VH Global Sustain. - Interim results to 30 June 2022
13/09/2022 07:00
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RNS Number : 1773Z VH Global Sustainable Energy Oppt. 13 September 2022
VH Global Sustainable Energy Opportunities plc (the "Company")
Interim results for the period ended 30 June 2022
The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO) is
pleased to report its interim results for the period from 1 January 2022 to 30
June 2022.
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)
The Company's LEI is 213800RFHAOF372UU580.
For further information, please contact:
Edelman Smithfield (PR Adviser)
Ged Brumby +44 (0)7540 412 301
Kanayo Agwunobi +44 (0)7581 010 560
Victory Hill Capital Advisors LLP (Investment Adviser)
Navin Chauhan info@victory-hill.com (mailto:info@victory-hill.com)
Numis (Joint Corporate Broker)
David Benda +44 (0)20 7260 1000
Matt Goss
Alvarium Securities Limited (Joint Corporate Broker)
Mark Thompson +44 (0)20 7016 6711
Eddie Nissen +44 (0)20 7016 6713
Oliver Kenyon +44 (0)20 7016 6704
G10 Capital Limited (AIFM)
Mohammed Rahman +44 (0)20 7397 5450
Paul Cowland
Apex Fund and Corporate Services (UK) Limited (Company Secretary)
Geetika Dayal +44 (0)7903 820 161
About Victory Hill Capital Advisors LLP
Victory Hill Capital Advisors LLP ("VHCA") (FRN 938594) is an Appointed
Representative of G10 Capital Limited, which is authorised and regulated by
the Financial Conduct Authority (FRN 648953).
Victory Hill is based in London and was founded in May 2020 by an experienced
team of energy financiers that have spun-out of a large established global
project finance banking group. The team have an established track record built
over six years while working together in their previous roles and
participating in over $37.1bn in sustainable energy project transaction
values, generating over 24.2 per cent. equity returns. In addition, the team
has also participated in more than $200bn in transaction values across 91
conventional and renewable energy-related transactions in over 30
jurisdictions worldwide, throughout their individual careers. The average
experience per individual is 22 years of relevant energy finance experience.
The VHCA 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.
VHCA is a signatory of the United Nations Principles for Responsible Investing
(UN PRI), the United Nations Global Compact (UN GC) and is a formal supporter
of the Financial Stability Board's Task-Force on Climate-related Disclosures
(TFCD).
Overview
About the Company
VH Global Sustainable Energy Opportunities plc ("GSEO" or 'the Company') is a
closed-ended investment company.
The Company's investment objective is to seek 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 OECD, OECD Key Partner Countries or OECD
Accession Countries and the EU.
The Company's investment policy states that it aims to achieve diversification
principally by making a range of sustainable energy infrastructure investments
across a number of distinct geographies and a mix of proven technologies that
align with the UN Sustainable Development Goals ("SDGs") where the investments
are a direct contributor to the acceleration of the energy transition towards
a net zero carbon world.
The Company's investment in proven technologies will include exposure to power
generation (renewable and conventional), biomass, transmission, distribution,
storage and waste-to-energy. These investments will be operational, in
construction or 'ready-to-build' but will not include assets that are under
development or in pre-consent stage.
No investment will be made in extraction projects involving either fossil
fuels or minerals.
financial Highlights
As at
30 June 2022
SNAPSHOT OF FINANCIAL STATEMENTS
109.5
Ordinary Share price (pence per share)
113.1
NAV per share (pence per share)
(3.2)%
Ordinary Share premium/(discount) to NAV*
341.2
Market capitalisation (£m)
1.25
Quarterly dividend per Ordinary Share (pence per share)
1.34%
Ongoing charges*
at a glance
£352.4m
Net asset value as at 30 June 2022
12.1%
Total shareholder return since IPO in Feb 2021*
£122M
Gross equity capital raised post period end
18.1%
NAV total return since IPO in Feb 2021*
5p
Progressive dividend target reaffirmed for 2022
1.1x
Cash dividend cover* as at 30 June 2022
ESG
11,666 mWh
Portfolio generation capacity
8,839T
CO(2) avoided
3,000
Equivalent homes powered by clean energy
*Alternative Performance Measurements are defined below
Interim Management Report
Chairman's Statement
On behalf of the Board, I am pleased to present the interim report and
financial statements for VH Global Sustainable Energy Opportunities plc
("GSEO" or "the Company") for the period from 1 January 2022 to 30 June 2022.
The financial period under review has witnessed continued global economic
challenges associated with the COVID-19 pandemic, the conflict in Ukraine
impacting on energy markets, as well as the sharp increase in the cost of
living that is severely affecting many families and households. Such events
have raised awareness of the urgent need to reduce the impacts of climate
change as major economies accelerate the transition to net zero. Against this
backdrop, the Company is investing in solutions that facilitate the
decarbonisation of energy, enable renewable energy technologies, improve
energy security and affordability, while having a meaningful impact in the
economies where it deploys capital.
The Company's strategy remains unchanged since IPO: the Company targets assets
which benefit from the transition to net zero by investing in a diverse
portfolio of energy assets around the world.
The Company's ability to invest in a range of technologies, across a broad
geographical scope diversifies the risk of weather patterns and prevents
reliance on any single regulatory regime or currency. We believe these
characteristics help us with the objective to offer shareholders attractive
risk-adjusted returns combined with high impact, through exposure to the
global energy transition.
At the period end, the Net Asset Value ("NAV") per share was 113.1p, an
increase of 8.8% from 104.0p at 31 December 2021, driven by strong operating
performance resulting in valuation increases within the portfolio, updated
inflation assumptions and a weakening Sterling against the US Dollar,
Australian Dollar and Brazilian Real.
During the period to 30 June 2022, the Company announced the completion of six
solar PV sites across five Brazilian states following a period of construction
and also committing a further £28m to its flexible power projects in the UK.
Further information on these activities is included in the Investment
Adviser's report.
fUNDING
The Board is delighted with the continued support from investors in the
Company's recent fundraise post period end, which provided an additional
£122m of capital to fund further acquisitions of operational assets and/or
investments into construction projects. This solid result in a period of
exceptional market volatility highlights the growing demand for exposure to
global energy transition investments and provides for a strong endorsement of
the Company's strategy. The Board of Directors would like to take this
opportunity to thank our existing investors for their continuing support and
welcome those new investors to the Company's shareholder register.
At the period end, the Company's gearing was 3.4% of Gross Asset Value, on the
basis of investment level debt. There is no structural gearing at the Company
level.
FINANCIAL PERFORMANCE
The Company's NAV per share was 113.1p at 30 June 2022, an increase of 8.8%
from the NAV per share at 31 December 2021 of 104.0p. GSEO's NAV total return
from IPO to 30 June 2022 was 18.1%, including dividends paid.
GSEO's profit before tax for the six-month period to 30 June 2022 was £32.4m
and earnings per share for the period were 10.4p.
interim dividend
The Company announced its first interim dividend of 1.25p per Ordinary Share
with respect to the period 1 January 2022 to 31 March 2022. Post reporting
period, the Company was pleased to announce the second interim dividend of
1.25p per Ordinary Share for the period 1 April 2022 to 30 June 2022 to be
paid on 16 September 2022.
In line with expectations set out in the IPO Prospectus, the Company reaffirms
the annual dividend target of 5.0p per Ordinary Share for the year beginning 1
January 2022.
The Company has a progressive dividend policy and intends to pay interim
dividends on a quarterly basis.
PORTFOLIO PERFORMANCE
The Company's investment portfolio performance remained resilient during the
period, with limited financial impact from the effects of the COVID-19
pandemic and disruptions to the energy market due to the Russian invasion of
Ukraine. The Investment Adviser, Victory Hill Capital Advisors LLP (''Victory
Hill''), remains diligent in minimising the Company's exposure to additional
macroeconomic factors such as supply chain disruption and energy availability.
Whilst inflation is one of these factors, it is worth highlighting that over
90% of the Company's revenue is inflation-linked with no caps.
The Investment Adviser places a considerable emphasis on monitoring and asset
management of the Company's investment portfolio, not only to protect the
value of each investment but also to pursue opportunities to create further
value for stakeholders through its asset value creation initiatives.
The operational assets within the portfolio provide key services to essential
industries and economies and continue to operate with minimal disruption.
Overall, the portfolio remains relatively insulated from macroeconomic factors
and therefore there has been no material impact to performance.
investment activity
During the period, GSEO announced that six solar PV sites across five
Brazilian states migrated from the construction to operational phase. These
sites represent approximately $13.7m (£11.3m) of the original $63m commitment
and will be generating 18.7MWp. All of the sites have contract lengths of 20
years and are inflation-linked.
The Company also committed a further £28m for the acquisition of a second UK
flexible power plant as part of the Company's programme to support the UK's
energy transition to net zero. The second site is located in County Durham and
will consist of a 35MW high efficiency combined heat power with carbon capture
and re-use plant to contribute to a clean, net zero, flexible and dependable
electricity solution for the UK's energy transition.
Post period, the Company committed BRL800m (£125m) for the acquisition of a
198MW operating hydro power facility in Brazil. The asset is already
generating cash flows with the expected annual return to exceed the Company's
target total return of 10%. In addition to this, the Company has added three
additional ready-to-build sites to the existing Australian solar PV programme
amounting to £21.2m and 15MW in size.
Including these post period events, the Company is currently 97% committed or
deployed.
GSEO continues to assist, and benefit from the energy transition by investing
in a diverse portfolio of energy assets. The Company's ability to invest in
OECD countries, OECD partner and OECD Accession countries allows us to take
advantage of reduced correlation in energy and power prices. Alongside the
ability to invest in a range of proven technologies, this broad geographical
scope also diversifies the influence of weather patterns, and prevents
reliance on any single regulatory regime. We also aim to minimise
concentration risk via investing across a large number of projects.
