VH Global Sustain. - Interim Results to 30 June 2023
15/09/2023 07:00
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RNS Number : 5198M VH Global Sustainable Energy Oppt. 15 September 2023
VH Global Sustainable Energy Opportunities plc (the "Company")
Interim results for the period ended 30 June 2023
The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO) is
pleased to report its interim results for the period from 1 January 2023 to 30
June 2023.
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
Hamza Ali +44 (0)7976 308 914
Victory Hill Capital Advisors LLP (Investment Manager)
Navin Chauhan info@victory-hill.com (mailto:info@victory-hill.com)
Numis (Corporate Broker)
David Benda +44 (0)20 7260 1000
Matt Goss
Apex Fund and Corporate Services (UK) Limited (Company Secretary)
ukfundcosec@apexgroup.com (mailto:ukfundcosec@apexgroup.com)
About Victory Hill Capital Partners LLP
Victory Hill Capital Partners LLP ("Victory Hill") is authorised and regulated
by the Financial Conduct Authority (FRN 961570).
Victory Hill is based in London and was founded in May 2020 by an
experienced team of energy financiers that spun-out of a large established
global project finance banking group. The team has participated in more
than $200bn in transaction values across 91 conventional and renewable
energy-related transactions in over 30 jurisdictions worldwide. Victory Hill
is the investment manager of the Company.
The Victory Hill team deploys its experience across different financial
disciplines in order to assess investments holistically from multiple points
of view. The firm pursues operational stability and well-designed corporate
governance to generate sustainable positive returns for investors. It focuses
on supporting and accelerating the energy transition and the attainment of the
UN sustainable development goals.
Victory Hill is a signatory of the United Nations Principles for Responsible
Investing (UN PRI), the United Nations Global Compact (UN GC), Net Zero Asset
Managers Initiative (NZAMI), a member of the Global Impact Investing Network
(GIIN) and is a formal supporter of the Financial Stability Board's Task-Force
on Climate-related Disclosures (TCFD).
ABOUT THE COMPANY
A specialist mandate to support the global energy transition
VH Global Sustainable Energy Opportunities plc's ("GSEO" or the "Company")
investment objective is to generate stable returns, principally in the form of
income distributions, by investing in a diversified portfolio of global
sustainable energy infrastructure assets, predominantly in countries that are
members of the EU, OECD, OECD Key Partner countries or OECD Accession
Countries.
The Company's investment policy states that it aims to achieve diversification
principally by making a range of sustainable energy infrastructure investments
across a number of distinct geographies and a mix of proven technologies that
align with the UN Sustainable Development Goals ("SDGs"). 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 may include exposure to power
generation (renewable and conventional), biomass, transmission, distribution,
storage and waste-to-energy. These investments are operational, in
construction or 'ready-to-build' but do not include assets that are under
development or in pre-consent stage.
No investment is made in extraction projects involving either fossil fuels or
minerals.
WHY INVEST IN GSEO?
A vehicle presenting a distinctive combination of access, return and impact.
Access
• Access to global private markets energy investments
• A geographically and technologically diversified portfolio of
actively managed, high-impact investments which aim to ensure an effective and
just climate transition
Return
• Targeting attractive risk-adjusted returns from around the
world
• A highly diversified mix of assets driving both long-term
capital growth and income generation
• High degree of inflation linkage with over 90% of revenues that
are inflation-linked
Impact
• Creating environmental and social impact transforming lives and
communities without compromising on returns
• Transparent impact reporting
• SFDR Article 9 fund
HIGHLIGHTS
FINANCIAL
£465.6m
Net asset value as at 30 June 2023
110.21p
NAV per share* as at 30 June 2023
1.3x
Cash dividend coverage* as at 30 June 2023
5.52p
Progressive dividend target per share reaffirmed for 2023
8.2%
Total annualised NAV return since IPO* (Feb 2021)
2.2%
Total leverage of the Company as a percentage of NAV as at 30 June 2023
>90%
% of revenues contracted and inflation-linked
92.8%
% of portfolio committed or deployed as at 30 June 2023
ESG
516,585MWh
Clean energy generated and injected into the grid
53,423
Tonnes of Carbon avoided
11,359
Tonnes of Sulphur Oxides avoided**
138,458
Equivalent UK homes powered annually by clean energy
* This disclosure is considered to represent the Company's alternative
performance measures ("APMs") and other performance measures used, together
with how these measures have been calculated can be found on below.
** Additional environmental disclosures are available below.
Interim Management Report
CHAIR'S STATEMENT
Leading the energy transition and driving positive impact on the environment
and society
By investing globally in a diverse range of proven technologies across the
energy value chain, GSEO continues to work towards its strategic goals of
accelerating the energy transition towards a net zero carbon world and
providing shareholders attractive risk-adjusted returns.
Bernard Bulkin
Chair
On behalf of the Board, I am pleased to present our Interim Report for VH
Global Sustainable Energy Opportunities plc (the "Company" or "GSEO") for the
six months to 30 June 2023.
The half year under review has seen continued growth in clean energy
investments despite macroeconomic headwinds. However, there are still two main
challenges that need to be addressed to meet planned net zero targets at a
global level: (1) energy security and grid stability, and (2) a balanced
capital investment approach for developed and developing economies. By
investing globally in a diverse range of proven technologies across the energy
value chain, GSEO continues to work towards its strategic goals of
accelerating the energy transition towards a net zero carbon world and
providing shareholders with attractive risk-adjusted returns.
The macroeconomic, regulatory and political uncertainties that have shaped the
market turbulence in 2023 so far, highlight some of the Company's unique and
market-enduring features:
• Higher interest rates have had limited impact on the Company's
asset performance as it continues to employ minimal leverage at the asset
level (limited to one asset, and equivalent to 2.2% of NAV at Company level)
and no leverage at fund level.
• With over 90% of the contracted revenues at asset level being
inflation-linked, the expected weakening of power prices has had a limited
impact on revenues and NAV whilst higher inflation has had a positive effect
on both.
FINANCIAL PERFORMANCE
The Company's financial performance has been resilient throughout the period
under review and GSEO's NAV total return (including dividends paid) for the
six-month period to 30 June 2023 was 4.6%. As additional assets under
construction become operational, we expect that GSEO will benefit from further
capital growth.
GSEO's profit before tax for the six-month period to 30 June 2023 was £20.1m
resulting in earnings per share of 4.8p.
Net cash flows from the underlying projects remain robust, covering the cash
dividend 1.3 times. In line with the dividend target for the year ending
31 December 2023 of 5.52p per Ordinary Share, the Company has paid a
quarterly dividend of 1.38p per share with respect to Q1 2023 as well as a
dividend of the same amount per share with respect to Q2 2023, giving a total
of 2.76p per share for the period, compared to 2.5p per share for the first
half of 2022, an increase of over 10%.
As at 30 June 2023, the Company is one of the lowest geared real asset
investment trusts in the sector. Consequently, the Board is of the opinion
that interest rate risk is not currently considered to be a material concern.
The Board was disappointed to see the share price fall to a 16.3% discount to
NAV at the end of the period. The discount has widened further since the
period end and the Board is acutely aware of the impact this has on GSEO's
shareholders' returns. The Board continually evaluates the optimum capital
allocation strategy for the company balancing the need to maintain a strong
balance sheet in order to support existing portfolio assets alongside further
investment opportunities and returning capital to shareholders via dividends
or share buybacks. In this regard the Board will commit to undertake share
buybacks when it believes those to be in the best interests of shareholders.
INVESTMENT ACTIVITY AND PORTFOLIO PERFORMANCE
Victory Hill, the Investment Manager of the Company, places a significant
emphasis on active asset management of the portfolio, not only to protect the
value of each investment but also to seek opportunities to create additional
value for shareholders.
Performance of operating assets continues to exceed expectations:
• The Brazilian hydro facility has performed ahead of
expectations, benefitting from a combination of higher hydro resource
availability, high inflation impacting PPA prices positively and an
optimisation of operating costs during the period.
• The Australian solar PV asset also outperformed during the
period, with a performance 5.7% above budget.
• The US terminal storage assets continued to deliver a strong
performance driven by higher than expected throughput volumes and
corresponding higher ancillary revenues.
During the period ending 30 June 2023, the Company has continued to deploy
capital towards sustainable energy infrastructure that drives the global
transition towards cleaner and more sustainable sources of power. Investment
activities and updates during the period include:
• The completion of the construction of the first upgraded solar
and storage hybrid system in Australia, through the addition of a 2-hour
4.95MW battery energy storage system ("BESS"), which is connected to the
existing operational solar PV site in Mobilong, South Australia.
• For the Brazilian solar PV assets, the completion of the 10th
solar site brings the total operational capacity of the Brazilian sites to
27.3 MW. These sites benefit from 20-year average life and inflation-linked
Power Purchase Agreements ("PPAs") with creditworthy corporate energy
offtakers.
One of the EPC contractors has faced financial difficulties which required us
to halt delivery of two of the projects that we were looking to relocate. As a
result of this, a write off has been made for these assets in the amount of
£4.5m.
The Company is contracting a new engineering procurement and construction
("EPC") company to finalise the construction of the six remaining solar sites
in two phases. Three sites are expected to commence operations in the first
quarter of 2024 as part of Phase I, following which construction will commence
for the remaining three sites under Phase II.
• Despite the need to replace the incumbent EPC contractor,
construction of the first UK flexible power site is well advanced, and first
power is expected by the end of the year while full commissioning of the
integrated plant with carbon capture & re-use ("CCR") technology is
expected to be reached in Q1 2024.
