VH Global Sustain. - Half-year Report
11/09/2024 07:00
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RNS Number : 6594D VH Global Sustainable Energy Oppt. 11 September 2024
VH Global Sustainable Energy Opportunities plc (the "Company")
Interim results for the period ended 30 June 2024
The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO)
is pleased to report its interim results for the period from 1 January
2024 to 30 June 2024.
The Interim Report will be made available on the Company's website
at https://www.vh-gseo.com (https://www.vh-gseo.com/) . A copy of the
Interim Report will be submitted to the National Storage Mechanism and will
shortly be available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
VH Global Sustainable Energy Opportunities plc ("GSEO" or the "Company") is an
investment company that provides exposure to a globally and technologically
diversified portfolio of sustainable energy infrastructure assets that support
the Sustainable Development Goals ("SDGs") and are essential for the global
transition towards net zero.
Company Highlights as at 30 June 2024
Financial
- Net asset value: £447.7m
- Net asset value per share:110.84p
- Total leverage of GSEO as a percentage of NAV: 1.9%
- Total annualised NAV return since IPO (Feb 2021): 8.0%
- Dividend target for FY 2024: 5.68 pence per share
- Dividend coverage: 1.1x
- Total annualised NAV return for H1 2024: (1.2%)
- Percentage of revenues contracted and inflation linked: >90%
Sustainability
- Clean energy generated and injected into the grid: 512,233 MWh
- Approximate equivalent UK homes powered annually by clean energy:
130,000
- Tonnes of carbon dioxide equivalent avoided: 80,734t
- Tonnes of sulfur oxides displaced: 10,862t
The Company's LEI is 213800RFHAOF372UU580.
For further information, please contact:
Edelman Smithfield (PR Adviser)
Ged Brumby +44 (0)7540
412 301
Hamza Ali +44
(0)7976 308 914
Victory Hill Capital Partners LLP (Investment Manager)
Navin
Chauhan info@victory-hill.com
Deutsche Numis (Corporate Broker)
David Benda +44 (0)20
7260 1000
Matt Goss
Apex Fund and Corporate Services (UK) Limited (Company Secretary)
ukfundscosec@apexgroup.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 spun-out of a large established
global project finance banking group. The team has participated in more
than $200bn in transaction values across 91 conventional and renewable
energy-related transactions in over 30 jurisdictions worldwide. Victory Hill
is the investment manager of the Company.
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), Net Zero Asset
Managers Initiative (NZAMI), a member of the Global Impact Investing Network
(GIIN) and is a formal supporter of the Financial Stability Board's Task-Force
on Climate-related Disclosures (TCFD).
ABOUT GSEO
Investment company with a specialist mandate to support the global energy
transition
VH Global Sustainable Energy Opportunities plc ("GSEO" or the "Company") is an
investment company that provides exposure to a globally and technologically
diversified portfolio of sustainable energy infrastructure assets that support
the Sustainable Development Goals ("SDGs") and are essential for the global
transition towards net zero.
The Company aims to achieve diversification principally by making a range of
sustainable energy infrastructure investments across (1) a number of distinct
geographies and (2) a mix of proven technologies, that align with the 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 may 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
in the development phase.
No investment is made in projects involving the extraction of fossil fuels or
minerals.
GSEO is a closed-ended investment company launched in February 2021 by way of
listing on the premium segment of the London Stock Exchange's Main Market.
GSEO is classified as an SFDR Article 9 Fund.
The Company is overseen by an independent board of non‑executive directors
and managed by Victory Hill Capital Partners LLP ("Victory Hill" or the
"Investment Manager").
ABOUT VICTORY HILL
Experienced and focused leadership
Victory Hill's experienced team brings decades of knowledge and practice
dedicated to energy finance and investment.
Victory Hill is 100% owned by its five co-founders, who have focused on
shaping the business in pursuit of long term value for its clients. With a
multitude of nationalities within the wider team, Victory Hill has a
highly-skilled and diverse team focused on taking the necessary approach to
sustainable energy investing, with localised insight and understanding.
Why invest in GSEO?
A vehicle presenting a distinctive combination of access, return and impact
Access
• Access to global private markets energy investments
• A geographically and technologically diversified portfolio
of actively managed, high-impact investments which aim to ensure an effective
and just climate transition
Return
• Targeting attractive risk-adjusted returns from
around the world
• A highly diversified mix of assets driving both
long-term capital growth and income generation
• High degree of inflation linkage with over 90%
of revenues that are inflation-linked
Impact
• Creating environmental and social impact transforming lives and
communities without compromising on returns
• Transparent impact reporting
• SFDR Article 9 fund
HIGHLIGHTS
Financial (as at 30 June 2024)
Net Asset Value NAV per share* Total leverage of GSEO
as a % of NAV*
£447.7m 110.84p
1.9%
31 Dec 23: £483.8m 31 Dec 23: 116.46p
31 Dec 23: 1.9%
Dividend coverage* Dividend target per share Total annualised NAV return
for FY 2024
since IPO (Feb 2021)*
1.1x
5.68p 8.0%
31 Dec 23: 1.1x
FY 2023: 5.52p 31 Dec 23: 10.0%
Total annualised NAV return for H1-24* % of revenues contracted
and inflation linked
(1.2%)
>90%
30 Jun 23: 4.6%
31 Dec 23: >90%
Sustainability (for the six-month period ending 30 June 2024)
512,233 MWh 130,000
Clean energy generated Approximate equivalent
and injected into the grid
UK homes powered annually
by clean energy
30 Jun 23: 516,585 MWh
30 Jun 23: 138,458
80,734* tonnes 10,862 tonnes
of carbon dioxide equivalent of sulfur oxides displaced
emissions avoided
30 Jun 23: 11,359 tonnes
30 Jun 23: 53,423 tonnes
*Alternative performance measures are defined below.
CHAIR'S STATEMENT
The Company's differentiated portfolio continues to generate predictable and
healthy income to support GSEO's attractive dividends, while providing strong
potential for capital growth.
Bernard Bulkin
Chair
On behalf of the Board, I am pleased to present the Interim Report for VH
Global Sustainable Energy Opportunities plc (the "Company" or "GSEO") for the
six months to 30 June 2024.
Whilst we are experiencing the second consecutive financial year of turbulent
market conditions, GSEO continues to show resilience relative to the wider
market, achieving key milestones during the period under review.
GSEO delivered a total annualised Net Asset Value ("NAV") return since IPO to
the end of the reporting period of 8.0%, and a fully cash-covered dividend.
This reflects the Company's differentiated portfolio, which continues to
generate predictable and healthy income to support GSEO's attractive
dividends, while providing strong potential for capital growth through a
combination of highly diversified and actively managed operational assets, and
assets in construction providing scope for capital growth.
Financial performance
As at 30 June 2024, the Company's NAV per share was 110.84, a decrease of 5%
during the six-month period under review. The primary driver of the decrease
in NAV per share was unrealised foreign exchange movements on the Company's
investments.
Net cash flows from the underlying projects remain robust, covering the cash
dividend 1.1 times. In line with the dividend target for the year ending
31 December 2024 of 5.68p per Ordinary Share, the Company has paid a
quarterly dividend of 1.42p per share with respect to Q1 2024 as well as a
dividend of the same amount per share with respect to Q2 2024, giving a total
of 2.84p per share for the period, compared to 2.76p per share for the first
half of 2023, an increase of c.3%.
While the Board is disappointed to see the Company trade on a discount to NAV
of 31.8%, it does believe this discount materially undervalues the Company,
especially considering the covered 7.5% dividend yield based on the share
price as at 30 June 2024.
Investment activity
In Australia, an agreement to acquire and build two new fully-permitted solar
PV sites with
co- located battery energy storage systems ("BESS") in New South Wales ("NSW")
was signed on 28 March 2024 and the construction phase started as planned in
the first half of the year, with completion expected in the next twelve
months. The solar farm components of the first three NSW sites also completed
commissioning during the period and the construction of the co-located BESS on
these sites has begun and is progressing in line with expectations.
In Brazil, three of the remaining six solar sites have entered the final
stages of construction during the period, and all 16 assets are expected to be
fully operational by the end of 2025.
Post-period, a major milestone was reached for the 10MW UK flexible power with
Carbon Capture and Reuse ("CCR") asset, with the successful completion of a
series of hot commissioning tests of the four Rolls Royce 16V engines. The
testing and integration of the CCR element of the asset is on track to be
completed by the end of 2024.
Furthermore, GSEO announced post-period the commitment to acquire and
construct a 59.8MW portfolio of five-operating, ready-to-build ("RTB") and
under construction solar and onshore wind generation assets in Spain, Portugal
and Sweden, for a total consideration of EUR53m. In addition, the Company has
acquired the project rights for an additional 188.6MW of four RTB solar PV
assets in Spain, the construction of which is expected to be funded by a
co-investor and project finance debt.