The Company's investment strategy of targeting high credit quality
counterparties and providing services to key industries through contractual
structures that limit exposure to demand or commodity price risk is proving to
be successful.
The Board is pleased with the timely deployment of capital into new and
follow-on investments during the year, which have been consistent with the
Company's strategy. This success demonstrates the Investment Adviser's
capability to source and secure attractive investments that meet the Company's
investment strategy and objectives, and their ability to add alpha to each of
its investment programmes which has been successfully translated into its net
asset value progression to date.
shareholder enagement and corporate governance
The Company aims to maintain an open dialogue with investors regarding its
strategic objectives, both financial and operational, and how they are
executed.
During the period since IPO, the Company's Investment Adviser and Corporate
Brokers engaged with shareholders through meetings, market announcements and
diverse written materials.
At the April 2022 AGM, the Board was pleased to announce that all the ordinary
resolutions and special resolutions, as set out in the Notice of AGM, were
approved by shareholders.
The Board will continue to engage actively with shareholders going forward and
remains at their disposal.
The Directors' primary duty is to promote the success of the Company for the
benefit of investors, with due consideration of other stakeholders' interests.
The Company seeks to maintain high standards of business conduct and corporate
governance, ensuring, via the Investment Adviser and Corporate Brokers, that
appropriate oversight, control and policies are in place to ensure the Company
treats all its investors fairly.
The Board seeks to ensure the alignment of the Company's objective,
principles, and strategy with culture of openness, discussion, and integrity
through ongoing discussion and engagement with key stakeholders.
environmental, social and governance
Sustainability is central to all activities undertaken by the Company and the
Investment Adviser, and the Company recognises that investing responsibly and
continually measuring the Company's sustainability impact is critical to the
Company's performance and growth over the longer term. The Company is
dedicated to accelerating the transition to a net zero carbon economy and
delivering long-term value for shareholders.
The Company's goal is to make a positive impact as we deploy capital into
sustainable energy projects around the world, and ensure that environmental,
social and governance ("ESG") criteria are incorporated into all of the
Company's investment decisions. This is reflected across the Company's
investment philosophy and approach, including the selection of the Company's
Investment Adviser, which is dedicated to the energy transition and in doing
so, creating high impact for shareholders and society as a whole.
Although the Company is not required to report under the recommendations of
the TCFD, many of those recommendations are followed in order to enhance the
Company's climate-related disclosures. The management of climate-related risks
and opportunities is integrated into the Company's risk management framework.
This looks at the likelihood of a risk and the severity of impact with and
without controls. This enables the Board and the Investment Adviser to
prioritise material risks for additional mitigation.
The Company has sustainable investment as its objective. Article 9 Funds under
the Sustainable Finance Disclosure Regulation ("SFDR") are products that have
a sustainable investment objective. As of 30 June 2022, 71% of the Company's
investments were aligned with EU Taxonomy economic activities. The remaining
29% were invested in economic activities with a different environmental
objective.
The disclosures related to TCFD and SFDR, and how they are incorporated,
including outputs, can be found in the Company's latest Annual Report as
published on 21 March 2022, with updates for this period on page 23 of this
report.
outlook
As economies move towards a net zero carbon future, the Company is well
positioned to be a leader in driving the energy transition and make a positive
impact on the environment as well as local communities around the globe.
2022 looks to be another pivotal year for the climate change agenda with the
United States has re-joining the Paris climate agreement and countries around
the world have accelerated their decarbonisation goals. We look towards COP27,
to be hosted by Egypt in November 2022, and the ongoing monitoring of those
pledges and commitments announced by countries around the world at COP26 last
year. All of this is supplemented by an ever-growing investor focus on
sustainability and climate change considerations. The Company is well
positioned to benefit from this shift as its strategy remains aligned with
this global transition and markets remain favourable for the Company given its
broad and diversified mandate.
In the current economic climate, the Board and the Investment Adviser are
continuing to closely monitor both macro and micro-economic indicators to
assess the potential future impact on the Company's activities. The Company
will continue to focus on generating attractive financial returns for its
shareholders, while having positive social and environmental impacts.
The Investment Adviser continues to focus on enhancing the value of its
existing portfolio, as well as seeking new investment opportunities that can
deliver solid risk-adjusted returns for investors. The Investment Adviser has
strong global origination capabilities as demonstrated in the relatively short
deployment period following the IPO and, most recently, the Company's
execution on one of its Enhanced Pipeline assets as showcased in the new
prospectus published on 9 June 2022.
We remain confident that GSEO's business model of responsible investment
practices, careful portfolio construction and enhancing value for stakeholders
will continue to generate sustainable returns for investors whilst
contributing towards a net zero carbon future.
On behalf of the Board of Directors, I would like to thank shareholders for
their support since the IPO and we look forward to delivering both yield and
capital growth whilst driving a high positive impact on the environment and
society.
Bernard Bulkin, PhD, OBE
Chairman
12 September 2022
Investment ADVISER's Report
The first half of this calendar year has been marked by external factors that
will dictate the shape and speed of global economic progress and international
relations for several years to come, but which together will not, in our
opinion, detract from the continuing and fundamental shift in the global
energy paradigm to achieving a net zero carbon future.
The year started optimistically following the signing of The Glasgow Climate
Pact at COP26, however, Russia's conflict with Ukraine dramatically reframed
the energy discussion and placed energy at the center of Europe's
deliberations. In particular, the threat of Russia as the biggest producer of
oil and gas in the region stopping its supply, particularly of natural gas, to
European economies has led to a spike in the cost of energy throughout the
continent, and by consequence throughout the interrelated global market for
natural gas.
This has had a key effect of igniting inflationary pressures in global
economies as we moved into the second quarter of the year. Whilst the effects
of energy prices are unlikely to manifest themselves fully in the summer
months of 2022, most western European economies expect the autumn and winter
months to be particularly harsh for household energy bills.
The Ukraine crisis has also demonstrated how, increasingly, pricing in power
markets has become interrelated, volatile and rising across different national
and regional markets. Tightness of gas and coal markets was evident in 2021,
with prices reaching unprecedented highs in October 2021. Russia's invasion of
Ukraine put even more pressure on and increased uncertainty across energy
commodity markets. European gas and coal prices surged to all-time highs and
displayed strong volatility in the first half of 2022. Asian spot LNG and coal
prices followed suit, reflecting the strong interconnection of the regional
markets.
In the United States, low storage levels together with elevated weather-driven
demand in the first quarter and muted response from suppliers led to
decade-high gas and coal prices. Tight supply-demand fundamentals, accompanied
by large uncertainties, are expected to linger well into 2023, for both coal
and gas across all key markets.(1)
In Australia, the knock-on effects of higher global natural gas and coal
prices, combined with its own issues of the running down of older coal fired
power plants (which have historically dominated the Australian power sector),
led to significant spikes in the power prices throughout its National
Electricity Market. The country experienced rolling blackouts and the
suspension of its traded power market, together with the imposition of
wholesale price caps in various states. The Company's long-term thesis on the
opportunities available in the Australian renewables market due to its
fundamental structural gap has become reality, and we are seeing the positive
effects of this volatility on the Company's Australian investments in the
first half of 2022.
The UK does not depend on Russian supplies of natural gas to the extent of
most of its neighbours and therefore there have not been any major
announcements of climb downs from its stated climate obligations in favour of
seeking the exploitation of new domestic natural gas production. However, to
support the build out of renewable power generation and ensure a balanced
energy system, the UK will continue to turn to grid firming technologies such
as the Combined Heat & Power ("CHP") with Carbon Capture and Utilisation
("CCU") projects. This will come to the fore in the subsequent autumn and
winter seasons, where anticipated low renewable energy yields, together with
higher natural gas prices are likely to drive power prices higher. In this
context, the Company's first CHP project is expected to be able to access
greater peak prices as it begins to generate power in Q1/Q2 2023.
Following the end of the reported period, President Biden signed into law a
US$740bn fiscal package to in part tackle climate change, the US deficit and
healthcare in the United States, under the Inflation Reduction Act ("IRA").
The IRA is expected to invest nearly US$375bn over the decade in climate
mitigation strategies including in renewable energy production (US$60bn clean
energy manufacturing tax credit and US$30bn production tax credits for wind
and solar energy). The IRA also establishes a sustainable aviation fuel tax
credit (due to be absorbed into a new clean fuel production tax credit in
2024) and tax incentives for biofuels, including renewable diesel. We believe
this achievement will result in positive effects on the Company's investment
strategy for the US, which is predicated on sustainable terminal storage
facilities, the biofuels value chain and core renewables such as wind and
solar.
( )
(1) Electricity Market Report - July 2022 Update, IEA (2022)
PIPELINE
We continue to originate sustainable energy opportunities globally, as
announced alongside the Company's capital raise post period end. We continue
to be focused on progressing the deployment of the Company's capital across a
diverse set of proven technologies, including hydroelectric power generation,
geothermal, wind and battery opportunities in a broad range of geographies,
including Brazil, the UK, Mexico, Australia and the US.
We see great potential to continue to deliver on a portfolio that is
diversified by geography and by technology. Thanks to a very robust pipeline,
we are able to prioritise opportunities that are complementary to the existing
GSEO portfolio and provide high impact and sustainable returns for
shareholders.
MARKET OUTLOOK
According to the US EIA, global energy demand is expected to increase by 47%
over the next 20 years, and the amount of global energy capital investment
required from 2020 to 2040 is estimated to be over US$40tn.(1)
Combined with the growth in energy demand, there is a fundamental and
significant shift in the manner in which energy will be consumed.