SHAREHOLDER ENGAGEMENT AND CORPORATE GOVERNANCE
At the April 2023 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 and I were delighted to welcome Daniella Carneiro to the Board of
GSEO as an independent non-executive Director in January, bringing extensive
experience in advising governments and companies on how to integrate ESG
("Environmental, Social and Governance") principles into business practice.
SUSTAINABILITY AND ESG
GSEO focuses on sustainable energy investments that are a direct contributor
to the acceleration of the energy transition towards a net zero carbon world.
The Company deploys capital into sustainable energy projects around the world
and ensures that ESG criteria are incorporated into all of its investment
decisions. This is reflected across GSEO's investment philosophy and approach,
including its Investment Manager, Victory Hill, which is dedicated to the
energy transition. As a signatory to the UN Principles for Responsible
Investment and the Net Zero Asset Managers Initiative, Victory Hill has
integrated ESG risks as well as opportunity assessments across every single
stage of its investment process in sustainable energy investments around the
world.
The Board recognises that transparency is becoming increasingly important in
the current market environment and a stronger focus has been put on supply
chain transparency and traceability, but also on transparent reporting, making
it easier for shareholders to assess and quantify the positive impact that
GSEO is having on the environment and communities.
OUTLOOK
Focusing on sustainable infrastructure globally has never been more relevant,
as the need for energy security and decarbonisation continues to rise. The
Company is investing in the global energy transition and the Investment
Manager continues to work both to preserve and enhance the portfolio's value
through its asset value creation strategy for the operational assets but also
as it continues to focus on constructing new sustainable energy
infrastructure.
Construction assets are already funded through committed capital and in time,
as these assets become operational, we expect improved dividend coverage as
well as an enhancement to the value of these assets.
The pipeline continues to grow based on the strong origination capabilities of
the Investment Manager, and the Board looks forward to further acquisitions
which enhance the value of the existing portfolio, with a continued focus on
geographical and technological diversification.
On behalf of the Board, I would like to thank shareholders for their continued
support, and I look forward to seeing GSEO pursuing its strong growth while
continuing to generate sustainable returns and capital growth for its
shareholders.
Bernard Bulkin, PhD, OBE
Chair
14 September 2023
ABOUT VICTORY HILL
Victory Hill is based in London and was founded in May 2020 by an experienced
team of energy financiers that spun-out of a large established global project
finance banking group. The team has participated in more than $200bn in
transaction values across 91 conventional and renewable energy-related
transactions in over 30 jurisdictions worldwide. Victory Hill is the
Investment Manager of the Company.
The Victory Hill team deploys its experience across different financial
disciplines in order to assess investments holistically. The firm pursues
operational stability and well-designed corporate governance to generate
sustainable positive returns for investors. It focuses on supporting and
accelerating the energy transition and the attainment of the UN Sustainable
Development Goals.
Victory Hill supports investors by identifying energy market dislocations,
structural gaps, arbitrage opportunities and trends.
Victory Hill's activities are entirely focused on energy and energy-related
investments, across infrastructure and private equity investment solutions.
INVESTMENT MANAGER'S REPORT
We have always believed in the importance of demand side dynamics, both as a
philosophy related to the efficient function of energy markets, and also as a
tool to ensure the orderly and just transition of the world to net zero.
Richard Lum
Co-CIO
MARKET BACKDROP AND OUTLOOK
As 2022 turned into the first half of 2023, much of the world was affected by
issues related to the "Energy Trilemma", a concept familiar to policy makers
worldwide. In essence this revolves around the need for society to prioritise
between the equally important, yet sometimes conflicting issues of achieving
energy security, enabling access to clean energy, and ensuring that energy
produced is affordable.
Many observers saw 2022 as the year in which this concept was tested to the
limits, as Russia's invasion of Ukraine undeniably made energy security and
affordability key issues for the majority of the public living in the West.
Energy prices skyrocketed as Russian gas supply dwindled at the same time as
European grids demanded more baseload power given seasonal weather factors,
and key nuclear power supply in France came offline for maintenance.
Whilst some market experts believed this marked the end or at least the
rebalancing of attention away from the energy transition, it has become clear
in the first half of 2023, that, contrary to this belief, the invasion of
Ukraine had hastened the transition. It has been suggested that the invasion
may have accelerated the transition by five to ten years. Indeed, according to
DNV's Energy Insights Report 2023: "Recent responses by countries, and
businesses reflect the fact that the energy transition is now directly tied to
competitiveness. It is a way to win in this new world where clean energy
technologies are a solution to ensuring energy security and economic growth".
The global energy order (or at least its European chapter) has come to terms
with placing Russian gas outside of its remit and, together with a milder
winter, energy prices have abated noticeably in the first half of 2023. Beyond
this, however, we find the roots of a more fundamental change in the world
order.
In 2022, it was widely accepted that ensuring a plentiful supply of natural
gas was important to achieving the last leg of the Energy Trilemma, that of
energy affordability. Coming into 2023, the focus is now on the different leg
of the Energy Trilemma, namely energy security. Natural gas is critical to
energy security in many grids throughout the world, but focussing on ensuring
a plentiful supply of it is not the answer to achieving energy security.
Rather, the focus needs to be on recalibrating the place it has in the overall
pantheon of energy demand. It is only by reducing demand for natural gas,
through sourcing alternatives such as green gases, synthetic methane and
biogas, as well as making the consumption of gas much more efficient in homes
and industry, that we can ensure energy security in a world without Russian
gas supply. It also happens to be that such conservation measures fit
perfectly into the sustainability objectives of the energy transition, as
reducing demand for natural gas through the introduction of alternatives means
that the transition can occur without the disruption which a strict focus on
eliminating its supply would cause.
Victory Hill has always believed in the importance of demand side dynamics,
both as a philosophy related to the efficient function of energy markets, and
also as a tool to ensure the orderly and just transition of the world to net
zero.
In the context of our prior observations (in the 2022 annual report) on the
growth of electricity as a share of final energy consumption, demand dynamics
mean that a much less disruptive way to decarbonise our power systems is not
to focus solely on eliminating supply of "dirty" electrons (from coal fired
and gas fired power plants) in favour of "clean" electrons from renewable
generation, but rather through implementing measures which reduce demand on
dirty electrons without disruption.
These measures also align with the Energy Trilemma limbs, such as energy
security. For example, we can call on flexible power plants which utilise
carbon capture and are therefore net zero to provide stability in the grid,
and storage technologies such as BESS and hydro facilities, all of which
provide for supply flexibility in markets with prominent supply of renewable
power and therefore high intermittency. Technologies such as BESS and hydro
facilities have energy storage properties, and hence are able to "recycle"
clean electrons for users, and therefore also meet with the Energy Trilemma
leg of access to clean energy.
Victory Hill's investment thesis for GSEO distils the essence of the energy
transition into four manifestations, and these, unsurprisingly, draw heavily
on the Energy Trilemma. We had concluded at the outset of our journey, that in
order to make a true impact in global sustainable energy, we had to invest in
assets which promoted or are linked to the phenomena of: i) addressing
climate change; ii) access to clean and affordable energy; iii) energy
efficiency; and iv) market liberalisation.
Achievement of energy efficiency in our power grids continues to be a huge
objective in the energy transition. The power grid (transmission and
distribution) and its transformation to be more efficient in the
transportation of electrons from production to consumption, is a bigger issue
for the energy industry and for the race to beat climate change. According to
DNV, the rate of expansion in renewables generation is quicker than the rate
at which the grid can adapt to accommodate the growth, as it cannot yet
adequately connect sources of renewable energy to areas of high demand. Ageing
power grid infrastructure is a significant barrier to greater use of
renewables, and therefore continued and increased investment in this area is
important.
Meanwhile, global supply chain issues have abated somewhat in 2023. Whilst the
price of solar PV modules is expected to fall this year as supply rebounds
from several setbacks over the past few years, the local content regulations
of the Inflation Reduction Act of 2022 in the US will place new pressures on
the industry as it will take some time before the local supply chain takes
shape or has the capabilities of other regions in the world (for example,
China).
The road to net zero has an obvious need for very large sums in investments.
This unprecedented requirement for mobilisation of capital into the energy
infrastructure has to come primarily from private sources. Victory Hill firmly
believes that the key to the success in this endeavor is to not only focus on
quantity of capital but also on ensuring that investments are done
intelligently. The Energy Trilemma is a complex equation to solve and without
the correct understanding of the realities in each market, large investments
may not deliver the desired outcome. Our mission is to make this journey a
success.
PORTFOLIO UPDATE
26 assets, 5 technologies, 4 jurisdictions across the globe
Highlights & Performance
The operating assets' actual energy generation is broadly above budget for the
six-month period to 30 June 2023.
• For the Brazilian hydro facility, generation has slightly
outperformed budget due to the higher hydro resource availability and low
performance of wind assets in the Brazilian energy mix.
• In terms of the Australian solar PV assets, strong operational
performance of the assets has led to actual energy production exceeding
budget. An upgrade initially planned for Q1 2023 by the network was postponed
to Q2 2023 which led to a shift of the related period of network partial
unavailability. Overall this shift contributed to a higher power export than
anticipated.
• The power generation of the Brazilian solar PV sites exceeded
budget as a result of the operational sites reaching their full generation
capacity ahead of expectation.