This programme completes the investment of undeployed funds and allows the
Company to further strengthen and diversify its portfolio by adding one new
technology and three core Western European energy markets.
The GSEO portfolio is expected to be fully operational during the course of
2025.
Please refer to the Investment Manager's Report for further details on the
investment activity.
Sustainability and ESG
The Company continues to deploy capital into sustainable energy projects
around the world and ensures that ESG criteria are incorporated into all its
investment decisions.
During the period under review, GSEO's assets have generated a total of
512,233 MWh of renewable energy, equivalent to powering over 130,000 average
UK homes annually. A total of 80,734 tonnes of greenhouse gas emissions were
avoided in the first half of 2024, and 10,862 tonnes of sulfur oxides were
displaced in the same period, attributable to the US terminal storage assets.
The Company aims to implement market-leading standards for transparency and
disclosure. GSEO discloses as an Article 9 Fund under the EU's Sustainable
Finance Disclosure Regulation and reports voluntarily its practice under the
Task Force on Climate-Related Financial Disclosures ("TCFD") recommendations
and requirements. The European Securities and Markets Authority recently
published final guidelines on the use of ESG related terms in fund names. The
Company is reviewing the implications of the guidelines and will seek
compliance under any resulting regulation. Further details will be found in
the Sustainability section of this report.
GSEO remains committed to strengthening climate-related financial disclosures
over time, continuously improving its data infrastructure tools to monitor the
sustainable impact of its investments efficiently. This also ensures accurate
reporting on key metrics, including carbon emissions avoided, renewable energy
generated, and life cycle analysis.
Discount management
While the Company continues to perform well, the Board acknowledges that the
prolonged share price discount to NAV has presented several challenges for
shareholders which both the Board and the Investment Manager are continuing to
address.
A £10 million share buyback programme was announced on 15 September 2023,
and was increased by a further £10 million on 22 February 2024. As at
30 June 2024, the Company had bought back a total of £13.8 million worth of
its own shares, and remains active in executing this programme. The Board
continually reviews the capital allocation options available to the Company,
particularly in relation to weighing up investing in new assets, or supporting
current assets, against the benefits of buying back the Company's shares at a
discount. It is our primary objective to deliver on the Company's financial
objectives of achieving a 10% total NAV return inclusive of an attractive and
progressive dividend, and playing a role in funding the global energy
transition.
While the minimal level of gearing does not require the Company to sell assets
to repay debt, the Board and the Investment Manager are always looking for
asset sale opportunities that increase shareholder value. In pursuing a
prudent capital allocation policy, the Investment Manager and the Board remain
actively involved in increasing marketability and liquidity of GSEO's shares
by attracting new institutional and retail investors to the shareholder
register.
The Board will continue to ensure the Company is doing everything it can to
manage its discount and is fully focussed on delivering long-term value for
shareholders.
The Board and the Investment Manager, alongside Deutsche Numis, the Company's
broker, continue to have an active dialogue with both existing and prospective
shareholders. They also have initiatives in place to continue targeting retail
investors. These investor relation and marketing initiatives continue to
showcase the attractiveness of GSEO, creating new buying in the Company's
shares with the objective of ultimately returning to trading at a premium to
NAV as merited by diversification, expectation of future value from bringing
projects to operations, anticipated revenue growth and long-term inflation
linked cashflows backed by real assets that are fundamental to the country in
which they are operating.
Outlook
As one of the first listed global Infrastructure funds to formally link the
origination of its investments to the sustainability agenda as defined by the
UN Sustainable Development Goals ("SDGs"), GSEO remains very well positioned
to play an important role in accelerating the world's energy transition to net
zero, while offering its shareholders differentiated and sustainable returns
over the long-term.
The Board and I are confident that the Company's share price will recover over
time. We remain focused on disciplined capital allocation to optimise and
enhance shareholder returns.
For the remainder of the year, the Investment Manager's focus will be on
enhancing the portfolio's value by completing the construction of existing
assets and continuing to create additional value through active management of
the operational assets.
On behalf of the Board, I would like to thank shareholders for their continued
support, and the Investment Manager, Victory Hill, for its hard work in
continuing to deliver on the Company's investment objective.
Bernard Bulkin, PhD, OBE
Chair
10 September 2024
INVESTMENT MANAGER'S REPORT
"Traditional views on the underlying drivers for increased power usage,
including electrification, decarbonisation of industry and electrification of
transportation, have been disrupted by the growth of data centres,
cryptocurrency and notably artificial intelligence (AI) technology."
Richard Lum
Victory Hill takes a holistic approach to addressing the energy transition,
across the energy value chain and across borders, and we designed GSEO in
order to meet the growing demands for power and midstream infrastructure
brought about by the global phenomena for more energy.
Our investments are thematically aimed at supporting the energy transition as
energy markets globally internalise this phenomena, leading to local market
dislocations. GSEO's investment in the UK is geared towards providing
dependable and carbon free flexible and baseload power in a system constrained
by intermittent renewables. We expect greater demand from AI driven data
centres to create further market constraints and potentially interesting
margin opportunities for our UK project to access.
Market backdrop & outlook
According to the International Energy Agency's (IEA) World Energy Investment
report for 2024, investment across the global energy sector is due to exceed
US$3 trillion dollars for the first time in 2024, with 60% of it going into
clean energy technologies and infrastructure, demonstrating the centrality of
energy to the global economy. As population growth continues to trend upwards
and global economies continue on their pathway out of the post‑covid slump,
demand for energy will continue to grow.
It is clear that growth in electricity's share of final energy consumption has
also played a key role in stimulating the overall demand growth for energy.
According to the IEA, electricity demand globally is expected to rise at a
faster rate over the next three years, at an average of 3.4% annually to 2026,
and its share of final energy consumption is expected to increase to 30% in
2030 from 20% currently.
A behavioural shift in the type of final energy economies consumed has
therefore been a key factor in the energy transition to net zero as we had
previously observed.
Generative AI technology is a relatively new phenomenon with potentially
profound benefits for global society, but at a cost of significant energy
demand, and potentially large emissions. AI processes are broken down into two
phases: firstly training, where large amounts of data are collated and
consumed, and secondly inference, where an AI model utilises its training to
reason and make predictions when presented with a request, in a way which
mimics human ability. The training phase of AI models consumes significant
amounts of energy. Indeed, it is estimated that, overall, a ChatGPT query may
consume anywhere between 6 to 10 times more energy than a similar Google
search.
The IEA estimates that data centres alone consumed an estimated 460
terawatt-hours (TWh) of electricity in 2022, and its consumption of
electricity could reach more than 1,000 TWh in 2026, equivalent to Japan's
electricity consumption.
Global data centre demand for electricity driven by AI is expected to result
in a generational growth in power demand, with some analysts (Goldman Sachs
Equity Research April 2024) estimating a 160% increase in data centre power
demand by the end of 2030, with data centres share of global power demand
rising to 3-4% of global power demand by the end of the decade. If all
predicted data centre power demand growth was concentrated in a single
country, according to analysts, it would be among the top 10 power consuming
countries in the world.
All of this demand for power will have significant implications for the energy
transition to net zero. Firstly, unless all of the supply of additional
electricity comes from renewable sources, there is likely to be an impact in
emissions growth. Data centre requirements for power cannot be met with
intermittent power sources such as renewable generation alone. Centres operate
irrespective of the time of day and whether there is sufficient wind or solar
resource to power their mission. Conventional sources of power will therefore
still have a role to play in enabling this technology over the medium term.
Some analysts predict that the jump in carbon dioxide emitted from data centre
requirements will be equivalent to a 100% increase in 2030 over 2022
(equivalent to 215-220 million tons), predicated on power from renewable PPA
sources accounting for up to 30% of the requirement, with the balance provided
by natural gas generation. Natural gas has 50% less carbon dioxide when
combusted compared to coal and is increasingly seen as a decarbonising fuel
source particularly in the US where cheap supplies of domestically produced
natural gas is abundant.
A Goldman Sachs report estimates that 47 GW of incremental power generation
capacity will be required in the USA to support US data centre power demand
growth cumulatively through 2030, met with about 60% gas and 40% renewable
sources. This is expected to translate to an additional $50 billion of
capital investment in US power generation capacity cumulatively through 2030.
Further capital will also be required to upgrade transmission infrastructure,
and indeed gas processing, storage and distribution channels.
In Europe, it is anticipated that electricity could account for up to 55% of
primary energy over the coming decade. Much of this growth in power demand is
expected to come from data centres located (a) in countries such as the
Nordics, Spain and France, where baseload power from nuclear, wind, hydro and
solar is relatively cheap and well supplied; and (b) as well as countries
with large financial and service centres, or countries that offer tax
incentives such as Germany, the UK and Ireland. It is estimated that AI-driven
consumption of power will add around 220TWh of electricity demand in Europe.
In continental Europe, the recently announced acquisition and build out of a
renewables platform in Spain, Portugal and Sweden will target opportunities
for favourable private PPAs as supply side constraints are addressed.
