TIDMPHE
RNS Number : 4564E
Powerhouse Energy Group PLC
30 June 2023
30 June 2023
Powerhouse Energy Group plc
("Powerhouse" or the "Company")
Audited Results for the Year Ended 31 December 2022
Powerhouse Energy Group Plc (AIM: PHE), a company pioneering
integrated technology that converts non-recyclable waste into low
carbon energy, is pleased to announce its audited results for the
year ended 31 December 2022.
FY2022 Summary
Operational Performance
-- Substantial progress made in developing the Company's
business strategy, exemplified by new project arrangements.
-- Creation of, and continuous progress on the Powerhouse
Technology Centre at Bridgend, with view to placing Powerhouse
Energy Group at the forefront of the waste-to-energy sector in
pyrolysis and gasification.
Financial performance
-- Company reported revenue for the year of GBP380,277.
-- Gross profit for the year of GBP84,365.
-- Significant goodwill and trade debt impairment due to
Company's changing business strategy. This reduction in the balance
sheet value has no implication on the ongoing business of the
Company.
-- Cash at bank of GBP5,882,897 as at 31 December 2022.
Company Growth
-- Negotiated terms for Powerhouse to take a 50% shareholding in
the Peel NRE Ltd special purpose vehicle, Protos Plastics-to
Hydrogen No 1 Ltd - transaction acquiring 100% of the share capital
completed post the year end.
-- 50% shareholding agreed with Hydrogen Utopia International
Plc at Konin in Poland and Tipperary, Ireland.
-- Antony Gardner-Hillman appointed as Non-Executive Chairman.
-- Anthony Gale and David Hitchcock appointed as new Non-Executive Directors.
-- Keith Riley appointed as Interim Chairman and then as Acting Chief Executive Officer.
Outlook
-- Change from the original business model, moving away from the
model of licensing PHE technology to third party developers for
flat returns by way of fixed annual licence fees.
-- Announced Joint Venture with Hydrogen Utopia International
Plc at County Longford in Ireland, replacing the Tipperary
project.
-- Obtained full ownership and control of the Protos Plastics-to
Hydrogen No 1 Ltd site near Chester.
-- Acquired the remaining 52% of Engsolve, the Company's engineering capability.
-- Appointment of Noage Energy Ltd as the Company's representative in Northern Ireland.
-- Revitalised Board including the appointment new Non-Executive
Directors bringing a range of additional skills and experience to
support the highly experienced competent executive team, including
the appointment of Professor Karol Kacprzak in February 2023.
-- Vision: to be a leader in technology solutions that rid the
world of, and utilise, non-recycled wastes, producing sustainable
energy whilst mitigating climate change impacts.
Antony Gardner-Hillman, Non-Executive Chairman, commented:
"Having joined the Board in January this year, I am delighted to
see the considerable progress that the Company has made in such a
short period of time. This year has seen Powerhouse focused on
where the business is heading, moving away from the business model
of licensing our technology to third party developers which we felt
was under-selling the true value of Powerhouse.
We are also delighted to have re-shaped the Company's board,
with four new non-executive directors who bring a wide range of
extensive experience which will support the Company's growth and
strategy going forward.
The changes implemented since the year end leave us well
positioned to make significant progress this year and in the longer
term as we strive towards a sustainable future. I look forward to
the strong future that is ahead for Powerhouse."
Keith Riley, Acting Chief Executive Officer, commented:
"In 2022 we commenced a transition in the Company's business
strategy that will start to be realised in 2023. This will be to
recognise market demand and to provide the Company with a
continuing revenue stream and enable its capital projects to be
developed as the necessary elements come into place. We have also
broadened the base of the business to allow this to happen.
We have had an excellent working relationship with Peel NRE Ltd
and look forward to it continuing. 2022 showed, however, that the
structure of the Protos Plastic to Hydrogen project as it was, was
not optimal and needed to be changed. The two companies worked
together on alternative arrangements and in 2023 we concluded that
it was best for Powerhouse to take full control. We will now apply
the strategy we describe in the Strategic Report in the Annual
Report to bring it to fruition.
A key foundation stone of the new business strategy is the
Company's knowhow and capabilities. In 2022 the Company took the
decision to invest in these, firstly creating the Powerhouse
Technology Centre at Bridgend in Wales, which will be in operation
in late 2023, and then the acquisition of Engsolve Ltd and its
integration into the Group completed in June 2023. We will build on
these further as the Company progresses.
I recognise that 2022 was a frustrating year for those wishing
to see construction starting on a facility incorporating Powerhouse
technology but believe that the steps taken in 2022 were essential
and will lead to an even stronger Company in the future than would
otherwise have been the case."
The annual report and accounts for the year ended 31 December
2022 will be sent to shareholders shortly and available to view on
the Company's website: https://www.powerhouseenergy.co.uk
For more information, contact:
Powerhouse Energy Group plc powerhouse@tavistock.co.uk
Keith Riley
WH Ireland Limited (Nominated Adviser)
James Joyce
James Bavister
Enzo Aliaj +44 (0) 207 220 1666
Turner Pope Investments (TPI) Ltd
(Joint Broker)
Andrew Thacker
James Pope +44 (0) 203 657 0050
Tavistock (Financial PR) powerhouse@tavistock.co.uk
Simon Hudson
Nick Elwes
Heather Armstrong
About Powerhouse Energy Group plc
Powerhouse Energy has developed a process technology which can
utilise waste plastic, end-of-life-tyres, and other waste streams
to convert them efficiently and economically into syngas from which
valuable products such as chemical precursors, hydrogen,
electricity, heat and other industrial products may be derived.
Powerhouse Energy's process produces low levels of safe residues
and requires a small operating footprint, making it suitable for
deployment at enterprise and community level.
Powerhouse Energy is quoted on the London Stock Exchange's AIM
Market under the ticker: PHE and is incorporated in England and
Wales.
For more information see www.powerhouseenergy.co.uk
CHAIRMAN'S STATEMENT
I was delighted to join the Board of Powerhouse Energy Group plc
("Powerhouse", PHE" or the "Company") as Non-Executive Chairman on
1 January this year and am pleased to be able to report positive
steps forward during the short period of my tenure of office so
far.
We have re-assessed where the business stands and is heading. We
have re-examined and moved away from the business model of
licensing our technology to third party developers for flat returns
by way of fixed annual licence fees, a model that we felt was
under-selling the real value of Powerhouse. The Company has now
altered its strategy towards joint venture arrangements with
project development partners, giving Powerhouse more say, and
providing upside opportunity for our shareholders. The change of
direction has been shown in our recent announcements on the
projects at County Longford in Ireland, and at Konin in Poland. We
were also very pleased that at the Protos site near Chester, once
it became clear that our partner (originally the site owner and
licensee of our technology) no longer shared our vision for the
project's development, Powerhouse took full ownership and control
on terms which included acceptable lease provisions for the site.
In addition, we were delighted to announce that we have brought our
engineering capability fully in-house, having now increased our
ownership of Engsolve Limited ("Engsolve"), our engineering
partner, to 100%. Engsolve was established and, until this most
recent transaction majority owned, by Powerhouse COO Paul Emmitt
(Powerhouse had acquired a 48% interest in Engsolve in 2021).
Although the former arrangement worked well in practice, it was not
necessarily the best platform from which to build the business that
Powerhouse should be. The new arrangement simplifies the Company's
access to its essential engineering requirements. The Board sees it
as a step forwards in presenting Powerhouse to the market as a
stand-alone business, with all the essential components in-house,
thereby reducing reliance on third parties and ensuring maximum
potential value for Powerhouse's shareholders.
In 2022, excellent progress continued on the Technology Centre
in Bridgend, a vitally important part of our ability to demonstrate
that Powerhouse intends to place itself at the forefront of
businesses aspiring for a position in the waste-to-energy sector.
Hydrogen fuel is only one part of the waste-to-energy picture. The
Company has maintained a watchful eye on the market for hydrogen,
particularly in relation to the publicity attracted by the use of
hydrogen as a transport fuel. That market remains in its infancy
and as such, we will continue to develop our capabilities in
electricity and heat production, fuelled by raw materials
(non-recyclable waste products with no use) that to others are a
growing problem but which, to Powerhouse, are the keys to the
door.
The Company has seen that progression by licensing our
technology to third parties does not mean they will provide the
significant funding required for the construction of each plant.
The Company will continue to need to do that with a development
partner, as we will do at Longford and Konin, or as in the case of
the Protos site, where the Company expects to "go it alone". We are
now exploring the right mix of equity and project finance, to be
ready when the opportunity opens up so as to ensure the business
can progress according to our strategy.
Post the year end the Board has been re-shaped, with four new
non-executive appointments, including myself, bringing an undoubted
range of additional skills and experience to provide a
non-executive component to support the highly experienced executive
team. As Chairman, my focus is on planning the pathway to financial
sustainability, ensuring that we have the right skills and other
resources within the Company, on the right terms, and that
Powerhouse continues to develop and protect its intellectual
property. I expect to see Powerhouse prove its viability in a
commercial context whilst we develop our working relationships with
third parties and maintain their confidence in order to deliver our
projects economically.
I wish to thank my predecessor Keith Riley, who held the reins
as Interim Non-Executive Chairman before moving to a new role as
Acting CEO, leading the small but excellent Powerhouse executive
team. They have made the induction process easy for the new
non-executive board members. I would also like to thank our
shareholders for their continued support over the last few
challenging years. The year ahead promises to be an exciting one as
we deliver on expectations and progress our vision for
Powerhouse.
Antony Gardner-Hillman
Non-Executive Chairman
29 June 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
The year under review was a challenging one for Powerhouse, but
one that I believe will be ultimately rewarding. It was the year
that started a change that the Board believe will move the Company
towards its goal of trading profitably and being at the forefront
of the waste-to-energy sector. 2021 had seen a change in
chairmanship of the Board, and it was hoped that the appointment of
a new Chief Executive Officer in January 2022, followed by a new
Non-Executive Chairman three months later would bring stability.
This was not to be the case, however, and on request of the Board,
I stepped in as Interim Chairman in June, and then had to assume
the dual role of Interim Chairman and Acting Chief Executive in
August 2022.
My objective in joining the PHE board from the outset was to
help progress the Company towards becoming a profitable enterprise.
The first step to doing this was to put in place a Board that could
both maintain the governance required for a company quoted on AIM,
whilst contributing to the day-today running of the Company in a
way that previous Boards had not. These changes were finally
achieved with the Board appointments which occurred at the
beginning of 2023, and I welcome what I see as a fresh start for
the Company.
As with previous years from a financial perspective, the Company
continued to sustain an overall loss in 2022. In 2021, the Company
reported revenue of GBP701,435 which was derived from three main
sources as described in the Strategic Report, one of which was
services provided to the Protos project. During 2022, as a result
of the construction contract tendering exercise on Protos I
describe below, PHE's engineering activity diminished whilst
waiting for the prospective contractors to prepare and return their
bids. As a result, revenue reduced to GBP380,277 in the year - a
reduction of 46%. This revenue in 2022 was made up of GBP38,984 of
HUI exclusivity income and GBP341,293 of billings to Protos
Plastics to Hydrogen No1 Ltd, Peel NRE's special purpose vehicle
(SPV) for the Protos project.. It was also possible, however, to
achieve a reduction in cost of sales from GBP599,914 in 2021 to
GBP295,912 in 2022, lowering the impact on gross profit ahead of
exceptionals which reduced from GBP101,521 in 2021 to GBP84,365 in
2022 - a reduction of 17%. In the event, however, following the
acquisition of the Protos SPV on 28 April 2023, it has been decided
to impair GBP341,293 of billings to the Protos SPV (Refer to note
29 in the financial statements). The added value of the work
carried out by the Company billed to the SPV will, however, be
recovered during 2023, as it remains an integral part of the
project's development.