Portfolio Optimisation
During the period, the first project of the UK programme successfully won the
UK's Capacity Market Auction T-4 at a price of £63/kW/year indexed to
inflation. Given the high reliability, efficiency and flexibility of this
plant, this 15‑year contract provides an additional source of long-term
inflation linked revenues to the project.
Regarding the Brazilian hydro facility, our operating partner has successfully
completed the transfer of the operations from the vendor at a lower cost than
anticipated in a shorter than expected time frame. As we look to the future,
we continue to work with our operating partner in identifying additional areas
for greater efficiency in the operation of the asset.
ASSETS UNDER CONSTRUCTION
As at 30 June 2023, 14.4% of the portfolio is under construction, compared to
62% in June 2022. As additional projects become operational, the Company
should continue to benefit from a NAV uplift as a result of more assets moving
from being under construction to operational phases as well as a stronger
dividend coverage ratio.
In Brazil, the 10th site was completed during the period to bring the
operational capacity to 27.3MW. A replacement EPC contractor has been
identified to complete the construction of the remaining six assets by 2024
(three of which in Q1 2024).
In the UK, construction of the first gas-fired power plant with carbon capture
and re-use ("CCR") technology has progressed steadily and reached significant
milestones with key equipment installed on site. The incumbent EPC contractor
has faced financial issues in connection with unrelated assets and prompt
measures were taken to protect the interests of the project, and continue
delivery of the programme on site while mobilising a replacement contractor to
complete construction. First power is expected by the end of the year and full
commissioning of the integrated plant with CCR is expected by Q1 2024.
The Australian programme has successfully delivered one of the first hybrid
solar and battery energy storage systems in South Australia to access a range
of revenue streams, capturing power price volatility and the need for
frequency management services. Construction was completed on time and on
budget in Q2 2023. The programme was further expanded with three new assets in
New South Wales. The construction of these three solar farms commenced in Q4
2022 and is expected to complete in line with budget. The solar farms are
expected to be completed in H2 2023 and the addition of battery storage is
under development by the operating partner.
NET ASSET VALUE
The NAV of the Company increased from £457.2m at 31 December 2022 to
£465.6m on 30 June 2023. The key NAV drivers were:
• A net increase in the value of investments of £23.6m, mainly
driven by a reduction of discount rates by 136bps across the portfolio due to
lower risk-free rates and sector risk premia, strong operational performance
in cash generative assets, notably in the Brazilian hydro facility, had
contributed in an upward revaluation in the portfolio. Total fair value gains,
including an additional Brazilian solar site and Australian solar PV asset
becoming operational during the period, offset a fair value loss of £4.5m in
the Brazilian solar PV assets.
• During the period, GBP strengthened versus the USD and AUD by 5.0%
and 7.3% respectively but weakened against the BRL by 4.7%. A net
strengthening of GBP against the portfolio currencies resulted in a marginal
decrease in FX. The Company has a mandate to hedge the short-term
distributions from investments from local currency to GBP.
• Total fund expenses for the period of £3.1m or 1.3% in ongoing
charges ratio, showing cost discipline in the period.
KEY SENSITIVITIES
The chart set out in the full Interim Report illustrates the sensitivity of
the Company's NAV per share to changes in key input assumptions for assets in
operation as at period end. In performing the sensitivity analysis, it is
assumed that potential changes occur independently of each other with no
effect on any other assumption, and that the number of investments in the
portfolio remains static throughout the modelled life.
Discount rate
A range of discount rates is applied in calculating the fair value of the
investments, considering risk free rate, country-specific and asset-specific
risk premia and betas. Discount rates for operational assets at 30 June 2023
are 7.3% (31 December 2022: 8.4%) in the US, 6.7% (31 December 2022: 8.6%)
in Australia, 9.1% (31 December 2022: 10.5%) for the Brazilian hydro
facility and 11.4% (31 December 2022: 13.1%) for the Brazilian solar PV
assets. A 1.0% increase (decrease) in discount rates across the portfolio
decreases (increases) NAV by 5.78p (6.73p).
Inflation
The sensitivity assumes a 1% increase or decrease in long‑term inflation
relative to the base case of 1.6% for the US assets, 0.7% for the Australian
assets and 3.0% for the Brazilian assets for each year of asset life. A 1.0%
increase (decrease) in inflation rates across the portfolio increases
(decreases) NAV by 5.53p (4.83p).
Operating expenses
The sensitivity assumes a 5% increase or decrease in operating expenses
relative to respective contracts and budgets for each asset. A 5% increase
(decrease) in operating expenses across the portfolio decreases (increases)
NAV by 1.48p (1.46p).
Foreign exchange
The sensitivity assumes a 10% increase or decrease in foreign exchange
movements against the sterling. The Company seeks to manage its exposure to
foreign exchange movements by hedging short-term distributions from
non-sterling investments but, due to long-term inflation-linked revenues
stemming from these investments, the Company does not hedge the principal
value of the investments. A 10% increase (decrease) in foreign exchange rates
across the portfolio decreases (increases) NAV by 6.65p (8.13p).
Asset life
The sensitivity assumes a 1-year increase or decrease in asset life relative
to the base cases of 30 years for the US terminal storage assets, 25 years
for the Australian solar PV with battery storage assets, Brazilian solar PV
assets and Brazilian hydro facility. A 1-year increase (decrease) in asset
lives across the portfolio increases (decreases) NAV by 1.02p (1.09p).
Resource sensitivity
The portfolio has little resource risk sensitivity given the
availability-based nature of the US terminal storage assets, the base load
generation profile of the Brazilian hydro facility, and the addition of
battery storage to the Australian solar PV assets to mitigate solar
intermittency risk.
PIPELINE
• Our focus remains on delivering assets still in construction in
the existing portfolio.
• We continue to originate new opportunities and weigh them
against proceeding with capital that is committed but yet to be deployed for
the current portfolio. The opportunity set to support the global transition to
net zero is vast, and given our strategy is founded on a global approach that
is technology agnostic, we consider a wide range of opportunities which we
believe offer shareholders the ability to make an impact and derive sector
leading returns.
CASE STUDIES
UK flexible power with CCR assets:
• The programme targets the grid-balancing opportunities in the UK
through a unique flexible power generation solution. This flexible power and
carbon capture and re‑use 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.
• Construction of the first site is well advanced with key
equipment delivered and installed at site.
• The incumbent EPC contractor has faced financial difficulties as a
result of challenging macroeconomic conditions for the construction industry
(high inflation, high interest rates and supply chain disruptions). The
situation with the incumbent EPC contractor has served as a good test of the
Victory Hill approach of having a local operating partner and discipline in
negotiating protective measures in the EPC contracts.
• The model has been proven to work with the operating partner and
Victory Hill acting quickly to identify a new EPC contractor to complete the
construction.
• Due to the change in EPC contractor, first power is now
expected by the end of 2023 and full commissioning of the integrated plant
with CCR expected in Q1 2024.
• Key project partners including Rolls Royce, Mitsubishi Turboden,
Climeon, Asco, Axpo and Buse Group remain involved in the project.
• All contracts including the carbon dioxide contract, power offtake
contract, and a 15-year contract at £63/kW/year in the UK Capacity Markets
Auction T-4 are unaffected.
• Asset continues to target returns aligned with the Company's
expectation.
Australian solar PV with battery storage assets:
• The Australian market is unique in that it has one of the greatest
renewable resources potential (land availability, wind and solar resources)
but is predominantly positioned at the opposite end of the energy spectrum in
having the majority of the country's energy needs generated by coal.
• This programme is on track, with delivery of the first
hybridised solar and battery system in South Australia completed in the
period. Construction of the solar farm component for three of the hybrid
systems is progressing with all solar farms expected to reach commencement of
operations ("COD") by H2 2023.
• The potential of a hybrid solar and battery system is
compelling, with more revenue opportunities due to grid balancing services
opening up and battery costs coming down.
US terminal storage assets:
• After exceeding financial performance in 2022, the two terminals
are well positioned to meet their 2023 budget as the assets benefit from their
inflation-linked "availability" contracts and from their ideal location in
South Texas which is a key aggregation hub for the Mexico US cross-border
product movements.
• For the first half of 2023, the terminals were 5% over budget
for revenue and 1% for EBITDA. A strong Q2 as a result of higher throughput
volumes at both T1 and T2 offset a slower than expected Q1 stemming from lower
volumes at T2.
Brazilian solar PV assets
• The Brazilian market has benefited from the growth of
distributed generation (DG) with its unique commercial model for this type of
energy source.
• 10 of the 16 sites are operational and generating energy
according to expectations.
• One of the EPC contractors has faced financial difficulties which
required us to halt delivery of two of the projects that we were looking to
relocate. As a result of this, a write off has been recognised for these
assets in the amount of £4.5m.
• Together with our operating partner, Victory Hill has acted
decisively in finding a replacement EPC contractor to finalise the six
remaining projects in an orderly manner.
• These six remaining sites will be finalised in two phases with
the first one prioritising the three projects with which we have delivery time
commitments with the offtakers. Phase one is expected to be completed by Q1
2024. Construction on the remaining three sites from phase two will commence
immediately when the EPC contractor becomes available and completion is
expected in 2024.
• As a result of active asset management, the programme remains
on track to deliver returns above the fund's target total NAV return of 10%.
Brazilian hydro facility
• Brazil has one of the world's largest hydrological resources
and is a global leader in hydropower generation. The country has attracted
large amounts of capital investment in the hydropower sector making it one of
the most established and prominent hydropower markets in the world. In Brazil,
hydropower generation continues to have systemic importance. Hydropower plants
provide a reliable and continuous source of clean energy for a power system
which needs to meet ever-growing demand.