Technological advances in society, and a significant underpinning of ambitions
to meet climate goals, have ensured that electrification of energy systems
globally will be the biggest trend in energy demand and supply in the medium
and longer term. Electricity is taking an ever-more central role to the lives
of energy consumers, and indeed the reliability and affordability of
electricity is set to become even more critical to all aspects of people's
lives and well-being.
Electricity's share of the world's final energy consumption has risen steadily
over recent decades and currently stands at 20%.(2) As the pace of
climate-related energy transition picks up in the future years, it will
account for around 50% of final energy use by 2050,(3) according to the IEA.
Given that electricity delivers useful energy services better than other
fuels, the contribution of electricity could be even higher than these numbers
suggest.
Our view, in this new energy economy, is that the market for clean technology
will continue to be a major area for investment and international competition,
and secular events such as the cessation of exports of Russian oil and gas in
light of the Ukraine conflict is unlikely to stop this momentum. The IEA
estimates in their World Economic Outlook 2021, that if the world is on track
to net zero emissions by 2050, then the annual market opportunity for
manufacturers of wind turbines, solar panels, lithium-ion batteries,
electrolysers and fuel cells will grow tenfold to US$1.2 trillion by 2050.
The Investment Adviser believes that GSEO is at the forefront of the private
initiative involvement in the energy transition with a global focus to enable
sustainable energy projects with long-term equity capital. The Company's
global approach means its attention will be centered around different themes
depending on the geography, as the energy transition means different
approaches required in each market.
In the UK, we have progressed with investments in grid balancing initiatives.
The advent of the Ukraine crisis, combined with unseasonably low wind yields,
has brought to prominence the importance of grid firming activities provided
in particular by gas-fired power plants in Q1 and Q2 of 2022. This has sent
power prices skyrocketing and many renewable facilities who do not have fuel
costs to bear have benefitted from windfall pricing exceeding their short run
marginal costs for operating, when they are able to generate.
The commercial structure of the Company's investment in the UK CHP project
ensures that the Company will benefit from the higher commodity prices, when
the first plant comes online to generate power in Q1/Q2 2023, given the
embedded power to gas price hedge in the PPA. We remain confident that the UK
programme will contribute meaningfully to the grid stability required given
the increased penetration of renewable power production in the market.
The need to improve Mexico's fuel mix remains strong and is expected to
increase. The Mexican government will continue to push on the agenda to
support state owned enterprises that control the fuel value chain and the
power generation segment. These entities depend greatly on the ability to
clean the domestic fuel to avoid environmental disasters of burning poorly
refined fuels.
In Brazil, the commitment to renewable energy penetration will continue to go
from strength to strength. While the country goes into this year's election,
both sides of the political spectrum continue to view the proliferation and
benefits of distributed generation solar PV plants favourable. These plants
will play a crucial role in supplying the Brazilian economy with clean and
affordable energy at a time when electricity prices will continue to cause a
lot of pain for Brazilian households. Like in some economies, inflation in
Brazil will continue to be high, putting some pressure on the currency
although also contributing to the inflation-linked revenues for the Company's
projects there.
The volatility caused by high commodity prices on the Australian energy market
is likely to persist over the next couple of years. Until such time that
sufficient renewable power, energy storage and gas-fired power generation
enters the grid at scale, the market will experience significant peaks in
power prices at peak times, as coal plants continue to run off production and
close. The outlook for the Company's investments therefore remains highly
supportive, with the opportunity to install onsite battery storage at the next
stage of development. This will ensure that the Australian assets will be able
to access the 'duck curve' margin in energy arbitrage at peak times as well as
participate in the ancillary services market, including frequency response.
(1) International Energy Outlook 2021 published by the US Energy Information
Administration.
(2) World Energy Outlook 2021 published by the International Energy Agency.
(3) International Energy Agency, Net Zero Emissions by 2050 Scenario.
NAV BRIDGE
The Company has seen positive movements in the portfolio during the period,
driven by:
- The Australian solar assets which are positioned to take advantage
of the energy transition. The latter part of June saw this transition come to
light with persistent high energy prices resulting in the implementation of
pricing caps.
- Four of the six Brazilian distributed solar sites have reached
mechanical completion and started injecting power into the grid.
- Strong operational performance in the US terminal assets capturing
trade flows from Mexico to the US and the expansion of the US terminal site
nearing completion with finalisation of a contract with PEMEX at the end of
June.
Despite increased interest rates, the positive movement from underlying asset
performance has been reflected in increased valuations and distributions from
the investments in the period.
Due to the long life of the assets with revenues that are linked to energy
prices and inflation, over the valuation period the underlying currency
exposure should be reflected in purchasing power parity. Therefore the Company
does not enter into currency hedges for these long-term cash flows.
The USD, AUD and BRL have strengthened vs GBP in the period. This has resulted
in positive movements in the valuation of assets, as asset valuations in
underlying currencies are marked at spot at period end.
An interim dividend of 1.25p was declared on 5 May 2022 for the quarter ended
31 March 2022. The Company has reaffirmed the annual dividend target of 5p per
Ordinary Share for the year beginning 1 January 2022.
Victory Hill Capital Advisors LLP
12 September 2022
PORTFOLIO UPDATE
As at 30 June 2022
Geographic Split as % of Total Committed Capital
%
UK 35
US 29
Australia 18
Brazil 17
Technology Split as % of Total Committed Capital
%
Flexible Power + CCR 35
Liquid Storage 29
Solar PV & Battery Storage 18
Solar PV 17
Operational vs Construction as % of Total Committed Capital
%
Construction 62
Operational 38
Revenue Breakdown as % of Total Committed Capital
%
Fixed-Price PPA 62
Availability 29
Merchant Mix 9
Case study: UK Flexible Gas and Carbon Capture Programme
The Company has committed £106m to fund the construction of two combined heat
and power plants which bring together high-efficiency, gas fired engine
technology with a carbon capture and re-use system to provide a clean, net
zero, flexible and dependable electricity solution for the UK. The combined
capacity will be 45MW across two sites in Nottinghamshire (10MW) and County
Durham (35MW). Once operational, the plants will be contracted under long-term
PPAs with well established energy companies for the power output, and
long-term CO(2) offtake agreements with large industrial companies for the
purified CO(2) product. Together, these revenue arrangements will provide the
Company with long-term, predictable, inflation-linked revenues.
The programme targets the grid-balancing opportunities in the UK through a
unique flexible power generation solution. This Flexible Power and Carbon
Capture Programme allows us to supply reliable baseload power without adding
to carbon emissions. By combining a range of existing and proven technologies,
this programme offers a very compelling solution to enable further renewable
energy penetration in the UK mix.
In terms of the execution of this programme, the first project has a full-wrap
turnkey lumpsum Engineering, Procurement and Construction (EPC) contract in
place and broke ground at the end of 2021. Construction is on schedule
including the delivery of long lead items. We expect to see power production
starting Q1/Q2 2023 with the full CO(2) capture completed by mid-2023.
The plant's detailed design was finalised and approved and the proposed site
has now been secured and cleared ready for the project installation stage. The
containers for the engine have been delivered to the contractors and are being
assembled with the engines. The main equipment is expected to be delivered on
site in Q3 2022.
A 15-year PPA has been signed with Axpo, a Swiss utility, offering substantial
flexibility in commercialisation while providing high predictability of cash
flows. The long-term offtake arrangement for the purified CO(2) is under
negotiation.
Case study: US Clean Fuels Programme
The Company owns a majority interest in two operating terminal storage sites
on the Texas Gulf Coast, a strategic aggregation hub for cross border
(US/Mexico) product movements. The two terminal assets have a useful life of
35 years (29 years remaining) with fully availability-based contracted
revenues. The terminals serve as a distribution point for clean, ultra-low
sulfur fuels into the Mexican power and transportation markets. The combined
capacity of the terminals is currently 525,000 bbls, however, the Company has
committed a further US$35m to fund the expansion of one of the assets, adding
a further 340,000 bbls of tank storage capacity. The expansion is expected to
be completed with Commercial Operational Date (COD) in late 2022.
After exceeding the financial performance expectations in 2021, the two
terminals are well positioned to meet their 2022 budget as the assets benefit
from inflation-linked availability contracts from its well-located site in
South Texas, which is a key aggregation hub for Mexico US cross border product
movements.
Given the increasing demand and serving needs of current tenants to increase
storage volumes and unloading capacity, the Company committed a further US$35m
in December last year to fund the expansion of one of the terminal storage
sites, to expand its combined capacity by 340,000 bbls to 865,000 bbls. The
plans are being executed without any delays or cost overruns and are expected
to be fully operational by the end of the year.
The strong performance of the US terminals was driven by more focused
management of the assets that identified further revenue streams and by
originating more contracts for the use of the terminals.
Case study: Australia Solar PV Plus Battery Programme
As part of this programme, the Company has the majority interest in two
operating solar PV sites totalling over 17MW in Queensland and South Adelaide.
The next phase of this project is the construction of battery energy storage
systems ("BESS"), allowing greater optionality to capture positive power price
movements and prevent over-exposure to negative power prices.
The Australian market is unique in that it has one of the greatest renewable
resources potential (land availability, wind and solar resources) but is
starting from an energy mix that is dominated by coal fired power plants. This
makes the transition one of the most challenging tasks around the world.
The increased cost of natural gas brought on by the Ukraine crisis combined
with the retirement of key coal fired power plants during the period has had a
material effect on the marginal price of power in the Australian market,
leading to significantly increased revenues for the Dunblane solar PV site in
Queensland. This volatility is likely to persist in the short to medium-term,
as coal fired generation continues to be decommissioned and flexible
generation and storage plays catch up with the build out of intermittent
renewable power sources. This is likely to bode well for the Company's further
investment in the country as the next stage of the programme involves the
construction of the BESS.