The major movements in the accounts for 2022 are the reduction
in goodwill, the impairment of the loan made to the Protos SPV and
the trade debt billed to the Protos SPV described above. All can be
attributed to the Company changing its business strategy following
the takeover of the Protos SPV and placing the Company on a
realistic and solid basis from which it can grow. The Company has
moved away from a twin reliance on technology licence sales (with
dependence on a third party to develop the project to which the
licence will apply), and granting of exclusive rights to third
parties in selected territories. It was evident that this approach
had led to a restriction on the activities PHE could undertake, and
stagnation of the Company's development. In consequence, in 2022
the Company decided to become proactively involved in the
development of its own facilities and began initially by entering
into joint ventures with development partners. In the event, the
joint venture with Peel was not realised and PHE acquired 100%
shareholding in the Protos SPV, making it currently the sole
developer of this project.
In 2021 the goodwill had been determined by considering a five
year view on the development of a series of facilities that Peel
was to develop progressively and the quantum determined by
summating the incoming licence fees and performing a discounted
cash flow to calculate the net present value. This was despite
there being no contractual basis or obligation in place for the
development of those projects. The goodwill value in 2022 was
eroded marginally from that of 2021 due to the passage of time. It
became apparent during 2022, however, that the rate of project
development anticipated in previous years was optimistic and that
due to limitations on resources and supply chain capacity, the
realisation of these capital projects will be slower than
anticipated. In consequence, the Board decided that the previous
goodwill calculation could not be supported and the Company would
write off the goodwill value in the 2022 accounts down to a
realistic value in today's market. The previous goodwill evaluation
of GBP42.96m is therefore reported as being impaired by GBP40.66m,
along with GBP0.5m of exclusivity fees from Peel NRE `protos
project', giving a total impairment of GBP41.16 million. There is
no implication on the ongoing business of the Company by this
reduction in balance sheet value, and the value added represented
by the loan value by the SPV under Peel and the trade debt in the
Protos project will be re-established in 2023.
As reported in a previous annual report, a Front-End Engineering
Design ("FEED") had been carried out on the Powerhouse proprietary
technology for converting plastics to hydrogen, trademarked
DMG(TM).. This had been funded through a loan facility to the
Protos SPV made available by PHE and underwritten by Peel NRE Ltd,
the then project owners, in November 2021. In February 2022, this
facility was extended until 31 August 2022, the view at the time
being that financial close of the Protos Plastics to Hydrogen
project could be achieved within that period. This facility was
extended again in August 2022 to 31 March 2023 and then further
extended to 29 April 2023.
Late 2022 saw a major change in the Peel project management team
and the contracting strategy for construction of the Protos
project. This led to an extensive tendering process during the
spring and summer of 2022 whereby four pre-qualified, selected
construction contractors were invited to tender for the
construction, commissioning and setting to work of the Plastics to
Hydrogen facility at Protos based on full specifications and a full
form contract draft. This resulted ultimately in Petrofac being
selected as preferred contractor, but what was consistent across
all bidders was that the total installed cost of the development
was significantly greater than had been estimated previously. Also
consistent across the potential contractors was a requirement that
further work was required on the FEED before prices could be
finalised. Rather than the GBP20 million stated at time of the
Dumbarton Dock planning permission, the tenders indicated the
installed cost to be more than twice this. It became immediately
apparent that the revenues that had been assumed from hydrogen
sales and waste gate fees would not produce the return on
investment required and Peel could not declare financial close
within the timescale anticipated. In consequence, to allow the
project development to continue, the various agreements between PHE
and Peel had to be extended.
In May 2022, we announced the Global Technology and Information
Centre, now known as the Powerhouse Technology Centre, which will
be opened late 2023 in Bridgend, Wales. This indicates a strong
commitment by the Company to invest in itself and its future
development. Gasification as a means of treating large volumes of
unprocessed waste has proved to have limitations and has even led
to some developments being impaired. This has created a false
impression that the technology "does not work" on wastes. This is
not the case, and the true potential of converting waste materials
into synthetic gas (or syngas) which can then be used to produce
other products is still to be realised. The technology Powerhouse
deploys is built on years of academic work and an original
reference plant. The Company has performed several years of testing
using the demonstrator unit at Thornton, and we have more recently
used advanced computer techniques with Manchester University to
improve the design further. We now even have a patent about to be
granted on the temperature control of the kiln with several still
pending. Nevertheless, there is still much we can do, and the
Feedstock Testing Unit to be installed at Bridgend will be a scaled
version of the commercial unit proposed for Protos and elsewhere,
and will permit a much closer simulation of the commercial unit
than its predecessor did. This will also enable the company to
apply its technology to other feedstocks, simplify the gas
processing system and optimise the outputs.
In June 2022, Peel announced that it had obtained planning
permission at Dumbarton Dock, West Dunbartonshire, Scotland for a
13,500 tonnes per annum DMG(TM) unit. Unfortunately, this was
short-lived as following the moratorium on incineration by Scottish
Government, the permission was called in for examination by the
Recorder in November 2022. It is my belief that the case for the
plastics to hydrogen facility could have been made successfully and
would have set a test case for these non-combustion waste
conversion technologies, thereby making obtaining planning
permission for future facilities that much easier. In the event
Peel decided it would not contest the case and withdrew the
planning permission.
It was evident to me from this and earlier events in late
2021/early 2022, that if PHE was to have a future, it had to have a
level of involvement in projects incorporating its technology.
Without this, the Company had no control on project decisions and
was making statements on matters that were not of its making, nor
had any ability to influence. To address this, it was agreed with
Peel that PHE should acquire 50% of the shareholding in Protos
Plastics to Hydrogen No1 Ltd, the SPV set up by Peel for
development of the project. This was announced in September 2022,
and documents were drawn up ready for signature, when following
discussions in early 2023 on roles and further funding of the
development activities, it was decided that the optimal way forward
was for PHE to acquire the entire SPV and take over the project
development, with Peel remaining as landlord of the site. This was
completed on 28 April 2023 and all agreements between Peel and PHE
were terminated.
As a result of this evolution during 2022, the Company used the
first quarter of 2023 to develop its new business strategy. The
main goal is to develop a portfolio of capital projects, but with a
broadening of both the feedstock and product output beyond the
narrow niche of plastics to hydrogen. Whilst plastic and hydrogen
will remain an important business line for PHE, it relies heavily
on the growth of demand for hydrogen. Demand is growing, but
currently lags behind what is required to sustain the building of
multiple PHE hydrogen from waste production facilities in the UK.
The Board has every confidence this will change and by the end of
this decade the use of hydrogen as a transport fuel will be common.
PHE is in an excellent position to take advantage of this, but in
the interim the Company must find alternative sources of revenue.
The recent full integration of Engsolve into PHE provides this
opportunity and in the Strategic Report we set out the role
Engsolve will play.
Engsolve has provided engineering support to PHE for many years,
with the Company holding 48% of the shareholding in since August
2021. The Company has now acquired the remaining stock. Engsolve
will bring with it a history of successfully delivering engineering
services to the energy, oil and gas, manufacturing, waste, and
safety sectors. It is PHE's intention to build on this legacy,
taking advantage of its specialist knowledge and the R&D
capability emerging from the Powerhouse Technology Centre, to
become a significant service provider. This will bring new revenue
streams into the company and help build its reserves to support the
capital projects.
Lastly, during 2022, PHE embarked upon building a pipeline of
projects. This is still underway and results are only now beginning
to emerge. Heads of terms were signed with Hydrogen Utopia
International Plc ("HUI") in August 2022 for a project in Konin,
Poland, but progress was severely delayed due to recent events in
Eastern Europe. In March 2023, however, it was announced that a
similar arrangement had been agreed with HUI on a project in
Longford, Ireland. More recently, we have also announced an
initiative in Ballymena, Northern Ireland. We will, however,
continue to be cautious in building the pipeline. PHE must maintain
focus on Protos, as with an implemented planning permission and
engineering largely complete, at time of writing, this still
remains PHE's fastest route to an installation - and focus must not
be detracted from that. Furthermore, it is important that PHE does
not enter into agreements it cannot properly service. The road to
success in this market is through expertise and quality. If we
deliver the quality the market demands, the quantity will follow,
and the Board are confident that it will.
Keith Riley
Acting Chief Executive Officer
29 June 2023
STRATEGIC REPORT
This strategic report presents the Directors' opinion regarding
the future direction of the Company and contains certain
forward-looking statements. These statements are made by the
Directors in good faith, based on the information available to them
at the time of writing and such statements should be treated with
caution as they address uncertainties.
During 2022 the Company received three sources of revenue:
1. GBP38,984 of HUI Exclusivity fees in relation to Konin, Greece & Portugal
2. GBP341,293 of billings to Peel's Protos special purpose
vehicle (SPV), Protos Plastics to Hydrogen No1 Ltd.
3. GBP60,326 arising from Engsolve profit share
These sources of revenue were the only ones available to the
Company in the year. No other source of revenue was available, as
income from licencing of the DMG(TM) Technology could not and would
not commence until project documentation for the construction of
the project had been completed and the payment profile agreed. With
the extant agreements in place, it was possible that no payment
would be received until commencement of commercial operations of
the facility.
Ahead of exceptional items, the Company made a gross profit in
the year of GBP84,365, derived from revenue items 1 and 2 above.
This compared to a gross profit in 2021 of GBP101,521. During 2022,
due to the construction contract tendering exercise on Peel's
Protos project, the Company's project related activities reduced
pending prospective contractors preparing and returning bids. As a
result, revenue reduced to GBP38,984 of exclusivity income and
GBP341,293 of billings to the Protos SPV - a reduction of 46% from
that in 2021. Due to a reduction in cost of sales from GBP599,914
in 2021 to GBP295,912 in 2022, gross profit was only reduced by
17%.
The sources of revenue stated above were the only ones available
to the Company in 2022. No other source of revenue was available,
as income from licencing of the DMG(TM) Technology could not, and
would not commence until project documentation for the construction
of the project had been completed and the payment profile agreed.
With the agreements in place, it was possible that no payment would
be received until commencement of commercial operations of the
facility. The Company had no other means of generating revenue
available to it.
Administration expenses for the year were GBP2,258,177, compared
with GBP2,147,476 in 2022, due primarily to the additional costs
incurred by changes to the Board of Directors. This gave an overall
loss for the year ahead of exceptional items of GBP2,113,486,
compared to GBP2,007,628 in 2021.
In 2021 the goodwill had been determined by considering a series
of 30 facilities that Peel was to develop progressively over a
period between 2022 and 2050, with the goodwill being a quantum
determined by summating the incoming licence fees over a five-year
period and performing a discounted cash flow to calculate the net
present value. The goodwill value in 2022 is eroded from that of
2021 due to the passage of time, and the realisation that the
incidence of projects over the period will be restricted to 5 in
number. The basic model is the same. The previous goodwill
evaluation of GBP42,960,000 is therefore reduced by GBP40,660,000
to GBP2,300,000. It has also been decided to impair the Peel NRE
exclusivity fees of GBP500,000, the loan drawdown and interest
accrual under the PHE loan facility to the Protos SPV of
GBP2,159,274 along with the trade debtor owed to the Company by the
Protos SPV of GBP1,183,686, giving a total balance sheet reduction
of GBP44.5m.
