TIDMGSEO
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 . 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 .
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
Numis (Corporate Broker)
David Benda +44 (0)20 7260 1000
Matt Goss
Apex Fund and Corporate Services (UK) Limited (Company Secretary)
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
GBP465.6m
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 GBP20.1m 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 GBP4.5m.
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
GBP63/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 GBP457.2m at 31 December
2022 to GBP465.6m on 30 June 2023. The key NAV drivers were:
-- A net increase in the value of investments of GBP23.6m,
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
GBP4.5m 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 GBP3.1m 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 GBP63/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 GBP4.5m.
-- 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.
GHG emissions (tonne
Scope Energy use (MWh) 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 Brazil (Solar
Metrics Unit Australia 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 Brazil (Hydro) USA Total portfolio
PV)
Gender
Diversity
% (Average Number
Male 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
Total Number of
recordable injuries
x 200,000/annual
TCIR 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/
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
INDEPENT 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)
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
As at As at
30 June 31 December
2023 2022
(unaudited) (audited)
Note GBP'000 GBP'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 Share Special
ended Share premium distributable Capital Revenue
30 June capital account reserve reserve reserve Total
2023 Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Share Special
ended Share premium distributable Capital Revenue
30 June capital account reserve reserve reserve Total
2022 Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP241,000,184 (30 June 2022:
GBP238,569,770).
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
For the For the
six-months six-months
period period
ended ended
30 June 30 June
2023 2022
(unaudited) (unaudited)
Note GBP'000 GBP'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 GBP136.3m and cash balances of GBP136.1m, 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 For the
six months six months
period period
ended ended
30 June 30 June
2023 2022
GBP'000 GBP'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 GBP70,000 (30 June 2022: GBP50,000) 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
GBPnil (30 June 2022: GBPnil).
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
Quoted
prices Significant Significant
in active Observable unobservable
markets inputs inputs
(level (level (level
Total 1) 2) 3)
As at 30 June 2023 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- ---------- ----------- -------------
Assets measured at fair value:
Non-current assets
Investments held at fair value
through profit or loss 329,381 - - 329,381
------------------------------- -------- ---------- ----------- -------------
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(level (level (level
As at 31 December 2022 Total 1) 2) 3)
------------------------------- ------- ---------- ----------- -------------
GBP'000 GBP'000 GBP'000 GBP'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 31 December
2023 2022
GBP'000 GBP'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 GBP7,862k 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 GBP7,989k per this note
and a realised foreign exchange loss of GBP127k 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 Long-term inflation is based on International Monetary
rates 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 The operating expenses are primarily based on the
expenses 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%
Australian solar PV with battery
Weighted Average 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%
Australian solar PV with battery
Australia storage assets 0.7%
Brazilian solar PV assets & Brazilian
Brazil hydro facility 3.0%
Total Asset Life Years US terminal storage assets 30 years
Years Australian solar PV with battery 25 years
storage assets
Years Brazilian solar PV assets 25 years
Years Brazilian hydro facility 25 years
Exchange rates GBP:USD US terminal storage assets 1:1.2697
Brazilian solar PV assets & Brazilian
GBP:BRL hydro facility 1:6.0838
Australian solar PV with battery
GBP:AUD 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
---------------------------------------------------------------------------------------------
Changes in
fair value Change in
Change in of investments NAV per share
input (GBP'000) (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
------------------------------------------------- --------- --------------- --------------
Changes in
fair value Change in
Change in of investments NAV per share
input (GBP'000) (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
--------------------------------------------- --------- --------------- --------------
Changes in
fair value Change in
Change in of investments NAV per share
input (GBP'000) (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
--------------------------------------------------------- --------------- --------------
Changes in
fair value Change in
Change in of investments NAV per share
input (GBP'000) (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
------------------------------------------------ --------- --------------- --------------
Changes in
fair value Change in
Change in of investments NAV per share
input (GBP'000) (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.
Ownership
interests
as at 30
Investments Place of Business 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
As at 30 31 December
June 2023 2022
GBP'000 GBP'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
As at 30 31 December
June 2023 2022
GBP'000 GBP'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 GBP36.4m
(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
As at 30 31 December
June 2023 2022
GBP'000 GBP'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
Special
Distributable
Issued Share Capital Share premium Reserve Total
and fully Number (A) (B) (C) (A+B+C)
Date paid of shares GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ ----------- ------------- ------------- -------------- --------
Opening balance 311,589,799 3,116 67,949 232,467 303,532
Ordinary
1 July 2022 shares 110,909,091 1,109 120,891 - 122,000
Share issue
1 July 2022 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
GBP122m 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
--------------------------------- --------- -------------- ---------
31 March
1 October 2022 - 31 December 2022 1.38p GBP5.8m 2023
30 June
1 January 2023 - 31 March 2023 1.38p GBP5.8m 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 GBP7,000, 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 GBP250m of NAV, 0.9% on NAV in excess of
GBP250m and up to and including GBP500m and 0.8% on NAV in excess
of GBP500m exclusive of VAT.
Furthermore, if in any fee period, the annual fee paid to the
Investment Manager exceeds:
a) GBP3.5m, the Investment Manager shall apply 8% of the annual
fee, subject to a maximum amount of GBP400,000, to subscribe for or
acquire ordinary shares of GBP0.01 each in the capital of the
Company.
b) GBP2.5m, 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 GBP2,180,809 (for 30 June 2022: GBP1,569,187)
(including VAT) of which GBP167,623 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 six month
period period
ended 30 ended 30
June 2023 June 2022
GBP'000 GBP'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 % of ordinary
shares shares
held 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 GBP14,924,400 (31 December 2022: GBP14,924,400)
As at the period-end, the Company held receivables from
affiliates of GBPnil, and a payable balance to affiliates of
GBP13,200 (31 December 2022: GBP355,000).
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:
-- GBP11m (31 December 2022: GBP14m) to the Brazilian solar PV programme.
-- GBP12m (31 December 2022: GBP17m) to the Australian solar PV with BESS programme.
-- GBP80m (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 For the period ended 30 June
2023 2022
-------------------- ------------------------------------- -------------------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ----------- ----------- ----------- ----------- ----------- -----------
Earnings (GBP'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 Year ended
ended 30 31 December
June 2023 2022
GBP'000 GBP'000
-------------------------- ----------- ------------
NAV (GBP'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 GBP5.8m.
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 GBP'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
d = b x
Adjusted closing c 113.22
---------------------------------- -------- ---- -------
Total return for the period ended d / a -
30 June 2023 (%) 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
d = b x
Adjusted closing c 118.41
e = d/a
Total return since IPO (%) -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 GBP12,258,165
Net distributions withheld at VH GSEO UK Holdings Limited GBP3,183,052
------------------------------------------------------------- -------------
Total new distributions received from underlying investments GBP15,441,217
------------------------------------------------------------- -------------
Dividend paid during the period ended 30 June 2023
(2.76p per ordinary share x Number of shares outstanding
as at 30 June 2023 of 422,498,890) GBP11,660,969
------------------------------------------------------------- -------------
Dividend cover 1.3x
------------------------------------------------------------- -------------
GLOSSARY
AIC Association of Investment Companies
AIFM Victory Hill Capital Partners LLP
Annual General Meeting A meeting held once a year which shareholders
or AGM 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 Capital Partners LLP
Victory Hill
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
Company Secretary 6(th) Floor
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
(END) Dow Jones Newswires
September 15, 2023 02:00 ET (06:00 GMT)
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