of review of the Annual Report and enquiries to
the various parties involved in the production of the Annual Report. The Audit
Committee reported its conclusions to the Board.
Margaret Stephens
Chair of the Audit Committee
27 March 2023
Report of the Nomination Committee
I am pleased to present the report of the Nomination Committee (the
"Committee") for the year ended 31 December 2022.
Composition
The composition of the Committee is set out in the Corporate Governance
Statement above. Details of how its performance evaluation has been conducted
are included below .
Meetings
There have been two meetings of the Committee during the year. The Directors'
attendance at these meetings is included in the Corporate Governance Statement
above.
Role of the Nomination Committee
The main responsibilities of the Committee include:
• reviewing the structure, size and composition of the Board and its
Committees;
• ensuring plans are in place for orderly succession to the Board
and ensuring that such plans promote diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths;
• leading the process for appointments to the Board and considering
the use of open advertising and/or an external search consultancy for each
appointment;
• considering job specifications and whether the candidates have the
necessary skills and time available to devote to the Company;
• arranging for any new Directors to be provided with training and
induction;
• making recommendations to the Board regarding the Company's policy
on the tenure of the Chair of the Company;
• reviewing the length of service of each Director and assessing if
this impacts their independence;
• making recommendations to the Board regarding the Company's policy
on diversity and inclusion; and
• performing a formal and rigorous evaluation of the Board, its
committees, the Chair of the Board and the individual Directors on at least an
annual basis, including, if appropriate, considering engagement of an external
evaluator to facilitate the evaluation.
Activities
During the year, the Nomination Committee:
• reviewed its terms of reference and considered whether these
remained appropriate;
• considered the results of the evaluation of the Board, its
Committees, the individual Directors and the Chair;
• as part of the evaluation process, considered the Board's
composition with reference to the mix of skills, diversity, knowledge and
experience, and how these aligned with the Company's strategic objectives and
the opportunities and challenges faced by it;
• agreed the policy regarding the tenure of the Chair and the other
Board members;
• reviewed the significant commitments of the Directors and the time
dedicated by them to the affairs of the Company;
• made recommendations to the Board regarding the Directors' annual
re-election by shareholders at the AGM; and
• discussed the succession plans for the Board to ensure its
progressive refreshing, which led to the appointment of Ms Carneiro as a
Director following the year end.
Appointment of new Director
The Nomination Committee regularly reviews the composition and effectiveness
of the Board and its Committees with the objective of ensuring that these have
the appropriate balance of skills and experience required to meet the current
and future opportunities and challenges facing the Company.
When considering the appointment of new Directors, the Committee actively
considers a range of factors including the expertise and experience required
in a prospective candidate and the diversity, including gender and ethnicity
diversity, of the Board and is mindful of the recommendations of the Hampton
Alexander Review and the Parker Review in this regard. These factors were
taken into consideration by the Committee as part of the appointment process
undertaken during the year which culminated in the appointment of Ms Carneiro
as a Director of the Company on 18 January 2023.
In order to conduct a formal, rigorous and transparent search process, the
Company engaged Trust Associates, an independent search consultancy with no
connection to the Company or its Directors, to assist with this appointment.
The Directors considered the desired background and expertise of the new
Director in order to complement the skills already on the Board and a
shortlist of diverse candidates was then provided by Trust Associates. The
Directors met with a number of these candidates, following which Ms Carneiro
was appointed to the Board.
Induction of new Directors
The Company has an established process in place for the induction of new
Directors. An induction pack is provided to new Directors by the Company
Secretary, containing relevant information about the Company, its
constitutional documents and its processes and procedures. New appointees meet
with relevant persons at the Investment Adviser and the Company's Broker.
Directors' training is also provided to each new Director by the Company's
legal adviser. Following the year end, this induction process was implemented
in respect of the appointment of Ms Carneiro as a Director of the Company.
Performance evaluation
A formal performance evaluation process is undertaken annually for the Board,
its Committees, the individual Directors and the Chair. The Directors are
aware that they continually need to monitor and improve Board performance and
recognise that this can be achieved through regular Board evaluation, which
provides a valuable feedback mechanism for improving Board effectiveness.
The Directors have undertaken an internal performance evaluation by way of
completing written questionnaires, led by the Chair, specifically designed to
assess the strengths and independence of the Board and the performance of its
Committees, the Chair and the individual Directors. The questionnaires are
also intended to analyse the focus of Board meetings and assess whether they
are appropriate, or if any additional information may be required to
facilitate Board discussions. Any training needs identified as part of the
evaluation process are also considered by the Board. The evaluation of the
Chair was carried out by the other Directors of the Company, led by Mr
Horlick. The results of the Board evaluation process were reviewed and
discussed by the Nomination Committee. The recommendations made as part of the
evaluation process were discussed by the Directors to ensure that all points
were addressed appropriately and to enable continuous improvement of the
Board.
The Committee's deliberations concluded that:
• as a whole, the Board functions effectively and the current
Committee structure remains appropriate;
• the Chair leads the Board effectively and promotes a culture of
openness and debate, and facilitates constructive Board relations and
effective contribution of all Directors. In liaison with the Company
Secretary, he ensures that the Directors receive accurate, timely and clear
information;
• each Director provides constructive challenge, strategic guidance,
offers specialist advice and holds third party service providers to account;
• all Directors are considered to be independent of the Investment
Adviser in both character and judgement. None of the Directors sit on the
boards of any other companies managed by the Investment Adviser; and
• all of the current Directors make an effective contribution to the
Company's operations which is important to its long-term sustainable success.
They have the requisite skills and experience to continue to provide able
leadership and direction for the Company.
Election and re-election of Directors
In accordance with the AIC Code, the Committee annually considers the
re-election of the Directors with reference to their performance over the
course of the financial year and ability to commit adequate amount of time to
the Company's affairs. Directors are subject to election by shareholders at
the first annual general meeting after their appointment and to annual
re-election at the Company's annual general meetings thereafter.
Following formal performance evaluation as detailed above, the Board strongly
recommends the election of Ms Carneiro and the re-election of all the other
Directors on the basis of their knowledge and understanding of the Company's
business model, their experience and expertise in investment matters, their
independence and continuing effectiveness and commitment to the Company. The
Directors' biographical details are set out on page 75 in the full Annual
Report and Financial Statements.
Diversity and inclusion
The Board's diversity policy is based on its belief that the Board should have
a diverse range of experience, skills and backgrounds. When making
recommendations for new appointments to the Board and planning for Board
succession, the Nomination Committee will take into consideration the
recommendations of the AIC Code and other guidance on boardroom diversity and
inclusion.
The Board welcomes the recommendations from the FTSE Women Leader Review on
gender diversity and the Parker review about ethnic representation on company
boards. Whilst the Board does not consider it appropriate to use specific
diversity targets given its small size, it acknowledges that diversity is
important to ensure that the Company can draw on a broad range of
perspectives, skills, experience, knowledge and backgrounds to effectively
lead the Company.
The FCA's Listing Rules now require companies to report on whether they have
met the following targets on board diversity:
• at least 40% of the individuals on the Board are women; and
• at least one of the senior positions on the Board is held by a
woman.
As at 31 December 2022, the Company had met these targets. Two out of four
Directors (50%) were women and one of them had a senior position, being the
Audit Committee Chair.
The following tables set out the gender and ethnic diversity of the Board as
at 31 December 2022:
Gender diversity Number of Board members Percentage of the Board Number of senior positions on the Board(1)
Men 2 50 1
Women 2 50 1
Ethnic diversity Number of Board members Percentage of the Board Number of senior positions on the Board(1)
White British or other White (including minority-white groups) 4(2) 100(2) 2
1 Senior positions include Chair of the Board and Chair of the Audit
Committee. As explained in the Corporate Governance Statement, the Company
does not have a Senior Independent Director.
2 Since 31 December 2022, the Company has appointed Ms Carneiro as a Director
on 18 January 2023. Her appointment has enhanced the gender diversity on the
Board to 60% and, being a Latin American, the ethnic diversity to 20%. Being a
dual Brazilian-British national, she strengthens another aspect of diversity
on the Board.
As an externally managed investment company with solely independent,
non-executive Directors, the Company does not have a Chief Executive or a
Chief Financial Officer and has no employees. Accordingly, there are no
disclosures about executive management positions to be provided. The role of
the Audit Committee Chair is considered to be a senior position and has been
included in the above tables. The information in the above tables was provided
by individual Directors in response to a request from the Company.
Tenure and succession planning
The Company has no employees, and the Investment Adviser is external to the
Company, therefore the Board's oversight of succession planning is restricted
to the Board level. The Board will, from time to time and where appropriate,
discuss the succession plans of the Investment Adviser through its Management
Engagement Committee.
The Board's succession plan is guided by its policy on tenure. The Board has
agreed on a limit of nine years on the tenure of the Directors, in line with
the recommendations of the AIC Code. It believes that the tenure should
balance the need to provide and maintain continuity, knowledge, experience and
independence, against the need to periodically refresh the Board composition,
in order to maintain an appropriate mix of the required skills, experience,
knowledge and length of service.
As the Company was launched in 2021, the Nomination Committee considers that
it will be appropriate to initiate formal succession planning in the Company's
third year of existence. At that time, the Committee will ensure that the
succession plan is based on merit and objective criteria and promotes
diversity of gender, social and ethnic backgrounds, cognitive and personal
strengths, whilst taking into account the challenges and opportunities facing
the Company and the Board and the balance of skills and expertise that are
required in the future.
Bernard Bulkin
Chair of the Nomination Committee
27 March 2023
Report of the Management Engagement Committee
I am pleased to present the report of the Management Engagement Committee (the
"Committee") for the year ended 31 December 2022.
Composition
The composition of the Committee is set out in the Corporate Governance
Statement above. Details of how its performance evaluation has been conducted
are included above in the report of the Nomination Committee .
Meetings
The Committee met once during the year under review and once post year end.
The Directors' attendance at the Committee meeting held during the year is set
out in the Corporate Governance Statement above.