In the US, GSEO's midstream infrastructure platform is well placed to access
further opportunities arising from the need to increase infrastructure build
out to support gas fired power generation, and in Australia, regional data
centre demand is anticipated to place further pressure on a constrained power
market, leading to more opportunities for margin access and frequency support
services from our solar and BESS storage hybrid projects.
The IEA estimates that data centres alone consumed an estimated 460
terawatt-hours (TWh) of electricity in 2022
A Goldman
Sachs report estimates that 47GW of incremental power generation capacity will
be required in the USA to support US data centre power demand growth
cumulatively through 2030
In Europe, it is anticipated that electricity could account for up to 55% of
primary energy over the coming decade
It is estimated that AI-driven consumption of power will add around 220TWh of
electricity demand in Europe
Investment updates
1. Brazilian solar PV assets
This programme is building a portfolio of distributed generation plants across
Brazil. There are currently 16 assets under this portfolio, 10 of which are
operational with the remaining six currently under construction. All assets
have useful lives of 25 years and are fully contracted with a combination of
investment-grade offtakers or a consortium of offtakers. All 16 assets are
expected to be fully operational by the end of 2025.
Update:
• During the period under review, we replaced the contractor
working on three of the construction assets due to their below-expected
performance and to prevent further delays.
• Performance of the operational assets is improving towards
the target levels from the original design as the Operations &
Maintenance teams continue to optimise their services.
2. Brazilian hydro facility
The 198MW run-of-river hydropower plant was acquired in 2022 from EDP Group.
The facility is located in the state of Espírito Santo, has been operational
since 1974 and went through a major repowering in 2011. The plant ownership
was awarded under a concession framework with three years remaining from
previous cycle and renewal planned for another 20 years thereafter. This
facility benefits from a portfolio of over 30 long-term inflation linked PPAs
with creditworthy counterparts in the regulated utilities market. It also has
the potential to commercialise power with large energy consumers in the
self-consumption segment of the energy market.
Update:
• The hydro facility in Brazil remains a strong performer in
the portfolio, exceeding expectations in the first half of the year.
• In June the asset marked its 50th anniversary since
commercial operations started.
The milestone was celebrated by Paraty Energia, the operating partner, with a
series of events designed to honour the plant's history, recognise the
contributions of its employees over the decades of operation, and engage with
the local community. The celebration included speeches, a documentary
screening, community activities and a commemorative plaque unveiling,
recognising the plant's significance to the region.
Over 200 villagers attended the celebration reflecting the community interest
and involvement.
The final day of celebrations focused on promoting family and community
connection, particularly aimed at the children and families of employees and
former employees. The latter underlined a sense of continuity over the
50 year history. The workforce was acknowledged, and the contributions of
past and present employees recognised in supporting successful plant
operations.
The 50th anniversary of the Mascarenhas Hydroelectric Plant was a landmark
event that celebrated the plant's rich history and its deep connection with
the community. Paraty Energia demonstrated its commitment to honouring the
past while looking forward to continued success and community engagement in
the future.
3. US terminal storage assets
In 2021, the Company acquired two operating liquid storage terminals located
in the Port of Brownsville, Texas, with the objective to displace
highly-pollutive fuel sources produced in Mexico. Since acquisition, the
capacity of the terminals has been expanded from 525,000 barrels to 895,000
barrels. The sites have a useful life of at least 30 years, and the operating
partner is Motus Energy LLC, which combines the team that built and operated
the assets from the previous owner and an established cross-border fuel
exporter.
Update:
• During the period under review, the Company continued to implement
operational optimisations and preventive maintenance. Terminal 1 tank
inspections and preventive services were implemented, without interrupting the
terminal's normal operations.
• The programme's operating partner, Motus, obtained the
ISO 45001 health and safety management system certification as well as
ISO 14001 environmental management certification on its operations, leading
to safer and improved operational practices. Motus was also awarded the ILTA
(International Liquid Terminals Association) 2024 Safety Award.
4. Australian solar PV with battery storage assets
This programme is building a portfolio of decentralised hybrid distributed
solar and battery assets, providing additional renewable energy and energy
storage capacity, both critically needed by the energy system in Australia.
GSEO has two operating assets in South Australia and Queensland totalling
17MWDC, with a 2-hour BESS on one of the assets to enhance its commercial
potential. The Company also owns three ready to build sites in New South Wales
("NSW") of 4.95MW solar with a 2-hour BESS. The solar farm component of these
sites has completed construction and construction of BESS is ongoing.
Update:
• The solar farm component of the three NSW sites completed
commissioning during the period and are operational. Construction of the
co-located BESS is progressing in line with expectations.
• During the period, we acquired two additional ready to build
projects in NSW comprised of 4.95MW solar PV sites with co-located 2-hour
BESS. Construction of the two hybrid sites has begun with completion expected
in the next 12 months.
• Once completed, the total capacity of the Australian programme will
be 37MW/60MWh, across seven assets.UK flexible power with CCR asset
5. UK flexible power with CCR asset
This programme consists of a flexible power generation asset that provides a
compelling solution to enable further renewable energy penetration in the UK.
It does so by providing a source of dependable flexible energy, which enables
the grid to respond to intermittency issues caused by wind and solar power
generation. The project has a 15-year power offtake and gas supply agreement
with a major European utility, Axpo, as well as a 15-year offtake agreement
for food-grade CO2 with Buse, a specialist industrial gases group. Additional
sources of revenues for the asset include grid ancillary services
(i.e. balancing mechanism, and capacity market payments). There is also
optionality for the asset to provide private wire power to local businesses.
This has not been assumed in the investment base case.
Update:
• During the period, the four Rolls Royce 16V engines were fully
commissioned and have been generating power in the course of testing, enabling
the site operational phase processes. Whilst current construction phase
insurance prevents the 16V operations from being ramped up to full capacity
until the overall integrated project reaches completion, power generated
during this period was transmitted to the grid and revenues were earned.
Meanwhile, the construction work continues based on the agreed construction
plan in the new EPC contract.
• The full commissioning of the plant with the CCR element is
progressing and completion is still expected in the second half of the year.
6. Post-period investment:
Spanish, Portuguese and Swedish solar & onshore wind assets
Post-period, we completed the acquisition of a new programme of renewable
energy assets focused on supporting the anticipated increase in demand for
power on the European continent.
The aim of this programme is to continue to support the global energy
transition by identifying market dislocations and providing investors with a
differentiated return. The three markets targeted in this programme are widely
acknowledged to be at the front-end of significant electricity demand in the
coming years due to increased electrification of the country, the
implementation of aggressive decarbonisation targets and the build out of new
energy intensive sectors including data centres and AI technology's
significant demand for power.
In Spain, the nationally mandated need to ensure quick penetration of solar
and wind generation, the accelerated decommissioning of baseload generation
sources such as nuclear power, coupled with a limited interconnection with
continental Europe, ensure conditions are aligning to allow investors to
secure differentiated returns through pursuing private commercial revenue
contracts.
Portugal's decarbonisation strategy centres around electrification and the
expansion of renewables as part of the electricity generation mix. As part of
its National Energy and Climate Plan (NECP), the country is targeting 80% of
electricity generation to come from renewables by 2030 and aims to reach a 47%
share of renewables in final energy consumption and 20% share of renewables
for transportation. Portugal has set technology-specific renewable capacity
targets for 2030 in its latest NECP to guide the expansion of clean energy.
Sweden is a global leader in decarbonisation and has targets to cut greenhouse
gas emissions by 59% by 2030 compared with 2005 and have 100% renewables in
its energy mix. Sweden was the first country to introduce carbon pricing and
is one of the countries with highest carbon price in the world which has
proven effective at driving decarbonisation. Major grid upgrades will catalyse
market integration and efficiency, alleviating existing bottlenecks in the
country and support higher, stable pricing in the long term with higher wind
captured prices. The latter is accompanied by increased power demand in North
Sweden. A major growth in industrial demand in northern Sweden is predicted,
primarily driven by an agenda to decarbonise energy intensive industries by
locating these close to cheap sources of renewable energy, such as AI-driven
data centres, EV battery manufacturers, and green steel which are expected to
increase demand by 19TWh of clean energy.
GSEO is partnering with Spanish Power SL, a specialised developer and operator
established in 1998, with a track record of constructing over 540MW of
projects and has developed and sold around 1.8GW of solar and onshore wind
projects. Spanish Power SL will own 20% of this programme.
The Company acquired a 59.8MW portfolio of five operating, ready-to-build
("RTB") and under construction solar and onshore wind generation assets in
Spain, Portugal and Sweden, for a total consideration of EUR53m. In addition,
the Company has acquired the project rights for 188.6MW of four RTB solar PV
assets in Spain, construction of which is expected to be fully funded by a
European strategic fund and project-level debt, giving a total program size of
248.4MW across nine assets.