• This form of power generation can provide capacity firming and
grid stability in times of heightened supply volatility caused by the growing
penetration of intermittent power generation by solar and wind in the energy
supply composition of the country. The penetration of intermittent renewables
is still in its infancy in Brazil, yet it is the fastest growing source of
power generation.
• Hydropower will continue to play a critical role in enabling further
penetration of those intermittent yet necessary technologies to achieve what
could become one of the world's most balanced and sustainable energy systems.
• In the period, our operating partner has successfully completed
the full transition of operations from the vendor, EDP. This was a remarkable
achievement in such a short timeframe and with no disruptions.
• Under the stewardship of our operating partner, the asset has
already exceeded expectations as a result of strong hydrological conditions,
inflation positively impacting PPAs and operational efficiencies.
OUR APPROACH TO SUSTAINABILITY & ESG
"A successful energy transition needs to balance the 'energy triangle' of
addressing environmental sustainability, providing energy security and access,
and facilitating economic growth and development(1). The Company's approach to
investment manifests this balance."
Eleanor Fraser-Smith
Head of Sustainability
Victory Hill Capital Partners LLP
The Company's UN Sustainable Development Goals (SDGs) aligned investment
strategy aims to support and accelerate the energy transition towards net zero
through its sustainable energy infrastructure investments that serve
communities around the world. To achieve these objectives the Investment
Manager recognises the need to invest in a sustainable and responsible way and
that social and environmental sustainability are interconnected and mutually
reinforcing. The Investment Manager through the Company's investments seeks to
address fundamental gaps in energy markets to support energy security, access
and economic growth.
The Investment Manager is committed to managing investments aligned with the
UN Global Compact principles. It does this by taking a risk-based approach
focussed on external validation of SDG strategy alignment, assessment of doing
no significant harm, ESG due diligence, materiality analysis, and risk and
opportunity assessment. Any gaps in governance practices or management systems
are identified. Material risks or opportunities to build sustainable value are
prioritised. Mitigation actions covering these aspects are agreed in the
investment specific sustainability action plan (SAP). The SAP is a dynamic
document that is frequently reviewed and updated with the Company's operating
partners.
(1)
https://www.weforum.org/agenda/2020/07/a-beginners-guide-to-the-energy-transition/
Regulatory compliance:
EU Taxonomy alignment
Following the acquisition of the Brazilian hydro facility at the end of 2022,
the Company can confirm the investment is aligned with the EU Taxonomy of
sustainable economic activities. The Investment Manager has completed, with
the support of a third party, an external assessment of EU Taxonomy alignment,
including climate risk and vulnerability, embodied carbon life cycle analysis
("LCA") and do no significant harm criteria.
The hydro facility is run-of-river with a power density of 43 W/m(2) and life
cycle GHG emissions comfortably below the 100g CO(2)e/KWh threshold. The LCA
methodology aligned with requirements of ISO14067 to provide third party
verification of the emission calculations.
The climate risk and vulnerability assessment was completed in accordance with
Appendix A of Annex 1 of the EU Taxonomy with adaptation measures taken.
The sustainable use and protection of water, marine resources, protection and
restoration of biodiversity and ecosystems, are relevant to the do no
significant harm assessment criteria for the investment. The current operating
license has provisions requiring a schedule of monitoring and additional
education programs to assess the health and quality of present biodiversity
and ecosystems. This consists of actively monitoring water resources, water
quality, sediment quality, sedimentometric and icthyofauna. Monitoring
includes the diversity of fish species in different parts of the river and
reservoir. The operating licence requires the manual transposition of fish
species from downstream of the hydro facility to upstream to mitigate
restrictions on fish migrations. The fish transposition schedule also removes
exotic non-native fish to reduce the pressure on native fish populations where
possible.
An environmental education plan for workers and local communities has been
implemented to raise environmental awareness and highlight its importance. Due
diligence has revealed no negative aspects from the monitoring programme to
date.
In the facility's SAP, the Company has required the hydro facility to obtain
the International Hydropower Association's sustainable standard certification
which will further identify opportunities for community engagement and
environmental protection.
As part of the Investment Manager's external validation of investment SDG
alignment, human rights, labour, and health and wellbeing attributes are
assessed. The investment meets social safeguard requirements, and the
Investment Manager will continue to monitor the investment's performance.
OPERATIONAL ESG PERFORMANCE & SUSTAINABILITY IMPACT DELIVERED IN H1 2023
PORTFOLIO ENERGY USE AND GHG EMISSIONS
The energy and greenhouse gas emission metric is the principal way in which
the Company assesses its impact. This data is collected at the site level and
aggregated to the portfolio level.
Scope Energy use (MWh) GHG emissions (tonne CO(2)e)
Scope 1 11,309 2,075
Scope 2 1,531 487
Total operational emissions (1&2) 12,840 2,562
Scope 3 - 3,406
Total Scope 1, 2 and 3 emissions 5,968
PORTFOLIO SUSTAINABILITY IMPACT
OPERATIONAL ESG PROGRESS
Environmental
The table below provides half-year absolute figures for 2023 of identified
material environmental metrics. Water is used in operational processes and
based on analyses none of the assets are in areas with high water stress. The
waste produced in the USA is mostly due to construction and is collected for
recycling from the US terminal storage. Operational solar renewable energy
assets do not produce waste.
Environmental Metrics Unit Australia Brazil (Solar PV) Brazil (Hydro) USA Portfolio
Water Megalitre - - <1 14 14
Waste Tonnes - - 6 60 66
NOx Avoided Tonnes - - - 1,129 1,129
SOx Avoided Tonnes - - - 11,359 11,359
PM10 Avoided Tonnes - - - 578 578
PM 2.5 Avoided Tonnes - - - 424 424
(3) Department for Business, Energy & Industrial Strategy (BEIS),
https://www.gov.uk/government/statistics/energy-consumption-in-the-uk
For the US terminal storage asset the Company reports on the avoided emissions
of pollutants to indicate the positive benefits on human health and the
environment from their removal; particularly because of their contribution to
acid rain and associated respiratory diseases and ill health.
Social
The importance of a diverse workforce is recognised and prioritised through
the Company's investments. It ensures the assets' operating partners provide
equal opportunities for their employees irrespective of race, colour,
religion, or belief, ethnic or national origins, gender, age, family status,
sexual orientation, disability, or political opinion.
The operating partners are committed to improving workforce diversity. There
is a high percentage of male workers on sites due to the industry being
traditionally male dominated and the low employment required in the management
of solar assets.
The Company places a high priority on the health and safety. The Company
expects operating partners, where material, to implement management systems to
ensure continuous improvement in this regard. All assets have health and
safety policies in place. For the first half of the year the total case injury
rate ("TCIR") for the portfolio was zero and one incident was reported, root
cause investigations were conducted and addressed.
Metric Unit Australia Brazil (Solar PV) Brazil (Hydro) USA Total portfolio
Gender Diversity
Male % (Average Number FTE for FY2023) 100 100 96 96 98
Female 0 0 4 4 2
Other 0 0 0 0 0
Turnover % 0 0 4 4 2
Total number of employees FTE 2 12 23 24 61
Health and Safety
Total Number of Incidents Number of Incidents 0 0 0 1 1
TCIR Total Number of recordable injuries x 200,000/annual hours worked 0 0 0 0 0
Net Zero Asset Managers Initiative
The portfolio target(4) was submitted to NZAMi earlier this year which aligned
with the investment manager's commitment to reduce scope 1 and scope 2
emissions and to the extent possible scope 3.
A third party used the science-based target initiative for financial
institutions net zero standard to set an intensity target for all assets under
management in the portfolio.
The mid-term to 2030 target is:
0.071 tonnes CO(2)e/MWhp to 0.026 tonnes CO(2)e/MWHp
The long term 2050 target is: 0.0035 tonnes CO(2)e/MWhp which is a 95%
reduction in total emissions.
The initial medium-term target will focus on operational emissions which make
up 78% of emissions with actions including assets pursuing renewable energy
contracts, operational efficiencies, and carbon capture. Actions to achieve
targets are included in asset SAPs.
(4) https://www.netzeroassetmanagers.org/signatories/victory-hill-capital-partners-llp/
(https://www.netzeroassetmanagers.org/signatories/victory-hill-capital-partners-llp/)
CASE STUDY
An ESG spotlight on Australia
Battery storage deployment:
further supporting grid decarbonisation
South Australia's high irradiation levels means it is well-suited for solar
generation, but this can fluctuate with weather conditions and diurnal
variations. Battery storage can help smooth out these intermittent energy
generation patterns by storing excess solar energy during the day and
releasing it during periods of low or no solar production. This ensures a more
reliable and consistent power supply, reducing the need for backup fossil
fuel-based generation, which in South Australia is provided by gas and oil,
and therefore facilitating and accelerating decarbonisation.
Responsible supply chain
Sustainability related challenges for solar and battery deployment include
supply chain transparency and traceability. Understanding the origin of raw
materials and components is the first step to assessing compliance with
environmental and social standards and best practices.
The Company's solar PV operating partner in Australia is taking a proactive
approach to supply chain management. Taking a human rights risk-based approach
they assessed for labour risks in the supply chain. The analysis focussed on
risks related to materials in the production of batteries such as cobalt, the
use of polysilicon for the production of PV cells, as well as the use of
migrant workers in construction.