Role of the Management Engagement Committee
The key responsibilities of the Committee are:
• monitoring and evaluating the AIFM and the Investment Adviser's
investment performance and, if necessary, providing appropriate guidance;
• reviewing, at least annually, the performance of the AIFM and the
Investment Adviser and considering their continued appointment on the terms
set out in their respective agreements with the Company;
• reviewing the level and method of remuneration, the basis of
performance fees (if any) and the notice period of the AIFM and the Investment
Adviser to ensure that these remain in the best interests of the shareholders;
• ensuring that processes have been put in place to review the
Company's risk management and internal control systems designed to safeguard
shareholders' investment and the Company's assets; and
• monitoring and evaluating the performance of the other key service
providers of the Company to ensure their continued competitiveness and
effectiveness.
Activities during the year
The Committee has conducted a comprehensive review of the performance of the
AIFM, the Investment Adviser and the Company's other key service providers.
This included an assessment of the services provided as well as the fees paid
for the provision of such services.
Following its review, the Committee is satisfied that the Investment Adviser
and the AIFM have the suitable skills and experience to manage the Company's
investments. It concluded that the Investment Adviser had diligently invested
the available funds during the year, in line with the investment policy, which
should provide stable returns to the Company's shareholders. The Directors are
satisfied that the collective skillset of the Investment Adviser's team
contains all the necessary skills and experience to best serve the interests
of GSEO shareholders in performing its delegated responsibilities. Details of
the Investment Adviser's activities during the year and the Company's overall
performance are included in the Strategic Report. The key elements of the
investment advisory fees are set out above.
As a whole, the Committee is satisfied that the Investment Adviser and the
AIFM have the suitable skills and experience to advise upon and manage,
respectively, the Company's investments, and believes that their continuing
appointment is in the best interests of shareholders.
The performance of the Company's other service providers is also closely
monitored by the Board, through the Committee. The Committee's review of the
key service providers comprised open and closed-ended questions and included a
review of the quality of their services and fees to ensure they remained
effective and competitive. This process also included reviewing each service
provider's policies and procedures to ensure that they had adequate controls
and procedures in place.
Following a comprehensive review, the Committee concluded that the performance
of all the Company's key service providers had been satisfactory and
recommended their continuing appointment on the current terms.
Richard Horlick
Chair of the Management Engagement Committee
27 March 2023
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report and the
financial statements in accordance with UK adopted international accounting
standards and applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, they are required to prepare the Company
financial statements in accordance with UK adopted international accounting
standards. Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of the profit or loss for
the Company for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in business; and
• prepare a Directors' report, a Strategic report and Directors'
remuneration report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
annual report and accounts, taken as a whole, are fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the Group's performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors and has been
delegated to the Investment Adviser. The Directors' responsibility also
extends to the ongoing integrity of the financial statements contained
therein.
Directors' responsibilities pursuant to DTR4
The Directors, to the best of their knowledge, confirm that:
• The financial statements have been prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the Company; and
• the annual report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
The Directors consider that the annual report and financial statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
Approval
This Directors' responsibilities statement was approved by the Board of
Directors and signed on its behalf by:
Bernard Bulkin
Chair
27 March 2023
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's
statutory accounts for the year ended 31 December 2022 or the period ended 31
December 2021 but is derived from those accounts. Statutory accounts for the
period ended 31 December 2021 have been delivered to the Registrar of
Companies and those for the year ended 31 December 2022 will be delivered in
due course. The Auditor has reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under Section 498 (2) or (3) of the
Companies Act 2006. The text of the Auditor's report can be found in the
Company's full Annual Report and Accounts at https://www.vh-gseo.com
(https://www.vh-gseo.com) .
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2022
For the year ended For the period from incorporation
31 December 2022
on 30 October 2020 to 31 December 2021
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Income
Gains on investments 7 - 4,131 4,131 - 22,046 22,046
Investment income 4 28,823 - 28,823 1,674 - 1,674
Total income and gains 28,823 4,131 32,954 1,674 22,046 23,720
Investment advisory fees 16 (3,810) - (3,810) (2,218) - (2,218)
Other expenses 5 (940) - (940) (1,136) - (1,136)
Profit/(loss) for the year/period before taxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Taxation 6 - - - - - -
Profit/(loss) for the year/period after taxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Profit and total comprehensive income attributable to:
Equity holders of the Company 24,073 4,131 28,204 (1,680) 22,046 20,366
Earnings/(loss) per share - basic and diluted (pence) 18 6.55 1.12 7.67 (0.87) 11.39 10.52
The total column of the Statement of Comprehensive Income is the profit and
loss account of the Company. The supplementary revenue return and capital
columns have been prepared in accordance with the Association of Investment
Companies Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations.
The above Statement of Comprehensive Income includes all recognised gains and
losses.
The notes below form part of these financial statements.
STATEMENT OF FINANCIAL POSITION
as at 31 December 2022
Note As at As at
31 December 2022
31 December 2021
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 7 315,133 159,618
Total non-current assets 315,133 159,618
Current assets
Cash and cash equivalents 10 141,791 163,810
Other receivables 9 740 811
Total current assets 142,531 164,621
Total assets 457,664 324,239
Current liabilities
Accounts payable and accrued expenses 11 (491) (341)
Total current liabilities (491) (341)
Total liabilities (491) (341)
Net assets 19 457,173 323,898
Capital and reserves
Share capital 13 4,225 3,116
Share premium 13 186,368 67,949
Special distributable reserve 14,15 232,467 232,467
Capital reserve 26,177 22,046
Revenue reserve 7,936 (1,680)
Total capital and reserves attributable to equity holders of the Company 457,173 323,898
Net asset value per ordinary share 19 108.21 103.95
The financial statements were approved and authorised for issue by the Board
of Directors on 27 March 2023 and signed on its behalf by:
Bernard Bulkin
Chair
Company Registration Number 12986255
The notes below form part of these financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the year ended 31 December 2022
For the year ended 31 December 2022 Note Share Share Special distributable reserve Capital Revenue reserve Total
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
Opening balance 3,116 67,949 232,467 22,046 (1,680) 323,898
Issue of share capital 13,14 1,109 120,891 - - - 122,000
Cost of issue of shares 14 - (2,472) - - - (2,472)
Transfer to special distributable reserve - - - - - -
Total comprehensive income for the year - - - 4,131 24,073 28,204
Interim dividends paid during the year - - - - (14,457) (14,457)
Balance at 31 December 2022 4,225 186,368 232,467 26,177 7,936 457,173
From the period from incorporation on 30 October 2020 to Note Share Share Special distributable reserve Capital Revenue reserve Total
31 December 2021
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
Opening balance
Issue of share capital 13,14 3,116 309,508 - - - 312,624
Cost of issue of shares 14 - (6,059) - - - (6,059)
Transfer to special distributable reserve - (235,500) 235,500 - - -
Total comprehensive income/(loss) for the period - - - 22,046 (1,680) 20,366
Interim dividends paid during the period - - (3,033) - - (3,033)
Balance at 31 December 2021 3,116 67,949 232,467 22,046 (1,680) 323,898
A total of 422,498,890 ordinary shares were issued since its incorporation to
31 December 2022.
The capital reserve represents the unrealised gains or losses on the
revaluation of investments. The unrealised element of the capital reserve is
not distributable. The special distributable reserve was created on court
cancellation of the share premium account. Distributable reserves comprise,
revenue, special distributable and capital reserves, which are distributable
by way of dividend. The total distributable reserves as at 31 December 2022
was £240,402,990 (31 December 2021: £230,787,289).
The notes below form part of these financial statements.
STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Note For the year ended For the period
31 December 2022
from incorporation
£'000
on 30 October 2020
to 31 December 2021
£'000
Cash flows from operating activities
Profit before tax 28,204 20,366
Adjustments for:
Movement in fair value of investments 7 (4,148) (23,595)
Interest on cash deposits 4 (2,310) -
Operating result before working capital changes 21,746 (3,229)
Decrease/(increase) in other receivables 9 71 (811)
Increase in accounts payable and accrued expenses 11 151 341
Net cash flow generated by/(used in) operating activities 21,968 (3,699)
Cash flows from investing activities
Purchase of investments 7 (151,367) (136,023)
Interest on cash deposits 4 2,310 -
Net cash used in investing activities (149,057) (136,023)
Cash flows from financing activities
Proceeds from issue of shares 122,000 312,624
Payment of share issue costs (2,472) (6,059)
Dividends paid in the year 15 (14,457) (3,033)
Net cash generated from financing activities 105,071 303,532
Net (decrease)/increase in cash and cash equivalents (22,019) 163,810
Cash and cash equivalents at beginning of the year/period 163,810 -
Cash and cash equivalents at end of the year/period 10 141,791 163,810
The notes below form part of these financial statements.
Notes to the financial statements
1. General information
VH Global Sustainable Energy Opportunities plc (the "Company") is a
closed-ended investment company, incorporated in England and Wales on 30
October 2020 as a public limited company under the Companies Act 2006 with
registered number 12986255. The Company commenced operations on 2 February
2021 when its shares commenced trading on the London Stock Exchange.
The Company and the AIFM have appointed Victory Hill Capital Partners LLP as
the Investment Adviser pursuant to the Investment Advisory Agreement dated 5
January 2021.
The Company has registered, and intends to carry on business, as an investment
trust with an investment objective to generate stable returns, principally in
the form of income distributions, by investing in a diversified portfolio of
global sustainable energy infrastructure assets, predominantly in countries
that are members of the EU, OECD, OECD Key Partner and OECD Accession
Countries.
The financial statements comprise only the results of the Company, as its
investment in VH GSEO UK Holdings Limited ("GSEO Holdings") is measured at
fair value through profit or loss in line with IFRS 10 as explained in note 2.
2. Significant accounting policies
2.1 Basis of preparation
The financial statements have been prepared in accordance with UK-adopted
international accounting standards and with the requirements of the Companies
Act 2006 as applicable to companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union as adopted at that
date was brought into UK law and became UK-adopted International Accounting
Standards. The Company transitioned to UK adopted international accounting
standards in its financial statements on 1 January 2021. There was no impact
or changes on recognition, measurement or disclosure in the period reported
resulting from the transition.
The financial statements are prepared on the historical cost basis, except for
revaluation of certain financial investments at fair value through profit or
loss. The principal accounting policies adopted are set out below and
consistently applied, subject to changes in accordance with any amendments in
IFRS.
The financial statements have also been prepared, as far as is consistent with
adopted IFRS and relevant and applicable to the Company in accordance with the
Statement of Recommended Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts (SORP) issued in April 2021 by the
Association of Investment Companies (AIC).