The programme is split into two deployment legs, the first of which, completed
in July, was an investment from GSEO of EUR53m to fund a 59.8MW portfolio
consisting of:
• A 3.7MW operational solar PV plant in Spain
• A 6MW operational onshore wind asset in Sweden
• A 20MW solar PV plant under construction in Portugal
• A 10.3MW solar PV plant under construction in Spain
• A 19.8MW RTB onshore wind asset in Spain
The second leg consists of funding the construction of the 188.6MW RTB solar
PV assets, for a total amount of EUR45m in Q4 of this year. Once the second
leg is completed, GSEO will be the largest owner of the portfolio with an
effective ownership of 43.5%, with the balance split between the equity
co-investor and joint venture partners, Spanish Power.
This investment will bring the total number of assets in the GSEO portfolio to
36, split across seven countries and six technologies.
Portfolio operational & financial performance
The operating assets' actual energy generation was broadly above budget for
the six-month period to 30 June 2024:
1. 10 Brazilian solar PV assets
• The portfolio of 10 operational distributed solar PV assets
in Brazil continues to generate power, albeit below full capacity, primarily
due to overvoltage events during the first half of the year. This has now been
remedied and we expect the budget deviation to improve in the second half of
the year.
2. Brazilian hydro facility
• The Brazilian hydro facility continues to be a strong
performer in the portfolio with earnings ahead of budget in the first half of
the year.
• This was mainly driven by a combination of higher hydro
resource availability, high inflation impacting PPA prices positively and an
optimisation of operating costs during the period.
3. Five operating Australian solar PV with
battery storage assets
• The Australian solar PV with battery storage programme exceeded
expectations during the period, with performance above budget.
• Overall, revenues were supported by higher wholesale prices compared
to the previous year, driven by increased demand from a colder winter in the
region.
4. US terminal storage assets
• The H1 EBITDA for the terminal storage assets was below
budget, owing to weather-related events in the Mexican Gulf Coast. This
disrupted the rail system used to transport products from Mexico to the
storage terminals, causing a backlog of product deliveries during the period.
*Brazil Hydro generation represents gross power generation
** Brazil Solar PV generation relates to production related to financial
performance including that consumed by the plant
Highly contracted portfolio with creditworthy counterparties
Programme Key offtaker(s) PPA term Asset life
Brazilian solar PV assets 20 years 25 years
Brazilian hydro facility More than 30 PPAs with up to 15 years 25 years
blue-chip utilities counterparties - e.g. EDP
US terminal storage assets * 3 years rolling 30 years
UK flexible power with CCR asset 15 years 25 years
Australian solar PV with battery storage assets Local Australian utilities - Targeting contracted revenues of up to 50% - the remainder is intentionally 25 years
e.g. Diamond Energy left as merchant to capture the peak margin opportunity in Australia
Note: Asset life: since acquisition/commercial operational date ("COD")
* PMI is a 100% subsidiary of PEMEX
CASE STUDY
The Australian power market
The Australian market is unique in that it has great renewable resource
potential (land availability, wind and solar resources) but is predominantly
positioned at the opposite end of the energy spectrum in having the majority
of the country's energy needs generated by coal.
As the country advances its policy to move away from coal and introduce more
renewable energy to the grid, the issue of grid stability increases. On cloudy
days with no breeze, renewables raise concerns about energy supply security
and price stability. Even when the sun is shining and the wind is blowing,
solar power and other intermittent renewables can be problematic for energy
grids.
Co-locating solar PV and BESS provides the system with additional renewable
energy. It also supports grid stability with the storage solution, allowing
the assets to better serve the needs of the Australian power market in its
energy transition.
Notably, GSEO expects to gain access to additional energy arbitrage as well as
frequency stability services revenue streams from the co-located BESS.
The above chart shows the average demand in South Australia during the summer
workday from 2017 to 2022. Demand volume for the network operator has been
declining during daylight hours due to increasing rooftop solar PV generation.
Intense energy production from rooftop solar PV throughout the day, followed
by a sharp drop in power production when the sun sets, does little to meet
energy demand which ramps up sharply in the afternoon. This phenomenon is
called the "duck curve". The duck curve - named due to its shape - helps us
understand the challenge of renewables integration and the potential a storage
solution like co-located BESS has in such market.
Following the completion of the construction of our co-located 2 hour 4.95MW
BESS, the solar and storage hybrid system in South Australia is capturing
attractive power prices in the intraday market. During H1 2024, the monthly
average captured price for BESS was over A$200/MWh, which is more than 4 times
higher than the average captured prices for solar during the same period. This
showcases how the asset is able to optimally shift its power dispatch profile
to capture high peak power prices in the early morning and afternoon.
Furthermore, during H1 2024, South Australia experienced electricity prices
above A$1,000/MWh 42 times, reaching at times the market cap price of
A$16,600/MWh. Similarly in New South Wales, we have observed events in May
where prices were above A$15,000/MWh. The reasons for such price spikes
varied, including variable renewable energy generation, weather, bushfires and
restricted import capacity from neighbouring regions. However, we believe this
trend will continue as this is an indication of prices being highly sensitive
to supply and demand fluctuations due to grid constraints and increased
intermittent renewable energy. This continues to support our thesis on having
flexible capacity within the programme.
Net Asset Value
The NAV of the Company decreased from £483.8m at 31 December 2023 to
£447.7m at 30 June 2024. The key drivers for the NAV decrease were:
• An unrealised foreign exchange loss of £22.2m mainly driven
by a 14.5% weakening of BRL against GBP during the period.
• £8.4m was spent by the Company during the period on the
ongoing share buybacks bringing the total number of shares bought back to
18.6m.
• The decrease in NAV was partially offset by the £9.9m received in
distributions from the underlying investments.
• The fair value movement on investments was -£0.2m as the weighted
average discount rate applied to operational assets decreased by a moderate
9bps offset by an updated inflation outlook.
• Total fund expenses for the period of £3.4m or 1.5% in an
ongoing charges ratio.
Key sensitivities
Discount rate
A range of discount rates are applied in calculating the fair value of the
investments, considering risk free rate, country-specific and asset-specific
risk premia and betas. Discount rates for operational assets at 30 June 2024
are 7.07% (31 December 2023: 6.91%) in the US, 7.65% (31 December
2023: 7.74%) in Australia, 9.40% (31 December 2023: 9.54%) for the
Brazilian hydro facility and 9.46% (31 December 2023: 9.67%) for the
Brazilian solar PV assets. A 1.5% increase (decrease) in discount rates
across the portfolio decreases (increases) NAV by 8.2p (10.2p).
Inflation
The sensitivity assumes a 1% increase or decrease in long-term inflation
relative to the base case of 2.15% for the US assets, 2.63% for the Australian
assets and 3.00% 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 7.0p (5.8p).
Operating expenses
The sensitivity assumes a 5% increase or decrease in operating expenses
relative to respective contracts and budgets for each asset. A 5% increase
(decrease) in operating expenses across the portfolio decreases (increases)
NAV by 2.1p (2.1p).
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 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 7.5p (9.2p).
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 1.3p (1.2p).
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, and the addition of
battery storage to the Australian solar PV assets to mitigate solar
intermittency risk.
SUSTAINABILITY
"The Company recognises that achieving a successful energy transition involves
balancing three key aspects: environmental sustainability, energy security
and access, and economic growth and development."
Eleanor Fraser-Smith
Head of Sustainability (Victory Hill Capital Partners LLP)
In the first half of 2024, the Company's investment and asset management
strategy maintained its impact and focus on achieving this balanced approach.
Investments continued to support the phasing out of pollutive energy sources
and supply of clean energy to power grids to serve communities and business.
The Company also implemented operational improvements, generating meaningful
local environmental and social benefits through engagement with its operating
partners.
ESG Regulation & Framework Alignment
The Company's investment strategy, designed to align with the UN Sustainable
Development Goals (SDGs), focuses on promoting and hastening the energy
transition by investing in sustainable energy infrastructure that benefits
communities globally. To reach these goals, the Investment Manager recognises
the importance of responsible and sustainable investment, acknowledging the
interconnectedness and mutual reinforcement of social and environmental
sustainability. Through the Company's investments, the Investment Manager aims
to bridge critical gaps in energy markets, supporting energy security,
accessibility, and economic growth.
The Investment Manager is committed to adhering to the principles of the UN
Global Compact. This involves employing a risk-based methodology to Company
investments that prioritises external validation of SDG strategy alignment,
ensuring no significant harm to SDG goals, and includes comprehensive ESG due
diligence, and materiality and risk-opportunity assessments.
Governance or management system gaps are identified, and significant risks or
opportunities to create sustainable value are prioritised. Actions to mitigate
these issues are outlined in each investment-specific Sustainability Action
Plan (SAP). The SAP is an evolving document that is consistently reviewed and
updated in collaboration with the Company's operating partners. Performance
against these plans form part of an annual operating partner assessment.