The assessment found low risk in battery procurement as the favoured battery
chemistry requires significantly less cobalt, and the preferred suppliers were
found to have no record of exploitative practices. There is higher potential
risk in solar panel procurement. To mitigate against this risk the operating
partner requested a bill of material provenance and modern slavery compliance
documentation from PV suppliers. The operating partner has also implemented a
supplier code of conduct to protect migrant workers which will be enforced in
all design, construction, engineering, and procurement contracts.
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 Chair's Statement and the
Investment Manager's Report) includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R, namely:
• An indication of important events that have occurred during the
first six months of the financial year, and their impact on the condensed
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial period; and
• Material related party transactions that have taken place in
the first six months and any material changes in the related party
transactions described in the last Annual Report.
The Directors of the Company are noted 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 42 to 49 of the 2022
Annual Report. In the view of the Board, the majority of the principal risks
and uncertainties were unchanged over the last six months and remain
applicable to the rest of the financial year.
Risks relating to the Company:
• Reliance on Investment Manager
• Reliance on third party service providers
• Currency risks
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
Chair
14 September 2023
INDEPENDENT REVIEW REPORT TO VH GLOBAL SUSTAINABLE ENERGY OPPORTUNITIES PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 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 2023 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 1, the annual financial statements of the Company are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion 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 Company to
cease to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and
for no other purpose. No person is entitled to rely on this report unless such
a person is a person entitled to rely upon this report by virtue of and for
the purpose of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose
and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
14 September 2023
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 2023 to 30 June 2023
For the six-month period ended For the six-month period ended
30 June 2023
30 June 2022
(unaudited)
(unaudited)
Note Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Income
Gains on investments 6 - 7,862 7,862 - 20,708 20,708
Investment income 3 15,356 - 15,356 13,562 - 13,562
Total income and gains 15,356 7,862 23,218 13,562 20,708 34,270
Investment management fees 13 (2,181) - (2,181) (1,569) - (1,569)
Other expenses 4 (917) - (917) (315) - (315)
Profit for the period before taxation 12,258 7,862 20,120 11,678 20,708 32,386
Taxation 5 - - - - - -
Profit for the period after taxation 12,258 7,862 20,120 11,678 20,708 32,386
Profit and total comprehensive income attributable to:
Equity holders of the Company 12,258 7,862 20,120 11,678 20,708 32,386
Earnings per share - basic and diluted (pence) 15 2.90 1.86 4.76 3.75 6.65 10.40
The total column of the Statement of Comprehensive Income is the profit and
loss account of the Company. The supplementary revenue return and capital
columns have been prepared in accordance with the Association of Investment
Companies Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations, no items are determined to be unusual by their nature, size or
incidence.
The above Statement of Comprehensive Income includes all recognised gains and
losses.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Note As at As at
30 June 2023
31 December 2022
(unaudited)
(audited)
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 6 329,381 315,133
Total non-current assets 329,381 315,133
Current assets
Cash and cash equivalents 9 136,079 141,791
Other receivables 8 646 740
Total current assets 136,725 142,531
Total assets 466,106 457,664
Current liabilities
Accounts payable and accrued expenses 10 (474) (491)
Total current liabilities (474) (491)
Total liabilities (474) (491)
Net assets 465,632 457,173
Capital and reserves
Share capital 11 4,225 4,225
Share premium 11 186,368 186,368
Special distributable reserve 11 232,467 232,467
Capital reserve 34,039 26,177
Revenue reserve 8,533 7,936
Total capital and reserves attributable to equity holders of the Company 465,632 457,173
Net asset value per ordinary share 110.21 108.21
The financial statements were approved and authorised for issue by the Board
of Directors on 14 September 2023 and signed on its behalf by:
Bernard Bulkin
Chair
Company Registration Number 12986255
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
As at 30 June 2023
For the six-month period ended Note Share Share Special distributable reserve Capital Revenue reserve Total
30 June 2023
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
Opening balance 4,225 186,368 232,467 26,177 7,936 457,173
Total comprehensive income for the period - - - 7,862 12,258 20,120
Interim dividends paid during the period 12 - - - - (11,661) (11,661)
Balance at 30 June 2023 4,225 186,368 232,467 34,039 8,533 465,632
For the six-month period ended Note Share Share Special distributable reserve Capital Revenue reserve Total
30 June 2022
capital
premium
£'000
reserve
£'000
£'000
£'000
account
£'000
£'000
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
A total of 422,498,890 ordinary shares were issued since its incorporation to
30 June 2023.
The capital reserve represents the unrealised gains or losses on the
revaluation of investments. The unrealised element of the capital reserve is
not distributable. The special distributable reserve was created on court
cancellation of the share premium account. Distributable reserves comprise,
revenue, special distributable and realised capital reserves, which are
distributable by way of dividend. The total distributable reserves as at
30 June 2023 was £241,000,184 (30 June 2022: £238,569,770).
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
Note For the For the
six-months
six-months
period ended
period ended
30 June 2023
30 June 2022
(unaudited)
(unaudited)
£'000
£'000
Cash flows from operating activities
Profit before tax 20,120 32,386
Adjustment for:
Movement in fair value of investments 6 (7,346) (19,816)
Interest on cash deposits 3 (2,776) -
Operating result before working capital changes 9,998 12,570
Decrease in prepayments and other receivables 94 464
Decrease in accounts payable and accrued expenses (17) (175)
Net cash flow generated from operating activities 10,075 12,859
Cash flows from investing activities
Purchase of investments 6 (6,902) (11,108)
Interest on cash deposits 3 2,776 -
Net cash used in investing activities (4,126) (11,108)
Cash flows from financing activities
Dividend paid in the period 12 (11,661) (3,896)
Net cash generated from financing activities (11,661) (3,896)
Net decrease in cash and cash equivalents (5,712) (2,145)
Cash and cash equivalents at beginning of the period 9 141,791 163,810
Cash and cash equivalents at end of the period 9 136,079 161,665
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 company limited under the
Companies Act 2006 with registered number 12986255. The Company commenced
operations on 2 February 2021 when its shares commenced trading on the London
Stock Exchange.
The Company has registered, and intends to carry on business, as an investment
trust with an investment objective to generate stable returns, principally in
the form of income distributions, by investing in a diversified portfolio of
global sustainable energy infrastructure assets, predominantly in countries
that are members of the EU, OECD, OECD Key Partner and OECD Accession
Countries.
The interim condensed financial statements comprise only the results of the
Company for the six-month period ended 30 June 2023, as its investment in VH
GSEO UK Holdings Limited ("GSEO Holdings") is measured at fair value through
profit or loss in line with IFRS 10 as explained in note 2.
The annual financial statements of the Company for the year ended 31 December
2022 were approved by the Directors on 27 March 2023 and are prepared in
accordance with UK adopted International Accounting Standards. The annual
financial statements are available on the Company's website
https://www.vh-gseo.com/.
2. Significant accounting policies
2.1 Basis of preparation
The condensed financial statements ("financial statements") included in this
Interim Report have been prepared in accordance with IAS 34 "Interim
Financial Reporting". The financial statements have been prepared on the
historical cost basis, as modified for the measurement of certain financial
instruments at fair value through profit or loss. The principal accounting
policies are set out in Note 2.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") issued in July 2022 by the Association of Investment
Companies ("AIC").
The financial statements are presented in sterling, which is the Company's
functional currency and are rounded to the nearest thousand, unless otherwise
stated.
The accounting policies, significant judgements, key assumptions and estimates
are consistent with those used in the latest audited financial statements to
31 December 2022. 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 2022.
The audited annual accounts for the year ended 31 December 2022 have been
delivered to the Registrar of Companies. The Auditor's report thereon was
unqualified and did not contain statements under section 498(2) or (3) of the
Companies Act 2006.
2.2 Review
This Interim Report has been reviewed by the Company's Auditor in accordance
with the International Standard on Review Engagements (ISREs).
2.3 Going concern
The Directors have reviewed the financial position of the Company and its
future cash flow requirements, taking into consideration current and potential
funding sources, investment into existing and near-term projects and the
Company's working capital requirements.
The Company continues to meet day-to-day liquidity needs through its cash
resources. As at 30 June 2023, the Company had net current assets of £136.3m
and cash balances of £136.1m, which are sufficient to meet current
obligations as they fall due. There is no external debt at the Company as at
period end.
The major cash outflows of the Company are the payment of dividends and costs
relating to the acquisition of new assets, both of which are discretionary,
and the Company's ongoing operating costs and the fulfillment of remaining
commitments made as laid out in note 14.
The Directors have reviewed Company forecasts and pipeline projections which
cover a period of at least 12 months from the date of approval of this
report, considering foreseeable changes in investment and the wider pipeline,
which show that the Company has sufficient financial resources to continue in
operation for at least the next 12 months from the date of approval of this
report. Furthermore, the Directors have considered a worst case scenario in
which the Company is assumed to meet all of its remaining investment
commitments within the next 12 months, in addition to dividend payments and
ongoing operating expenses. Even in this unlikely scenario, the Company has
sufficient headroom to meet all expected cash outflows with its existing cash
balances.
The Directors have considered factors relating to the wider global
macroeconomic environment in 2023, in particular changes in inflation and
interest rates. As the Company's income is primarily inflation-linked, a rise
in inflation would have a positive impact on cashflows from operating assets
and an uplift in valuation of the investment portfolio. An increase in
interest rates may result in an increase in risk-free rates, therefore
negatively impacting valuation of investments. Furthermore, the Company has no
physical assets in Ukraine, Russia or Eastern Europe and therefore, regional
geopolitical factors have an immaterial impact on the Company.