The financial statements incorporate the financial statements of the Company
only. The primary objective of the Company is to generate returns in Sterling.
The Company's performance is measured in Sterling terms and its ordinary
shares are issued in Sterling. Therefore, the Company has adopted Sterling as
the presentation and functional currency for its financial statements. These
financial statements are presented in pounds sterling and are rounded to the
nearest thousand, unless otherwise stated.
The preparation of financial statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates it also requires the
Company's management to exercise judgment in applying the Company's accounting
policies. The areas where significant judgments and estimates have been made
in preparing the financial statements and their effect are disclosed in note
3.
2.2 Investment entity and basis of non-consolidation of subsidiaries
The sole objective of the Company, through its subsidiary GSEO Holdings, is to
make investments, via individual corporate entities. The Company typically
will subscribe for equity in or issue loans to GSEO Holdings in order for it
to finance its investments.
The Directors have concluded that the Company has all the elements of control
as prescribed by IFRS 10 "Consolidated Financial Statements" in relation to
all its subsidiaries and that the Company satisfies the three essential
criteria to be regarded as an investment entity as defined in IFRS 10.
There are three key conditions to be met by the Company for it to meet the
definition of an investment entity. The three essential criteria are that the
entity must:
1. Obtain funds from one or more investors for the purpose of providing
these investors with professional investment management services;
2. Commit to its investors that its business purpose is to invest its
funds solely for returns from capital appreciation, investment income or both;
and
3. Measure and evaluate the performance of substantially all of its
investments on a fair value basis.
In satisfying the second criteria, the notion of an investment time frame is
critical. An investment entity should not hold its investments indefinitely
but should have an exit strategy for their realisation.
In this regard, GSEO Holdings is itself an investment entity. Consequently,
the Company need not have an exit strategy for its investment in GSEO
Holdings.
As for investments in subsidiaries, the Company intends to hold each
investment until the end of its life, at which point the assets are expected
to have no residual value. The Directors consider that this demonstrates a
clear exit strategy from these investments. The Company may choose to sell its
interest in an investment before the end of its project life if an attractive
offer is received from a potential purchaser and the Directors consider that
this demonstrates a clear exit strategy from these investments.
Subsidiaries are therefore measured at fair value through profit or loss, in
accordance with IFRS 13 "Fair Value Measurement", IFRS 10 "Consolidated
Financial Statements" and IFRS 9 "Financial Instruments".
Further detail on the significant judgements in the basis of non-consolidation
of the subsidiaries of the Company is disclosed in note 3.
2.3 Going concern
The Directors have reviewed the financial position of the Company and its
future cash flow requirements, taking into consideration current and potential
funding sources, investment into existing and near-term projects and the
Company's working capital requirements.
The Company faces a number of risks and uncertainties, as set out in the
Strategic Report above. The financial risk management objectives and policies
of the Company, including exposure to price risk, interest rate risk, credit
risk and liquidity risk are discussed in note 12 to the financial statements.
The Company continues to meet day-to-day liquidity needs through its cash
resources. As at 31 December 2022, the Company had net current assets of
£142m (2021: £164.3m) and cash balances of £141.8m (2021: £163.8m), which
are sufficient to meet current obligations as they fall due. There is no
external debt at the Company as at year end.
The major cash outflows of the Company are the payment of dividends and costs
relating to the acquisition of new assets, both of which are discretionary,
the Company's ongoing operating costs and the fulfillment of remaining
commitments made as laid out in note 17.
The Directors have reviewed Company forecasts and pipeline projections which
cover a period of at least 12 months from the date of approval of this report,
considering foreseeable changes in investment and the wider pipeline, which
show that the Company has sufficient financial resources to continue in
operation for at least the next 12 months from the date of approval of this
report. Furthermore, the Directors have considered a worst case scenario in
which the Company is assumed to meet all of its remaining investment
commitments within the next 12 months, in addition to dividend payments and
ongoing operating expenses. Even in this unlikely scenario, the Company has
sufficient headroom to meet all expected cash outflows with its existing cash
balances.
The Directors have considered factors relating to the wider global
macroeconomic environment in 2022, in particular changes in inflation and
interest rates. As the Company's income is primarily inflation-linked, a rise
in inflation would have a positive impact on cashflows from operating assets
and an uplift in valuation of the investment portfolio. An increase in
interest rates may result in an increase in risk-free rates, therefore
negatively impacting valuation of investments. Furthermore, the Company has no
physical assets in Ukraine, Russia or Eastern Europe and therefore, regional
geopolitical factors have an immaterial impact on the Company.
Based on its assessment above, the Directors have a reasonable expectation
that the Company has sufficient resources to continue in operational existence
for at least 12 months from the date of the approval of these financial
statements. The Directors are not aware of any material uncertainties that may
cast significant doubt upon the Company's ability to continue as a going
concern. Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
2.4 Financial Instruments
Financial assets and financial liabilities are recognised in the Company's
statement of financial position when the Company becomes a party to the
contractual provisions of the instrument.
Financial assets
The classification of financial assets at initial recognition depends on the
purpose for which the financial asset was acquired and its characteristics.
All financial assets are initially recognised at fair value plus transaction
cost except for those designated as fair value through profit or loss, which
are recognised at fair value only. All purchases of financial assets are
recorded at the date on which the Company became party to the contractual
requirements of the financial asset.
The Company's financial assets principally comprise of investments held at
fair value through profit or loss and at amortised cost.
Investments held at fair value through profit or loss
The Company accounts for its investment in its wholly owned direct subsidiary
GSEO Holdings at fair value through profit and loss in accordance with IFRS 9.
At initial recognition, investments in sustainable energy infrastructure
projects in GSEO Holdings are measured at fair value through profit or loss.
Subsequently, gains or losses resulting from the movement in fair value are
recognised in the Statement of Comprehensive Income at each valuation point.
As both the Company and GSEO Holdings are investment entities under IFRS, the
Company includes its investment in GSEO Holdings at fair value through profit
or loss.
As shareholder loan investments form part of a managed portfolio of assets
whose performance is evaluated on a fair value basis, loan investments are
designated at fair value in line with equity investments. The Company measures
its investment as a single class of financial asset at fair value in
accordance with IFRS 13 Fair Value Measurement.
Gains or losses resulting from the movement in fair value are recognised in
the statement of comprehensive income at each valuation point and are
allocated to the capital column of the statement of comprehensive income.
Refer to note 7 for details regarding the valuation methodology of
investments.
Financial assets are recognised/derecognised at the date of the
purchase/disposal. Investments are initially recognised at cost, being the
fair value of consideration given.
Transaction costs are recognised as incurred and allocated to the capital
column of the statement of comprehensive income.
Fair value is defined as the amount for which an asset could be exchanged
between knowledgeable willing parties in an arm's length transaction. The
Board will consider any observable market transactions and will measure fair
value using assumptions that market participants would use when pricing the
asset, including any assumptions regarding risk surrounding the transaction.
A financial asset (in whole or in part) is derecognised either:
• when the Company has transferred substantially all the risks and
rewards of ownership; or
• when it has neither transferred or retained substantially all the
risks and rewards and when it no longer has control over the assets or a
portion of the asset; or
• when the contractual right to receive cashflow has expired.
Financial assets at amortised cost
Loans and other receivables that are non-derivative financial assets and that
have fixed or determinable payments that are not quoted in an active market
are classified as financial assets at amortised cost. Financial assets are
measured at amortised cost using the effective interest rate method, less any
impairment. Impairment provisions for loans and receivables are recognised
based on a forward-looking expected credit loss model. All financial assets
assessed under this model are immaterial to the financial statements.
The Company's financial assets held at amortised cost comprise of cash and
cash equivalents and other receivables in the Statement of Financial Position.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual agreements entered into and are recorded on the date on which the
Company becomes party to the contractual requirements of the financial
liability.
The Company's other financial liabilities measured at amortised cost include
accounts payable and accrued expenses which are initially recognised at fair
value and subsequently measured at amortised cost using the effective interest
rate method.
A financial liability (in whole or in part) is derecognised when the Company
has extinguished its contractual obligations, it expires or is cancelled. Any
gain or loss on derecognition is taken to the statement of comprehensive
income.
2.5 Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held on call with
banks and other short-term highly liquid deposits with original maturities of
3 months or less, that are readily convertible to a known amount of cash and
are subject to an insignificant risk of changes in value.
2.6 Foreign currencies
Transactions entered into by the Company in a currency other than its
functional currency are recorded at the rates ruling when the transactions
occur.
Foreign currency monetary assets and liabilities are translated to the
functional currency at the exchange rate ruling at the balance sheet date.
Foreign exchange differences arising on translation to the functional currency
are recognised in the Statement of Comprehensive Income, within other expenses
or other income. Foreign exchange differences relating to investments held at
fair value through profit or loss are shown within the line Gains/(losses) on
investments.
2.7 Dividends
Dividends payable to the Company's shareholders are recognised as
distributions in the financial statements when the Company's obligation to
make payment has been established.
2.8 Income recognition
Investment income comprises interest income on shareholder loan investments
and dividend income from GSEO Holdings, which are recognised when the
Company's entitlement to receive payment is established. Interest income from
cash deposits is recognised in the statement of comprehensive income using the
effective interest method. Investment income and interest income are allocated
to the revenue column of the Company's statement of comprehensive income
unless such income is of a capital nature.
Gains and losses on fair value of investments in the income statement
represent gains or losses that arise from the movement in the fair value of
the Company's investment in GSEO Holdings. Movements in relation to the fair
value of investments are allocated to the capital column of the Company's
statement of comprehensive income at each valuation point.
2.9 Expenses
Expenses are accounted for on an accruals basis. These include AIFM,
investment advisory fees and other expenses are allocated to the revenue
column of the Statement of Comprehensive Income. 100% of the investment
advisory fees are charged as an expense item within the Statement of
Comprehensive Income. Fees relating to the AIFM and Investment Adviser are
detailed in note 16.
Share issue expenses of the Company directly attributable to the issue and
listing of shares are charged to the share premium account.
2.10 Share capital and share premium
Financial instruments issued by the Company are treated as equity if the
holder has only a residual interest in the assets of the Company after the
deduction of all liabilities. The Company's ordinary shares are classified as
equity instruments.