The Company's investment objective reflects its commitment to sustainability,
making it subject to the EU Sustainable Finance Disclosure Regulation
("SFDR"). Disclosures are available on the Company's website.
The European Securities and Markets Authority ("ESMA") recently published
final guidelines on the use of ESG related terms in fund names. The Company is
reviewing the guidelines' terminology proscriptions and restrictions within
the context of its sustainability objective and underlying investments.
The Company is pursuing a label under the new FCA Sustainable Disclosure
Regulation ("SDR") and has explicitly updated its investment objective to
highlight sustainability goals previously identified in the investment policy,
with approval from the Board and Investment Manager governance committees. The
Company is evaluating label options and preparing necessary documentation to
meet the December 2024 application deadline.
H1 2024 Sustainability Highlights
Solar energy generated
40,838 MWh
30 June 2023: 28,334 MWh
Hydro power generated
471,395* MWh
30 June 2023: 488,251 MWh
Equivalent to powering over
130,000
houses annually in the UK**
30 June 2023: 138,458 households
Sulfur oxides displaced
10,862 tonnes
30 June 2023: 11,359 tonnes
CO2e emissions avoided
80,734*** tonnes
30 June 2023: 53,423 tCO2e
The equivalent of removing over
44,074
average sized cars from UK roads
30 June 2023: 26,100
* Hydro generation represents the power injected into the
grid only.
** References for equivalency calculations: UK energy use -
www.ofgem.gov.uk UK mileage - www.dft.gov.uk
*** Increase in avoided emissions (2023 interim comparison) is
attributed to increased carbon intensity of Brazilian grid (IEA published
emission factors).
H1-24 ESG OPERATIONAL PERFORMANCE
Half year 2024 ESG operational performance(1)
Portfolio energy use and GHG emissions(2)
Scope Energy use (MWh) Energy use (MWh) GHG emission, GHG emission
H1 2024
H1 2023
(t CO2e) H1 2024
(t CO2e) H1 2023
Scope 1 8,831 10,730± 1,597 1,963±
Scope 2 1,345 910± 366 269±
Total operational emissions (Scope 1&2) 10,176 11,640± 1,963 2,232±
Scope 3 - - 23,278 16,827±
Total Scope emissions - - 25,242 19,059±
The Company has reported progress against the net zero asset managers target
for the portfolio reporting a 12% reduction in scope 1&2 emissions from H1
2023 to H1 2024. This was driven primarily by efficiency gains in the terminal
storage asset.
There has been a slight increase in operational emissions due to additional
operational assets, including the Australian solar PV with battery storage
assets. The increase in Scope 2 is due primarily to the commissioning of the
BESS assets in Australia and increase in imported grid electricity.
Improvements in Scope 3 data capture and reporting is reflected in the
increased emissions data.
Operational environmental and social data
Metric Units 2024 H1 2023 H1
Water Use kilolitres 14,706 14,000
Water Quality Index - Hydro WQI Good Good
Waste tonnes 7 66
NOX avoided tonnes 1,078 1,129
PM 10 & 2.5 avoided tonnes 960 1,002
Environmental performance is comparable to H1 2023 despite the additional
assets. Avoided air emissions metrics reflect a slight reduction in HSFO flow
through the US terminal storage asset.
Social
Metric Units 2024 H1 2023 H1
Gender Diversity
Male % of average 98 98
Female % of average 2 2
Other % of average 0 0
Staff turnover % of average 21 2
Total number of employees (asset) Full time equivalent (FTE) 67.5 61
Total number of employees (operator) Full time equivalent (FTE) 57 NR
Health and Safety
Total incident number(3) Number of incidents 3 1
Total case injury rate(4) Total number of recordable injuries 2 0
Staff turnover remains a challenge in the US where the workforce is transient
and the local labour market is competitive. The operator is continuing to
implement policies to support labour retention. The Brazilian hydro facility
also saw some turnover in Q2 following a period of workforce stability.
Improving diversity for small mid-market operators remains a challenge
particularly in female representation. Recruitment pipelines continue to draw
from local talent pools that lack diversity and the operators often lack
resources for robust diversity initiatives. The Company is committed to
working with the operators to overcome challenges and create a more diverse
workforce.
The Company is pleased that health and safety continues to be a focus for
operating partners. Root cause review of two traffic related incidents in the
Brazilian solar PV programme has led to improved practices by the operating
partner and the Company continues to monitor progress.
(1) ESG data is not assured. Limited assurance is achieved
on end of year data. For the most up to date assured ESG data please see the
2023 annual report and accounts.
(2) Data with ± symbol is restated from 2023 interim
report following correction of energy use reporting at US terminal storage
asset and improved reporting with increase in Scope 3 categories included.
(3) This includes near miss and those resulting in
employee injury.
(4) Number of recordable injuries reported.
CASE STUDY
Enhancing operations and community engagement in the Brazilian distributed
solar portfolio
The Company's solar PV footprint in Brazil continues to grow with ten
operating solar sites and six currently under construction. These are
distributed across nine regions in Brazil.
The Investment Manager works with its operating partners to build capacity on
sustainability and ESG topics and provides guidance on environmental and
social aspects of operations. This collaboration supported the Company's
operating partner, Energea, in its efforts to improve ESG practices.
Strengthening health and safety practices
In collaboration with Victory Hill, Energea has prioritised health and safety
across all sites with key initiatives including:
• Policy and procedures: updating the health and safety manual
to reflect best practices.
• Training programs: implementing training sessions for O&M
specialists focusing on best practices, emergency procedures and hazard
recognition.
• Distribution of personal protective equipment (PPE): ensuring
all team members are equipped with the necessary PPE to perform their duties
safely.
• Site risk analysis: conducting in-depth risk assessments for
each site with expert external support to identify potential hazards and
implement corrective measures.
Addressing transportation risks
Transportation between sites has been identified as a key safety risk due to
the significant distances involved. In the first half of the year, two
traffic-related incidents, fortunately resulting in no serious injuries,
prompted a thorough review of transportation practices. Evaluation of current
practices led to the development of more stringent transportation protocols,
including:
• Appropriate vehicles: Ensuring that all vehicles used are
company-provided and suitable for the terrain and conditions of the routes
between sites.
• Employee awareness: Reinforcing transportation procedures through
training and communication, emphasising the use of company-provided vehicles
only.
• Vehicle maintenance: Regular maintenance schedules to keep
the fleet in optimal condition, ensuring safety and reliability.
Energea provides transportation for all site-based teams and stipulates only
company-owned vehicles can be used during working hours. This policy not only
enhances safety but also ensures that vehicle maintenance is consistent and up
to date.
Employee and community engagement
In addition to focusing on internal operations, Energea has taken significant
steps to improve its engagement with local communities:
• Improved signage: Installation of clear, visible signage around
all sites, highlighting potential dangers and providing contact details for
the site operator.
• Community outreach: Active engagement with local businesses and
residents to raise awareness of the sites and their benefits.
• Stakeholder engagement plan: Using an Investment Manager provided
tool and guidance, Energea initiated interviews with local community members
to gather feedback on the impact of the sites. Key themes included better
signage, recruitment opportunities, and infrastructure improvements such as
roads, drainage and access to renewable energy.
Outcomes and future plans
Energea's proactive approach has enhanced local safety culture, improved
employee engagement and started to create stronger community relationships
through increased engagement and responsiveness to community feedback.
The asset Sustainability Action Plan, agreed between Energea and the
Investment Manager, identifies priorities in 2024. The operator will continue
to focus on health, safety and security, transportation safety, and community
engagement. The operator is committed to ongoing improvement, ensuring that
its operations benefit both employees and the surrounding communities.
The Investment Manager is working with Energea to set the standard for
responsible and sustainable renewable energy operations.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors acknowledge responsibility for the Interim Report and confirm
that, to the best of their knowledge, these condensed financial statements
have been prepared in accordance with IAS 34 "Interim Financial Reporting" and
give a true and fair view of the assets, liabilities, financial position and
profit of the Company, as required by DTR 4.2.4R. The Directors confirm that
the Interim Report (including the Chair's Statement and the Investment
Manager's Report) includes a fair review of the information required by DTR
4.2.7R and DTR 4.2.8R, namely:
• An indication of important events that have occurred during
the first six months of the financial year, and their impact on the condensed
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial period; and
• Material related party transactions that have taken place in
the first six months and any material changes in the related party
transactions described in the last Annual Report.
The Directors of the Company are noted on below.
The principal risks and uncertainties associated with the Company's business
include, but are not limited to, the risks listed below. Information on these
risks and how they are managed is set out on pages 49 to 56 of the 2023 Annual
Report. In the view of the Board, the majority of the principal risks and
uncertainties were unchanged over the last six months and remain applicable to
the rest of the financial year.