During the six months, we reached final investment decision ("FID") on the
implementation of BESS on the Mobilong solar PV site in South Australia. Our
operating partners, Birdwood Energy are currently project managing the BESS
implementation.
Case study: Brazil Solar PV Programme
The Company committed US$63m to fund the construction of 18 remote distributed
solar generation sites across 10 Brazilian states with a total capacity of
75MW. Brazil is a key partner of the OECD. The projects involve building solar
PV farms to supply energy to creditworthy commercial and industrial users, as
well as large multinational corporations with operations in Brazil. The
lengths of the contracts will be 20 years on average and inflation-linked.
To-date, six sites across five states are now complete following a period of
construction. These sites represent approximately US$13.7m and will be
generating 18.7MWp.
The Brazilian market has been benefiting from the growth of distributed
generation (DG) with its unique commercial model for this type of energy
source. Brazil is taking advantage of its hydro power capacity that provides a
natural balancing mechanism for the addition of intermittent renewable sources
such as solar and wind.
Under this programme, we are positioned as one of the leaders in this segment
with projects coming online and more projects being added to the programme.
The Investment Adviser's own monitoring provides oversight for the benefit of
the Company. The team continually monitors the performance of the EPC
companies employed and has the ability to enforce contractual protections if
issues occur. As a result of this process, installation delays on some site
have been offset by financial penalties imposed on the EPC companies. Ensuring
the quality of assets for a long and sustainable lifetime is core to this
strategy.
From the first three batches already sanctioned, which involved 18 sites, COD
for six sites has occurred through H1 2022. The remaining sites are expected
to become operational by Q3 2022. A new batch is under due diligence to
commence construction in this period as well and is anticipated to have a much
shorter construction period as we implement lessons learned from the initial
batches.
The developer and Victory Hill are continually looking for further value
creation opportunities for the programme through further addition of new
sites.
Sustainability
Environmental, Social & Governance update
The Company's overarching investment strategy is to make sustainable energy
infrastructure investments which drive the energy transition and are aligned
with energy and infrastructure specific sustainable development goals (SDGs)
including climate action (13), good health and wellbeing (3), and affordable
and clean energy access (7).
The Company's investments tackle issues such as access to modern energy
infrastructure, climate change and reducing the health and environmental
impacts of polluting fuels.
SDG
7 Affordable and Clean Energy
13 Climate Action
3 Good Health and Well-being
Indicator
MWh of renewable energy produced displacing carbon intensive generation
Carbon dioxide equivalent avoided (TCO2e) by displacing carbon intensive
generation
Carbon footprint covering scope 1 & 2 operational emissions
Emissions Highlights
Tonnes of carbon monoxide (CO) avoided
Tonnes of nitrogen oxides (NOX) avoided
Tonnes of sulphur oxides (SOX) avoided
Tonnes of particulate matter (PM10 and PM2.5) avoided
Operational health and safety
Data (1)
Renewable Power generated from 1 January 2022.
11,666 MWH of renewable power was generated from the Australian and Brazilian
assets displacing fossil fuel generation equating to 8,839 tonnes CO2e
avoided.
The predicted generation once portfolio is fully operation is 224,569 MWH.
The predicted avoided emissions for GSEO's portfolio once fully operational is
30,624 tonnes annually.
Portfolio carbon footprint since 1 January 2022 is 1,510 tonnes CO2e.
75% reduction in Scope 3 truck emissions in Texas Terminal.
Tonnes of pollutive compounds removed by facilitating cleaner fuels in Mexico
to half year.
CO: 117
NOX: 111
SOX: 11,285
PM10: 575
PM2.5: 428
Zero lost time injuries and incidents in portfolio operating assets.
(1) Generation data includes programme assets that came online pre June and
does not constitute a full half year generation.
The investment goals are complemented by the Company's sustainability
strategy, which is fundamental to their longer-term success. This includes
taking responsibility for ESG impact of asset operations on stakeholders
including communities, investors, the environment and operating partners and
their employees.
The ESG context for each asset differs depending on sector, geography, and
local attributes of operation. A materiality assessment of each asset in the
portfolio identifies and prioritises ESG issues for mitigation and management.
A sample of these considerations is shown in the table below.
This assessment is informed by various international standards and benchmarks
including the Global ESG Benchmark for Real Assets (GRESB) materiality
process, the Sustainability Accounting Standards Board (SASB) sector
standards, the UN principles on responsible investment, the International
Finance Corporation (IFC) performance standards for projects as well as the
SDGs.
Geographic risk analysis is informed by publicly available indices such as
those produced by Transparency International, Walk Free, US State Department,
Freedom House, Fund for Peace, Climate Tacker, German Watch and the ILO labour
statistics.
Direct engagement with the asset informs understanding of local risks and
potential impacts such as biodiversity loss, community grievance and
opportunities for providing employment and economic growth, as well as
aptitude to control these risks through adequate operational policies and
practices.
The ESG process informs sustainability action plans for asset management which
focuses on engaging asset operating partners on priority risks and
opportunities, and ensuring appropriate mitigating and management plans are in
place.
ESG Considerations Explanation
Greenhouse gas emissions Report GHG emissions and avoidance and put in place reduction measures where
necessary aligned with net zero goals.
Climate physical risk and vulnerability Assess asset vulnerability to climate related physical risks and implement
appropriate adaptation measures.
Energy Manage and report on energy consumption and generation from non-renewable and
renewable sources.
Air pollution Measure and reduce air pollution from operations where applicable.
Hazardous substances Disclose and mitigate the production or use of substances that can pose human
health and environmental harm.
Water use and discharges Use water efficiently and disclose the quantity and method of withdrawal and
responsible disposal.
Waste Implement a waste management hierarchy to promote reuse, recycling, and
responsible disposal to minimise environmental impact.
Material sourcing and efficiency Responsible sourcing accounts for the environmental and social impacts of the
products and materials procured and their efficiency in use with the aim of
limiting impacts in the value chain.
End of life management Take a life cycle approach to management and consider the disposal and
recyclability of equipment and plant at the end of life.
Biodiversity and habitat Take a Do No Significant Harm approach to biodiversity and habitat and manage
any impacts to ecologically rich areas from operations.
Health and safety Manage hazards and risks to those that interact with the assets through
operational health and safety policies, management plans, training, and
reporting processes.
Employment Engage employees through policies and benefits to support retention, and
provide jobs and build capacity locally.
Inclusion and diversity Policies and plans to promote diversity of boards and employees, equal
opportunity and anti-discrimination, and reporting progress.
Forced or compulsory labour Implement processes to prevent, identify and manage modern slavery risks to
operations and value chains.
Community development Take an active role in the local communities to mitigate any negative impacts
and leave a positive legacy.
ESG oversight and resourcing Appropriate resources to manage ESG related issues with effective reporting to
the Board.
Cybersecurity and data protection Protect information technology from unauthorised use or attacks, and to
protect customer privacy and their data from misuse and theft.
Whistle-blower protection Assets are expected to implement procedures to enable stakeholders to raise
issues such as unethical and dangerous practices, and to protect those who do
raise these issues.
THE EU SUSTAINABLE FINANCE DISCLOSURE REGULATION 2019/2088
SFDR was introduced by the European Commission as part of a package of
legislative measures arising from the European Commission's action plan on
sustainable finance.
The Company has sustainable investment as its objective as described above.
Article 9 funds under SFDR are products that have a sustainable investment
objective ("Article 9 Funds").
SFDR imposes mandatory ESG disclosure obligations for asset managers and other
financial markets participants with Article 9 funds, with the regulation
effective from January 2023. The aim is to standardise disclosures on how ESG
factors are integrated into investment decision processes and how risks and
impacts of those investments are managed in the European Union. SFDR requires
disclosure of information on its website, in the pre-contractual information
and in the periodic information provided to investors.
In anticipation of these requirements the Company has disclosed relevant
information in the 2021 annual report, registration document, and the
Investment Adviser Principal Adverse Sustainability Impact Statement (PAIS).
This statement provides investors and interested parties with preliminary
information on PAIS with a recognition that this statement will be amended so
that it is compliant with SFDR and its implementing legislation from 2023.
The Investment Adviser considers principal adverse impacts of its investment
advice on investment decisions and asset management. The material issues that
may impact infrastructure investments and conversely the impacts they may have
on stakeholders and the environment will vary depending on asset
characteristics and geographic location. The material principal adverse
impacts and associated indicators measured may be specific to individual
assets and may vary across the Portfolio. The Company considers the systemic
ESG risks associated with infrastructure projects such as stakeholder health
and safety, physical climate risk and vulnerability exposure and adaptation
requirements, and supply chain. Measuring the renewable energy generated and
associated greenhouse gas emissions from applicable investments is important
to demonstrate the investment impact.
TASK FORCE ON CLIMATE RELATED FINANCIAL DISCLOSURES
Under the TCFD framework the Company has previously reported on the risks and
opportunities for its sustainable energy infrastructure investments in the
2021 annual report and accounts. Identifying physical climate risks and
necessary adaptations to mitigate these is an important consideration in the
Company's ESG materiality assessment.
For additional insight, the Investment Adviser contracted an expert third
party sustainability consultant to conduct physical climate risk and
vulnerability assessments (CRVA) for each of the Company's investments. The
CRVA was conducted in accordance with the criteria of the EU Commission
Delegated Regulation (EU) 2021/2139 which form the Technical Screening
Criteria of the EU Taxonomy. Specifically, to accord with the requirements of
Appendix A of the above regulation, the Generic Criteria for Do No Significant
Harm to Climate Change Adaptation.