Costs associated or directly attributable to the issue of new equity shares
are recognised as a deduction in equity and are charged from the share premium
account. Incremental costs include those incurred in connection with the
placing and admission which include fees payable under a placing agreement,
legal costs, and any other applicable expenses.
The costs incurred in relation to the Company's IPO and for the additional
raise in July 2022 were charged to the share premium account.
2.11 Taxation
Under the current system of taxation in the UK, the Company is liable to
taxation on its operations in the UK.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates that have been enacted or substantively enacted at the date of
the statement of financial position.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
Deferred tax assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition of other
assets and liabilities in a transaction that affects neither the tax profit or
the accounting profit. Deferred tax liabilities are recognised for taxable
temporary differences arising on investments, except where the Company is able
to control the timing of the reversal of the difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited to the statement of comprehensive income except when it
relates to items charged or credited directly to equity, in which case the
deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets and liabilities are not discounted.
2.12 Segmental reporting
The Board of Directors, being the Chief Operating Decision Maker (the "CODM"),
is of the opinion that the Company is engaged in a single segment of business,
being investment in Global Sustainable Energy Opportunities.
The Company has no single major customer. The internal financial information
to be used by the CODM on a quarterly basis to allocate resources, assess
performance and manage the Company will present the business as a single
segment comprising the portfolio of investments in energy efficiency assets.
The financial information used by the Board to manage the Company presents the
business as a single segment.
2.13 Changes to accounting standards and interpretations
At the date of authorisation of the financial statements, the following
amendments had become newly effective for accounting periods beginning on or
after 1 January 2022:
• A number of narrow-scope amendments to IFRS 3 "Business
Combinations", IAS 16 "Property, plant and equipment", IAS 37 "Provisions,
contingent liabilities and contingent assets" and annual improvements on IFRS
1 "First-time Adoption of IFRS", IFRS 9 "Financial instruments", IAS 41
"Agriculture" and illustrative examples accompanying IFRS 16 "Leases".
The Company has reviewed and concluded that these amendments do not have an
impact on the year-end financial statements of the Company.
The table below shows a number of standards and interpretations which had been
published but not yet effective.
Description Effective Date
IFRS 17 Insurance Contracts Periods beginning on or after 1 January 2023
Amendments to the following standards: Periods beginning on or after 1 January 2023
• IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2 (Disclosure of Accounting Policies)
• IAS 8 Accounting policies, Changes in Accounting Estimates and
Errors (Definition of Accounting Estimates)
• IAS 12 Income Taxes (Deferred Tax related to Assets and
Liabilities arising from a Single Transaction)
Amendments to the following standards: Periods beginning on or after 1 January 2024
• IFRS 16 Leases (Liability in a Sale and Leaseback)
• IAS 1 Presentation of Financial Statements (Classification of
Liabilities as Current or Non-Current)
• IAS 1 Presentation of Financial Statements (Non-current
Liabilities with Covenants)
Similarly, the Company has assessed the impact of the future amendments and
has determined that the application of these amendments and interpretations in
current and future periods will not have a significant impact on its financial
statements.
3. Critical accounting estimates, judgements, and assumptions
The preparation of financial statements requires the Directors of the Company
to make judgements, estimates and assumptions that affect the reported amounts
recognised in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that require a material
adjustment to the carrying amount of the asset or liability in the future.
The estimates and underlying assumptions underpinning our investments are
reviewed on an ongoing basis by both the Directors and the Investment Adviser.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Significant estimates, judgements and assumptions for the year are set out as
follows:
Key judgement: Investment entity and basis of non-consolidation
As detailed in note 2.2, the Directors have concluded that the Company and its
wholly owned direct subsidiary, GSEO Holdings, meet the definition of an
investment entity by satisfying the three key conditions as set out in IFRS
10. This assessment involves an element of judgement as to whether the company
continues to meet the criteria outlined in the accounting standards.
Being investment entities, the Company and GSEO Holdings are measured at fair
value as opposed to being consolidated on a line-by-line basis, meaning their
balance sheet is included in the fair value of investments rather than in the
Company's balance sheet.
The Directors believe the treatment outlined above provides the most relevant
information to investors.
Key estimation and uncertainty: Fair value estimation for investments at fair
value
Fair value for each investment held through GSEO Holdings is calculated by the
Investment Adviser as investments are not traded in active markets. Fair value
for operational sustainable energy infrastructure investments will typically
be derived from a discounted cash flow (DCF) methodology and the results will
be benchmarked against appropriate multiples and key performance indicators,
where available for the relevant sector/industry. For sustainable energy
infrastructure investments that are not yet operational at the time of
valuation, the price of recent investment may be used as an appropriate
estimate of fair value initially, but it is likely that a DCF will provide a
better estimate of fair value as the asset moves closer to operation.
In a DCF analysis the fair value is derived from the present value of the
investment's expected future cash flows to the Company's intermediate holdings
i.e. GSEO Holdings, from investments in both equity (dividends) and
shareholder loans (interest and repayments). The DCF models use observable
data, to the extent practicable, and apply reasonable assumptions and
forecasts for revenues, operating costs, macro-level factors, project specific
factors and an appropriate discount rate. Changes in assumptions about these
factors could affect the reported fair value of investments, which is detailed
in note 7, considering the sensitivity of key modelling assumptions on the
Company's net asset value.
The AIFM and the Investment Adviser exercise their judgement in assessing the
discount rate for each investment. This is based on knowledge of the market,
taking into account market intelligence gained from publicly available
information, bidding activities, discussions with financial advisers,
consultants, accountants and lawyers. The discount rates are reviewed
quarterly and updated, where appropriate, to reflect changes in the market and
in the project risk characteristics.
The risk of climate change has been considered in the valuation of
investments, where applicable. Future power prices are estimated using
forecast data from third-party specialist consultancy reports, which reflect
various factors including gas prices, carbon prices and renewables deployment.
Short to medium term inflation assumptions used in the valuations are based on
third party forecasts. In the longer term, an assumption is made that
inflation will increase at a long-term rate.
The estimates and assumptions that are used in the calculation of the fair
value of investments is disclosed in note 7.
Key judgement: Equity and debt investment in GSEO Holdings
The Company classifies its investments based on its business model for
managing those financial assets and the contractual cash flow characteristics
of the financial assets. The portfolio of investments is managed, and
performance is evaluated on a fair value basis.
The contractual cash flows of the Company's shareholder loans (debt
investments) are solely principal and interest, however, these are not held
for the purpose of collecting contractual cash flows. The collection of
contractual cash flows is only incidental to achieving the Company's business
model's objective.
Consequently, in applying their judgement, the Directors have satisfied
themselves that the equity and debt investments into its direct wholly owned
subsidiary, GSEO Holdings, share the same investment characteristics and, as
such, constitute a single asset class for IFRS 7 disclosure purposes.
4. Investment income
For the year ended For the period from incorporation on
31 December 2022
30 October 2020 to 31 December 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Interest on cash deposits 2,310 - 2,310 132 - 132
Interest income from investments 4,906 - 4,906 1,542 - 1,542
Dividend income 21,607 - 21,607 - - -
Investment income 28,823 - 28,823 1,674 - 1,674
5. Operating expenses
For the year ended For the period from incorporation on
31 December 2022
30 October 2020
£'000
to 31 December 2021
£'000
Fees to the Company's Auditor
Statutory audit of the year-end financial statements 170 110
Assurance related services for the year/period ended 50 60
Other non-audit services 48 5
Tax Advisory fees 10 84
AIFM fees 74 66
Directors' fee 220 202
Other expenses 368 609
Total other expenses 940 1,136
Fees with respect to the Investment Adviser and the AIFM are set out in note
16.
The Company had no employees during the period. Full detail on Directors' fees
is provided in the Directors' Remuneration Report. There were no other
emoluments during the year.
6. Taxation
a. Analysis of charge in the year/period
For the year ended 31 December 2022 For the period from incorporation on
30 October 2020 to 31 December 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Corporation tax - - - - - -
b. Factors affecting total tax charge for the year/period
The effective UK corporation tax rate applicable to the Company for the period
is 19%. The tax charge differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust company.
The differences are explained below:
For the year ended 31 December 2022 For the period from incorporation on
30 October 2020 to 31 December 2021
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Profit/(loss) for the year/period before taxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Corporation tax at 19% 4,574 785 5,359 (319) 4,189 3,870
Effect of:
Capital (gains) / losses not taxable - (785) (785) - (4,189) (4,189)
Expenditure not deductible (96) - (96) 13 - 13
Non-taxable UK dividends (4,105) - (4,105) - - -
Management expenses not utilised/recognised (180) - (180) 306 - 306
Interest distributions (193) - (193) - - -
Total tax charge for the year/period - - - - - -
Investment companies which have been approved by HM Revenue & Customs
under section 1158 of the Corporation Tax Act 2010 are exempt from tax on
capital gains. The Directors are of the opinion that the Company has complied
with the requirements for maintaining investment trust status for the purposes
of section 1158 of the Corporation Tax Act 2010.
Additionally, the Company may utilise the interest streaming election which
allows the Company to designate dividends wholly or partly as interest
distributions for UK tax purposes. Interest distributions are treated as tax
deductions against taxable income of the Company so that investors do not
suffer double taxation on their returns.
The financial statements do not directly include the tax charges for the
Company's intermediate holding company, as GSEO Holdings is held at fair
value. GSEO Holdings is subject to taxation in the United Kingdom.
c. Deferred taxation
The Company has no unutilised excess management expenses therefore no deferred
tax asset has been recognised.
The Company has not provided for deferred tax on any capital gains or losses
arising on the revaluation of investments.
7. Investments at fair value through profit or loss
As set out in note 2.2, the Company designates its interest in its wholly
owned direct subsidiary GSEO Holdings as an investment at fair value through
profit or loss at each balance sheet date in accordance with IFRS 13, which
recognises a variety of fair value inputs depending upon the nature of the
investment. Specifically:
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation at the end of
each reporting period.
The Company classifies all assets measured at fair value as below:
Fair value hierarchy
As at 31 December 2022 Total Quoted prices Significant Observable inputs Significant unobservable inputs
£'000
in active markets
(level 2)
(level 3)
(level 1)
£'000
£'000
£'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss 315,133 - - 315,133
As at 31 December 2021 Total Quoted prices Significant Significant
£'000
in active
observable
unobservable
markets
inputs
inputs
(level 1)
(level 2)
(level 3)
£'000
£'000
£'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss 159,618 - - 159,618
All of the Company's investments have been classified as Level 3 and there
have been no transfers between levels during the year ended 31 December 2022.