There is no implication in this adjustment on the ongoing
trading of the Company by this reduction in balance sheet value.
Both expenditure under the loan and the owner engineer services
provided by the Company to the Protos SPV contributed to the
development of the project in terms of intellectual property and
physical assets. These will be will be re-evaluated and
consolidated during 2023 into a loan to Protos Plastics to Hydrogen
No 1 Ltd by the Company as project development costs and in
accordance with the business strategy described below.
The Vision and the Mission
The vision of Powerhouse is to be a leader in technology
solutions that rid the world of and utilise non-recycled wastes
producing sustainable energy whilst mitigating climate change
impacts.
The Company's mission is to provide flexible, innovative,
solutions to global pollution by converting such non-recycled
wastes into valuable end-products, including low carbon energy. We
will develop facilities to achieve this and when appropriate, will
license third party developers to deliver similar facilities that
reduce environmental impact. We will also use our expertise to
assist others in their efforts to reduce climate change.
The Commercial Offering
The commercial offering of Powerhouse is to apply its expertise
in engineering and project management to the development of
facilities that can generate continuous profit streams for the
Company. It specialises in low carbon energy production from waste
materials but is able to apply its know-how and expertise to any
application that reduces the impacts to the environment, both
pollution and climate change.
The Company has developed as its core technology a rotating kiln
that can process organic or fossil-based carbonaceous materials
using pyrolysis and gasification. This produces a synthetic gas (or
syngas) that can produce a range of products including:
Gaseous fuels
Liquid fuels
Electrical power
Heat
Chemical feedstocks
Char
Sources of Revenue
Until now, PHE has focused exclusively on the licencing of its
proprietary technology for the production of hydrogen from
plastics. The arrangement with Peel was based entirely upon a
licencing model. This was seen as a low-cost, low-risk option. This
model did, however, depend on third parties to develop the
application for the technology, and PHE played little or no role in
the project management. Unfortunately, it was also flawed because
whilst multiple facilities deploying the registered trademark DMG
technology were projected, there was little appreciation of the
technical complexity involved and the inextricable link that is
needed between the engineering and the management of the project
development. Consequently, the supply chain's ability to deliver
the equipment was over estimated. There was also a hidden risk that
to sell any licence there is an inevitable requirement for
warranties to be given and with a "hands-off' position within the
project, the Company was not set up to deliver these. For the
Company to sell further licences to less "friendly" clients than
Peel, it was also necessary to have the reference of an operational
plant.
In the third quarter of 2022, the decision was made that PHE
must be able to control its own destiny and could no longer rely
entirely on others to deliver facilities deploying its technology.
As a consequence, the licence model was superseded by the Company
taking a direct interest in such projects.
To develop an operating facility such as that proposed at
Protos, it requires a construction and commissioning programme of
at least 18 months. Specialist materials are required for some of
the equipment due to the high operating temperatures and the
propensity of hydrogen to embrittle steels and leak from even
welded joints. This means that some of the equipment can only come
from specialist manufacturers and the delivery periods are long due
to supply chain issues. Prior to construction, it is necessary to
obtain planning permission and the necessary environmental permits,
so the typical project cycle time from conception to reality of a
PHE plastics to hydrogen facility is around four years. With other
configurations - for example, an electricity generation only
facility - it can be a few months less, but not substantially
shorter. Whatever the period of development, construction and
setting to work, the Company earns no revenue during that period
whatever business model is adopted and may not do so until the
facility is generating sufficient profits.
To date, shareholder funds have financed the Company's working
capital. If nothing else is put in place, this would remain the
case until revenue was earned from an operating project. On top of
this, the question must be addressed of how the capital project is
to be financed.
Engsolve, being now fully integrated within the Powerhouse
Group, brings with it a history of providing engineering services
to third party clients. Although this income is modest at present,
it can form a base on which the Company can build a revenue stream
whilst the capital projects are developed. This will inevitably
require recruitment of some new personnel and a deliberate drive to
sell these services. Engsolve has an existing base and a successful
track record. With positioning of the Company within its specialist
areas, it will be possible to build the client base rapidly,
producing income from engineering services to reduce the cash
requirement from shareholder funds. This will also enable PHE to
build its equity share in the capital projects.
Financing of the PHE Capital Projects
No extensive consideration had previously been given to the
financing of facilities within the Company as it was to be done by
others. The only action taken by the Company was to carry out a
raise of GBP10 million (gross) through shareholder equity in August
2021. This funded the loan to Peel on Protos - hence the
development on that site - and has provided the Company's working
capital ever since.
The new strategy is for PHE to develop a portfolio of capital
projects. By taking an equity interest in these projects, the
eventual dividend flow will greatly exceed that which could be
generated by licence fees. This will have a significant positive
impact on the Company's value and will drive growth and increase
overall returns on invested capital.
To achieve this, each project will be considered on its merits
although the approach taken in their structure and financing may
differ from project to project. In every case, a special purpose
vehicle (SPV) will be formed, and the Company will develop the
project to financial close. Ahead financial close, however, a
decision will be taken on the approach taken by the Company at
financial close, and this may be different for each project. For
example, initially when the Company has limited equity, it may
dilute its interest at financial close to become a minor
shareholder in the SPV, or even sell the total shareholding in the
project. The Company's income from the project will be a
development fee that will be charged to equity partners entering
the project (or for its sale) and a dividend pro rata with the
shareholding. As the portfolio builds and cash position
strengthens, the proportion of equity the Company maintains in the
project can grow.
In each case a form of project finance is used, with minimal or
no call on shareholders to invest directly in the SPVs unless they
express a wish to do so.
Project Finance
Project finance is the funding of long-term infrastructure,
using a limited or even non-recourse financial structure. Equity
and debt are used to finance the project and are paid back from the
cash flow generated by the project. This is effectively a loan
structure that relies primarily on the project's cash flow for
repayment, with the project's assets, rights, and interests held as
secondary collateral.
The key to obtaining project finance is de-risking the technical
risks and attention to detail in establishing the costs and revenue
streams and the covenants of the third parties concerned. This is
the stage that the Company is now at on Protos and will update the
financial market when the appropriate arrangements have been
completed.
Research & Development
The application of R&D has always been an important factor
in PHE's development. This remains the case, and in 2022 the
Company announced its intent to enhance this by establishing the
Powerhouse Technology Centre at Bridgend. A purpose-designed
Feedstock Testing Unit (FTU) is in manufacture and will be
installed within the Centre during 2023. The FTU is a scaled
version of the commercial Thermal Conversion Chamber (TCC) and will
allow simulations of the commercial operating plant to be carried
out under controlled conditions. It is anticipated that this will
enable the Powerhouse Technology to be demonstrated in practice
independent of building the commercial unit and hence give comfort
to potential investors that the technical risk can be
mitigated.
It is the director's firm belief that the use of thermal
processes such as pyrolysis and gasification will grow in
forthcoming years as lead chemical recycling develops and overtakes
and possibly replaces for some materials physical recycling.
Building the Company's expertise and knowledge in this field will
allow the Company to be at the forefront of this transition. The
ambition is for the Company to be the go-to company in the UK for
these thermal treatments and associated materials behaviour, and
for the Powerhouse Technology Centre to become a profit centre in
its own right.
PRINCIPAL RISKS AND MITIGATIONS
The Board of Directors is responsible for ensuring that the risk
register is maintained and updated. This ensures a reasonable, but
not absolute, assurance that significant risks are mitigated and
managed to an acceptable level.
The Executive Directors are responsible for establishing and
maintaining the risk register on all capital projects. This
identifies risks and assesses their potential impact using
quantification techniques. Mitigations are then considered, and the
residual risk identified.
Significant risks are those which if materialise will have
material impact on the Company's long-term performance and delivery
of its business strategy. These are summarised in the following
table.
Risk Description Mitigation
Operations Greater than anticipated All suppliers to be
increases in global pre-qualified for their
pricing and pressures relevant experience
on supply chain adversely and stability.
impact financial viability
of capital projects, Regular review of supply
chain and maintain competitive
Supply chain manufacturing tension.
capacity is constrained
and cannot meet required General cost-side inflation
delivery times. will be reflected in
offtake price escalation.
Longer development timescales
than anticipated. Contract security and
performance requirements
Key contractors/suppliers to be included in all
are unwilling to provide major supplier contracts.
required performance
guarantees. In-house team to be
strengthened with competent
personnel, whilst also
working with experienced
partners - eg strategic
framework agreement
with Petrofac.
------------------------------- ---------------------------------
Technical Risk Risk that the technical Pyrolysis and gasification
solution chosen does are well established
not perform to the standards technologies widely
anticipated. reported in the literature.
Substantial testing
of the feedstock conversion
to syngas process has
been carried out by
PHE using the Demonstrator
Unit at Thornton.
PHE works with academia
to deploy latest computer-aided
tools.
Independent due diligence
on the process will
be carried out prior
to implementation.
The new FTU to be installed
at Bridgend will have
the capability of simulating
the commercial kiln
to enable predictive
testing to be performed.
------------------------------- ---------------------------------
Intellectual Property Patent applications Patents give PHE unique
may not be granted. control over its technology,
but knowhow and expertise
Maintaining patents is considered to be
is costly and cannot more important and can
cover the whole world. mitigate against copying.
------------------------------- ---------------------------------
Government Policy Drivers of demand for Maintain presence and
pollution reduction, communicate with government
recycling and climate departments on Low Carbon
change avoidance rely Fuels Standards.
on support from Government
policy. Currently counterfactuals
are not recognised within
Policy supports for UK policy.
avoided CO2 emissions
and counterfactuals
is important to provide
PHE with competitive
advantage.
------------------------------- ---------------------------------
Competition Competition may depress The need to establish
revenues or even act capital projects acts
as a barrier to PHE's as a high barrier to
entry to the market. entry, which deters
competition. PHE is
not aware of any significant
competitor within its
business strategic area.
Once access to land
is established, competitive
pressures lie with waste
gate fees and offtake
sales. PHE strategy
now is to target waste
streams that can command
adequate gate fees and
adapt offtakes to match
market demand - hence
the broadening of offering
beyond plastics and
hydrogen.
------------------------------- ---------------------------------
Funding of working Cost of development All capital projects
capital/cash flow significantly above are programmed budgeted
ability of shareholder and the spend controlled.
equity to fund. Most of the development
spend on Protos is already
Cash position inadequate expensed.
to fund project development.
Cash flow is managed
and reviewed monthly.
New business strategy
of providing engineering
services through Engsolve
will improve cash flow.
------------------------------- ---------------------------------
Financing of capital Shareholder equity cannot Project finance approach
projects finance capital projects. to be followed. PHE
will de-risk each element
Cost of capital projects required to achieve
increase and depress an investable project.
IRR below investment
level. Engineering design completed.
Specifications available
for plant & equipment
to be contracted using
model form contracts.
Projects value engineered
to minimise cost prior
to design freeze.
Capital costs to be
fixed as early as possible.
Currency risk to be
hedged.