The CRVA was carried out using climate projections across different
Representative Concentrations Pathways used by the Intergovernmental Panel on
Climate Change (IPCC) fifth assessment report (AR5). Climate modelling of
regional impacts on the locations where each of the Company's assets are
situated was used. The impacts of these changes were interpreted in order to
understand the physical hazards the assets might experience over their
lifetime. The sustainable energy infrastructure investments considered under
the CRVA have expected lifespans greater than 10 years.
Vulnerability of the assets to projected climate related hazards was
considered based on asset design standards, site locations and risk to climate
related impacts as well as historic climate-related issues which may have been
experienced in the region.
Adaptation solutions were identified based on the outputs of the CRVA. These
adaptations show the resilience of the asset is improved to withstand such
vulnerabilities. The most common hazards identified was the potential for
wildfire or flood. All assets have appropriate drainage designed and is some
cases enhanced to move excess water away from sites. All sites also have
appropriate fire fighting equipment installed.
The Company also reports on energy generation and consumption and associated
carbon emissions or avoidance. This year the Investment Adviser became
signatory to the Net Zero Asset Managers Initiative and commissioned an
external adviser to recommend a road map towards 2050 net zero goals for the
Company portfolio.
The carbon intensity of the Company's portfolio is low. The Company predicts
the majority of emissions that will require reduction by 2050 will be Scope 3.
The Company will publish its net zero 2050 target and associated road map once
construction investments are operational and it has a more accurate
understanding of baseline emissions.
ESG UPDATE CASE STUDIES
The asset sustainable action plans include commitments to resource and
implement policies and plans on priority environmental, social and governance
issues. This may include health and safety, responsible procurement, and waste
and water management. Individual goals under a net zero target will also be
included.
Social: Responsible Sourcing
The energy transition will require many more minerals and metals as economies
shift from fossil fuel dependent systems to material intensive stems. Ensuring
social and environmental risk management of supply chains will be critical to
facilitating a just transition. The solar and battery supply chains can be
complex and opaque. The Company works with operating partners to understand
and manage these risks.
The Australian solar farms operating partner implements a "supplier code of
conduct" setting out expectations for socially and environmentally responsible
procurement. This includes expectations to comply with labour standards with
respect to health and safety, voluntary employment, child labour and young
workers, working hours, wages and benefits, humane treatment, freedom of
association and collective bargaining, labour hire, anti-discrimination,
equality, diversity and community.
A third-party assessment of strategic suppliers, such as solar panel and
battery companies checks that working practices and appropriate policies and
procedures are in place. The Company does not work with suppliers blacklisted
for poor working practices such as those backlisted by the U.S. Commerce
Department, as part of an effort to halt commerce connected to allegations of
human rights violations against minorities.
In Brazil the construction of distributed solar sites is also demonstrating
social impact. The direct jobs created is estimated at 344 communities.
Environmental: Responsible Construction
Construction commenced early in 2022 on the UK gas peaking with carbon capture
and reuse investment. The Company works closely, through the Investment
Adviser, with service providers and the EPC partner on responsible contracting
practices including waste management and health and safety.
Despite a brownfield site the contractor engaged a wildlife expert to assess
bird and bat populations and ensured any site clearance was done before
nesting season. The site has suffered from fly tipping previously and this was
responsibly disposed of, as well as water course improvement and mains grid
connection was established to avoid diesel generator emissions.
The EPC is ISO certified for quality, health, safety and environmental
management and is listed as a prequalified supplier including on HSE criteria
under the Achilles. The Company recognises that responsible construction
starts with selecting highly qualified partners.
The Company tracks performance on sustainability indicators with the EPC
submitting monthly metrics on health and safety and environmental performance.
Governance: ESG Policies
The Company ensures that all project partners have necessary policies and
practices in place to ensure they operate ethically, sustainably and in
accordance with all local laws and regulations.
The Investment Adviser has worked closely with the Brazilian solar farm
operator to support development and roll out of environment, social and
governance policies to ensure appropriate governance is in place to manage the
priority risks and opportunities. All asset operating partners are required to
implement policies covering various ESG topics as applicable to projects
including biodiversity and habitat, manage health and safety, material
sourcing, diversity and inclusion, conflict of interest and whistle blower
protection. Partners are required to report overall performance surrounding
their sustainability strategy.
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",
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 Management Report (including the Chairman's Statement and the
Investment Adviser'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 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 48 and 51 of the 2021
Annual Report.
The current global economic market volatility and the war in Ukraine have
impacted the business in several areas as detailed in the Chairman's Statement
and Investment Adviser's Report. However, 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 Adviser
- Reliance on third party service providers
- Currency risks
Risks relating to the portfolio investment strategy:
- Illiquidity of investments
Risks relating to investments:
- Construction risks
- Due diligence
- Demand, usage and throughput risks
- Meteorology risks
- Counterparty risks
- Uninsured loss and damage
- Curtailment risks
- Commodity price risks
Risks relating to the Company's shares:
- Discount to NAV
Risks relating to regulation:
- Regulatory risks
Operational risks:
- Operation and management risks of the portfolio of assets
- Valuation risks
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
Chairman
12 September 2022
Financial Statements
INDEPENDENT REVIEW REPORT
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 2022 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 2022 which comprises the 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 International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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 2, the annual financial statements of VH Global
Sustainable Energy Opportunities PLC 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 section 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, however future events or conditions may cause the VH Global
Sustainable Energy Opportunities PLC 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
12 September 2022
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 2022 to 30 June 2022
For the period from incorporation on 30 October 2020 to 30 June 2021
For the six-month period ended 30 June 2022 (unaudited) (unaudited)
Note Revenue £'000 Capital Total Revenue £'000 Capital Total
£'000
£'000
£'000
£'000
Income
Gains/(losses) on investments 5 - 20,708 20,708 - (1,910) (1,910)
Investment income 3 13,562 - 13,562 60 - 60
Total income and gains 13,562 20,708 34,270 60 (1,910) (1,850)
Investment advisory fees 12 (1,569) - (1,569) (973) - (973)
Other expenses (315) - (315) (572) - (572)
Profit/(loss) for the period before taxation
11,678 20,708 32,386 (1,485) (1,910) (3,395)
Taxation 4 - - - - - -
Profit/(loss) for the period aftetaxation
11,678 20,708 32,386 (1,485) (1,910) (3,395)
Profit and total comprehensive income attributable to:
Equity holders of the company 11,678 20,708 32,386 (1,485) (1,910) (3,395)
Earnings/(loss) per share - basic and diluted (pence)
14 3.75 6.65 10.40 (1.00) (1.29) (2.29)
The total column of the Statement of Comprehensive Income is the profit and
loss account of the Company. The supplementary revenue return and capital
columns have been prepared in accordance with the Association of Investment
Companies Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations.
The above Statement of Comprehensive Income includes all recognised gains and
losses.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF Financial Position
As at 30 June 2022
As at
As at 30 June 31 December
2022 2021
(Unaudited) (Audited)
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 5 190,542 159,618
Total non-current assets 190,542 159,618
Current assets
Cash and cash equivalents 8 161,665 163,810
Other receivables 7 347 811
Total current assets 162,012 164,621
Total assets 352,554 324,239
Current liabilities
Accounts payable and accrued expenses 9 (166) (341)
Total current liabilities (166) (341)
Total liabilities (166) (341)
Net assets 352,388 323,898
Capital and reserves
Share capital 10 3,116 3,116
Share premium 67,949 67,949
Special distributable reserve 10 232,467 232,467
Capital reserve 42,754 22,046
Revenue reserve 6,102 (1,680)
Total capital and reserves attributable to equity holders of the company 352,388 323,898
Net asset value per Ordinary Share (pence) 113.09 103.95
The financial statements were approved and authorised for issue by the Board
of Directors on 12 September 2022 and signed on their behalf by:
Bernard Bulkin
Chairman
Company Registration Number 12986255
The notes below form part of these financial statements.
CONDENSED STATEMENT OF changes in sharholdERs' equity
As at 30 June 2022
Note Share capital £'000 Share premium account £'000 Special distributable reserve £'000 Capital reserve £'000 Revenue reserve £'000 Total
£'000
For the six months ended
30 June 2022 (unaudited)
Opening balance 3,116 67,949 232,467 22,046 (1,680) 323,898
Total comprehensive income/ (loss) for the period
- - - 20,708 11,678 32,386
Interim dividends paid during the period - - - - (3,896)
(3,896)
Balance at 30 June 2022 3,116 67,949 232,467 42,754 6,102 352,388
For the period from incorporation on 30 October 2020 to 30 June 2021 Share premium account Special distributable
(unaudited)
Share capital £'000 £'000 reserve Capital reserve Revenue reserve
£'000 £'000 £'000 Total £'000
Note
Opening balance
Issue of share capital 10 2,426 240,198 - - - 242,624
Cost of issue of shares 10 - (4,698) - - - (4,698)
Transfer to special distributable
reserve - (235,500) 235,500 - - -
Total comprehensive income/ (loss) for the period
- - - (1,910) (1,485) (3,395)
Balance at 30 June 2021 2,426 - 235,500 (1,910) (1,485) 234,531
A total of 311,589,799 Ordinary Shares were issued since its incorporation to
30 June 2022.
The capital reserve represents the unrealised gains or losses on the
revaluation of investments. The unrealised element of the capital reserve is
not distributable. The special distributable reserve was created on court
cancellation of the share premium account. The revenue, special distributable
and realised capital reserves are distributable by way of dividend.