Based on its assessment above, the Directors have a reasonable expectation
that the Company has sufficient resources to continue in operation for at
least 12 months from the date of the approval of these financial statements.
The Directors are not aware of any material uncertainties that may cast
significant doubt upon the Company's ability to continue as a going concern.
Therefore, the financial statements have been prepared on the going concern
basis.
2.4 Critical accounting judgements, estimates and assumptions
The preparation of the interim financial statements requires the Directors of
the Company to make judgements, estimates and assumptions that affect the
reported amounts recognised in the financial statements. However, uncertainty
about these assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of the asset or liability in the
future. The estimates and underlying assumptions underpinning our investments
are reviewed on an ongoing basis by both the Directors and the Investment
Manager. Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
Significant estimates, judgements and assumptions for the period are set out
as follows:
Key estimation and uncertainty: Fair value estimation for investments at fair
value
Fair value is calculated by discounting at an appropriate discount rate future
cash flows expected to be received by the Company's intermediate holdings from
investments. The discount rates used in the valuation exercise represent the
Investment Manager's and the Board's assessment of the rate of return in the
market for assets with similar characteristics and risk profile. The discount
rates are reviewed quarterly and updated, where appropriate, to reflect
changes in the market and in the project risk characteristics. The estimates
and assumptions that are used in the calculation of the fair value of
investments is disclosed in note 6.
Key judgement: Equity and debt investment in VH GSEO UK Holdings
In applying their judgement, the Directors have satisfied themselves that the
equity and debt investments into its direct wholly owned subsidiary, VH GSEO
UK Holdings, share the same investment characteristics and, as such,
constitute a single asset class for IFRS 7 disclosure purposes.
Key judgement: Investment entity and basis of non-consolidation
The Company has adopted the amendments to IFRS 10 which states that
investment entities should measure all of their subsidiaries that are
themselves investment entities at fair value (in accordance with IFRS 9
Financial Instruments: Recognition and Measurement, and IFRS 13 Fair Value
Measurement). Being investment entities, GSEO and its wholly owned direct
subsidiary, GSEO Holdings are measured at fair value as opposed to being
consolidated on a line-by-line basis, meaning their cash and working capital
balances are included in the fair value of investments rather than the Group's
current assets. The Directors believe the treatment outlined above provides
the most relevant information to investors.
2.5 Segmental reporting
The Board of Directors is of the opinion that the Company is engaged in a
single segment of business, being investment in global sustainable energy
opportunities. The Company has no single major customer. The internal
financial information to be used by the chief operating decision maker
("CODM") on a quarterly basis to allocate resources, assess performance and
manage the Company will present the business as a single segment comprising
the portfolio of investments in energy efficiency assets. The financial
information used by the Board to manage the Company presents the business as a
single segment.
3. Investment Income
For the six-months period ended For the six-months period ended
30 June 2023
30 June 2022
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Interest on cash deposits 2,776 - 2,776 476 - 476
Interest income from investments 3,080 - 3,080 1,979 - 1,979
Dividend income 9,500 - 9,500 11,107 - 11,107
Investment income 15,356 - 15,356 13,562 - 13,562
4. Operating expenses
For the six months period ended For the six months period ended
30 June 2023
30 June 2022
£'000
£'000
Fees payable to the Company's auditor (exclusive of VAT) for the:
-Interim assurance review 70 50
AIFM fees 36 36
Directors' fees 166 118
Other expenses 650 441
Unrealised FX gains and losses (5) (330)
Total operating expenses 917 315
Fees with respect to the Investment Manager are set out in note 13, related
parties transactions.
The Company had no employees during the period. Full detail on Directors' fees
are disclosed note 13. There were no other emoluments during the period.
The fees to the Company's Auditor for the period ended 30 June 2023 include
£70,000 (30 June 2022: £50,000) payable in relation to a limited review of
the Interim Report and estimated accruals proportioned across the year for the
audit of the statutory financial statements.
5. Taxation
Taxable income during the period was offset by management expenses and the tax
charge for the period ended 30 June 2023 is £nil (30 June 2022: £nil).
6. Investments at fair value through profit or loss
As set out in note 2.6, the Company designates its interest in its wholly
owned direct subsidiary GSEO Holdings as an investment at fair value through
profit or loss at each balance sheet date in accordance with IFRS 13, which
recognises a variety of fair value inputs depending upon the nature of the
investment. Specifically:
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Company determines whether transfers have occurred
between levels in the hierarchy by reassessing categorisation at the end of
each reporting period.
The Company classifies all assets measured at fair value as below:
Fair value hierarchy
As at 30 June 2023 Total Quoted prices Significant Significant
£'000
in active
Observable inputs
unobservable
markets
(level 2)
inputs
(level 1)
£'000
(level 3)
£'000
£'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss 329,381 - - 329,381
As at 31 December 2022 Total Quoted prices Significant Significant
in active
observable
unobservable
markets
inputs
inputs
(level 1)
(level 2)
(level 3)
£'000 £'000 £'000 £'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss 315,133 - - 315,133
All of the Company's investments have been classified as Level 3 and there
have been no transfers between levels during the period ended 30 June 2023.
As at As at
30 June 2023
31 December 2022
£'000
£'000
Opening balance at beginning of the period/year 315,133 159,618
Additions during the period at cost 6,902 151,367
322,035 310,985
Fair value movement on investments:
Change in fair value of equity investments(1) 7,989 4,144
Interest on loan investments(2) (643) 4
Total fair value movement on investments 7,346 4,148
Closing balance 329,381 315,133
(1) The £7,862k in the Statement of Comprehensive Income within other
expenses/ income and Statement of Changes in Equity is made up of unrealised
fair value gains of £7,989k per this note and a realised foreign exchange
loss of £127k during the period.
(2) This is the amount related to the unpaid shareholder loan interest income
as at the period end.
Further information on the basis of valuation is detailed in note 2 to the
financial statements.
Valuation methodology
As disclosed on pages 124 to 127 of the Company's Annual Report for the year
ended 31 December 2022, 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 2023.
Valuation Assumptions
The following economic assumptions were used in the valuation of operating
assets.
Discount rates The discount rate used in the valuations is derived according to
internationally recognised methods.
Typical components of the discount rate are risk free rates, country-specific
and asset-specific risk premia. The latter comprise the risks inherent to the
respective asset class as well as specific premia for other risks such as
construction.
Power price Power prices are based on power price forecasts from leading market
consultants adjusted for expected deployment of energy transition assets.
Energy yield Estimated based on energy yield assessments from leading technical consultants
as well as operational performance data (where applicable).
Inflation rates Long-term inflation is based on International Monetary Fund (IMF) forecasts
for the respective jurisdiction.
Asset life Refer to the table below for details. In individual cases a longer operating
life may be assumed where the contractual set-up supports such assumption.
Operating expenses The operating expenses are primarily based on the respective contracts and
budgets.
Taxation rates The underlying country-specific tax rates are derived from leading tax
consulting firms.
Capital expenditure Based on the contractual arrangements (e.g. EPC agreement), where applicable.
Key Assumptions
30 June 2023
Discount rate Weighted Average US terminal storage assets 7.3%
Weighted Average Australian solar PV with battery storage assets 6.7%
Weighted Average Brazilian solar PV assets 11.4%
Weighted Average Brazilian hydro facility 9.1%
Long-term inflation United States US terminal storage assets 2.0%
Australia Australian solar PV with battery storage assets 0.7%
Brazil Brazilian solar PV assets & Brazilian hydro facility 3.0%
Total Asset Life Years US terminal storage assets 30 years
Years Australian solar PV with battery storage assets 25 years
Years Brazilian solar PV assets 25 years
Years Brazilian hydro facility 25 years
Exchange rates GBP:USD US terminal storage assets 1:1.2697
GBP:BRL Brazilian solar PV assets & Brazilian hydro facility 1:6.0838
GBP:AUD Australian solar PV with battery storage assets 1:1.9051
Valuation sensitivity
The key sensitivities in the DCF valuation are considered to be the discount
rate used in the DCF valuation and long-term assumptions in relation to
inflation, operating expenses and asset life.
The discount rate applied in the valuation of the operating assets are as per
the table above, which is considered to be an appropriate base case for
sensitivity analysis. A variance of +/-1% is considered to be a reasonable
range of alternative assumptions for discount rate.
The base case long term inflation rate assumption depends on the geographical
location for assets in operation. These are disclosed in the table above. A
variance of +/-1% is considered to be a reasonable range of alternative
assumptions for inflation.
For assets in construction, the Company has only sensitised the impact of
foreign exchange fluctuations. A variance of +/-10% is considered to be a
reasonable range of alternative assumptions for foreign exchange.
The analysis below shows the sensitivity of the investments value (and impact
on NAV) to changes in key assumptions. All sensitivity calculations have been
performed on the basis that each of the other assumptions remains constant and
unchanged.