------------------------------- ---------------------------------
Feedstock supply Feedstock unavailable Quantified assessments
risk or only at negative of available feedstock
gate fees. have been carried out.
PHE will target available
feedstocks and seek
long-term agreements
for feedstock supply.
------------------------------- ---------------------------------
Offtake market Offtake market at different Expand the range of
risk price point than anticipated. offtakers approached
to provide competitive
Lack of demand for offtake. tension.
Adapt the project to
meet market demand.
------------------------------- ---------------------------------
Regulatory and Regulations may change. Projects designed to
Compliance Risk meet existing regulations.
Change in law provisions
included in project
contracts.
------------------------------- ---------------------------------
Key Performance Indicators (KPIs)
Due to the nature of the Company's business strategy, which was
essentially passive, relying on others to develop projects so that
licences for the Company's technology could be sold, no KPI
performance measuring system was in place. It is also of note that
the number of employees of the Company as at 31 December 2022 was
one.
Following the implementation of the strategy described above,
the Company will adopt a range of metrics in the form of KPIs,
which will be reported on periodically to measure performance. The
implementation of the KPIs will be rolled out during 2023 and cover
the following:
Financial measures :
-- Underlying profit & loss to measure the Company's
profitability for the year attributable to equity shareholders of
the Group. It will exclude exceptional items, remeasurements,
timing and force majeur incidents from the calculation;
-- Company capital investment. The Company plans to invest in
the development of its capital projects and will publish five-year
plan from January 2023 to March 2028 across all areas of the
Powerhouse Group.
-- Research and Development spend. This will measure expenditure invested in the development of decarbonisation of energy systems, and will provide a transparent view of the Company's compatibility with reduction in contamination, pollution and climate change mitigation.
-- Return on capital employed (ROE). The Company will provide a
target and forecast on the potential ROE of its capital investments
to provide an indication of its performance in generating value for
shareholders.
Non-Financial Measures
-- Contamination & Pollution Reduction. This is a projected
measure of the reduction the Company's projects will have on
reducing contamination and pollution by the waste products
processed by the Company's capital projects and engineering
services provided to others.
-- Climate change mitigation. This is a projected measure of the
reduction the Company's projects and engineering services will have
on reducing climate change impacts.
-- Stakeholder satisfaction. Customer and stakeholder
satisfaction, will be measure with view to maintaining engagement
with these groups and improving service levels.
-- Employee Engagement. The Company will measure how engaged our
employees feel, based on the percentage of favourable responses to
questions repeated annually in our employee engagement survey. The
target will be to increase engagement compared with the previous
year. A review of diversity within the workforce will also be
carried out with view to increasing diversity as the workforce
grows.
Statement of Directors' Duties to Stakeholders under s.172
Companies Act 2006
The Directors acted in in good faith throughout the year with
view to promoting the long-term success of the Company for the
benefit of its members as a whole, with due regard to stakeholders
and the matters set out in section 172 of the Companies Act
2006.
The Board recognises its responsibilities to each of the
Company's stakeholders and to society, and have endeavoured to
ascertain the interests and views of its stakeholders and consider
these when making decisions. The Board acknowledges its
responsibility for setting and monitoring the culture, values and
reputation of the Powerhouse Energy Group, and seeks to live by its
values.
When making decisions, the Directors have regard to all
stakeholders but acknowledge that not every decision will result in
a preferred outcome for all. The Board strives to balance the
different and competing priorities and interests of our
stakeholders in a way compatible with the long-term, sustainable
success of the business and which maintains a standard of business
conduct aligned to our values and purpose.
The Directors are aware of their duty under section 172 of the
Companies Act 2006 to act in the way which they consider, in good
faith, would be most likely to promote the success of the Company
for the benefit of its members as a whole. and, in doing so, to
have regards (amongst other matters) to
-- The likely consequences of any decision in the long term;
-- The interests of the Company's employees;
-- The need to foster the Company's business relationships with
suppliers, customers and others;
-- The impact of the Company's operations on the community and the environment;
-- The desirability of the Company maintaining a reputation for
high standards of business conduct; and
-- The need to act fairly between members of the Company.
The Board recognises that the long-term success of the Company
requires positive interaction with its stakeholders. Positive
engagement with stakeholders will enable our stakeholders to better
understand the activities, needs and challenges of the business and
enable the Board to better understand and address relevant
stakeholder views which will assist the Board in its decision
making and to discharge its duties under Section 172 of the
Companies Act 2006.
We reproduce here the Code of Conduct of the Company for easy
reference which the directors believe meet the requirements of
s172.
Company's Code of Conduct
1. Introduction
This Powerhouse Energy Group (Powerhouse) Code of Conduct is a
steering document that defines how the Company will act towards its
employees, towards its clients, business partners, suppliers,
competitors, and other organisations in all situations related to
our business. The Code of Conduct is an integral part of the
Company's Environmental, Social and Governance (ESG) Strategy and
defines our corporate responsibility in society.
It is mandatory that this Code of Conduct is understood and
complied with by all personnel working for the Company and its
subsidiaries or on their behalf, including Representatives.
The Powerhouse Board of Management and CEO are ultimately
responsible for the Code and its implementation. The Board will
monitor its compliance through annual performance reviews, annual
employee surveys and internal and external audits.
All Powerhouse officers, employees and those representing the
Company represent the Company's brand and reputation through the
solutions and value we create and our behaviour.
2. Our People
Powerhouse will maintain a structured recruitment process with a
structured performance appraisal and talent management process. We
will create development opportunities and continuous learning for
our employees. By encouraging a feedback culture and working with
the insights from our employees, we increase their engagement.
It is the responsibility of each employee to look after their
own personal and professional development, but at all times
supported by the Company. Employees will be given equal
opportunities for professional development both within their
existing fields and in new areas.
The Company believes that diversity is an important asset within
the company and in our relationships with clients and stakeholders.
We promote equal rights and opportunities of employees in the
workplace regardless of their gender identity, age, ethnicity,
religion or other belief, disability, or sexual orientation.
3. Social Responsibility
The company accepts continuing responsibility for its services
to its clients and thereby to society. The company will permanently
contribute to the benefit of its clients and society through
sustained technological development and personnel training aimed at
improving its performance.
Sustainability is a permanent goal in every project. The largest
contribution to sustainability lies in the projects Powerhouse
develops and has three facets:
1. Our projects must contribute to sustainable development;
2. We will strive to increase the sustainability performance of our client's projects; and
3. We will act sustainably in our own operations and performance.
Powerhouse is committed to improve the lives of people and to
respect human rights. We should always act in a socially and
ethically responsible way, within the laws of the countries in
which we operate. We support and respect human rights, as defined
by the UN in the Universal Declaration of Human Rights.
4. Quality of Service
The Company will only undertake project assignments in its areas
of expertise where it has the capabilities to deliver efficient and
effective service to its clients. We are committed to providing
high quality services to clients and will focus on quality
management as a working methodology and on permanent improvement as
a means to improve that quality of service. It is our intent to be
certified in Quality, Environment and Health & Safety in
accordance with ISO 9001, ISO 14001 and ISO 45001 and we are
committed to continuously improve our management system.
Health and safety is a top priority for the Company, with a
zero-incident target. We are committed to eliminate hazards, reduce
risk and ensure that health and safety information, instruction,
training, and supervision is provided to all.
The Company is committed to the continual improvement of its
knowledge base, abilities and tools in the area of its expertise.
The company will focus on technology management as a working
methodology and shall extend to its clients the benefits of its
professional achievements.
5. Objectivity
Powerhouse will be loyal to its clients and will maintain the
confidentiality of any information from the client that is obtained
in the process of performing services. The Company will also keep
confidential the documents and reports prepared for the client.
The Company will avoid any conflict of interest and will inform
a client beforehand of any potential conflict of interest that
could emerged during the execution of its services.
The Company will only offer its services under contracting terms
that do not interfere with its independence, integrity and
objectivity.
Powerhouse will not accept any remuneration that could encourage
the offering of a biased opinion.
6. Corporate integrity
Powerhouse complies with all applicable laws, regulations, and
other requirements applicable to operations in the countries where
Powerhouse is active. This Code applies to all parts of the
organisation, irrespective of where we are based, or where our
projects are performed.
The Company will operate and compete in accordance with the
legislation of each Territory and will not accept fraud,
corruption, bribes, or unpermitted competition-restricting
practices. We are committed to supporting international and local
efforts to eliminate corruption and financial crime. We will not
commit to activities that we cannot defend or account for, and we
must not make decisions based on improper relationships or personal
relationships. We also undertake to maintain correct and accurate
accounting and reporting in accordance with the accounting rules in
each Territory in which we operate.
The company will act at all times for the benefit of clients,
and will carry out services with professional integrity, whilst not
jeopardising the interest of society.
The promotional activity of the company and its services will
uphold the dignity and reputation of the industry. Brochures and
other formal documents describing resources, experience, work and
reputation will reflect the Company's actual circumstances in a
truthful manner.
The Company will manage with integrity its internal and external
clients. It will focus on business integrity management as a
working methodology.
We respect the privacy of individuals and recognise the
importance of personal data entrusted to us by our employees,
clients, and other parties. Confidential information received by
Powerhouse from clients and other external parties must as a
minimum be treated and protected in the same way as the Company's
own confidential information. It is the responsibility of every
employee and Representative to process and protect all personal
data compliant with the applicable privacy legislation in a
relevant and proper manner.
Employees and Representatives must report any violations of
business ethics or human rights that arise in their course of work,
even if the Company is not directly involved or party to it. In
addition, employees should report incidents which could be a breach
of business ethics and may remain anonymous if they so wish.
7. Communications
Powerhouse employees are encouraged to communicate and share
information but must at the same time ensure that the Powerhouse
brand is strengthened and not weakened.
Our communications must always reflect, protect and develop the
Company's position in the market as well as show that we are
available to our stakeholders Every Powerhouse employee and
Representative is an ambassador for the company. Communications
must support the Company's business goals and profitable growth
strategy while securing a cohesive brand identity in the market.
All managers are responsible for ensuring that they and their
employees comply with the guidance documents that apply for
communication within and from Powerhouse.
As a company listed on the London AIM stock market we are
obliged to communicate anything related to the Powerhouse business,
financial condition, and results in line with the laws and rules
that apply to listed companies. We report transactions correctly
and in a true and fair way.
8. Competition
The company will only solicit work and participate in private
and public competitive tendering under a high standard of corporate
ethics and competitive practices, and with total integrity in its
transactions. The Company will not participate in prohibited
anti-competitive activities, illegal price-fixing agreements,
market sharing or abuse of dominant position.
The company favours quality-based selection for the contracting
of services.
If solicited to review the work performed by another company,
the company will act in accordance with its business integrity and
objectivity policies.
The Company will not endorse compensation or contribution
arrangements destined to influence or secure work no seek
commissions from suppliers of equipment and services recommend it
to the client as part of the company's services.
The Company will not take part in activities that could damage
the reputation of it's business or the business of others.