The movement on the level 3 unquoted investment during the year is shown
below:
As at As at
31 December 2022
31 December 2021
£'000
£'000
Opening balance at beginning of the year/period 159,618 -
Additions during the period at cost 151,367 136,023
310,985 136,023
Fair value movement on investments:
Change in fair value of equity investments(1) 4,144 22,046
Interest on loan investments2 4 1,549
Total fair value movement on investments 4,148 23,595
Closing balance 315,133 159,618
1 The £4,131k in the Statement of Comprehensive Income within other
expenses/income and Statement of Changes in Equity is made up of unrealised
gains of £4,144k per this note and a realised foreign exchange loss of £13k
during the year.
2 This is the amount related to the unpaid shareholder loan interest income
as at the year/period end.
Further information on the basis of valuation is detailed in note 3 to the
financial statements.
Valuation methodology
As set out in note 2.2, the Company meets the definition of an investment
entity as described by IFRS 10, as such the Company's investment in the GSEO
Holdings is valued at fair value.
The Company acquired underlying investments in special purpose entities (SPEs)
through its equity and debt investment in GSEO Holdings, as detailed in note
8. The Investment Adviser has carried out fair market valuations of the SPE
investments, where applicable, as at 31 December 2022, reviewed by the AIFM.
In line with IFRS 13, level of fair value hierarchy within the financial
assets or financial liabilities ranges from level 1 to level 3 and is
determined on the basis of the lowest level input that is significant to the
fair value measurement.
The Company records the net asset value of GSEO Holdings by calculating and
aggregating the fair value of each of the individual investments in which the
Company holds an indirect investment. Due to their nature, such investments
are expected to be classified as level 3 as they are not traded and contain
unobservable inputs. The Directors have satisfied themselves as to the
methodology used, the discount rates and key assumptions applied, and the
valuation.
The fair value of investments that are operational as at year end are measured
at fair value through profit or loss using the DCF methodology in line with
the IFRS 13 framework for fair value measurement. As at 31 December 2022, the
US terminal storage assets, one of the five Australian solar PV with battery
storage assets and nine of the eighteen Brazilian solar PV assets are being
measured at fair value, using DCF valuation. Separately, investment in the
Brazilian hydro facility uses its acquisition price, adjusted for
distributions and cash generated by the asset post acquisition, as the most
appropriate measurement of its fair value at year end, due to the recency of
the acquisition on 7 December 2022, and that the asset has not materially
changed since acquisition.
Fair value of investments that are in construction as at year end is measured
on a cost basis, as the most appropriate proxy of their fair value. At year
end, the remaining Australian solar PV with battery storage assets, remaining
Brazilian solar PV assets, and the UK flexible power with CCR assets are in
construction. Therefore, until commencement of operations, the cost basis is
considered to be the most appropriate measure of valuation. There are no
indications at 31 December 2022 that the cost basis should be impaired.
In line with IFRS 13, the fair value of one of the five solar PV assets in
Australia is calculated as the acquisition price of the asset and the cash
flows associated with the installation and operation of the BESS. This is the
best estimate of valuation as the highest and best use of the asset would be
when the BESS has been fully integrated with the solar plants.
The total movement in the value of the investments in GSEO Holdings is
recorded through profit and loss in the Statement of Comprehensive Income
Statement of the Company.
Valuation assumptions
The following economic assumptions were used in the valuation of operating
assets.
Discount rates The discount rate used in the valuations is derived according to
internationally recognised methods.
Typical components of the discount rate are risk free rates, country-specific
and asset-specific risk premia. The latter comprise the risks inherent to the
respective asset class as well as specific premia for other risks such as
construction.
Power price Power prices are based on power price forecasts from leading market
consultants adjusted for expected deployment of energy transition assets.
Energy yield Estimated based on energy yield assessments from leading technical consultants
as well as operational performance data (where applicable).
Inflation rates Long-term inflation is based on International Monetary Fund (IMF) forecasts
for the respective jurisdiction.
Asset life Refer to the table below for details. In individual cases a longer operating
life may be assumed where the contractual set-up supports such assumption.
Operating expenses The operating expenses are primarily based on the respective contracts and
budgets.
Taxation rates The underlying country-specific tax rates are derived from leading tax
consulting firms.
Capital expenditure Based on the contractual arrangements (e.g. EPC agreement), where applicable.
Key assumptions
31 December 2022
Discount rate Weighted Average US terminal storage assets 8.43%
Weighted Average Australian solar PV with battery storage assets 8.55%
Weighted Average Brazilian solar PV assets 13.09%
Weighted Average Brazilian hydro facility 10.48%
Long-term inflation(1) United States US terminal storage assets 2.0%
Australia Australian solar PV with battery storage assets 2.5%
Brazil Brazilian solar PV assets & Brazilian hydro facility 3.0%
Remaining asset life Years US terminal storage assets 30 years
Years Australian solar PV with battery storage assets 25 years
Years Brazilian solar PV assets 25 years
Years Brazilian hydro facility 25 years
Exchange rates GBP:USD US terminal storage assets 1:1.210
GBP:BRL Brazilian solar PV assets & Brazilian hydro facility 1:6.386
GBP:AUD Australian solar PV with battery storage assets 1:1.775
(1)Source: IMF. Inflation rates have been taken from IMF published on 14 Oct
2022 (data is published biannually), which provides yearly forecasted
inflation up to 2027. Long-term inflation rate refers to the 2027 projected
rate. Short-term inflation volatility of up to 2027 has been accounted for in
the valuation of operating assets.
Valuation sensitivity
The key sensitivities in the DCF valuation are considered to be the discount
rate used in the DCF valuation and long-term assumptions in relation to
inflation, operating expenses and asset life.
The discount rate applied in the valuation of the operating assets are as per
the table above, which is considered to be an appropriate base case for
sensitivity analysis. A variance of +/-1% is considered to be a reasonable
range of alternative assumptions for discount rate.
The base case long term inflation rate assumption depends on the geographical
location for assets in operation. These are disclosed in the table above. A
variance of +/-1% is considered to be a reasonable range of alternative
assumptions for inflation.
For assets in construction, the Company has only sensitised the impact of
foreign exchange fluctuations. A variance of +/- 10% is considered to be a
reasonable range of alternative assumptions for foreign exchange.
The analysis below shows the sensitivity of the investments value (and impact
on NAV) to changes in key assumptions. All sensitivity calculations have been
performed on the basis that each of the other assumptions remains constant and
unchanged.
Change in input Changes in fair value of investments Change in NAV
(£'000)
per share (pence)
Discount Rate - US terminal storage assets -1.00% 11,669 2.76
1.00% (9,995) (2.37)
Discount Rate - Australian solar PV with battery storage assets -1.00% 365 0.09
1.00% (325) (0.08)
Discount Rate - Brazilian solar PV assets -1.00% 1,332 0.32
1.00% (1,183) (0.28)
Discount Rate - Brazilian hydro facility -1.00% 9,300 2.20
1.00% (8,088) (1.91)
Discount Rate - All -1.00% 22,665 5.36
1.00% (19,591) (4.64)
Change in input Changes in fair value of investments Change in NAV
(£'000)
per share (pence)
Inflation - US terminal storage assets -1.00% (9,666) (2.29)
1.00% 11,188 2.65
Inflation - Australian solar PV with battery storage assets -1.00% (442) (0.10)
1.00% 63 0.01
Inflation - Brazilian solar PV assets -1.00% (1,071) (0.25)
1.00% 1,098 0.26
Inflation - Brazilian hydro facility -1.00% (7,447) (1.76)
1.00% 5,891 1.39
Long-term Inflation - All (see table below) -1.00% (18,627) (4.41)
1.00% 18,241 4.32
Change in input Changes in fair value of investments Change in NAV
(£'000)
per share (pence)
Asset life - US terminal storage assets -1 year (1,504) (0.36)
+1 year 1,358 0.32
Asset life - Australian solar PV with battery storage assets -1 year (76) (0.02)
+1 year 310 0.07
Asset life - Brazilian solar PV assets -1 year (137) (0.03)
+1 year 137 0.03
Asset life - Brazilian hydro facility -1 year (1,512) (0.36)
+1 year 1,440 0.34
Asset life - All -1 year (3,230) (0.76)
+1 year 3,245 0.77
Change in input Changes in fair value of investments Change in NAV
(£'000)
per share (pence)
Operating expenses - US terminal storage assets -5.00% 3,555 0.84
5.00% (3,555) (0.84)
Operating expenses - Australian solar PV with battery storage assets -5.00% 15 0.00
5.00% (15) (0.00)
Operating expenses - Brazilian solar PV assets -5.00% 429 0.10
5.00% (428) (0.10)
Operating expenses - Brazilian hydro facility -5.00% 2,565 0.61
5.00% (2,743) (0.65)
Operating expenses - All -5.00% 6,565 1.55
5.00% (6,742) (1.60)
Change in input Changes in fair value of investments Change in NAV
(£'000)
per share (pence)
FX (GBP:USD) -10.00% 11,790 2.79
10.00% (9,646) (2.28)
FX (GBP:BRL) -10.00% 15,905 3.76
10.00% (13,014) (3.08)
FX (GBP:AUD) -10.00% 3,585 0.85
10.00% (2,933) (0.69)
FX - All -10.00% 31,280 7.40
10.00% (25,593) (6.06)
The sensitivities above are assumed to be independent of each other. Combined
sensitivities are not presented.
8. Unconsolidated subsidiaries
The following table shows subsidiaries of the Company. As the Company is
regarded as an investment entity, these subsidiaries have not been
consolidated in the preparation of the financial statements.