The total distributable reserves as at 30 June 2022 was £238,569,770.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF cash flows
For the period 1 January to 30 June 2022
For the six-month period ended 30 June 2022 (unaudited) £'000 For the period from incorporation on 30 October 2020 to 30 June 2021
(unaudited)
£'000
Note
Cash flows from operating activities
Profit before taxation 32,386 (3,395)
Adjustments for:
Movement in fair value of investments 5 (19,816) (736)
Operating result before working capital changes 12,570 (4,131)
Decrease/(increase) in prepayments and other receivables 464 (497)
Increase in interest receivables - (16)
(Decrease)/increase in accounts payable and accrued expenses (175) 569
Net cash flow generated/(used) in operating activities 12,859 (4,075)
Cash flows from investing activities
Purchase of investments 5 (11,108) (49,462)
Net cash used in investing activities (11,108) (49,462)
Cash flows from financing activities
Proceeds from issue of shares - 242,624
Payment of share issue costs - (4,699)
Dividend paid in the period (3,896) -
Net cash generated/(used) from financing activities (3,896) 237,925
Net (decrease)/increase in cash and cash equivalents (2,145) 184,388
Cash and cash equivalents at beginning of the period 163,810 -
Cash and cash equivalents at end of the period 10 161,665 184,388
The notes below form part of these financial statements.
NOTES TO THE CONDENSED 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 limited company under the Companies
Act 2006 with registered number 12986255. The Company commenced operations on
2 February 2021 when its shares commenced trading on the London Stock
Exchange.
The Company and the AIFM have appointed Victory Hill Capital Advisors LLP as
their Investment Adviser pursuant to the Investment Advisory Agreement dated 5
January 2021.
The Company has registered, and intends to carry on business, as an investment
trust with an investment objective to seek 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 OECD, OECD Key Partner Countries, OECD
Accession Countries or the EU.
The interim condensed unaudited financial statements of the Company (the
"interim financial statements") are for the six-month period ended 30 June
2022 and comprise only the results of the Company, as its investment in VH
GSEO UK Holdings Limited ("GSEO Holdings") is measured at fair value through
profit or loss in line with IFRS 10 as explained in Note 2.
2. Significant accounting policies
2.1 Basis of preparation
The condensed financial statements included in this Half Year Report have been
prepared in accordance with IAS 34 "Interim Financial Reporting". The same
accounting policies, presentation and methods of computation are followed in
these condensed financial statements as were applied in the preparation of the
Company's annual financial statements for the year ended 31 December 2021 and
are expected to continue to apply in the Company's annual financial statements
for the year ending 31 December 2022.
The Company's financial statements have been prepared under the historical
cost convention, as modified by the revaluation of financial assets and
financial liabilities at fair value through profit or loss, and in accordance
with UK adopted international accounting standards.
The interim 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 April 2021 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 2021. 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 2021. The
audited annual accounts for the year ended 31 December 2021 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 Half Year 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 2022, the Company had cash balances of £161.7m,
which are sufficient to meet current obligations as they fall due.
Furthermore, the Company successfully raised a further £122m (net proceeds of
£119.6m) through equity issuance post period end, increasing the Company's
cash balances to £281.3m.
The major cash outflows of the Company are deploying funds on remaining
existing commitments, the payment of dividends and costs relating to the
acquisition of new assets, where the latter two are discretionary, and the
Company's ongoing operating costs.
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. Based on this review, the Directors have a reasonable expectation that
the Company has adequate resources to continue in operational existence for at
least 12 months from the date of approval of this report. Accordingly, they
continue to adopt the going concern basis in preparing the financial
statements.
2.4 Critical accounting judgements, estimates and assumptions
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates and
underlying assumptions are reviewed regularly on an on-going basis. Revisions
to accounting estimates are recognised in the period in which the estimates
are revised and in any future periods affected. There have been no significant
estimates, judgements or assumptions for the period.
2.5 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 Adviser'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. Details of the
areas of estimation in the calculation of fair value are disclosed in Note 5.
2.6 Equity and debt investment in VH GSEO UK Holdings Limited
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 Limited, share the same investment characteristics and, as such,
constitute a single asset class for IFRS 7 disclosure purposes.
2.7 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, the Company and its wholly owned direct subsidiary,
VH GSEO UK Holdings Limited are measured at fair value as opposed to being
consolidated on a line-by-line basis, meaning their cash, debt and working
capital balances are included in the fair value of investments rather than the
Group's current assets. The Directors have satisfied themselves that VH GSEO
UK Holdings Limited meets the characteristic of an investment entity. VH GSEO
UK Holdings Limited has one investor, the Company, however, in substance VH
GSEO UK Holdings Limited is investing the funds of the investors of the
Company on its behalf.
2.8 Segmental reporting
The Board 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 is
used 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-month period ended For the period from incorporation on 30 October 2020 to 30 June 2021
30 June 2022
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000 £'000 £'000 £'000
Interest on cash deposits 476 - 476 60 - 60
Interest income from investments 1,979 - 1,979 - - -
Dividend income 11,107 - 11,107 - - -
Investment income 13,562 - 13,562 60 - 60
4. Taxation
The effective UK corporation tax rate applicable to the Company for the period
is 19%. The tax charge differs from the charge resulting from applying the
standard rate of UK corporation tax for an investment trust company. The tax
for the period shown in the Condensed Statement of Comprehensive Income is as
follows.
For the six-month period ended For the period from incorporation on 30 October 2020 to 30 June 2021
30 June 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000
£'000 £'000 £'000
Profit/(losses) for the period before taxation 11,678 20,708 32,386 (1,485) (1,910) (3,395)
Corporation tax at 19% 2,219 3,934 6,153 (282) (363) (645)
Effect of:
Capital (gains) / losses not taxable - (3,934) (3,934) - 290 290
(Expenses) not deductible / income not taxable (2,219) - (2,219) 282 - 282
Foreign exchange losses - - - - 73 73
Total tax charge for the period - - - - - -
5. Investments at fair value through profit or loss
As set out in Note 2, the Company designates its interest in its wholly owned
direct subsidiary VH GSEO UK Holdings Limited as an investment at fair value
through profit or loss at each balance sheet date in accordance with IFRS 13.
As at 30 June 2022 (unaudited) As at 31 December 2021
£'000 (audited)
£'000
Opening balance at beginning of the period 159,618 -
Additions during the period at cost 11,108 136,023
170,726 136,023
Fair value movement on investments:
Change in fair value of equity investments (1) 20,721 22,046
Change in interest on loan investments (2) (905) 1,549
Total fair value movement on investments 19,816 23,595
Closing balance 190,542 159,618
( )
(1) The £20,708k in the Statement of Comprehensive Income and Statement of
Changes in Equity includes both realised and unrealised gain/(losses) on
investments.This amount is made up of the £20,721k in this note and a
realised foreign exchange loss of £13k during the period.
(2) Change in Interest on loan investments is the difference between amount of
interest receivable as on 31 December 2021 and as on 30 June 2022. It shows
reduction in value because of receipt of interest and change in discount rates
during the period.
Valuation methodology
As disclosed on pages 92 and 93 of the Company's Annual Report for the year
ended 31 December 2021, 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
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 2022.
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 will be based on power price forecasts from leading market
consultants.
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 IMF inflation forecasted rates for the
respective jurisdiction.
Asset life In general, an operating life of 29 years for terminals and 25 years for solar
PV assets is assumed. 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. Operating expenses are primarily fixed expenses.
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 2022 (unaudited)
Discount rate United States Terminals 6.6%
Australia operating PV asset 6.8%
Brazil operating PV assets 10.7%
Long-term inflation* United States 2.0%
Australia 2.5%
Brazil 3.0%
Remaining Asset Life United States Terminals 29 years
Australia operating PV asset 25 years
Brazil operating PV assets 25 years
Exchange rates GBP:USD 1:1.218
GBP:BRL 1:6.402
GBP:AUD 1:1.764
* Source: IMF. Inflation rates have been taken from IMF, which provides yearly
forecasted inflation up to 2027. Long-term inflation rate refers to the 2027
projected rate. Short-term inflation volatility of up to 2027 has been
accounted for in the valuation of operating assets.
Valuation sensitivity
As at 30 June 2022, the US terminals, one of the two solar PV assets in
Australia and four of the eighteen remote distributed generation assets in
Brazil are being measured using DCF valuation. 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.
In line with IFRS 13, the fair value of one of the two solar PV assets in
Australia is calculated as the acquisition price of the asset and the cash
flows associated with the installation and operation of the BESS. This is the
best estimate of valuation as the highest and best use of the asset would be
when the BESS has been fully integrated with the solar plants.
The expansion of the US terminals, remaining Brazil Solar PV assets, and the
UK Flexible Power, Carbon Capture & Reuse are in construction. Therefore,
until commencement of operations, the cost basis is considered to be the most
appropriate measure of valuation. There are no indications at 30 June 2022
that the cost basis should be impaired. 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 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 +/- 0.5% 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 +/- 0.5% is considered to be a reasonable range of alternative
assumptions for inflation.
As at 30 June 2022
Change in fair value of Investments Change in NAV per share Pence
£'000
Change in input
Base case
-0.5% 4,761 1.53
Discount rate - US Terminals 6.6%
+0.5% (4,383) 1.41
-0.5% 505 0.16
Discount rate - AU Solar PV 6.8%
+0.5% (468) (0.15)
-0.5% 467 0.15
Discount rate - BR Solar PV 10.7%
+0.5% (438) (0.14)
-0.5% 5,733 1.84
Discount rate - All
+0.5% (5,289) (
1
.