Keith Riley
Acting Chief Executive Officer
2 9 June 2023
STATEMENT OF COMPREHENSIVE INCOME
For The Year Ended 31 December 2022
31 December 31 December
Note 2022 2021
GBP GBP
Revenue 2 380,277 701,435
Cost of sales (295,912) (599,914)
------------- -------------
Gross Profit 84,365 101,521
Administrative expenses 4 (2,258,177) (2,147,476)
Acquisition costs 0 (11,735)
Share of associate 5 60,326 50,062
Operating loss (pre exceptional items) (2,113,486) (2,007,628)
Exceptional Items
Exclusivity Impairment 6 (500,000) -
Goodwill Impairment 6 (40,660,000) -
Loan Impairment 7 (2,159,274) -
Revenue Impairment 7 (986,392) -
Operating Loss (post exceptional items) (46,419,152) (2,007,628)
Net finance income/(cost) 8 65,448 10,987
Loss before taxation (46,353,704) (1,996,641)
Income tax credit 9 155,025 126,145
Total comprehensive loss (46,198,679) (1,870,496)
------------- -------------
Loss per share (pence) 10 (1.17) (0.05)
Diluted loss per share (pence) 10 (1.17) (0.05)
All activities are in respect of continuing operations and there
are no other items of comprehensive income.
The notes numbered 1 to 30 are an integral part of the financial
information.
STATEMENT OF FINANCIAL POSITION
As At 31 December 2022
Note 2022 2021
GBP GBP
ASSETS
Non-current assets
Intangible fixed assets 11 2,502,073 43,554,498
Tangible fixed assets 12 5,795 33,092
Investments in subsidiary undertakings 13 1 1
Investments in associated undertakings 13 187,638 140,540
Total non-current assets 2,695,507 43,728,131
Current Assets
Loans receivable 14 0 1,165,286
Trade and other receivables 15 403,247 963,648
Corporation tax recoverable 16 166,318 155,227
Cash and cash equivalents 17 5,882,897 9,637,460
------------ ------------
Total current assets 6,452,462 11,921,621
Total assets 9,147,969 55,649,752
------------ ------------
LIABILITIES
Current liabilities
Creditors: amounts falling due within
one year 18 (279,306) (563,781)
Total current liabilities (279,306) (563,781)
Total assets less current liabilities 8,868,663 55,085,971
Net assets 8,868,663 55,085,971
------------ ------------
EQUITY
Share capital 21 22,900,856 22,900,856
Share premium 22 61,291,710 61,291,710
Merger relief reserve 22 0 36,117,711
Accumulated deficit 23 (75,323,903) (65,224,306)
Total surplus 8,868,663 55,085,971
------------ ------------
The financial statements of Powerhouse Energy Group Plc, Company
number 03934451, were approved by the Board of Directors and
authorised for issue on 29 June 2023 and signed on its behalf
by:
Keith Riley
Director
The notes numbered 1 to 30 are an integral part of the financial
information.
STATEMENT OF CASHFLOWS
For The Year Ended 31 December 2022
Note 2022 2021
GBP GBP
Cash flows from operating activities
Operating Loss (46,419,152) (2,007,628)
Adjustments for:
Share based payments (18,629) 34,829
Amortisation 10,263 5,049
Depreciation 27,970 28,824
Goodwill & Exclusivity impairment 41,160,000 -
Loan Impairment 2,077,600 -
Share of associate result (49,033) (50,062)
Provision against investments 0 49
Loan Interest Charge 81,674 -
Other none cash movements 3,006 -
-Changes in working capital:
Decrease/(Increase) in contract costs 0 14,550
Decrease/(Increase) in trade and other
receivables 560,401 (763,338)
Increase/(Decrease) in trade and other
payables (284,475) 55,015
Tax credits received 166,318 118,927
Net cash used in operations (2,684,057) (2,563,785)
------------ -----------
Cash flows from investing activities
Purchase of interest in associate 13 0 (99,990)
Loans advanced 14 (927,600) (1,150,000)
Purchase of intangible fixed assets 11 (117,838) (39,965)
Purchase of tangible fixed assets 12 (673) (8,896)
Net cash flows from investing activities (1,046,111) (1,298,851)
------------ -----------
Cash flows from financing activities
Proceeds from issue of shares 0 10,063,802
Payments of principal under leases 20.3 (23,455) (23,882)
Net finance costs 8 (940) (4,299)
Net cash flows from financing activities (24,395) 10,035,621
------------ -----------
Net increase/(decrease) in cash and cash equivalents (3,754,563) 6,172,985
Cash and cash equivalents at beginning
of year 9,637,460 3,464,475
Cash and cash equivalents at end of year 5,882,897 9,637,460
------------ -----------
The notes numbered 1 to 30 are an integral part of the financial
information.
STATEMENT OF CHANGES IN EQUITY
For The Year Ended 31 December 2022
Merger
Ordinary Deferred Share relief Accumulated
share capital shares premium reserve deficit Total
GBP GBP GBP GBP GBP GBP
Balance at 1 January 2021 18,575,503 3,113,785 52,594,934 36,117,711 (63,544,097) 46,857,836
Transactions with equity
parties:
- Share issues on exercise
warrants 24,477 - 174,603 - - 199,080
- Share issues to exercise
options 278,000 - 253,982 - - 531,982
- Share issues in year 909,091 - 9,090,909 - - 10,000,000
Share based payments - - - - 190,287 190,287
Share issue costs - - (822,718) - - (822,718)
Reserve transfer- goodwill - - - - - -
impairment
Total comprehensive loss - - - - (1,870,496) (1,870,496)
Balance at 31 December
2021 19,787,071 3,113,785 61,291,710 36,117,711 (65,224,306) 55,085,971
Transactions with equity parties:
- Share issues on exercise warrants - - - - -
- Share issues to exercise - - - - - -
options
- Share issues in year - - - - - -
Share based payments - - - - (18,629) (18,629)
Reserve transfer - goodwill
impairment - - - (36,117,711) 36,117,711 0
Total comprehensive loss - - - - (46,198,679) (46,198,679)
Balance at 31 December
2022 19,787,071 3,113,785 61,291,710 0 (75,323,903) 8,868,663
============== ========== ========== ============ ============ ============
The following describes the nature and purpose of each reserve
within equity:
Deferred shares: Represents the combined total of all deferred
shares (0.5p, 4p and 4.5p)
Share premium: Amount subscribed for share capital in excess of nominal value
Merger relief reserve: Amount subscribed for share capital in
excess of nominal value where merger relief applies (Note 1.1)
Accumulated deficit: Accumulated deficit represents the
cumulative losses of the company and all other net gains and losses
and transactions with shareholders not recognised elsewhere
The notes 1 to 30 are an integral part of the financial
information.
NOTES TO THE ACCOUNTS
For The Year Ended 31 December 2022
1. accounting policies
Powerhouse Energy Group Plc is a company incorporated in England
and Wales. The Company is a public limited company quoted on the
AIM market of the London Stock Exchange. The address of the
registered office is 15 Victoria Mews, Mill Field Road, Cottingley
Business Park, Bingley BD16 1PY. The principal activity of the
Company is to continue the development of its technology and to
support its customers in order to achieve its full commercial
roll-out. The following accounting policies have been applied
consistently in dealing with items which are considered material in
relation to the financial information.
1.1. Basis of preparation
This financial information is for the year ended 31 December
2022 and has been prepared in accordance with International
Financial Reporting Standards ("IFRS") issued by the International
Accounting Standards Board (IASB), as adopted for use in the United
Kingdom (UK) and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS (except as otherwise
stated). These accounting policies and methods of computation are
consistent with the prior year, unless otherwise stated.
The Company's only UK subsidiaries are non-trading and not
material. There are also long-term restrictions on the operations
of the Company's subsidiaries in the US and Switzerland. With these
restrictions in place, the Company is also unable to exert control
over the subsidiaries. As such the Company has claimed exemptions
applicable to it under Companies Act section 405 (2) and 405 (3b)
and IFRS 10 to not present any Consolidated financial statements
for the year ended 31 December 2022. Investments in subsidiaries
that are not consolidated are carried at cost less any provision
for impairment.
The acquisition of Waste2Tricity Limited during 2020 was
transacted by way of a share for share exchange and qualifies for
merger relief, meaning that no share premium is recorded on the
issue of the consideration shares. The excess of the fair value of
consideration shares over their nominal value has been recorded in
a merger relief reserve.
Associates are entities which the Company has significant
influence but not control or joint control as defined under IAS 28.
This is generally the case where the Company holds between 20% and
50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting.
Under the equity method of accounting, investments are initially
recognised at cost and adjusted thereafter to recognise the
Company's share of the post-acquisition profits or losses of the
investee in the Income statement. Dividends received or receivable
from associates and joint ventures are recognised as a reduction in
the carrying value of the investment.
When the Company's share of losses in an equity-accounted
investment exceeds or equals its interest in the equity, the
Company does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the other entity.
Unrealised gains on transactions between the Company and its
associates and joint ventures are eliminated to the extent of the
Company's interest in these entities. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment in the asset transferred.
Accounting policies of the equity accounted investees are
changed where necessary to ensure consistency with the policies
adopted by the Company. The carrying value of equity accounted
investments is tested for impairment in accordance with the policy
described in Note 1.18 (ii).
As of 31(st) December 2022 the Company has one associate,
Engsolve Limited, the interest in which was acquired during
2021.
Other investments, which are not publicly traded, are initially
measured at cost and subsequently measured at cost less accumulated
losses.
1.2. Judgements and estimates
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts in the
financial statements.
Areas involving a higher degree of judgements or complexity, or
areas where assumptions or estimates are significant to the
financial statements such as the exercise to assess the fair value
of goodwill, share based payments (share options and warrants) and
going concern are disclosed within the relevant notes.
1.3. Going concern
The financial statements have been prepared on a Going Concern
basis. The Directors' views are based upon working capital
projections which take into account the intended use of the funds
in hand over the next 12 months.
At 31st December 2022 the company was still pursuing a business
strategy of selling licences for use of its technology to Peel
Group on a series of projects to be constructed on sites within
Peel's ownership and Peel's control. In prior years, Goodwill had
been calculated using a discounted cash flow calculation od licence
fees arising from 10 prospective projects to be developed by Peel
over a ten-year period. As at 31st December 2022, Peel had two
projects under development - Protos in Cheshire and Rothsay Dock in
Clydebank - with others still in prospect, but it had become
evident that due to availability of resources and limitations in
the supply chain, no more than five projects would be constructed
within a 10 year view. The Goodwill valuation is, therefore
calculated on this basis, resulting in a reduction of Goodwill from
42.69m in 2021 to 2.3m at the end of this reporting period, and it
is the view of the directors that this is a fair valuation at this
time .
Towards the end of 2022, thinking on the licencing business
strategy was changing and discussions were underway with Peel with
view to the Company acquiring a 50% ownership of Protos Plastics to
Hydrogen No1, the special purpose vehicle (SPV) set up by Peel to
finance and develop the project at Protos. This change in business
strategy is described in the Strategic Report section of this
Annual Report and crystallised post-reporting period in May 2023,
when the company acquired 100% of the SPV shareholding. It also
entered into a 50/50 joint venture with Hydrogen Utopia
International for a project to be developed at Longford, Republic
of Ireland and is developing a further prospect for a wholly owned
project in Ballymena, Northern Ireland.
In looking forward to determine the Going Concern status, the
business planning of the Company post the current reporting period,
is based on the following:
-- The acquisition of Engsolve Ltd (announced June 2023) giving
the Company the ability to earn revenues from engineering services.
Engsolve had an existing client base, a history of providing such
services and was integrated into the Company Group with an existing
bank balance. This provides an immediate and ongoing revenue stream
to the Company, extending its positive cash position;
-- The development of a series of capital projects addressing
contamination, pollution and climate change mitigation and
deploying where possible, but not exclusively, the Company's
proprietary technology. These projects will be developed to a point
where the construction and future operation of the project can be
financed using combinations of equity and debt.