Investments Place of Business Ownership interests as at 31 December 2022
VH GSEO UK Holdings Limited United Kingdom 100%
Victory Hill Distributed Energy Investments Limited United Kingdom 100%
Victory Hill Flexible Power Limited United Kingdom 100%
Rhodesia Power Limited United Kingdom 100%
Victory Hill USA Holdings LLC United States 100%
Victory Hill Midstream Investments LLC United States 100%
Victory Hill Midstream Energy LLC United States 100%
Motus T1 LLC United States 100%
Motus T2 LLC United States 100%
Victory Hill Australia Investments Pty Ltd Australia 100%
Victory Hill Distributed Power Pty Ltd Australia 100%
Mobilong Solar Farm Pty Ltd Australia 100%
Dunblane Solar Pty Ltd Australia 100%
Dubbo Solar Project Pty Ltd Australia 100%
Narrandera Solar Project Pty Ltd Australia 100%
Coleambally East Solar Farm Pty Ltd Australia 100%
Greentech Solar Project No 1 Unit Trust Australia 100%
Dubbo Solar Project Unit Trust Australia 100%
Narrandera Solar Project Unit Trust Australia 100%
VH Participacoes Hidreletricas do Brasil LTDA Brazil 98.25%
VH Hydro Brasil Holding S.A. Brazil 100%
Energest S.A. Brazil 100%
Victory Hill Holdings Brasil S.A. Brazil 99.99%
Energea Itaguai I Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Itaguai II Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Itaguai III Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Nova Friburgo LTDA* Brazil 100%
Gera Solar SE LTDA* Brazil 100%
Gera Solar RN LTDA* Brazil 100%
Gera Solar RN LTDA* Brazil 100%
Gera Solar PB Energia LTDA* Brazil 100%
Gera Solar MS LTDA* Brazil 100%
Energea Palmas Geracao S.A* Brazil 100%
Energea Geracao de Projetos Minas Gerais LTDA* Brazil 100%
Energea Geracao de Projetos RJ LTDA* Brazil 100%
Energea Geracao de Projetos RJ II LTDA* Brazil 100%
Energea Vassouras VH Geracao LTDA* Brazil 100%
CGS Sao Paulo Locacoes LTDA* Brazil 100%
At 31 December 2022, the Company has one direct subsidiary and owns 100% of
GSEO Holdings. The Company owns investments in the other entities per the
table above through its ownership of GSEO Holdings. GSEO Holdings owns 100% of
Victory Hill USA Holdings LLC, Victory Hill Australia Investments Pty Ltd,
Victory Hill Distributed Energy Investments Limited and Victory Hill Flexible
Power Limited and 98.25% of VH Participacoes Hidreletricas do Brasil Ltda.
The Company's investments in Victory Hill Midstream Investments LLC, Victory
Hill Midstream Energy LLC, Motus T1 LLC and Motus T2 LLC are held through
Victory Hill USA Holdings LLC. These relate to the US terminal storage assets.
The Company's investments in Brazilian solar PV assets are held through
Victory Hill Distributed Energy Investments Limited, which holds 99.99% of
Victory Hill Holdings Brasil S.A. The holdings of Victory Hill Holdings Brasil
S.A. are indicated by an asterisk in the list of unconsolidated subsidiaries
above.
The Company's investments in VH Hydro Brasil Holding S.A. and Energest S.A.
are held through VH Participacoes Hidreletricas do Brasil LTDA. These relate
to the Brazilian hydro facility.
The Company's investments in Victory Hill Distributed Power Pty Ltd, Mobilong
Solar Farm Pty Ltd, Dubbo Solar Project Pty Ltd, Narrandera Solar Project Pty
Ltd, Coleambally East Solar Farm Pty Ltd, Dunblane Solar Pty Ltd, Greentech
Solar Project No 1 Unit Trust, Dubbo Solar Project Unit Trust and Narrandera
Solar Project Unit Trust are held through Victory Hill Australia Investments
Pty Ltd. These relate to the Australian solar PV with battery storage assets.
The Company's investments in Rhodesia Power Limited is held through Victory
Hill Flexible Power Limited. These relate to the UK flexible power with CCR
assets.
9. Other receivables
As at As at
31 December 2022
31 December 2021
£'000
£'000
Other receivables 96 65
Interest receivable on cash and cash equivalents 270 9
Receivable from affiliates 355 737
Prepayments 19 -
Total other receivables 740 811
The Directors have analysed the expected credit loss in respect of receivables
and concluded there was no material exposure for the year/period ended 31
December 2022 and 31 December 2021.
10. Cash and cash equivalents
As at As at
31 December 2022
31 December 2021
£'000
£'000
Cash at bank 48,075 92,094
Cash on deposit 93,716 71,716
Total cash at bank 141,791 163,810
Cash on deposit consists of funds held in a 32 day notice deposit account with
Barclays Bank plc.
11. Accounts payable and accrued expenses
As at As at
31 December 2022
31 December 2021
£'000
£'000
Accrued expenses 491 197
Accounts payable - 144
Accounts payable and accrued expenses 491 341
The Directors consider that the carrying amount of other payables and accrued
expenses matches their fair value.
12. Financial risk management
The Company's activities expose it to a variety of financial risks: market
risk (including currency risk, interest rate risk and price risk), credit risk
and liquidity risk.
The AIFM and the Investment Adviser have risk management procedures and
processes in place which enable them to monitor the risks of the Company. The
objective in managing risk is the creation and protection of shareholder
income and value. Risk is inherent in the Company's activities, but it is
managed through a process of ongoing identification, impact assessment, and
monitoring and subject to risk limits and other controls.
The principal financial risks facing the Company in the management of its
portfolio are as follows:
Currency risk
The Company make investments which are based in countries whose local currency
may not be Sterling and the Company and its investments may make and/or
receive payments that are denominated in currencies other than Sterling.
Therefore, when foreign currencies are translated into Sterling there could be
a material adverse effect on the Company's profitability and its net asset
value.
The Company's investments are held for the long-term and the Company may enter
into hedging arrangements for periods less than 12 months to hedge against
short-term currency movements. Currency risk is taken into consideration at
time of investment and included in the Investment Adviser's assessment of
minimum hurdle rate from investments. Hedging policies of the Company will be
reviewed on a regular basis to ensure that the risks associated with the
Company's investments are being appropriately managed.
The Company invests in a portfolio of assets through GSEO Holdings, which pays
dividends in sterling to the Company. Shareholder loan investments and
interest are held and paid in local currencies at the Company, including
US$63,665,000 and A$35,400,000, representing a total of 15.9% of the Company's
NAV at year end.
Note 7 details sensitivity analysis on the impact of changes to the inputs on
the fair value of the Company's investments.
Interest rate risk
The Company's interest rate risk on its financial assets is limited to
interest earned on cash or cash equivalents and any shareholder loan
investments, which yield interest at fixed rates. The Board considers that,
shareholder loan investments bear interest at a fixed rate, they do not carry
any interest rate risk.
The Company may use borrowings for multiple purposes, including for investment
purposes. At the year end the Company held no borrowings. Interest rate risk
will be taken into consideration when taking out any such borrowings.
The Company's interest and non-interest bearing assets and liabilities as at
31 December 2022 and 31 December 2021 are summarised as below:
For the year ended For the period ended
31 December 2022
31 December 2021
Interest bearing Non-interest bearing Total Interest Non-interest bearing Total
£'000
£'000
£'000
bearing
£'000
£'000
£'000
Cash and cash equivalents 141,791 - 141,791 163,810 - 163,810
Prepayments and other receivables - 470 470 - 802 802
Interest receivable 270 - 270 9 - 9
Investments at fair value through profit or loss 89,047 226,086 315,133 56,717 102,901 159,618
Total assets 231,108 226,556 457,664 220,536 103,703 324,239
Liabilities
Accounts payable and accrued expenses - (491) (491) - (341) (341)
Total liabilities - (491) (491) - (341) (341)
Price risk
The operation and cash flows of certain investments will depend, in
substantial part, upon prevailing market prices for electricity and fuel, and
particularly natural gas. The Company intends to mitigate these risks by
entering into (i) hedging arrangements; (ii) extendable short, medium and
long-term contracts; and (iii) fixed price or availability based asset-level
commercial contracts, and ensuring that market risk is combined with
non-market risk exposures.
Price risk is limited to the fair value of investments. Note 7 details
sensitivity analysis on the impact of changes to the inputs on the fair value
of the Company's investments and profits.
Credit risk
Credit risk is the risk that a counterparty will cause financial loss to the
Company by failing to meet a commitment it has entered into with the Company.
The Company's credit risk exposure is minimised with its policy to enter into
banking arrangements with reputable financial institutions with a credit
rating of at least 'A/Positive' from Standard and Poor's and making loan
investments which are equity in nature. The Investment Adviser monitors the
credit ratings of banks used by the Company on a regular basis.
The table below shows the Company's maximum exposure to credit risk:
As at As at
31 December 2022
31 December 2021
£'000
£'000
Cash and cash equivalents 141,791 163,840
Investments at fair value through profit or loss 89,047 56,717
Other receivables (note 9) 740 811
231,578 221,368
The Company had no derivatives during the period.
Liquidity risk
The Company manages its liquidity and funding risks by considering cash flow
forecasts and ensuring sufficient cash balances are held within the Company to
meet future needs. Prudent liquidity risk management implies maintaining
sufficient cash and marketable securities, the availability of financing
through appropriate and adequate credit lines, and the ability of
counterparties to settle obligations. The Company ensures, through forecasting
of capital requirements, that adequate cash is available.
The following table details the Company's liquidity analysis in respect of its
financial liabilities on contractual undiscounted payments:
As at 31 December 2022 <3 3-12 1-5 >5 Total
Months
Months
Years
Years
£'000
£'000
£'000
£'000
£'000
Accounts payable and accrued expenses 491 - - - 491
491 - - - 491
As at 31 December 2021 <3 3-12 1-5 >5 Total
Months
Months
Years
Years
£'000
£'000
£'000
£'000
£'000
Accounts payable and accrued expenses 311 30 - - 341
311 30 - - 341
The Board of Directors monitors key risks faced by the Company and has agreed
policies for managing the above risks with the AIFM and/or the Investment
Adviser.
Capital management
The Company considers its capital to comprise ordinary share capital,
distributable reserves and retained earnings.
The Company's primary capital management objectives are to ensure the
sustainability of its capital to support continuing operations, meet its
financial obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded with a combination of cash, debt and
equity.