Risks relating to the Company:
• Reliance on Investment Manager
• Reliance on third party service providers
• Currency risks
• Liquidity risks
Risks relating to the portfolio investment strategy:
• Illiquidity of investments
• Market conditions
• Concentration risk
Risks relating to investments:
• Construction risks
• Due diligence
• Counterparty risks
• Uninsured loss and damage
• Curtailment risks
• Commodity price risks
• ESG risks
Risks relating to the Company's shares:
• Discount to NAV
Risks relating to regulation:
• Regulation
Operational risks:
• Operation and management risks of the portfolio of assets
• Valuation risk
Climate-related risks:
• Physical risks
• Transition risks
This Interim Report was approved by the Board of Directors and the above
Responsibility Statement was signed on its behalf by:
Bernard Bulkin
Chair
10 September 2024
INDEPENDENT REVIEW REPORT TO VH GLOBAL SUSTAINABLE ENERGY OPPORTUNITIES PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended
30 June 2024 which comprises Condensed Statement of Comprehensive Income,
Condensed Statement of Financial Position, Condensed Statement of Changes in
Shareholders' Equity, Condensed Statement of Cash Flow and Notes to the
Financial Statements.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion paragraph of this
report, nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
Company to cease to continue as a going concern.
Responsibilities of directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and
for no other purpose. No person is entitled to rely on this report unless such
a person is a person entitled to rely upon this report by virtue of and for
the purpose of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose
and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
10 September 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the period 1 January 2024 to 30 June 2024
For the six-month period ended For the six-month period ended
30 June 2024
30 June 2023
(unaudited)
(unaudited)
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Income
(Loss) / Gain on investments 6 - (23,229) (23,229) - 7,862 7,862
Investment income 3 10,514 - 10,514 15,356 - 15,356
Total income and (losses) / gains 10,514 (23,229) (12,715) 15,356 7,862 23,218
Investment management fees 13 (2,218) - (2,218) (2,181) - (2,181)
Other expenses 4 (1,156) - (1,156) (917) - (917)
Profit / (loss) for the period before taxation 7,140 (23,229) (16,089) 12,258 7,862 20,120
Taxation 5 - - - - - -
Profit / (loss) for the period after taxation 7,140 (23,229) (16,089) 12,258 7,862 20,120
Profit / (loss) and total comprehensive income attributable to:
Equity holders of the Company 7,140 (23,229) (16,089) 12,258 7,862 20,120
(Loss) / earnings per share - basic and diluted (pence) 15 1.75 (5.68) (3.93) 2.90 1.86 4.76
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, no items are determined to be unusual by their nature, size or
incidence.
The above Statement of Comprehensive Income includes all recognised gains and
losses.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Note As at As at
30 June
31 December 2023
2024
(audited)
(unaudited)
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 6 371,956 369,047
Total non-current assets 371,956 369,047
Current assets
Cash and cash equivalents 9 75,771 74,258
Cash receivable 8 - 40,367
Other receivables 8 541 441
Total current assets 76,312 115,066
Total assets 448,268 484,113
Current liabilities
Accounts payable and accrued expenses 10 (573) (270)
Total current liabilities (573) (270)
Total liabilities (573) (270)
Net assets 447,695 483,843
Capital and reserves
Share capital 11 4,225 4,225
Share premium 11 186,368 186,368
Special distributable reserve 11 218,624 227,067
Capital reserve 35,466 58,694
Revenue reserve 3,012 7,489
Total capital and reserves attributable to equity holders of the Company 447,695 483,843
Net asset value per ordinary share 110.84 116.46
The financial statements were approved and authorised for issue by the Board
of Directors on 10 September 2024 and signed on its behalf by:
Bernard Bulkin
Chair
Company Registration Number 12986255
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
As at 30 June 2024
For the six-month period ended 30 June 2024 Note Share Share Special distributable reserve Capital Revenue reserve Total
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
Opening balance 4,225 186,368 227,067 58,694 7,489 483,843
Shares bought back 11 - - (8,443) - - (8,443)
Total comprehensive income/(loss) for the period - - - (23,229) 7,140 (16,089)
Interim dividends paid during the period 12 - - - - (11,616) (11,616)
Balance at 30 June 2024 4,225 186,368 218,624 35,465 3,013 447,695
For the six-month period ended Note Share Share Special distributable reserve Capital Revenue reserve Total
30 June 2023
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
Opening balance 4,225 186,368 232,467 26,177 7,936 457,173
Total comprehensive income for the period - - - 7,862 12,258 20,120
Interim dividends paid during the period 12 - - - - (11,661) (11,661)
Balance at 30 June 2023 4,225 186,368 232,467 34,039 8,533 465,632
A total of 422,498,890 ordinary shares were issued since its incorporation to
30 June 2024.
During the period, the Company purchased for treasury a total of 11,568,147
ordinary shares.
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 and revenue reserves are distributable to
Shareholders of the Company.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2024
Note For the For the
six-months
six-months
period ended
period ended
30 June 2024
30 June 2023
(unaudited)
(unaudited)
£'000
£'000
Cash flows from operating activities
(Loss) / profit before tax (16,089) 20,120
Adjustment for:
Movement in fair value of investments 6 23,217 (7,346)
Interest on cash deposits 3 (1,417) (2,776)
Operating result before working capital changes 5,711 9,998
Decrease in prepayments and other receivables 40,267 94
Increase / (decrease) in accounts payable and accrued expenses 303 (17)
Net cash flow generated from operating activities 46,281 10,075
Cash flows from investing activities
Purchase of investments 6 (26,126) (6,902)
Interest on cash deposits 3 1,417 2,776
Net cash used in investing activities (24,709) (4,126)
Cash flows from financing activities
Share buybacks 11 (8,443) -
Dividends paid in the period 12 (11,616) (11,661)
Net cash used in financing activities (20,059) (11,661)
Net decrease in cash and cash equivalents 1,513 (5,712)
Cash and cash equivalents at beginning of the period 9 74,258 141,791
Cash and cash equivalents at end of the period 9 75,771 136,079
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 and registered as a public company limited 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 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 interim condensed financial statements comprise only the results of the
Company for the six-month period ended 30 June 2024, 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.
The annual financial statements of the Company for the year ended 31 December
2023 were approved by the Directors on 4 April 2024 and are prepared in
accordance with UK adopted International Accounting Standards. The annual
financial statements are available on the Company's website
https://www.vh-gseo.com/.
2. Significant accounting policies
2.1 Basis of preparation
The condensed financial statements ("financial statements") included in this
Interim Report have been prepared in accordance with IAS 34 "Interim
Financial Reporting". The financial statements have been prepared on the
historical cost basis, as modified for the measurement of certain financial
instruments at fair value through profit or loss. The principal accounting
policies are set out in Note 2.
The financial statements have also been prepared as far as is 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 July 2022 by the Association of Investment
Companies ("AIC").
The financial statements are presented in sterling, which is the Company's
functional currency and are rounded to the nearest thousand, unless otherwise
stated.
The accounting policies, significant judgements, key assumptions and estimates
are consistent with those used in the latest audited financial statements to
31 December 2023. These condensed financial statements do not constitute
statutory accounts as defined in section 434 of the Companies Act 2006 and,
therefore, do not include all information and disclosures required in the
annual financial statements and should be read in conjunction with the
Company's annual financial statements for the year ended 31 December 2023.
The audited annual accounts for the year ended 31 December 2023 have been
delivered to the Registrar of Companies. The Auditor's report thereon was
unqualified and did not contain statements under section 498(2) or (3) of
the Companies Act 2006.
2.2 Review
This Interim Report has been reviewed by the Company's Auditor in accordance
with the International Standard on Review Engagements (ISREs).
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 continues to meet day-to-day liquidity needs through its cash
resources. As at 30 June 2024, the Company had net current assets of £75.7m
and cash balances of £75.8m, which are sufficient to meet current obligations
as they fall due. There is no external debt at the Company as at period end.
The Company's major cash outflows include discretionary expenses such as
dividend payments and costs related to acquiring new assets, as well as
ongoing operating expenses.
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 2024, 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 the Middle East 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 operation 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.
Therefore, the financial statements have been prepared on the going concern
basis.
2.4 Critical accounting judgements, estimates and assumptions
The preparation of the interim 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
Manager. 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 period are set out
as follows:
Key estimation and uncertainty: Fair value estimation for investments at fair
value
Fair value is calculated by discounting, at an appropriate discount rate,
future cash flows expected to be received by the Company's intermediate
holdings from investments. The discount rates used in the valuation exercise
represent the Investment Manager's and the Board's assessment of the rate of
return in the market for assets with similar characteristics and risk profile.
The discount rates are reviewed quarterly and updated, where appropriate, to
reflect changes in the market and in the project risk characteristics. The
estimates and assumptions that are used in the calculation of the fair value
of investments are disclosed in note 6.
Key judgement: Equity and debt investment in VH GSEO UK Holdings
In applying their judgement, the Directors have satisfied themselves that the
equity and debt investments into its direct wholly owned subsidiary, VH GSEO
UK Holdings, share the same investment characteristics and, as such,
constitute a single asset class for IFRS 7 disclosure purposes.