Adopting this approach:
-- The Company will have an ongoing revenue stream;
-- Investment in the development of the capital projects will be
via shareholder loans to the SPV, repayable at financial close;
-- In the event development of the project does not look viable
(for example, failing to obtain the necessary permissions),
expenditure will be curtailed and a replacement project
identified;
-- As the project approaches financial close and viability is
established, equity partners will be sought to take shareholder
equity in the SPV and the project financed by a mix of equity and
debt to be determined or the Company's entire shareholding in the
SPV sold.
The directors consider therefore that other than fixed costs,
the cash spend looking forward can be managed. Within the 13-month
cashflow projection (June 2023 - June 2024) GBP740k is
discretionary and can be adjusted or even stopped. Large capital
expenditure can also be avoided until the Company is in a position
make to such investments. The Cashflow also includes the net costs
of acquisition of Engsolve of GBP107k and annual spend of GBP475k.
It is anticipated that Engsolve revenues over the period will
exceed these values.
A cash inflow of GBP1.2m is also anticipated following asset
financing of the Feedstock Testing Unit and associated equipment to
be installed in the Powerhouse Technology Centre at Bridgend later
in 2023, offsetting this capital purchase. The Company has received
two initial offers of asset finance for the New Test Unit. In the
unlikely event the Company does not receive the asset finance it
will need to reduce expenditure on capital projects, offset by
income from Engsolve activities.
It is of note that the loan made to the Protos SPV of GBP2.16m
was expended on engineering and project management, the value of
which has been preserved in the SPV and now under control of the
Company. This loan will be recovered along with the GBP1.18m Protos
debt at financial close of the Protos project. In consequence, this
balances of GBP3.34m is not included in the Going Concern
evaluation, and in the directors' opinion does not materially
impact their opinion regarding Going Concern. The loan and debtor
will be provided for at the end of Dec 22 and will be fully
impaired. Should the Protos project proceed the provision for the
loan and debtor will be reversed and then fully recovered from the
Protos SPV.
1.4. Foreign currency translation
The financial information is presented in sterling which is the
Company's functional currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies are revalued to the exchange rate at date of
settlement or at reporting dates (as appropriate). Exchange gains
and losses resulting from such revaluations are recognised in the
Statement of Comprehensive Income.
Foreign exchange gains and losses are presented in the Statement
of Comprehensive Income within administrative expenses.
1.5. Revenue
(i) Engineering services
The Company has provided engineering services for the
application of its technology, the intellectual property which the
Company owns. Revenue from providing services is recognised in the
accounting period in which services are rendered. For fixed-price
contracts, revenue is recognised based on the actual service
provided to the end of the reporting period as a proportion of the
total services to be provided to the extent to which the customer
receives the benefits. This is determined based on the actual
labour hours spent relative to the total expected labour hours.
Where contracts include multiple performance obligations as
specified by the work scope, the transaction price will be
allocated to each performance obligation based on estimated
expected cost-plus margin.
Estimates of revenues, costs or extent of progress toward
completion of services are revised if circumstances change. Any
resulting increases or decreases in estimated revenues or costs are
reflected in profit or loss in the period in which the
circumstances that give rise to the revision become known by
management.
In case of fixed-price contracts, the customer pays the fixed
amount based on a payment schedule. If the services rendered by the
Company exceed the payment, a contract asset is recognised. If the
payments exceed the services rendered, a contract liability is
recognised.
If a contract includes an hourly fee, revenue is recognised in
the amount to which the Company has a right to invoice.
(ii) Exclusivity fees
Where the Company grants a developer exclusive rights to utilise
its technology in a particular territory for an exclusivity fee,
the fee is recognised in the income statement over the agreed
exclusivity period.
1.6. Leases
For any new contracts entered into, the Company considers
whether a contract is, or contains, a lease. A lease is defined as
'a contract, or part of a contract, that conveys the right to use
an asset for a period of time in exchange for consideration'. To
apply this definition the Company assesses whether the contract
meets three key evaluations which are whether:
(i) the contract contains an identified asset which is either
explicitly defined in the contract or implicitly specified by being
identified at the time the asset is made available to the
Company;
(ii) the Company has the right to obtain substantially all of
the economic benefits from use of the asset throughout the period
of use, considering its rights within the defined scope of the
contract;
(iii) the Company has the right to direct the use of the
identified asset throughout the period of use.
Where the above evaluations are met, at lease commencement date,
the Company recognizes a right of use asset and a lease liability
on the balance sheet. The right of use asset is measured at cost,
which is made up of the measurement of the initial lease liability,
any direct initial costs incurred by the Company, an estimate of
any costs to dismantle and remove the asset at the end of the
lease, and any lease payments made in advance of the lease
commencement date.
The Company depreciates right of use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right of use asset or the end of the lease
term. The Company assesses the right of use asset for impairment
when such indicators exist.
At the commencement date the Company measured the lease
liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if
that rate is readily available or the Company's incremental
borrowing rate. For the assessment of the lease entered into in
2020 the Company applied a rate of 7.5%.
Subsequent to initial measurement the liability will be reduced
for payments and increased for interest. It is remeasured to
reflect any reassessment or modification or is there are any
changes to the repayment schedule.
1.7. Finance income and expenses
(i) Income
Interest income is calculated by applying the effective interest
rate to the gross carrying amount of a financial asset except for
financial assets that subsequently become credit impaired. For
credit impaired financial assets, the effective interest rate is
applied to the net carrying amount of the financial asset (after
deduction of the loss allowance).
(ii) Expense
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition.
1.8. Income tax expense
The tax expense for the period comprises current and deferred
tax.
UK corporation tax is provided at amounts expected to be paid
(or recovered) using the tax rates and laws that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all temporary
differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an
obligation to pay more tax in the future or a right to pay less tax
in the future have occurred at the balance sheet date. Temporary
differences are differences between the Company's taxable profits
and its results as stated in the financial statements that arise
from the inclusion of gains and losses in tax assessments in
periods different from those in which they are recognised in the
financial statements.
A net deferred tax asset is regarded as recoverable and
therefore recognised only to the extent that, on the basis of all
available evidence, it can be regarded as more likely than not that
there will be suitable taxable profits from which the future
reversal of the underlying temporary differences can be
deducted.
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which the temporary differences
are expected to reverse, based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is measured on a non-discounted basis.
1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation. Cost represents the cost of acquisition or
construction, including the direct cost of financing the
acquisition or construction until the asset comes into use.
Depreciation on property, plant and equipment is provided to
allocate the cost less the residual value by equal instalments over
their estimated useful economic lives of 3 years, once the asset is
complete.
The expected useful lives and residual values of property, plant
and equipment are reviewed on an annual basis and, if necessary,
changes in useful life or residual value are accounted for
prospectively.
1.10. Intangible assets
Goodwill represents the future economic benefits arising from a
business combination that are not individually identified and
separately recognised. Goodwill is carried at cost less accumulated
impairment losses. Refer to note 1.18 for impairment testing
procedures. Goodwill impairment losses are not reversible as
explained in note 1.18 (iii).
Exclusivity rights acquired in a business combination that
qualify for separate recognition are recognised as intangible
assets at their fair value and subsequently assessed for impairment
loss.
Costs associated with patent applications are capitalised in the
year of spend and amortised over their estimated useful lives of 20
years on a straight-line basis commencing from the date of patent
application. Any cost associated with the upkeep of a patent is
amortised over the remaining useful life of that patent.
An internally generated intangible asset arising from
development is only recognised where all of the following have been
demonstrated: (i) the technical feasibility of completing the
asset; (ii) the intention to complete the asset and the ability to
use or sell it; (iii) the availability of resources to complete the
asset; and (iv) the ability to reliably measure the cost
attributable to the asset during its development.
Research and development
In all other instances research and development expenditure is
recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a
subsequent period.
1.11. Other non-current assets
Other non-current assets represent investments in subsidiaries.
The investments are carried at cost less accumulated impairment.
Cost was determined using the fair value of shares issued to
acquire the investment.
Financial assets
The Company classifies financial assets as loans and receivables
within current assets, except for maturities greater than 12 months
after the balance sheet date. These are classified as noncurrent
assets. Assets are initially recognised at fair value plus
transaction costs. Loans and receivables are subsequently carried
at amortised cost using the effective interest rate method.
1.12. Contract costs
The Company recognises costs incurred in fulfilling contracts
with customers that are directly associated with the contract as an
asset if those costs are expected to be recoverable. Contract costs
are amortised on a basis consistent with the transfer of goods and
services to which the asset relates.
1.13. Trade and other receivables
Trade receivables are initially recognised at fair value.
Subsequently they are carried at amortised cost less any provision
for impairment.
1.14. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits and are recognised and subsequently carried at fair value.
For the purpose of presentation in the statement of cashflows, cash
and cash equivalents include cash on hand, deposits held at call
with financial institutions, other short term, highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current
liabilities in the balance sheet.
1.15. Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Trade and other payables are recognised initially at
fair value and subsequently measured at amortised cost using the
effective interest method.
1.16. Financial assets and liabilities
i) Financial assets
Loans receivable, where forward receivables comprise solely of
payments of principal and interest, are measured at amortised cost.
Interest income from these financial assets is included in finance
income using the effective interest rate method.
ii) Financial liabilities
Loans payable are financial obligations arising from funding
received and used to support the operational costs of the Company.
These are initially recognised at fair value. Loans are
subsequently carried at amortised cost using the effective interest
method.
1.17. Adoption of new and revised standards
i) New and amended standards adopted by the Company
New and amended standards for the current period and effective
from 1 January 2022 have been applied by the Company,
including:
Covid-19 Related Rent Concessions (Amendment to IFRS 16)
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,
IAS 39 and IFRS 7)
Business Combinations (Amendments to IFRS 3
Onerous Contracts - cost of fulfilling a contract (Amendment to
IAS 37)
Annual Improvement to IFRS Standards (Amends 4 IFRS
standards)
Property Plant & Equipment - Proceeds before intended use
Amendment to IAS 16
There are no transition adjustments relating to the adoption of
these standards.
ii) Standards issued but not yet effective
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2022 reporting
periods and have not been adopted early by the Company. These
standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable
future transactions.
1.18. Impairment
(i) Goodwill
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired.
(ii) Other assets
At each balance sheet date, the carrying amounts of assets are
reviewed to determine whether there is any indication that those
assets have suffered an impairment loss. An impairment loss is
recognised whenever the carrying amount of an asset or its cash
generating unit exceeds its recoverable amount. Impairment losses
recognised in respect of cash generating units are allocated first
to reduce the carrying amount of any goodwill allocated to cash
generating units and then to reduce the carrying amount of the
other assets in the unit on a pro-rata basis. A cash generating
unit is the group of assets identified on acquisition that generate
cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. The recoverable amount of assets
or cash generating units is the greater of their fair value less
costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash
generating unit to which the asset belongs.
(iii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, an impairment loss is reversed if there
has been a change in the estimates used to determine the
recoverable amount.
An impairment loss is reversed only to the extent that the
asset's carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortisation, if
no impairment loss had been recognised.
1.19. Share based payments
Share based payments are made to employees and third parties and
all are equity settled.