13. Share capital
Date Issued and fully paid Number of shares Share Capital Share premium Special Distributable Reserve Total
(A)
(B)
(C)
(A+B+C)
£'000
£'000
£'000
£'000
30 October 2020 Ordinary shares 1 - - - -
2 February 2021 Ordinary shares 242,624,280 2,426 240,198 - 242,624
2 February 2021 Share issue costs - - (4,698) - (4,698)
13 April 2021 Transfer to special distributable reserve - - (235,500) 235,500 -
11 November 2021 Dividends paid - - - (3,033) (3,033)
3 December 2021 Ordinary shares 68,965,518 690 69,310 - 70,000
3 December 2021 Share issue costs - - (1,361) - (1,361)
At 31 December 2021 311,589,799 3,116 67,949 232,467 303,532
1 July 2022 Ordinary shares 110,909,091 1,109 120,891 - 122,000
1 July 2022 Share issue costs - - (2,472) - (2,472)
At 31 December 2022 422,498,890 4,225 186,368 232,467 423,060
The Company was incorporated on 30 October 2020 when the issued share capital
of the Company was £0.01 represented by one ordinary share and £50,000
represented by 50,000 management shares of nominal value of £1.00 each, which
were subscribed for by Victory Hill Capital Partners LLP. On 2 February 2021,
the Company issued a further 242,624,280 ordinary shares and on that date
242,624,281 ordinary shares were admitted to trading on the London Stock
exchange. The management shares were redeemed at par on 2 February 2021.
On 1 December 2021, the Company raised additional gross proceeds of £70
million through the issue of 68,965,518 ordinary shares at an issue price of
101.5 pence per ordinary share.
On 1 July 2022, the Company raised additional gross proceeds of £122 million
through the issue of 110,909,091 ordinary shares at an issue price of 110
pence per ordinary share.
Shareholders are entitled to all dividends paid by the Company and on a
winding up, provided that the Company has satisfied all its liabilities, the
shareholders are entitled to all of the residual assets of the Company.
14. Special distributable reserve
As at As at
31 December 2022
31 December 2021
£'000
£'000
Balance at beginning of year/period 232,467 -
Transfer from share premium account - 235,500
Dividends paid in the year/period - (3,033)
Balance at end of year/period 232,467 232,467
In order to increase distributable reserves available for the payment of
future dividends, the Company resolved on 5 January 2021 that, the amount
standing to the credit of the share premium account of the Company immediately
following completion of the issue be cancelled and transferred to a special
distributable reserve.
As stated by the Institute of Chartered Accountants in England and Wales
(ICAEW) and the Institute of Chartered Accountants in Scotland (ICAS) in the
technical release TECH 02/17BL, The Companies (Reduction of Share Capital)
Order 2008 SI 2008/1915 ("the Order") specifies the cases in which a reserve
arising from a reduction in a company's capital (i.e., share capital, share
premium account, capital redemption reserve or redenomination reserve) is to
be treated as a realised profit as a matter of law.
The Order also applies the general prohibition in section 654 on the
distribution of a reserve arising from a reduction of capital. The Order
provides that if a limited company having a share capital reduces its capital
and the reduction is confirmed by order of court, the reserve arising from the
reduction is treated as a realised profit unless the court orders otherwise.
15. Dividends
The Board of Directors of the Company announced an interim dividend of 1.25p
per ordinary share of £3.9m with respect to the period 1 January 2022 to 31
March 2022, which was paid on 10 June 2022.
On 4 August 2022, the Board of Directors announced an interim dividend of
£5.3 million equivalent to 1.25 pence per share with respect to the period 1
April 2022 to 30 June 2022 which was paid on 16 September 2022.
On 4 November 2022, the Board of Directors announced an interim dividend of
£5.3 million equivalent to 1.25 pence per share with respect to the period 1
July 2022 to 30 September 2022 which was paid on 16 December 2022.
Total dividend paid in the year was £14.5 million.
On 22 February 2023, the Board of Directors announced an interim dividend of
£5.8 million equivalent to 1.38 pence per ordinary share with respect to the
period 1 October 2022 to 31 December 2022, which will be paid on 31 March
2023.
16. Transactions with AIFM, Investment Adviser and related parties
AIFM
The Company has entered into the AIFM Agreement with G10 Capital Limited (the
'AIFM') under which the AIFM has been appointed to act as the Company's
alternative investment fund manager with overall responsibility for the risk
management and portfolio management of the Company, providing alternative
investment fund manager services and ensuring compliance with the requirements
of the AIFM Rules, subject to the overall supervision of the Directors in
accordance with the policies laid down by the Directors from time to time and
the investment restrictions referred to in the AIFM Agreement.
The AIFM Agreement provides that the Company will pay to the AIFM a fixed
monthly fee of £5,000, exclusive of VAT. The Company will also reimburse the
AIFM for reasonable expenses properly incurred by the AIFM in the performance
of its obligations under the AIFM Agreement.
The AIFM Agreement may be terminated by the Company or the AIFM giving not
less than four months' written notice. The AIFM Agreement may be terminated
with immediate effect on the occurrence of certain events, including
insolvency or in the event of a material and continuing breach.
The AIFM fees for the year ended 31 December 2022 amounted to £74,400 (2021:
£66,000) (including VAT) and no amount was outstanding at the year end.
Investment Adviser
The Company and the AIFM have entered into an Investment Advisory Agreement
with Victory Hill Capital Partners LLP. Under the Investment Advisory
Agreement, the AIFM and the Company have appointed Victory Hill as the
Investment Adviser to the Company and the AIFM.
Under the terms of the Investment Advisory Agreement, the Investment Adviser
will (i) seek out and evaluate investment opportunities: (ii) recommend the
manner in which investments should be made, retained and realised; (iii)
advise the Company and the AIFM in relation to acquisitions and disposals of
assets; (iv) provide asset valuations to assist the Administrator in the
calculation of; the quarterly Net Asset Value; and (v) provide operational,
monitoring and asset management services.
The Investment Adviser is entitled to receive from the Company an annual fee
to be calculated as percentages of the Company's net assets, 1% on the first
£250m of NAV, 0.9% on NAV in excess of £250m and up to and including £500m
and 0.8% on NAV in excess of £500m exclusive of VAT.
Furthermore, if in any fee period, the annual fee paid to the Investment
Adviser exceeds:
a) £3.5 million, the Investment Adviser shall apply 8% of the annual
fee, subject to a maximum amount of £400,000, to subscribe for or acquire
ordinary shares of £0.01 each in the capital of the Company.
b) £2.5 million, the Investment Adviser shall apply 2% of the annual fee
to be paid as a charitable donation to O&C Limited, or other suitable
registered charity aimed at promoting sustainable energy, as selected by the
Investment Adviser, provided that if, following the Investment Adviser's
reasonable endeavours, a suitable charity cannot be found, this 2% portion of
the annual fee (net of any applicable taxes) will be applied to the
subscription for or acquisition of ordinary shares.
No performance fee is payable to the Investment Adviser.
The Investment Advisory Agreement may be terminated on 12 months' written
notice, provided that such notice may not be served before 2 February 2025.
The Investment Advisory Agreement may be terminated with immediate effect on
the occurrence of certain events, including insolvency or in the event of a
material and continuing breach.
The investment advisory fees for the year ended 31 December 2022 amounted to
£3,809,615 (2021: £2,217,992) (including VAT) of which £167,623 was
outstanding and included in accounts payable and accrued expenses at the end
of the year.
Directors
The Directors have been entitled to aggregate annual remuneration (excluding
expenses) payable and benefits in kind granted as follows:
For the year ended
31 December 2022
£'000
Bernard Bulkin OBE 70
Margaret Stephens 50
Richard Horlick 50
Louise Kingham CBE 50
220
The Directors are not eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits. There is no amount set aside or
accrued by the Company in respect of contingent or deferred compensation
payments or any benefits in kind payable to the Directors. During the year
ended 31 December 2022, Directors fees of £220,000 were paid of which none
was payable at the year end.
The Directors held the following beneficial interests in the ordinary shares
of the Company as at 31 December 2022.
As at 31 December 2022
Number of ordinary shares held % of ordinary shares in issue
Bernard Bulkin OBE 38,181 0.009
Margaret Stephens 28,181 0.007
Richard Horlick 300,000 0.071
Louise Kingham CBE 20,000 0.005
Other balances with related parties
The Company entered into intercompany loan agreements with GSEO Holdings,
which entered into further intercompany loan agreements with the following
subsidiary companies these balances form part of the investments balance in
the Statement of Financial position.
• Victory Hill USA Holdings LLC (US$63,665,000)
• Victory Hill Australia Investments Pty Ltd (A$35,400,000)
• Victory Hill Flexible Power Ltd (£14,924,400)
Note that £4,000 of accrued interest accumulated during the year.
During the year ended 31 December 2022, the Company entered into intercompany
loan agreements with Victory Hill USA Holdings LLC of US$2,100,000, Victory
Hill Australia Investments Pty Ltd of A$17,400,000 and Victory Hill Flexible
Power Ltd of £14,924,400. Dividends of £21,607,272 were paid to the Company
during the year ended 31 December 2022.
As at the year-end, the Company held receivables from affiliates of £355,000.
This comprises of £346,000 from VH GSEO UK Holdings Limited, £2,000 from VH
Hydro Brasil Holdings S.A., £2,000 from Victory Hill Flexible Power Limited
and £5,000 from Victory Hill Distributed Power Pty Ltd.
17. Contingent liabilities and commitments
At 31 December 2022 the Company had no contingent liabilities.
In Brazil, the Company has a remaining commitment of £14m (31 December 2021:
£10m) in the construction of remote distributed solar generation projects
across Brazil.
In Australia, the Company has a remaining commitment of £17m (31 December
2021: £34m) to acquire a portfolio of distributed solar generation assets
with plans to build battery storage capacity in Australia in two tranches.
In the UK the Company has a remaining commitment £80m (31 December 2021:
£72m) to fund two Flexible Power plants which bring together high efficiency
gas-fired turbine technology with carbon capture systems to provide a clean
and flexible electricity solution for the United Kingdom, with a combined
capacity of 45MW.
There are no remaining commitments to fulfill as at year end relating to the
US storage assets and the Brazilian hydro facility.
18. Earnings per share
Earnings per share (EPS) is calculated by dividing profit for the period
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares in issue on 1 January 2021 to 31 December 2022.
Amounts shown below are both basic and diluted measures as there were no
dilutive instruments in issue throughout the current year/period.