7
0
)
-0.5% (4,249) (1.36)
Inflation - US Terminals 2.0%
+0.5% 4,597 1.48
-0.5% (395) (0.13)
Inflation - AU Solar PV 2.5%
+0.5% 421 0.14
-0.5% (358) (0.11)
Inflation - BR Solar PV 3.0%
+0.5% 366 0.12
-0.5% (5,003) (1.61)
Inflation - All
+0.5% 5,384 1
.
7
3
-1 year (1,572) (0.50)
Asset life - US Terminals 29 years
+1 year 1,501 0.48
-1 year (129) (0.04)
Asset life - AU Solar PV 25 years
+1 year 150 0.05
-1 year (154) (0.05)
Asset life - BR Solar PV 25 years
+1 year 143 0.05
-1 year (1,855) (0.60)
Asset life - All
+1 year 1,793 0
.
5
8
-5% 3,030 0.97
Operating expenses - US Terminals Per project
+5% (3,030) (0.97)
-5% 48 0.03
Operating expenses - AU Solar PV Per project
+5% (61) (0.03)
-5% 218 0.07
Operating expenses - BR Solar PV Per project
+5% (233) (0.07)
-5% 3,329 1.07
Operating expenses - All
+5% (3,346) (1.07)
-10% 11,898 3.82
FX (GBP:USD) 1.218
+10% (9,735) (3.12)
-10% 5,221 1.68
FX (GBP:BRL) 6.402
+10% (4,272) (1.37)
-10% 2,286 0.73
FX (GBP:AUD) 1.764
+10% (1,870) (0.60)
-10% 19,405 6.23
FX - All
+10% (15,877) (5.10)
The sensitivities above are assumed to be independent of each other. Combined
sensitivities are not presented.
6. 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. There has been no
change in ownership structure since 31 December 2021.
Investments Place of Business Ownership interests as at 30 June 2022
VH GSEO UK Holdings Limited United Kingdom 100%
Victory Hill Distributed Energy Investments Limited United Kingdom 100%
Victory Hill Flexible Power Limited United Kingdom 100%
Rhodesia Power Limited United Kingdom 100%
Wellcape Land 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%
Port Pirie Solar Pty Ltd Australia 100%
Dunblane Solar Pty Ltd Australia 100%
Victory Hill Holdings Brasil S.A. Brazil 99.99%
Energea Itaguai I Aluguel De Equipamentos E Manutencao LTDA Brazil 100%
Energea Itaguai II Aluguel De Equipamentos E Manutencao LTDA Brazil 100%
Energea Itaguai III Aluguel De Equipamentos E Manutencao LTDA Brazil 100%
Energea Nova Friburgo LTDA Brazil 100%
Gera Solar SE LTDA Brazil 100%
Gera Solar RN LTDA Brazil 100%
Gera Solar PA LTDA Brazil 100%
Gera Solar PB Energia LTDA Brazil 100%
Gera Solar MS LTDA Brazil 100%
Energea Palmas Geracao S.A Brazil 100%
Energea Geracao de Projetos Minas Gerais LTDA Brazil 100%
Energea Geracao de Projetos RJ LTDA Brazil 100%
Energea Geracao de Projetos RJ II LTDA Brazil 100%
Energea Vassouras VH Geracao LTDA Brazil 100%
CGS Sao Paulo Locacoes LTDA Brazil 100%
At 30 June 2022, the Company had one direct subsidiary and owned 100% of VH
GSEO UK Holdings Limited. The Company owns investments in the other entities
per the table above through its ownership of VH GSEO UK Holdings Limited. VH
GSEO UK Holdings Limited 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.
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 terminals.
The Company's investments in the Brazilian entities are held through Victory
Hill Distributed Energy Investments Limited, which holds 99.99% of Victory
Hill Holdings Brasil S.A. These relate to the Brazil Solar PV assets.
The Company's investments in Victory Hill Distributed Power Pty Ltd, Port
Pirie Solar Pty Ltd and Dunblane Solar Pty Ltd are held through Victory Hill
Australia Investments Pty Ltd. These relate to the Australia Renewable power
generation and Battery storage assets.
The Company's investments in Rhodesia Power Limited and Wellcape Land Limited
are held through Victory Hill Flexible Power Limited. These relate to the UK
Flexible Power, Carbon Capture & Reuse assets.
7. Other receivables
As at As at
30 June 2022
31 December 2021
£'000 £'000
Other receivables 67 811
Interest receivable on Money Market instruments 124 -
Prepayments 156 -
Total other receivables 347 811
The Directors have analysed the expected credit loss in respect of receivables
and concluded there was no material exposure for the period ended 30 June 2022
and 31 December 2021.
8. Cash and cash equivalents
As at As at
30 June 2022
31 December 2021
£'000 £'000
Cash at bank 27,948 92,094
Cash on deposit 133,717 71,716
Total cash at bank 161,665 163,810
Cash on deposit consists of funds held in a 32-day notice deposit account with
Barclays Bank plc and money market instruments with State Street Corp.
9. Accounts payable and accrued expenses
As at As at
30 June 2022
31 December 2021
£'000 £'000
Accrued expenses 165 197
Other payables 1 144
Accounts payable and accrued expenses 166 341
The Directors consider that the carrying amount of trade and other payables
matches their fair value.
10. Share Capital
Date Issued and fully paid Number of shares Share Capital £'000 Share premium Special Distributable Reserve As at 30 June 2022
£'000
£'000
£'000
30 October 2020 Ordinary shares 1 - - - -
2 February 2021 Ordinary shares 242,624,280 2,426 240,198 - 242,624
2 February 2021 Share issue costs - - (4,698) - (4,698)
13 April 2021 Transfer to special distributable reserve - - (235,500) 235,500 -
11 November 2021 Dividends paid - - - (3,033) (3,033)
3 December 2021 Ordinary shares 68,965,518 690 69,310 - 70,000
3 December 2021 Share issue costs - - (1,361) - (1,361)
30 June 2022 311,589,799 3,116 67,949 232,467 303,532
Post period end, the Company raised additional gross proceeds of £122m
through the issue of 110,909,091 Ordinary Shares at an issue price of 110p per
Ordinary Share.
In order to increase distributable reserves available for the payment of
future dividends, the Company resolved on 5 January 2021 that, conditional
upon admission and the approval of the Court, the amount standing to the
credit of the share premium account of the Company immediately following
completion of the issue be cancelled and transferred to a special
distributable reserve.
As stated by the Institute of Chartered Accountants in England and Wales
(ICAEW) and the Institute of Chartered Accountants in Scotland (ICAS) in the
technical release TECH 02/17BL, The Companies (Reduction of Share Capital)
Order 2008 SI 2008/1915 (the Order) specifies the cases in which a reserve
arising from a reduction in a company's capital (i.e., share capital, share
premium account, capital redemption reserve or redenomination reserve) is to
be treated as a realised profit as a matter of law.
The Order also disapplies the general prohibition in Companies Act 2006
Section 654 on the distribution of a reserve arising from a reduction of
capital. The Order provides that if a limited company having a share capital
reduces its capital and the reduction is confirmed by order of court, the
reserve arising from the reduction is treated as a realised profit unless the
court orders otherwise.
Subsequently, following approval by the Court and registration of the
cancellation with the Registrar of Companies, an amount of £235,499,532 was
transferred to a special distributable reserve with effect from 13 April 2021,
which can be utilised to fund distributions by way of dividends to the
Company's shareholders.
11. Dividends
The Board of Directors of VH Global Sustainable Energy Opportunities plc
announced an interim dividend of 1.25p per Ordinary Share of £3.9m with
respect to the period 1 January 2022 to 31 March 2022, which was paid on 10
June 2022.
12. Transactions with AIFM, Investment Adviser and Related Parties
AIFM
The Company has entered into the AIFM Agreement with G10 Capital Limited (the
AIFM) under which the AIFM has been appointed to act as the Company's
alternative investment fund manager with overall responsibility for the risk
management and portfolio management of the Company, providing alternative
investment fund manager services and ensuring compliance with the requirements
of the AIFM Rules, subject to the overall supervision of the Directors in
accordance with the policies laid down by the Directors from time to time and
the investment restrictions referred to in the AIFM Agreement.
The AIFM Agreement provides that the Company will pay to the AIFM a fixed
monthly fee of £5,000, exclusive of VAT. The Company will also reimburse the
AIFM for reasonable expenses properly incurred by the AIFM in the performance
of its obligations under the AIFM Agreement.
The AIFM Agreement may be terminated by the Company or the AIFM giving not
less than four months' written notice. The AIFM Agreement may be terminated
with immediate effect on the occurrence of certain events, including
insolvency or in the event of a material and continuing breach.
The AIFM fees for the period ended 30 June 2022 amounted to £36,000
(including VAT) (for 30 June 2021: £35,784) and no amount was outstanding at
the periods ended 30 June 2022 and 2021.
Investment Adviser
The Company and the AIFM have entered into an Investment Advisory Agreement
with Victory Hill Capital Advisors LLP. Under the Investment Advisory
Agreement, the AIFM and the Company have appointed Victory Hill as Investment
Adviser to the Company and the AIFM.
Under the terms of the Investment Advisory Agreement, the Investment Adviser
will (i) seek out and evaluate investment opportunities; (ii) recommend the
manner in which investments should be made, retained and realised; (iii)
advise the Company and the AIFM in relation to acquisitions and disposals of
assets; (iv) provide asset valuations to assist the Administrator in the
calculation of the quarterly Net Asset Value; and (v) provide operational,
monitoring and asset Management services.
The Investment Adviser is entitled to receive from the Company an annual fee
to be calculated as percentages of the Company's net assets, 1% on the first
£250m of NAV, 0.9% on NAV in excess of £250m and up to and including £500m
and 0.8% on NAV in excess of £500m exclusive of VAT.