Key judgement: Investment entity and basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states that
investment entities should measure all of their subsidiaries that are
themselves investment entities at fair value (in accordance with IFRS 9
Financial Instruments: Recognition and Measurement, and IFRS 13 Fair Value
Measurement). Being investment entities, GSEO and its wholly owned direct
subsidiary, GSEO Holdings are measured at fair value as opposed to being
consolidated on a line-by-line basis, meaning their cash and working capital
balances are included in the fair value of investments rather than the Group's
current assets. The Directors believe the treatment outlined above provides
the most relevant information to investors.
2.5 Segmental reporting
The Board of Directors 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 chief operating decision maker
("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.
3. Investment Income
For the six-months period ended For the six-months period ended
30 June 2024
30 June 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Interest on cash deposits 1,417 - 1,417 2,776 - 2,776
Interest income from investments 3,926 - 3,926 3,080 - 3,080
Dividend income 5,171 - 5,171 9,500 - 9,500
Investment income 10,514 - 10,514 15,356 - 15,356
4. Operating expenses
For the six months period ended For the six months period ended
30 June 2024
30 June 2023
£'000
£'000
Fees payable to the Company's auditor (exclusive of VAT) for the:
-Interim assurance review 73 70
AIFM fees 37 36
Directors' fees 196 166
Other expenses 650 849
Unrealised FX gains and losses - (5)
Total operating expenses 1,156 917
Fees with respect to the Investment Manager are set out in note 13, related
parties transactions.
The Company had no employees during the period. Details of Directors' fees are
disclosed in note 13, with no other emoluments reported.
5. Taxation
Taxable income during the period was offset by expenses and the tax charge for
the period ended 30 June 2024 is £nil (30 June 2023: £nil).
6. Investments at fair value through profit or loss
As set out in note 2.6, the Company designates its interest in its wholly
owned direct subsidiary GSEO UK 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 30 June 2024 Total Quoted prices Significant Significant
£'000
in active
Observable inputs
unobservable
markets
(level 2)
inputs
(level 1)
£'000
(level 3)
£'000
£'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss 371,956 - - 371,956
As at 31 December 2023 Total Quoted prices Significant Significant
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 369,047 - - 369,047
All of the Company's investments have been classified as Level 3 and there
have been no transfers between levels during the period ended 30 June 2024.
As at As at
30 June
31 December 2023
2024
£'000
£'000
Opening balance at beginning of the period/year 369,047 315,133
Additions during the period at cost 26,126 22,819
395,173 337,952
Fair value movement on investments:
Change in fair value of equity investments(1) (23,229) 32,649
Interest on loan investments(2) 12 1,554
Total fair value movement on investments (23,217) 31,095
Closing balance 371,956 369,047
(1) The £23,229k in the Statement of Comprehensive Income
within other expenses/ income and Statement of Changes in Equity is made up of
unrealised losses of £23,229k per this note and a realised foreign exchange
loss of £nil during the period.
² This is the amount related to the unpaid shareholder
loan interest income as at the period end.
Further information on the basis of valuation is detailed in note 2 to the
financial statements.
Valuation methodology
As disclosed on pages 143 to 147 of the Company's Annual Report for the year
ended 31 December 2023, IFRS 13 "Fair Value Measurement" requires disclosure
of fair value measurement by level. The 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 fair value of the Company's investments is
the net asset value of VH GSEO UK Holdings Limited 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, they are always
expected to be classified as level 3 as the investments are not traded and
contain unobservable inputs. There have been no transfers between levels
during the six months ended 30 June 2024.
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
30 June 2024
Discount rate Weighted Average US terminal storage assets 7.07%
Weighted Average Australian solar PV with battery storage assets 7.65%
Weighted Average Brazilian solar PV assets 9.46%
Weighted Average Brazilian hydro facility 9.40%
Long-term inflation United States US terminal storage assets 2.15%
Australia Australian solar PV with battery storage assets 2.63%
Brazil Brazilian solar PV assets & Brazilian hydro facility 3.00%
Total 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 1:1.2645
GBP:BRL Brazilian solar PV assets & Brazilian hydro facility 1:7.0745
GBP:AUD Australian solar PV with battery storage assets 1:1.8960
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 +/-1.50% 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.
As at 30 June 2024 Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Discount rate - US terminal storage assets -1.50% 21,854 5.41
1.50% (17,261) -4.27
Discount rate - Australian solar PV with battery storage assets -1.50% 2,440 0.60
1.50% (1,972) -0.49
Discount rate - Brazilian solar PV assets -1.50% 2,873 0.71
1.50% (2,361) -0.58
Discount rate - Brazilian hydro facility -1.50% 14,130 3.50
1.50% (11,516) -2.85
Discount rate - All -1.50% 41,296 10.22
1.50% (33,110) -8.20
As at 30 June 2024 Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Inflation - US terminal storage assets -1.00% (9,861) -2.44
1.00% 11,561 2.86
Inflation - Australian solar PV with battery storage assets -1.00% (1,295) -0.32
1.00% 1,269 0.31
Inflation - Brazilian solar PV assets -1.00% (1,797) -0.45
1.00% 2,114 0.52
Inflation - Brazilian hydro facility -1.00% (10,480) -2.59
1.00% 13,366 3.31
Long-term Inflation - All -1.00% (23,432) -5.80
1.00% 28,310 7.01
As at 30 June 2024 Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Asset life - US terminal storage assets -1 year (1,921) -0.48
+1 year 2,227 0.55
Asset life - Australian solar PV with battery storage assets -1 year (455) -0.11
+1 year 292 0.07
Asset life - Brazilian solar PV assets -1 year (368) -0.09
+1 year 344 0.09
Asset life - Brazilian hydro facility -1 year (2,238) -0.55
+1 year 2,241 0.55
Asset life - All -1 year (4,982) -1.23
+1 year 5,104 1.26
As at 30 June 2024 Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Operating expenses - US terminal storage assets 5.00% (4,254) -1.05
-5.00% 4,273 1.06
Operating expenses - Australian solar PV with battery storage assets 5.00% (251) -0.06
-5.00% 252 0.06
Operating expenses - Brazilian solar PV assets 5.00% (775) -0.19
-5.00% 781 0.19
Operating expenses - Brazilian hydro facility 5.00% (3,143) -0.78
-5.00% 3,143 0.78
Operating expenses - All 5.00% (8,423) -2.09
-5.00% 8,450 2.09
As at 30 June 2024 Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
FX (GBP:USD) -10.00% 13,910 3.44
10.00% (11,381) -2.82
FX (GBP:BRL) -10.00% 19,520 4.83
10.00% (15,971) -3.95
FX (GBP:AUD) -10.00% 3,782 0.94
10.00% (3,095) -0.77
FX - All -10.00% 37,212 9.21
10.00% (30,446) -7.54
The sensitivities above are assumed to be independent of each other. Combined
sensitivities are not presented.
7. 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 30 June 2024
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%
Tabbita Solar Farm Pty Ptd Australia 100%
Griffith Solar Pty Ltd 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 Itaguaí I Ltda. * Brazil 100%
Energea Itaguaí II Ltda. * Brazil 100%
Energea Itaguaí III Ltda. * Brazil 100%
Energea Nova Friburgo Ltda. * Brazil 100%
Energea Itabaiana Ltda. * Brazil 100%
Energea Redenção Ltda. * Brazil 100%
Energea Itaporanga Ltda. * Brazil 100%
Energea Bataguassu Ltda. * Brazil 100%
Energea Palmas S.A. * Brazil 100%
Energea Itacarambi Ltda. * Brazil 100%
Energea Vassouras I Ltda. * Brazil 100%
Energea Seropédica Ltda. * Brazil 100%
Energea Paraíba do Sul Ltda. * Brazil 100%
Energea Taquaritinga Ltda. * Brazil 100%
Energea Nova Cruz Ltda. * Brazil 100%
At 30 June 2024, 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 and Dunblane Solar Pty Ltd are
held through Victory Hill Australia Investments Pty Ltd. These relate to the
Australian solar PV with battery storage assets.
The Company's investment in Rhodesia Power Limited is held through Victory
Hill Flexible Power Limited. These relate to the UK flexible power with CCR
asset.
8. Other receivables
As at As at
30 June
31 December 2023
2024
£'000
£'000
Other receivables 93 95
Interest receivable on loan 326 317
Receivable from affiliates 83 -
Prepayments 39 31
Total other receivables 541 441
The Directors have analysed the expected credit loss in respect of receivables
and concluded that there was no material exposure for the period/year ended
30 June 2024 and 31 December 2023.
Cash of £nil is held on behalf of the Company by VH GSEO UK Holdings Limited
(31 December 2023: £40,367k).
9. Cash and cash equivalents
As at As at
30 June
31 December 2023
2024
£'000
£'000
Cash at bank 4,805 30,542
Cash on deposit(1) 70,966 43,716
Total cash at bank 75,771 74,258
(1) Cash on deposit consists of funds held with State Street
amounting to £70.8m (31 December 2023: £26.4m) and in a 32-day notice
deposit account with Barclays Bank plc amounting to £0.2m (31 December
2023: £43.7m).