As at 30 June 2023
Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Discount rate - US terminal storage assets -1.00% 12,432 2.94
1.00% (10,604) -2.51
Discount rate - Australian solar PV with battery storage assets -1.00% 1,145 0.27
1.00% (1,000) -0.24
Discount rate - Brazilian solar PV assets -1.00% 1,744 0.41
1.00% (1,536) -0.36
Discount rate - Brazilian hydro facility -1.00% 13,102 3.10
1.00% (11,293) -2.67
Discount rate - All -1.00% 28,422 6.73
1.00% (24,433) -5.78
Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Inflation - US terminal storage assets -1.00% (9,095) -2.15
1.00% 10,444 2.47
Inflation - Australian solar PV with battery storage assets -1.00% (1,003) -0.24
1.00% 1,225 0.29
Inflation - Brazilian solar PV assets -1.00% (1,530) -0.36
1.00% 1,723 0.41
Inflation - Brazilian hydro facility -1.00% (8,766) -2.07
1.00% 9,956 2.36
Long-term Inflation - All -1.00% (20,394) -4.83
1.00% 23,348 5.53
Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Asset life - US terminal storage assets -1 year (1,738) -0.41
+1 year 1,540 0.36
Asset life - Australian solar PV with battery storage assets -1 year (222) -0.05
+1 year 188 0.04
Asset life - Brazilian solar PV assets -1 year (258) -0.06
+1 year 237 0.06
Asset life - Brazilian hydro facility -1 year (2,372) -0.56
+1 year 2,337 0.55
Asset life - All -1 year (4,591) -1.09
+1 year 4,303 1.02
Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
Operating expenses - US terminal storage assets -5.00% 3,727 0.88
5.00% (4,012) -0.95
Operating expenses - Australian solar PV with battery storage assets -5.00% 253 0.06
5.00% (260) -0.06
Operating expenses - Brazilian solar PV assets -5.00% 644 0.15
5.00% (602) -0.14
Operating expenses - Brazilian hydro facility -5.00% 1,648 0.39
5.00% (1,284) -0.30
Operating expenses - All -5.00% 6,272 1.48
5.00% (6,157) -1.46
Change in input Changes in fair value of investments (£'000) Change in NAV per share (pence)
FX (GBP:USD) -10.00% 12,642 2.99
10.00% (10,344) -2.45
FX (GBP:BRL) -10.00% 17,643 4.18
10.00% (14,435) -3.42
FX (GBP:AUD) -10.00% 4,065 0.96
10.00% (3,326) -0.79
FX - All -10.00% 34,350 8.13
10.00% (28,105) -6.65
The sensitivities above are assumed to be independent of each other. Combined
sensitivities are not presented.
7. Unconsolidated Subsidiaries
The following table shows subsidiaries of the Company. As the Company is
regarded as an investment entity, these subsidiaries have not been
consolidated in the preparation of the financial statements.
Investments Place of Business Ownership interests as at 30 June 2023
VH GSEO UK Holdings Limited United Kingdom 100.00%
Victory Hill Distributed Energy Investments Limited United Kingdom 100.00%
Victory Hill Flexible Power Limited United Kingdom 100.00%
Rhodesia Power Limited United Kingdom 100.00%
Victory Hill Holdings Brasil S.A. Brazil 99.99%
Energea Itaguaí I Ltda. * Brazil 100.00%
Energea Itaguaí II Ltda. * Brazil 100.00%
Energea Itaguaí III Ltda. * Brazil 100.00%
Energea Nova Friburgo Ltda. * Brazil 100.00%
Energea Itabaiana Ltda. * Brazil 100.00%
Energea Nova Cruz Ltda. * Brazil 100.00%
Energea Redenção Ltda. * Brazil 100.00%
Energea Itaporanga Ltda. * Brazil 100.00%
Energea Bataguassu Ltda. * Brazil 100.00%
Energea Palmas S.A. * Brazil 100.00%
Energea Itacarambi Ltda. * Brazil 100.00%
Energea Vassouras I Ltda. * Brazil 100.00%
Energea Seropédica Ltda. * Brazil 100.00%
Energea Paraíba do Sul Ltda. * Brazil 100.00%
Energea Taquaritinga Ltda. * Brazil 100.00%
VH Participacoes Hidreletricas do Brasil Ltda Brazil 98.25%
VH Hydro Brasil Holding S.A. Brazil 100.00%
Energest S.A. Brazil 100.00%
Victory Hill USA Holdings LLC United States 100.00%
Victory Hill Midstream Investments LLC United States 100.00%
Victory Hill Midstream Energy LLC United States 100.00%
Motus T1 LLC United States 100.00%
Motus T2 LLC United States 100.00%
Victory Hill Australia Investments Pty Ltd Australia 100.00%
Victory Hill Distributed Power Pty Ltd Australia 100.00%
Mobilong Solar Farm Pty Ltd Australia 100.00%
Dunblane Solar Pty Ltd Australia 100.00%
Dubbo Solar Project Pty Ltd Australia 100.00%
Narrandera Solar Project Pty Ltd Australia 100.00%
Coleambally East Solar Farm Pty Ltd Australia 100.00%
Dubbo Solar Project Unit Trust Australia 100.00%
Narrandera Solar Project Unit Trust Australia 100.00%
Greentech Solar Project No 1 Unit Trust Australia 100.00%
At 30 June 2023 the Company had one direct subsidiary and owned 100% of GSEO
Holdings. The Company owns investments in the other entities per the table
above through its ownership of GSEO Holdings. GSEO Holdings owns 100% of
Victory Hill USA Holdings LLC, Victory Hill Australia Investments Pty Ltd,
Victory Hill Distributed Energy Investments Limited and Victory Hill Flexible
Power Limited and 98.25% of VH Participacoes Hidreletricas do Brasil Ltda.
The Company's investments in Victory Hill Midstream Investments LLC, Victory
Hill Midstream Energy LLC, Motus T1 LLC and Motus T2 LLC are held through
Victory Hill USA Holdings LLC. These relate to the US terminal storage
assets.
The Company's investments in the Brazilian solar PV assets are held through
Victory Hill Distributed Energy Investments Limited, which holds 99.99% of
Victory Hill Holdings Brasil S.A. The holdings of Victory Hill Holdings
Brasil S.A. are indicated by an asterisk ("*") in the list of unconsolidated
subsidiaries above.
The Company's investments in VH Hydro Brasil Holding S.A. and Energest S.A.
are held through VH Participacoes Hidreletricas do Brasil LTDA. These relate
to the Brazilian hydro facility.
The Company's investments in Victory Hill Distributed Power Pty Ltd, Mobilong
Solar Farm Pty Ltd, Dubbo Solar Project Pty Ltd, Narrandera Solar Project
Pty Ltd, Coleambally East Solar Farm Pty Ltd, Dunblane Solar Pty Ltd,
Greentech Solar Project No 1 Unit Trust, Dubbo Solar Project Unit Trust and
Narrandera Solar Project Unit Trust are held through Victory Hill Australia
Investments Pty Ltd. These relate to the Australian solar PV with battery
storage assets.
The Company's investment in Rhodesia Power Limited is held through Victory
Hill Flexible Power Limited. This relates to the UK flexible power with CCR
assets.
8. Other receivables
As at 30 June 2023 As at
£'000
31 December 2022
£'000
Other receivables 95 96
Interest receivable on loan 518 270
Receivable from affiliates - 356
Prepayments 33 19
Total other receivables 646 740
The Directors have analysed the expected credit loss in respect of receivables
and concluded that there was no material exposure for the period/year ended
30 June 2023 and 31 December 2022.
9. Cash and cash equivalents
As at 30 June 2023 As at
£'000
31 December 2022
£'000
Cash at bank(1) 42,363 48,075
Cash on deposit 93,716 93,716
Total cash at bank 136,079 141,791
(1) Cash at bank includes money market investments of £36.4m (31 December
2022: Nil).
Cash on deposit consists of funds held in a 32-day notice deposit account with
Barclays Bank plc.
10. Accounts payable and accrued expenses
As at 30 June 2023 As at
£'000
31 December 2022
£'000
Accrued expenses 461 491
Other payables 13 -
Accounts payable and accrued expenses 474 491
The Directors consider that the carrying amount of trade and other payables
matches their fair value.
11. Share Capital
Date Issued and fully paid Number of shares Share Capital Share premium Special Distributable Reserve Total
(A)
(B)
(C)
(A+B+C)
£'000
£'000
£'000
£'000
Opening balance 311,589,799 3,116 67,949 232,467 303,532
1 July 2022 Ordinary shares 110,909,091 1,109 120,891 - 122,000
1 July 2022 Share issue costs - - (2,472) - (2,472)
At 31 December 2022 (audited) 422,498,890 4,225 186,368 232,467 423,060
30 June 2023 (unaudited) 422,498,890 4,225 186,368 232,467 423,060
On 1 July 2022, the Company raised additional gross proceeds of £122m
through the issue of 110,909,091 Ordinary Shares at an issue price of
110 pence per Ordinary Share.
Shareholders are entitled to all dividends paid by the Company and on a
winding up, provided that the Company has satisfied all its liabilities, the
shareholders are entitled to all pf the residual assets of the Company.
12. Dividends
Pence per Ordinary Share Total dividend Date paid
1 October 2022 - 31 December 2022 1.38p £5.8m 31 March 2023
1 January 2023 - 31 March 2023 1.38p £5.8m 30 June 2023
13. Transactions with AIFM, Investment Manager and Related Parties
AIFM
On 3 May 2023 the Company entered into an Alternative Investment Fund
Management Agreement ("AIFM Agreement") with Victory Hill Capital
Partners LLP (the "AIFM") replacing G10 Capital Limited. Victory Hill Capital
Partners LLP is acting as the Company's AIFM with overall responsibility for
the risk management and portfolio management of the Company, providing
alternative investment fund management services and ensuring compliance with
the requirements of the AIFM Rules, subject to the overall supervision of the
Board of Directors in accordance with the policies set by the Directors from
time to time and the investment restrictions as set out in the AIFM Agreement.