(i) Third party provision of services
a) Via issue of shares
Contractors receive remuneration in the form of share-based
payments, whereby services are provided and settled by the issue of
shares. The cost of equity settled transactions is determined at
the fair value of the services provided, based upon invoiced
amounts or formal agreements in place with suppliers.
b) Via issues of share warrants
The Company also issues share warrants to third parties in
relation to services provided by suppliers. The cost of equity
settled transactions is determined at the fair value of the
services provided, based upon invoiced amounts or formal agreements
in place with suppliers. Where no fair value of services can be
directly obtained, the fair value at the grant date is determined
using the Black and Scholes valuation model. At each reporting date
the Company revises its estimates of the number of options that are
likely to be exercised with any adjustment recognised in the income
statement.
(ii) Directors and employees
c) Via issues of share options
The Company has issued share options to Directors and employees
through approved and unapproved option plans. The fair value of
options issued is determined at the date of grant and is recognised
as an expense in the Income Statement. The fair value at the grant
date is determined using the Black and Scholes valuation model. At
each reporting date the Company revises its estimates of the number
of options that are likely to be exercised with any adjustment
recognised in the income statement.
Where share-based payments give rise to the issue of new share
capital, the proceeds received by the Company are credited to share
capital and share premium when the share entitlements are
exercised.
1.20. Employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave that are
expected to be settled wholly within 12 months after the end of the
period in which the employees render the related service are
recognised in respect of employees' services up to the end of the
reporting period and are measured at the amounts expected to be
paid when the liabilities are settled. The liabilities are included
within creditors in the balance sheet.
For defined contribution pension plans, the company pays
contributions to publicly or private administered pension insurance
plans on a mandatory, contractual or voluntary basis. The Company
has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefit expense
when they are due. Prepaid contributions are recognized as an asset
to the extent that a cash refund or a reduction in the future
payments is available.
The Company does not contribute to any defined benefit pension
plans.
1.21. Segmental reporting
An operating segment is a component of the Company:
-- that engages in business activities from which it may earn
revenues and incur expenses (including revenues and expenses
relating to transactions with other components of the Company);
-- whose operating results are reviewed regularly by the
Company's chief decision maker to make decisions about resources to
be allocated to the segment and assess its performance; and
-- for which discrete financial information is available.
The Company considers it has one business segment, being a UK
based development company intending to license its technology to
projects in the UK and internationally.
2. Revenue
2022 2021
GBP GBP
Engineering and related services 341,293 628,859
Exclusivity fees 38,984 71,829
Other - 747
--------- ---------
380,277 701,435
========= =========
During the year, the Company billed for engineering work carried
out on projects. All revenue generated has arisen in the UK.
3. Employee costs
2022 2021
GBP GBP
Directors' fees 581,072 274,575
Wages and salaries 174,769 178,710
Social security costs 75,609 48,835
Pensions 16,817 3,960
848,267 506,080
========= =========
Highest Paid Director - refer to note 27
The number of average monthly employees (including Directors)
are as follows:
2022 2021
Management 6 7
Operations 3 3
------ ------
Total 9 10
------ ------
The total number of employees as at 31 December 2022 (including
Directors) was 4 (2021: 9) comprising 3 in management and 1 in
operations (2020: 5 in management, 4 in operations). All Directors
are classed as management.
4. Administrative expenses
Included in administrative expenses are: 2022 2021
GBP GBP
Research and development costs 431,185 585,195
Amortisation 10,263 5,049
Depreciation 5,397 4,199
Depreciation - right of use asset 22,573 24,625
Share based payments (18,629) 34,829
Foreign exchange (gains)/losses 162 (429)
Auditor's remuneration for audit services:
Fees payable to the Company's auditor for
the audit of the Company's annual financial
statements 31,000 25,000
Fees payable to the Company's auditor and
their associates for other services: 1,500 1,000
Non-audit fees paid to auditors
R & D Taxation advisory and compliance services 12,000 10,000
======== ==========
5. Share of associate
2022 2020
GBP GBP
Share of profits 60,326 50,062
-------- --------
60,326 50,062
======== ========
The Company acquired a 48.39% stake in Engsolve on 12 August
2021 as explained in note 13. The above result represents the
Company's share of the associate's profits arising since
acquisition. The Company's share of the associate's tax is included
in the tax charge (see note 9).
6. Goodwill & Exclusivity impairment
2022 2021
GBP GBP
Goodwill Impairment 40,660,000 -
Exclusivity impairment 500,000 -
------------ ----
41,160,000 -
============ ====
In 2020, Goodwill of GBP57,152,699 was recognised on the
acquisition and hive up of Waste2tricity Limited. An independent
fair value assessment is commissioned by the Directors on the
carrying value at each balance sheet date as explained in note 11.
Impairments are made based upon the results of those assessments
plus input from the Board. Refer to CEO Report
7. Loan & Revenue impairment
2022 2021
GBP GBP
Loan Impairment 2,159,274
Revenue impairment 986,392 -
----------- ----
3,145,666 -
=========== ====
Further description on the impairment of the Loan impairment
("loan debtor") and Revenue impairment ("trade debtor") is
disclosed in Note 14.
In 2020, Exclusivity of GBP500,000 was recognised on the
acquisition and hive up of Waste2tricity Limited. An independent
fair value assessment is commissioned by the Directors on the
carrying value at each balance sheet date as explained in note 11.
Impairments are made based upon the results of those
assessments.
8. Net finance income/(cost)
2022 2021
GBP GBP
Loan interest receivable 66,388 15,286
Other interest receivable 251 47
Bank and other interest payable (1,191) (4,346)
------- --------
65,448 (10,987)
======= ========
9. Income tax and deferred tax
As the Company incurred a loss, no current tax is payable (2021:
GBPnil). In addition, as there is no certainty about future profits
from which accumulated tax losses could be utilised, accordingly no
deferred tax asset has been recognised. The Company submitted a
claim for research and development tax credits during the year
amounting to GBP166,318 (2021: GBP135,657) which has been
recognised in the accounts. Accumulated tax losses amount to an
estimated GBP22.0 million (2021: GBP17.0 million) and reflect tax
losses submitted in tax returns and arising during the period less
any relief taken for research and development credits. The tax
credit rate is lower (2021: lower) than the standard rate of tax.
Differences are explained below.
Current tax 2022 2021
GBP GBP
Loss before taxation 46,353,704 1,996,641
----------- ---------
Tax credit at standard UK corporation tax
rate of 19% (2019: 19%) 8,807,204 379,362
Effects of:
Goodwill impairment not deductible for tax
purposes (7,820,400) -
Expenses not deductible for tax purposes 2,429 (9,837)
Allowable deduction on exercise of share options - 445,750
Research and development tax credits claimed 166,318 135,657
Deferred tax asset not recognised (1,000,526) (824,787)
----------- ---------
Income tax credit 155,025 126,145
=========== =========
10. Loss per share
2022 2021
Total comprehensive loss (GBP) (46,198,679) (1,870,496)
Weighted average number of shares 3,957,414,135 3,918,497
Loss per share in pence (1.17) (0.05)
Diluted loss per share in pence (1.17) (0.05)
For the year ended 31 December 2022, 3,581,355 of the options in
issue and 381,100,979 of the warrants in issue were excluded from
the diluted loss per share calculation due to being
anti-dilutive.
For the year ended 31 December 2021, 1,062,692 of the options in
issue and 9,090,910 of the warrants in issue were excluded from the
diluted loss per share calculation due to being anti-dilutive.
There have been no shares issued in the financial year or since
the year end.
11. Intangible fixed assets
Goodwill Exclusivity Patent Total
rights costs
GBP GBP GBP GBP
Cost
At 1 January 2021 57,152,699 500,000 61,752 57,714,451
Additions - hive up of - - - -
W2T
Additions - - 39,965 39,965
------------ ------------------- -------------- ---------------
At 31 December 2021 57,152,699 500,000 101,717 57,754,416
------------ ------------------- -------------- ---------------
Accumulated amortisation
& impairment
At 1 January 2021 14,192,699 - 2,170 14,194,869
Amortisation charge for
the year - - 5,049 5,049
At 31 December 2021 14,192,699 - 7,219 14,199,918
------------ ------------------- -------------- ---------------
Carrying amount
------------ ------------------- -------------- ---------------
At 31 December 2021 42,960,000 500,000 94,498 43,554,498
------------ ------------------- -------------- ---------------
Cost
At 1 January 2022 57,152,699 500,000 101,717 57,754,416
Additions - - 117,838 117,838
------------ ------------------- -------------- ---------------
At 31 December 2022 57,152,699 500,000 219,555 57,872,254
------------ ------------------- -------------- ---------------
Accumulated amortisation & impairment
At 1 January 2022 14,192,699 - 7,219 14,199,918
Amortisation charge for
the year - 10,263 10,263
Impairment charge for
the year 40,660,000 500,000 - 41,160,000
------------ ------------------- -------------- ---------------
At 31 December 2022 54,852,699 500,000 17,482 55,370,181
------------ ------------------- -------------- ---------------
Carrying amount
------------ ------------------- -------------- ---------------
At 31 December 2022 2,300,000 - 202,073 2,502,073
------------ ------------------- -------------- ---------------
Goodwill acquired in 2020 arose on the acquisition and hive up
of Waste2Tricity Limited. It was considered attributable to the
Company's DMG(TM) technology, which is intended to be licensed on a
project-by-project basis to generate income to the Company over the
lifetime of each project.
The recoverable amount of goodwill at the balance sheet date was
assessed as a directors' valuation (2021: via independent
third-party valuation). The directors (2021: Valuer) assessed
impairment of GBP40.66m to goodwill (2021: the valuer assessed
goodwill above its carrying value resulting in no impairment). The
directors (2021: valuer) took note of the ICAEW Corporate Finance
Faculty Best Practice Guideline April 2008 and applied a discounted
cashflow approach, supported by the International Private Equity
and Venture Capital Guidelines of December 2018.
The key assumptions made by the directors (2021: valuer)
were:
the expected roll out of the technology over 5 years following
the delivery of the Protos project (2021: roll out over 5 years
based on probability adjusted scenarios);
that the roll out will not be significantly impacted by
competing technologies (2021: same assumption);
that the Company and roll out developer construct 5 projects
(2021: have the capability to scale up where necessary to deliver
the assumed roll out pipeline);
the expected operating life of projects from which the Company
will earn licence revenues (2021: same assumption);
the expected licence fees arising per project based upon
agreements with Peel NRE (2021: same assumption);
the expected cost of services to support annual licence fee
income estimated by the Company based upon current draft project
agreements (2021: same assumption);
applying a discount rate to cashflow of 35% (2021: 10%) assessed
by review of market survey reports of discount rates for projects
within similar and competing sectors which was considered to
provide a reasonable estimate of a weighted average cost of capital
for a company benefiting from the assumed roll out.
Changes to the above assumptions would impact the valuation
assessment.
The Directors believe that key sensitivities in the valuation
are as follows:
(i) In 2022, the directors have assumed a fixed number of 5
projects and 6 systems to be rolled out. Sensitivity workings with
the roll out of 3 projects and 3 systems would decrease the
valuation by cGBP0.8m to GBP1.5m. (2021: the valuer assumed a
probability adjusted roll out scenario). The valuer attributed
probabilities to different roll out scenarios based upon a review
of information provided by the Company and Peel NRE. This takes
account of expected timelines and the average number of systems
expected to be deployed at each site. The rollout assumptions made
by the valuer averages out at 17.85 systems. Based upon the
valuer's assumptions, an incremental system would increase or
decrease the valuation by c GBP2.3m).