The Investment Advisory Agreement may be terminated on 12 months' written
notice, provided that such notice may not be served before 2 February 2025.
The Investment Advisory Agreement may be terminated with immediate effect on
the occurrence of certain events, including insolvency or in the event of a
material and continuing breach.
The Investment Advisory fees for the period ended 30 June 2022 amounted to
£1,569,187 (including VAT) (for 30 June 2021: £972,849) of which none was
outstanding (as of 30 June 2021: £198,236) and included in accounts payable
and accrued expenses at the end of the period.
Directors
The Directors have been entitled to aggregate annual remuneration (excluding
expenses) payable as follows:
For the six-month period ended
30 June 2022
£'000
Bernard Bulkin OBE 35
Margaret Stephens 25
Richard Horlick 25
Louise Kingham CBE 25
110
There has been no change in Directors' shareholdings since 31 December 2021.
The Directors are not eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits. There is no amount set aside or
accrued by the Company in respect of contingent or deferred compensation
payments or any benefits in kind payable to the Directors. During the period
ended 30 June 2022, Directors' fees of £110,000 were paid (for 30 June 2021:
£91,201) of which none was payable at the periods ended 30 June 2022 and
2021.
The Directors held the following beneficial interests in the Ordinary Shares
of the Company as at 30 June 2022.
As at 30 June 2022
Number of Ordinary Shares held % of Ordinary Shares held
Bernard Bulkin OBE 20,000 0.006
Margaret Stephens 10,000 0.003
Richard Horlick 200,000 0.064
Louise Kingham CBE 10,000 0.003
Other balances with related parties
The Company entered into intercompany loan agreements with VH GSEO UK Holdings
Limited, which entered into further Intercompany loan agreements with the
following subsidiary companies.
Intercompany loans as at 30 June 2022 are listed below:
· Victory Hill USA Holdings LLC (USD 63,665,000)
· Victory Hill Australia Investments Pty Ltd (AUD 18,000,000)
· Victory Hill Flexible Power Ltd (GBP 7,800,000)
During the period ended 30 June 2022, the Company entered into intercompany
loan agreements with Victory Hill USA Holdings LLC of US$2,100,000 and Victory
Hill Flexible Power Ltd of £7,800,000. Dividends of £11,107,272 were paid to
the Company during the period.
13. Contingent liabilities and commitments
At 30 June 2022 the Company had no contingent liabilities (31 December 2021:
nil).
In Brazil, the Company has a remaining commitment of £13.7m (31 December
2021: £13.0m) in the construction of remote distributed solar generation
projects across ten Brazilian states with a total capacity of 75MW.
In Australia, the Company has a remaining commitment of £34.0m (31 December
2021: £34.0m) to acquire a portfolio of distributed solar generation assets
with plans to build battery storage capacity in Australia in two tranches.
In the UK, in addition to a further £28m made on 26 May 2022, the Company has
a remaining commitment £91.6m (31 December 2021: £71.9m) to fund two
Flexible Power plants which bring together high efficiency gas-fired turbine
technology with carbon capture systems to provide a clean and flexible
electricity solution for the United Kingdom, with a combined capacity of 45MW.
There are no remaining commitments to fulfill as at period end relating to the
US terminals.
14. 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 since the Company's incorporation on 30
October 2020 to 30 June 2022. Amounts shown below are both basic and diluted
measures as there were no dilutive instruments in issue Throughout the current
period.
For the six-month period For the period from incorporation on 30 October 2020 to 30 June 2021
ended 30 June 2022
Revenue Capital Total Revenue Capital Total
Earnings (£'000) 11,678 20,708 32,387 (1,485) (1,910) (3,395)
Weighted average number of
Ordinary Shares 311,589,799 311,589,799 311,589,799 147,771,167 147,771,167 147,771,167
EPS (p) 3.75 6.65 10.39 (1.00) (1.29) (2.29)
15. 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 Period ended
30 June 2022
31 December
2021
NAV (£'000) 352,388 323,898
Number of Ordinary Shares 311,589,799 311,589,799
NAV per share (p) 113.09 103.95
16. Post balance sheet events
On 1 July 2022, the Company successfully raised a further £122m through
equity issuance. The proceeds raised will be used to invest in a number of
potential sustainable energy infrastructure investments. The Investment
Adviser is confident that the Company would be able to invest or commit
substantially all of the net proceeds from the recent issue in the next three
to six months.
On 4 August 2022, the Board approved a dividend of £5.3m equivalent to 1.25p
per Ordinary Share. The record date for the dividend is 19 August 2022 and the
payment date is 16 September 2022.
On 31 August 2022, the Company announced the acquisition of the Mascarenhas
Hydro Electric Facility (the "Hydro Facility") in the state of Espírito
Santo, Brazil for a total consideration of BRL 1,225mn comprised of BRL 800mn
on closing subject to adjustments. The remainder is payable subject to the
conditions established under the process of renewal of the Hydro Facility
concession in H1 2027. The transaction closing is subject to customary
regulatory approvals.
On 12 September 2022, the Company announced to acquire and build three
fully-permitted solar PV sites for £21.2m as part of the existing £50m
commitment to its Australian solar PV and storage investment programme (the
"Australian Energy Transition Programme"). This relates to Phase III of the
Australian Energy Transition Programme in respect of an initial three new
solar PV sites of 5MW each, located in New South Wales.
ALTERNATIVE PERFORMANCE MEASURES
In reporting financial information, the Company presents alternative
performance measures, "APMs", which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company.
The APMs presented in this report are shown below:
Earnings per share
In addition to Note 14 above, the Board considers it appropriate to disclose
an additional EPS figure for the comparative period, 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 since the Company
commenced its operations on 2 February 2021 to 30 June 2021. The Board
believes this provides a more relevant measure of the Company's performance in
the comparative period.
Revenue Capital Total
Earnings (£'000) (1,485) (1,910) (3,395)
Weighted average number of Ordinary Shares 242,624,281 242,624,281 242,624,281
EPS (p) (0.61) (0.79) (1.40)
Premium/(Discount) to NAV
The amount, expressed as a percentage, by which the share price is more than
the NAV per Ordinary Share.
As at 30 June 2022
NAV per Ordinary Share (pence per share) 113.1
Ordinary Share price (pence per share) 109.5
Premium / (Discount) to NAV as at 30 June 2022 (%) (3.2)
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 2022 NAV Share price
Opening as at commencement of operations on 2 February 2021 98.0p 100.0p
Closing as at 30 June 2022 113.1p 109.5p
Dividends paid to-date 2.50p 2.50p
Dividend adjustment factor 1.023 1.023
Adjusted closing 118.1p 112.1p
Total return (%) 18.1% 12.1%
Dividend cover
Dividend cover ratio calculation is based on net cash flows generated at the
special purpose entities ("SPE") adjusted for the Company level expenses and
dividends paid by the Company.
Period ended 30 June 2022
Net cash flow generated at the SPEs (£'000) 4,137
Dividend cover 1.1x
Glossary
AIC Association of Investment Companies
AIFM Alternative Investment Fund Manager, G10 Capital Limited
Annual General Meeting or AGM A meeting held once a year which shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the company in which they are invested
Bbls Barrels
COD Commercial Operational Date
Company VH Global Sustainable Energy Opportunities plc
Decentralised energy Energy which is produced close to where it will be used, rather than at a
large centralised plant elsewhere, delivered through a centralised grid
infrastructure
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share
Dividend Income receivable from an investment in shares
EPC Engineering, procurement and construction
ESG Environmental, social and governance
EU European Union
Ex-dividend date The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to shareholders
Financial Conduct Authority The independent body that regulates the financial services industry in the UK
or FCA
FiT Feed-in Tariff
GAV Gross Asset Value
Gearing A way to magnify income and capital returns, but which can also magnify losses
GHG Green House Gases
Investment Adviser / Victory Hill Victory Hill Capital Advisors 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
MWp Megawatt Peak
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
O&M Operation and Maintenance
PPA Power Purchase Agreement
Premium The amount, expressed as a percentage, by which the share price is more than
the net asset value per share
PV Photovoltaic
ROC Renewable Obligation Certificates
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Share price The price of a share as determined by a relevant stock market
SPE Special Purpose Entity
TCFD Task Force on Climate-Related Financial Disclosures
Total return Total return statistics enable the investor to make performance comparisons
between investment trusts with different dividend policies. The total return
measures the combined effect of any dividends paid, together with the rise or
fall in the share price or NAV. This is calculated by the movement in the
share price or NAV plus the dividends paid by the Company assuming these are
reinvested in the Company at the prevailing NAV/share price
WACC Weighted Average Cost of Capital
Key Company Information
Company number: 12986255
Country of incorporation: England and Wales
Directors, Management and Advisers
Non-Executive Directors Bernard Bulkin OBE (Chairman)
Richard Horlick
Louise Kingham CBE
Margaret Stephens
Registered Office 6th Floor
Bastion House
140 London Wall
London
EC2Y 5DN
AIFM G10 Capital Limited
4th Floor
3 More London Riverside
London
SE1 2AQ
Investment Adviser Victory Hill Capital Advisors LLP
4 Albemarle Street
London
W1S 4GA
Joint Corporate Broker Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Joint Corporate Broker Alvarium Securities Limited
10 Old Burlington Street
London
W1S 3AG
Legal Adviser to the Company Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Administrator and Company Secretary Apex Fund and Corporate Services (UK) Limited
6th Floor
Bastion House
140 London Wall
London
EC2Y 5DN
Depositary
Apex Depositary (UK) Limited
6th Floor
Bastion House
140 London Wall
London
EC2Y 5DN
Registrar Computershare Limited
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditor BDO LLP
55 Baker Street
London
W1U 7EU
END
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