10. Accounts payable and accrued expenses
As at As at
30 June
31 December 2023
2024
£'000
£'000
Accrued expenses 421 270
Other payables 152 -
Accounts payable and accrued expenses 573 270
The Directors consider that the carrying amount of trade and other payables
matches their fair value.
11. Share Capital
Date Issued and fully paid Number of shares Share Share premium Special Distributable Reserve Total
Capital
(B)
(C)
(A+B+C)
(A)
£'000
£'000
£'000
£'000
Opening balance 422,498,890 4,225 186,368 232,467 423,060
Buyback of Ordinary shares - - - (5,400) (5,400)
At 31 December 2023 (audited) 422,498,890 4,225 186,368 227,067 417,660
Opening balance 422,498,890 4,225 186,368 227,067 417,660
Buyback of Ordinary shares - - - (8,443) (8,443)
At 30 June 2024 (unaudited) 422,498,890 4,225 186,368 218,624 409,217
During the period under review, the Company purchased for treasury a total of
11,568,147 Ordinary Shares at an aggregate cost of £8,443,168 (including
stamp duty and other fees) at an average price per Ordinary Share of 72.5p.
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 pf the residual assets of the Company.
12. Dividends
Pence per Ordinary Share Total dividend Date paid
1 October 2023 - 31 December 2023 1.42p £5.8m 22 March 2024
1 January 2024 - 31 March 2024 1.42p £5.8m 25 June 2024
13. Transactions with the Investment Manager and Related Parties
Investment Manager
Victory Hill is the Company's investment manager and AIFM with overall
responsibility for the risk management and portfolio management of the
Company, providing investment management services and ensuring compliance with
the requirements of the AIFM Rules, subject to the overall supervision of the
Board of Directors in accordance with the policies set by the Directors from
time to time and the investment restrictions as set out in the Alternative
Investment Fund Management Agreement ("AIFM Agreement").
The AIFM Agreement provides that the Company will pay to the Investment
Manager a fixed monthly AIFM fee of £5,833, exclusive of VAT.
The Investment Manager is also entitled to receive from the Company an annual
investment management 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
Manager exceeds:
a) £3.5m, the Investment Manager 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) £2.5m, the Investment Manager shall apply 2% of the annual fee
to be paid as a charitable donation to a suitable registered charity aimed at
promoting sustainable energy, as selected by the Investment Manager, provided
that if, following the Investment Manager'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.
The AIFM Agreement may be terminated on 12 months' written notice, provided
that such notice may not be served before 2 February 2025. 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 investment management fees for the period ended 30 June 2024 amounted to
£2,217,913 (30 June 2023: £2,211,211) (including VAT) of which £nil
(31 December 2023: £nil) was outstanding and included in accounts payable
and accrued expenses at the end of the period.
The Company will also reimburse the Investment Manager for reasonable expenses
properly incurred by the Investment Manager in the performance of its
obligations under the AIFM Agreement.
Directors
The Directors have been entitled to aggregate annual remuneration (excluding
expenses) of:
For the For the
six month period ended 30 June 2024
six month period ended 30 June 2023
£'000
£'000
Bernard Bulkin OBE 47 41
Margaret Stephens 36 29
Richard Horlick 32 29
Louise Kingham CBE 31 29
Daniella Carneiro 31 27
177 155
The Directors are not eligible for bonuses, pension benefits, share options or
long-term incentive schemes. 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.
The Directors held the following beneficial interests in the ordinary shares
of the Company as at 30 June 2024.
As at 30 June 2024
Number of ordinary shares held % of ordinary shares in issue
Bernard Bulkin OBE 68,101 0.016
Margaret Stephens 56,960 0.013
Richard Horlick 300,000 0.071
Louise Kingham CBE 26,753 0.006
During the period, interest income totalling £4.0m was paid to the company in
respect of the interest bearing loans between the Company and its
subsidiaries.
14. Contingent liabilities and commitments
As at 30 June 2024, the Company had no contingencies or commitments.
15. (Loss) / 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 2024 to 30 June 2024.
Amounts shown below are both basic and diluted measures as there were no
dilutive instruments in issue throughout the period.
For the period ended 30 June 2024 For the period ended 30 June 2023
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
(Loss) / earnings (£'000) 7,140 (23,229) (16,089) 12,258 7,862 20,120
Weighted average number of ordinary shares 409,063,127 409,063,127 409,063,127 422,498,890 422,498,890 422,498,890
EPS (p) 1.75 (5.68) (3.93) 2.90 1.86 4.76
16. 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 period.
Period ended 30 June 2024 Year ended
£'000
31 December 2023
£'000
NAV (£'000) 447,695 483,843
Number of ordinary shares 403,903,422 415,471,569
NAV per share (p) 110.84 116.46
17. Post balance sheet events
On 25 July 2024, the Company announced it had invested EUR 53m in a 248.4MW
solar and onshore wind portfolio in Spain, Portugal and Sweden.
On 7 August 2024, the Company declared an interim dividend in respect of the
period from 1 April 2024 to 30 June 2024 of 1.42 pence per Ordinary Share,
will be paid on 13 September 2024 to Shareholders on the register on
16 August 2024.
Post period end, the Company had announced cumulative buybacks of 4,950,000
shares between 1 July 2024 and 10 September 2024.
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 APMs 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 30 June 2024 £447,694,992.00
Total number of outstanding shares as at 30 June 2024 £403,903,422.00
NAV per share 5 110.84
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 £463,669,875.00
Recurring costs in the year to date £6,828,368.00
Ongoing charges 22 1.5%
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.
Period ended 30 June 2024 NAV
Opening as at 1 January 2024 a 116.46p
Closing as at 30 June 2024 b 110.84p
Dividends paid during the period 2.84p
Dividend adjustment factor c 1.038p
Adjusted closing d = b x c 115.04p
Total return for the period (%) d / a - 1 -1.2%
From IPO to 30 June 2024 NAV
Opening as at 2 February 2021 98.00p
Closing as at 30 June 2024 b 110.84p
Dividends paid to date since IPO 13.3p
Dividend adjustment factor c 1.15p
Adjusted closing d = b x c 127.19p
Total return since IPO (%) e = d/a - 1 29.8%
Number of years since IPO f 3.40p
Total annualised NAV return since IPO (%) (1 + e)^(1/f)-1 8.0%
Dividend cover
The dividend cover ratio is calculated by dividing the cash available for
distribution by the dividends paid during the period ended 30 June 2024. Cash
available for distribution comprises underlying asset earnings (post tax and
profit share), net of interest expense and fund expenses.
Dividend cover
Cash available for distribution £16,643,478
Interest service cost £411,383
Fund expenses £3,414,186
Cash available for distribution £12,817,909
Dividends paid £11,616,275
Dividend cover 1.10
Gearing
The total leverage percentage is calculated by dividing the GBP value of the
debt held in the US terminal storage assets divided by the net asset value of
the fund as at 30 June 2024.
Gearing Page
Debt (£'k) 8,300
Fund NAV (£'k) 35 447,695
Leverage 5 1.85%
GLOSSARY
AIC Association of Investment Companies
AIFM Victory Hill Capital Partners LLP
COD Commercial Operations Date
Company VH Global Sustainable Energy Opportunities plc
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share
Distribution Distributions consist of dividends, interest and returns of capital
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 The independent body that regulates the financial services industry in the UK
Gearing A way to magnify income and capital returns, but which can also magnify losses
GHG Green House Gases
Investment Manager / 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
PPA Power Purchase Agreement
PV Photovoltaic
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Share premium The amount, expressed as a percentage, by which the share price is more than
the net asset value per share
Share price The price of a share as determined by a relevant stock market
TCFD Task Force on Climate-Related Financial Disclosures
COMPANY INFORMATION
Non-executive Directors Administrator and Company Secretary
Bernard Bulkin OBE (Chair) Apex Fund and Corporate Services (UK) Limited
Daniella Carneiro
6(th) Floor
Richard Horlick
125 London Wall
Louise Kingham CBE
London
Margaret Stephens
EC2Y 5AS
Registered office Depositary
6(th) Floor Apex Depositary (UK) Limited
125 London Wall
6(th) Floor
London
125 London Wall
EC2Y 5AS
London
EC2Y 5AS
Investment Manager
Registrar
Victory Hill Capital Partners LLP
4 Albemarle Street Computershare Investor Services PLC
London
The Pavilions
W1S 4GA
Bridgwater Road
Bristol
Corporate Broker
BS99 6ZY
Deutsche Numis Securities Limited Auditor
45 Gresham Street
London BDO LLP
EC2V 7BF
55 Baker Street
London
Legal Adviser
W1U 7EU
Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Company number: 12986255
Country of incorporation: England and Wales
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