The AIFM Agreement provides that the Company will pay to the AIFM a fixed
monthly fee of £7,000, 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 Investment Manager is entitled to receive from the Company an annual fee
to be calculated as percentages of the Company's net assets, 1% on the first
£250m of NAV, 0.9% on NAV in excess of £250m and up to and including £500m
and 0.8% on NAV in excess of £500m exclusive of VAT.
Furthermore, if in any fee period, the annual fee paid to the Investment
Manager exceeds:
a) £3.5m, the Investment Manager shall apply 8% of the annual fee,
subject to a maximum amount of £400,000, to subscribe for or acquire ordinary
shares of £0.01 each in the capital of the Company.
b) £2.5m, the Investment Manager shall apply 2% of the annual fee to
be paid as a charitable donation to a suitable registered charity aimed at
promoting sustainable energy, as selected by the Investment Manager, provided
that if, following the Investment Manager's reasonable endeavours, a suitable
charity cannot be found, this 2% portion of the annual fee (net of any
applicable taxes) will be applied to the subscription for or acquisition of
ordinary shares.
The Investment Management Agreement may be terminated on 12 months' written
notice, provided that such notice may not be served before 2 February 2025.
The Investment Management Agreement may be terminated with immediate effect on
the occurrence of certain events, including insolvency or in the event of a
material and continuing breach.
The Investment management fees for the period ended 30 June 2023 amounted to
£2,180,809 (for 30 June 2022: £1,569,187) (including VAT) of which £167,623
was outstanding 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:
For the For the
six month period ended 30 June 2023
six month period ended 30 June 2022
£'000
£'000
Bernard Bulkin OBE 41 35
Margaret Stephens 29 25
Richard Horlick 29 25
Louise Kingham CBE 29 25
Daniella Carneiro 27 0
155 110
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.
The Directors held the following beneficial interests in the ordinary shares
of the Company as at 30 June 2023.
As at 30 June 2023
Number of ordinary shares held % of ordinary shares in issue
Bernard Bulkin OBE 38,181 0.009
Margaret Stephens 28,181 0.007
Richard Horlick 300,000 0.071
Louise Kingham CBE 20,000 0.005
Other balances with related parties
The Company entered into intercompany loan agreements with GSEO Holdings,
which entered into further intercompany loan agreements with the following
subsidiary companies these balances form part of the investments balance in
the Statement of Financial position.
• Victory Hill USA Holdings LLC US$64,686,291 (31 December 2022:
USD$63,665,000)
• Victory Hill Australia Investments Pty Ltd A$40,290,000 (31
December 2022: A$35,400,000)
• Victory Hill Flexible Power Ltd £14,924,400 (31 December
2022: £14,924,400)
As at the period-end, the Company held receivables from affiliates of £nil,
and a payable balance to affiliates of £13,200 (31 December
2022: £355,000).
14. Contingent liabilities and commitments
As at 30 June 2023, the Company had no contingent liabilities.
Of the existing commitments, the following amounts are outstanding as at
30 June 2023:
• £11m (31 December 2022: £14m) to the Brazilian solar PV
programme.
• £12m (31 December 2022: £17m) to the Australian solar PV with
BESS programme.
• £80m (31 December 2022: 80m) to the UK flexible power with CCR
programme.
15. Earnings per share
Earnings per share ("EPS") is calculated by dividing profit for the period
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares in issue on 1 January 2023 to 30 June 2023.
Amounts shown below are both basic and diluted measures as there were no
dilutive instruments in issue throughout the period.
For the period ended 30 June 2023 For the period ended 30 June 2022
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
Earnings (£'000) 12,258 7,862 20,120 11,678 20,708 32,386
Weighted average number of ordinary shares 422,498,890 422,498,890 422,498,890 311,589,799 311,589,799 311,589,799
EPS (p) 2.90 1.86 4.76 3.75 6.65 10.39
16. Net asset value per share
Net asset value per share is calculated by dividing the net assets
attributable to ordinary equity holders of the Company by the number of
ordinary shares outstanding at the reporting date. Amounts shown below are
both basic and diluted measures as there were no dilutive instruments in issue
throughout the current period.
Period ended 30 June 2023 Year ended
£'000
31 December 2022
£'000
NAV (£'000) 465,632 457,173
Number of ordinary shares 422,498,890 422,498,890
NAV per share (p) 110.21 108.21
17. Post balance sheet events
On 2 August 2023, the Company declared an interim dividend in respect of the
period from 1 April 2023 to 30 June 2023 of 1.38 pence per Ordinary Share,
paid on 14 September 2023 to Shareholders on the register on 11 August 2023.
On that record date, the number of Ordinary Shares in issue was 422,498,890
and the total dividend paid to Shareholders amounted to £5.8m.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APMs) are often used to describe the
performance of investment companies although they are not specifically defined
under IFRS. Calculations for APMs used by the Company are shown below.
In reporting financial information APMs are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company.
The APMs presented in this report are shown below:
NAV per share
NAV per share is calculated by dividing the Company's NAV by the total number
of outstanding shares at year end.
Page
NAV as at 30 June 2023 465,631,856
Total number of outstanding shares as at 30 June 2023 422,498,890
NAV per share 5 110.21p
Ongoing charges
A measure expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company, calculated in
accordance with the AIC methodology.
Page
Average undiluted NAV (in £'m) 470,096,297
Recurring costs in year 6,185,514
Ongoing charges 15 1.32%
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 2023 Page NAV
Opening as at 1 January 2023 a 108.21p
Closing as at 30 June 2023 b 110.21p
Dividends paid during the period 2.76p
Dividend adjustment factor c 1.027
Adjusted closing d = b x c 113.22
Total return for the period ended 30 June 2023 (%) d / a - 1 7 4.6%
From IPO to 30 June 2023 Page NAV
Opening as at 2 February 2021 a 98.00p
Closing as at 30 June 2023 b 110.21p
Dividends paid to date since IPO 7.76p
Dividend adjustment factor c 1.074
Adjusted closing d = b x c 118.41
Total return since IPO (%) e = d/a -1 20.8%
Number of years from IPO to 30 June 2023 f 2.41
Total annualised NAV return since IPO (%) (1+e)^(1/f)-1 5 8.2%
Dividend cover
The dividend cover ratio is calculated by using the Company's distributable
profits for the year, divided by the amount of dividends paid during the
period ending 30 June 2023.
Profit for the period at VH Global Sustainable Energy Opportunities plc £12,258,165
Net distributions withheld at VH GSEO UK Holdings Limited £3,183,052
Total new distributions received from underlying investments £15,441,217
Dividend paid during the period ended 30 June 2023 £11,660,969
(2.76p per ordinary share x Number of shares outstanding as at 30 June 2023
of 422,498,890)
Dividend cover 1.3x
GLOSSARY
AIC Association of Investment Companies
AIFM Victory Hill Capital Partners LLP
Annual General Meeting or AGM A meeting held once a year which shareholders can attend and where they can
vote on resolutions to be put forward at the meeting and ask directors
questions about the company in which they are invested
COD Commercial Operations Date
Company VH Global Sustainable Energy Opportunities plc
Discount The amount, expressed as a percentage, by which the share price is less than
the net asset value per share
Dividend Income receivable from an investment in shares
EPC Engineering, procurement and construction
ESG Environmental, social and governance
EU European Union
Ex-dividend date The date from which you are not entitled to receive a dividend which has been
declared and is due to be paid to shareholders
Financial Conduct Authority The independent body that regulates the financial services industry in the UK
Gearing A way to magnify income and capital returns, but which can also magnify losses
GHG Green House Gases
Investment Manager / Victory Hill Victory Hill Capital Partners LLP
Investment Company A company formed to invest in a diversified portfolio of assets
Investment Trust An investment company which is based in the UK and which meets certain tax
conditions which enables it to be exempt from UK corporation tax on its
capital gains. The Company is an investment trust
IPO Initial Public Offering
MW Megawatt
MWh Megawatt Hour
NAV per ordinary share NAV divided by the number of ordinary shares in issue (excluding any shares
held in treasury)
Net asset value or NAV An investment company's assets less its liabilities
OECD Organisation for Economic Co-operation and Development
Ongoing charge The 'ongoing charges' ratio is an indicator of the costs incurred in the
day-to-day management of the Company, expressed as a percentage of average net
assets. This ratio calculation is based on Association of Investment Companies
('AIC') recommended methodology
Ordinary shares The Company's ordinary shares in issue
PPA Power Purchase Agreement
PV Photovoltaic
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Share premium The amount, expressed as a percentage, by which the share price is more than
the net asset value per share
Share price The price of a share as determined by a relevant stock market
TCFD Task Force on Climate-Related Financial Disclosures
COMPANY INFORMATION
Non-Executive Directors Bernard Bulkin OBE (Chair)
Daniella Carneiro
Richard Horlick
Louise Kingham CBE
Margaret Stephens
Registered Office 6(th) Floor
125 London Wall
London
EC2Y 5AS
Investment Manager Victory Hill Capital Partners LLP
4 Albemarle Street
London
W1S 4GA
Corporate Broker Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Legal Adviser Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Administrator and Apex Fund and Corporate Services (UK) Limited
6(th) Floor
Company Secretary
125 London Wall
London
EC2Y 5AS
Depositary Apex Depositary (UK) Limited
6(th) Floor
125 London Wall
London
EC2Y 5AS
Registrar Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Auditor BDO LLP
55 Baker Street
London
W1U 7EU
Company number: 12986255
Country of incorporation: England and Wales
END
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. END IR LIMRTMTMBBAJ
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