For the year ended 31 December 2022 For the period from incorporation on 30 October 2020 to 31 December 2021
Revenue Capital Total Revenue Capital Total
Earnings (£'000) 24,073 4,131 28,204 (1,680) 22,046 20,366
Weighted average number of ordinary shares 367,500,135 367,500,135 367,500,135 193,505,110 193,505,110 193,505,110
EPS (p) 6.55 1.12 7.67 (0.87) 11.39 10.52
19. Net asset value per share
Net asset value per share is calculated by dividing the net assets
attributable to ordinary equity holders of the Company by the number of
ordinary shares outstanding at the reporting date. Amounts shown below are
both basic and diluted measures as there were no dilutive instruments in issue
throughout the current year/period.
Year ended Period ended 31 December 2021
31 December 2022
NAV (£'000) 457,173 323,898
Number of ordinary shares 422,498,890 311,589,799
NAV per share (p) 108.21 103.95
20. Post balance sheet events
On 22 February 2023, the Board of Directors announced an interim dividend of
£5.8 million equivalent to 1.38 pence per ordinary with respect to the period
1 October 2022 to 31 December 2022 which will be paid on 31 March 2023.
21. Controlling parties
There is no ultimate controlling party of the Company.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APMs) are often used to describe the
performance of investment companies although they are not specifically defined
under IFRS. Calculations for APMs used by the Company are shown below.
In reporting financial information, the Company presents alternative
performance measures, "APMs", which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company.
The APMs presented in this report are shown below:
NAV per share
NAV per share is calculated by dividing the Company's NAV by the total number
of outstanding shares at year end.
Page
NAV as at 31 December 2022 457,173,179
Total number of outstanding shares as at 31 December 2022 422,498,890
NAV per share 3 1.08
Ongoing charges
A measure expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company, calculated in
accordance with the AIC methodology.
Page
Average undiluted NAV (in £'m) 405.03
Recurring costs in year 5.26
Ongoing charges 3 1.30%
Premium / (discount) to NAV
The amount, expressed as a percentage, by which the share price is more than
the NAV per ordinary share.
As at 31 December 2022 Page
NAV per ordinary share (pence / share) 1.082
Ordinary share price (pence / share) 1.010
Premium / (Discount) to NAV as at 31 December 2022 (%) n/a (7.13%)
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of any dividends paid out by
the Company, with reinvestment on ex-dividend date.
Year ended 31 December 2022 Page NAV Share price
Opening as at 1 January 2022 a 103.95p 107.00p
Closing as at 31 December 2022 b 108.21p 101.0p
Dividends paid during the year 3.75p 3.75p
Dividend adjustment factor c 1.0335 1.0335
Adjusted closing d = b x c 111.84p 104.38p
Total return for the year (%) d / a - 1 3 7.6% -2.4%
From IPO to 31 December 2022 Page NAV Share price
Opening as at 2 February 2021 a 98.00p 100.00p
Closing as at 31 December 2022 b 108.21p 101.00p
Dividends paid to date since IPO 5.00p 5.00p
Dividend adjustment factor c 1.0458 1.0458
Adjusted closing d = b x c 113.17p 105.62p
Total return since IPO (%) d / a - 1 3 15.5% 5.6%
Dividend cover
The dividend cover ratio is calculated by using the Company's distributable
profits for the year, divided by the amount of dividends paid during the year
ending 31 December 2022.
Profit for the year at VH Global Sustainable Energy Opportunities plc £24,073,045
Net distributions withheld at VH GSEO UK Holdings Limited £6,068,537
Total new distributions received from underlying investments £30,141,582
Dividend declared for financial year 2022 £21,674,193
(5.13p per ordinary share x Number of shares outstanding as at
31 December 2022 of 422,498,890)
Dividend cover 1.4x
Glossary
AIC Association of Investment Companies
AIFM Alternative Investment Fund Manager, G10 Capital Limited
Annual General Meeting or AGM A meeting held once a year which shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the company in which they are invested
COD Commercial Operational Date
Company VH Global Sustainable Energy Opportunities plc
Decentralised energy Energy which is produced close to where it will be used, rather than at a
large centralised plant elsewhere, delivered through a centralised grid
infrastructure
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share
Dividend Income receivable from an investment in shares
EPC Engineering, procurement and construction
ESG Environmental, social and governance
EU European Union
Ex-dividend date The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to shareholders
Financial Conduct Authority or FCA The independent body that regulates the financial services industry in the UK
FiT Feed-in Tariff
GAV Gross Asset Value
Gearing A way to magnify income and capital returns, but which can also magnify losses
GHG Green House Gases
Investment Adviser / Victory Hill Victory Hill Capital Partners LLP
Investment Company A company formed to invest in a diversified portfolio of assets
Investment Trust An investment company which is based in the UK and which meets certain tax
conditions which enables it to be exempt from UK corporation tax on its
capital gains. The Company is an investment trust
IPO Initial Public Offering
MW Megawatt
MWh Megawatt Hour
NAV per ordinary share NAV divided by the number of ordinary shares in issue (excluding any shares
held in treasury)
Net asset value or NAV An investment company's assets less its liabilities
OECD Organisation for Economic Co-operation and Development
Ongoing charge The 'ongoing charges' ratio is an indicator of the costs incurred in the
day-to-day management of the Company, expressed as a percentage of average net
assets. This ratio calculation is based on Association of Investment Companies
('AIC') recommended methodology
Ordinary shares The Company's ordinary shares in issue of £0.01 each
O&M Operation and Maintenance
PPA Power Purchase Agreement
Premium The amount, expressed as a percentage, by which the share price is more than
the net asset value per share
PV Photovoltaic
ROC Renewable Obligation Certificates
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Share price The price of a share as determined by a relevant stock market
SPE Special Purpose Entity
TCFD Task Force on Climate-Related Financial Disclosures
Total return Total return statistics enable the investor to make performance comparisons
between investment trusts with different dividend policies. The total return
measures the combined effect of any dividends paid, together with the rise or
fall in the share price or NAV. This is calculated by the movement in the
share price or NAV plus the dividends paid by the Company assuming these are
reinvested in the Company at the prevailing NAV/share price
WACC Weighted Average Cost of Capital
Shareholder Information
Share information
The Company's ordinary shares of 1p each are quoted on the Official List of
the FCA and traded on the premium segment of the Main Market of the London
Stock Exchange.
SEDOL number BNKVP75
ISIN GB00BNKVP754
Ticker/TIDM GSEO
LEI 213800RFHAOF372UU580
Frequency of NAV publication
The Company's NAV is released via RNS to the London Stock Exchange on a
quarterly basis and is published on the Company's website.
Sources of further information
Copies of the Company's annual and interim reports, stock exchange
announcements and further information on the Company can be obtained from the
Company's website: www.vh-gseo.com.
Financial calendar
March Annual results announced
Payment of first interim dividend
April Annual General Meeting
June Payment of second interim dividend
Company's half-year end
September Interim results announced
Payment of third interim dividend
December Payment of fourth interim dividend
Company's year end
Share register enquiries
Computershare Investor Services PLC maintains the share register on behalf of
the Company. In the event of queries regarding shares registered in your own
name, please contact the Registrar on 0370 703 0333. This helpline also offers
an automated self-service functionality (available 24 hours a day, 7 days a
week) which allows you to:
• hear the latest share price;
• confirm your current shareholding balance;
• confirm your payment history; and
• order Change of Address, Dividend Bank Mandate and Stock Transfer
forms.
By quoting the reference number on your share certificate, you can check your
holding on the Registrar's website at
www.investorcentre.co.uk. They also offer a free, secure share management
website service which allows you to:
• view your share portfolio and see the latest market price of your
shares;
• calculate the total market value of each shareholding;
• view price histories and trading graphs;
• register to receive communications from the Company, including the
Annual Report and Financial Statements, in electronic format;
• update bank mandates and change address details;
• use online dealing services; and
• pay dividends directly into your overseas bank account in your
chosen local currency.
To take advantage of this service, please log in at www.investorcentre.co.uk
and enter your Shareholder Reference Number and Company Code (this information
can be found on the last dividend voucher or your share certificate).
Electronic Communications and Proxy Voting
If you hold stock in your own name, you can choose to receive communications
from the Company, and vote, in electronic format. This has environmental
benefits in the reduction of paper, printing, energy and water usage, as well
as reducing costs to the Company. The paragraphs below explain how you can use
these services.
Electronic Communications
If you would like to take advantage of this service, please visit the
Registrar's website at www.investorcentre.co.uk and register. You will need
your Shareholder Reference Number (which is on your share certificate and tax
voucher) to hand. If you then agree to the terms and conditions, in future, on
the day that documents are sent to shareholders by post, you will receive an
e-mail providing the website address link to the documents. After you
register, paper documents will be available on request.
Electronic Proxy Voting
You can also return proxies electronically at www.eproxyappointment.com. If
you have registered for electronic communications, you will be issued a PIN
number to use when returning proxies to the secure Registrar website. You do
not need to register for electronic communications to use electronic proxy
voting, paper proxy forms will contain a PIN number to allow you to return
proxies electronically. If you have any questions about this service, please
contact Computershare on 0370 703 0333.
Association of Investment Companies
The Company is a member of the AIC, which publishes statistical information in
respect of member companies. The AIC can be contacted on 020 7282 5555,
enquiries@theaic.co.uk or visit the website: www.theaic.co.uk
(http://www.theaic.co.uk) .
Company Information
Non-executive Directors Administrator and Company Secretary
Bernard Bulkin OBE (Chair) Apex Fund and Corporate Services (UK) Limited
Daniella Carneiro
6th Floor
Richard Horlick
125 London Wall
Louise Kingham CBE
London
Margaret Stephens
EC2Y 5AS
Registered office Depositary
6th Floor Apex Depositary (UK) Limited
125 London Wall
6th Floor
London
125 London Wall
EC2Y 5AS
London
EC2Y 5AS
AIFM Registrar
G10 Capital Limited Computershare Investor Services PLC
4th Floor
The Pavilions
3 More London Riverside
Bridgwater Road
London
Bristol
SE1 2AQ
BS99 6ZY
Investment Adviser Auditor
Victory Hill Capital Partners LLP BDO LLP
4 Albemarle Street
55 Baker Street
London
London
W1S 4GA
W1U 7EU
Corporate Broker
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Legal Adviser
Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Company number: 12986255
Country of incorporation: England and Wales
ENDS
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rns@lseg.com (mailto:rns@lseg.com)
or visit
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.
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. END FR NKOBNDBKBANB
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