(ii) The discount rate applied to the cashflows. Sensitivity
workings with a discount rate 5% higher at 40% would decrease the
valuation by cGBP0.5m to GBP1.8m. (2021: an increase in the
discount rate of 1% to 11% would impact the Valuer's valuation
assessment by GBP4.4m).
(iii) Inflation - an increase in the inflation assumption above
that assumed in the directors (2021: valuer's) model would result
in adjustment to the licence fees and result in an increase the
director's (2021: valuer's) valuation.
The Directors have not accounted for the possibility of any
onerous obligations arising within the service contracts from which
licence fees will be earnt as there is no reason to expect that
these will arise at this stage in the business life cycle.
Exclusivity rights arose on the acquisition and hive up of
Waste2Tricity Limited. They are subject to an Option Agreement
between the Company and Peel NRE. The directors have provided for a
full impairment of GBP500,000 for exclusivity rights (2021: no
impairment is considered to have arisen).
As explained in note 28, the Company acquired the full ownership
of Protos Plastics to Hydrogen No. 1 Ltd (also known as "Protos
SPV") from Peel NRE Ltd for a nominal payment of GBP1 on 28 April
2023. During the year to 31 December 2022, the company had been in
discussions with Peel NRE to enter into a 50/50 Joint Venture
arrangement with Peel NRE. However, this did not materialise and
Peel NRE continued to own 100% of Protos SPV until the Company
finally purchased 100% of the share capital of Protos SPV on 28
April 2023. The purchase agreement by the Company secures full
control of Protos SPV with an option to lease on the site at Protos
Chester, CH2 4RB. This post balance sheet event, is a material
change in business approach for the Company, allowing the Company
to take full responsibility for funding, construction and operation
of a waste to energy site utilising the DMG(TM) technology. The
directors have opted not to pursue a licencing business model that
was previously part of the reason for the hive up of Waste2Tricity
Limited into the Company in 2020. This has therefore resulted in a
non-adjusting post balance sheet event under IAS 28.
Refer to the CEO section of the Annual Report
12. Tangible fixed assets
Right of use Property, Fixtures Total
asset plant and and
Land and buildings equipment fittings
GBP GBP GBP GBP
Cost
At 1 January 2021 49,250 12,720 - 61,970
Additions - 7,693 1,203 8,896
-------------------- ----------------- ---------------- -----------------
At 31 December 2021 49,250 20,413 1,203 70,866
-------------------- ----------------- ---------------- -----------------
Accumulated depreciation
At 1 January 2021 2,052 6,898 - 8,950
Charge for the year 24,625 3,807 392 28,824
-------------------- ----------------- ---------------- -----------------
At 31 December 2021 26,677 10,705 392 37,774
-------------------- ----------------- ---------------- -----------------
Carrying amount
-------------------- ----------------- ---------------- -----------------
At 31 December 2021 22,573 9,708 811 33,092
-------------------- ----------------- ---------------- -----------------
Cost
At 1 January 2022 49,250 20,413 1,203 70,866
Additions - - 673 673
-------------------- ----------------- ---------------- -----------------
At 31 December 2022 49,250 20,413 1,876 71,539
-------------------- ----------------- ---------------- -----------------
Accumulated depreciation
At 1 January 2022 26,677 10,705 392 37,774
Charge for the year 22,573 4,865 532 27,970
-------------------- ----------------- ---------------- -----------------
At 31 December 2022 49,250 15,570 924 65,744
-------------------- ----------------- ---------------- -----------------
Carrying amount
-------------------- ----------------- ---------------- -----------------
At 31 December 2022 - 4,843 952 5,795
-------------------- ----------------- ---------------- -----------------
13. Investments
2022 2022 2022 2021 2021 2021
GBP GBP GBP GBP GBP GBP
Subsidiaries Associates Other Subsidiaries Associates Other
Cost or carrying
value at 1 January 48,947,155 140,540 - 48,947,156 49 -
Additions - - - - 99,990 -
Goodwill recognised - - - - - -
Dividends - (1,935) - - - -
Share of associate's
net result - 49,033 - - 40,550 -
Transfers - - - - (49) 49
Disposals - - - (1) - -
Cost or carrying value
31 December 48,947,155 187,638 - 48,947,155 140,540 49
-------------- ---------- ----- ------------ ---------- -----
Provision at 1 January (48,947,154) - - (48,947,154) - -
Additions - - - - - (49)
Disposals - - - - - -
-------------- ---------- ----- ------------ ---------- -----
Accumulated impairment (48,947,154) - (48,947,154) - (49)
-------------- ---------- ----- ------------ ---------- -----
Carrying value 1 187,638 - 1 140,540 -
-------------- ---------- ----- ------------ ---------- -----
(i) Subsidiaries
Investments relate to costs of investments in subsidiary
undertakings, namely in Powerhouse Energy, Inc, Pyromex AG and
Powerhouse Energy UK Limited. Powerhouse Energy, Inc is
incorporated in California in the United States of America and the
Company holds 100 per cent of the common stock and voting rights of
the subsidiary. Pyromex AG is based in Zug, Switzerland and the
Company holds 100 per cent of the shares and voting rights of the
subsidiary. Powerhouse Energy UK Limited is a wholly owned UK based
dormant company.
The registered address of Powerhouse Energy Inc is 145 N Sierra
Madre Blvd, Pasadena, CA 91107, USA.
The registered address of Pyromex AG is Chollerstrasse 3,
CH-6300, Zug, Switzerland.
The registered address of Powerhouse Energy UK Limited is 15
Victoria Mews, Mill Field Road, Cottingley Business Park, Bingley
BD16 1PY.
Waste2Tricity Limited, which was acquired in 2020, was
incorporated in the UK and on 1 January 2021 the Company owned 100
per cent of its common stock and voting rights. It was dissolved on
1 June 2021.
(ii) Acquisition of interest in Engsolve Limited
On 12 August 2021, the Company acquired 48.39% of the share
capital of Engsolve Limited for cash consideration of GBP99,990.
Engsolve Limited is incorporated and operates in the UK. Summary
financial information of Engsolve Limited at acquisition and
balance sheet dates is provided below:
31 Dec 2022 31 Dec 2021
GBP GBP
Summarised balance sheet
Fixed assets 6,221 7,848
Cash and cash equivalents 400,073 317,423
Other current assets 86,632 99,845
Current liabilities (109,457) (138,981)
----------- -----------
Net assets 383,469 286,135
Company share 48.39% 48.39%
Share of net assets 185,550 138,452
----------- -----------
Summarised Income statement
- post acquisition
Revenue 976,182 402,122
-------- -------
Profit from continuing operations 101,334 83,804
Profit from discontinued - -
operations
Other comprehensive income - -
-------- -------
Total comprehensive income 101,334 83,804
-------- -------
Company Share of pre-tax
profit 60,326 50,062
Company share of tax (11,293) (9,512)
Dividends received 1,935 GBPnil
The Company incurred advisory costs associated with the
acquisition which were expensed in 2021.
(iii) Other investments
During 2021, the Company's investment in Waste2Tricity
International (Thailand) Limited was transferred into a new
Thailand based entity, Altec Energy Limited ("Altec"). The Company
has not taken part in fund raises investment made by Altec
subsequent to its formation. In the previous year's accounts the
interest was identified as being reduced to 33.8% as at 31 December
2021 and to 30.4% since December 2021. We have been recently
informed that the audit of Altec accounts picked up an error in
these calculations. The share holding was in fact 33.5% as at
December 2021 and 30.1% since December 2021 (a 0.3% error in the
calculation). PHE Due to the passive nature of the Company's
involvement, the interest is held in other investments.
14. Loans receivable
2022 2021
GBP GBP
Loans advanced 2,077,600 1,150,000
Accrued interest 81,674 15,286
Loan provision (2,159,274) -
- 1,165,286
----------- ---------
On 12 May 2021, the Company agreed to provide a loan facility
for up to GBP3.8m to Protos Plastics to Hydrogen No 1 Limited, the
Peel NRE special purpose vehicle and owner of the development of
the Protos plant. The loan was to provide support to the plant
construction and to secure long lead time items and project design
services. The loan facility was made available for an initial
6-month period, accruing interest daily at the Bank of England base
rate plus 2%. The availability period for the facility was
subsequently extended until 28 April 2023 at which point Powerhouse
Energy Group Plc acquired 100% of the share capital of Protos
Plastics to Hydrogen No1 Limited for GBP1. From October 2022 to the
year end, the directors were seeking a 50/50 JV with Peel NRE and
there had been other indicators of a change in the risk profile.
The directors in note 11 have assumed a discount rate of 35% for
the project with Peel NRE, due to the change in the risk profile.
Accordingly, the Directors have impaired the loan in full. The
Directors have also applied the same approach to the trade debtor
balance of GBP986,392 which existed between Powerhouse Energy Group
Plc and Protos Plastics to Hydrogen No 1 Limited and have
subsequently impaired the trade debtor balance also to GBPNil value
at the year end.
15. Trade and other receivables
2022 2021
GBP GBP
Trade receivables - 447,967
Other receivables 342,021 177,513
Prepayments and accrued income 61,226 338,168
403,247 963,648
------- -------
16. Corporation tax
2022 2021
GBP GBP
Corporation tax recoverable 166,318 155,227
166,318 155,227
------- -------
17. Cash and cash equivalents
2022 2021
GBP GBP
Cash balances 5,882,897 9,637,460
5,882,897 9,637,460
--------- ---------
18. Trade and other payables: amounts falling due within one year
2022 2021
GBP GBP
Trade payables 116,560 144,105
Lease liability 0 23,455
Other creditors and accruals 148,563 238,955
Other taxes 10,677 156,642
Pensions payable 3,506 624
279,306 563,781
------- -------
19. Financial assets and financial liabilities
Financial assets 2022 2021
GBP GBP
Financial assets at amortised cost:
- Trade receivables - 447,967
- Other financial assets at amortised
cost - 1,165,286
- Cash and cash equivalents 5,882,897 9,637,460
5,882,897 11,250,713
--------- ----------
Financial liabilities 2022 2021
GBP GBP
Liabilities at amortised cost
- Trade payables 116,560 144,105
- Other creditors 148,563 238,955
- Taxes - VAT & payroll 10,677 156,642
- Pensions payable 3,506 624
- Lease liabilities 0 23,455
279,306 563,781
------- -------
20. Leases
The Company has leased offices at the location of its research
facility for a duration less than one year. The lease is reflected
in the accounts as an expense on the income statement.
20.1 Amounts recognised in the balance sheet
Right of use assets relate to leased properties that do not meet
the definition of investment property and are presented within
tangible fixed assets per Note 11.
2022 2021
GBP GBP
Right of use assets
Balance at 1 January 22,573 47,198
Additions to right of use assets - -
Depreciation charge for the year (22,573) (24,625)
Balance at 31 December - 22,573
-------- --------
2022 2021
Future minimum rentals payable are as GBP GBP
follows:
Amounts payable:
Within one year - 24,310
Later than one year and not later than - -
five years
----- ------
Total gross payments - 24,310
Impact of finance expenses - (855)
Carrying value of liability - 23,455
--- ------
20.2 Amounts recognised in income statement
2022 2021
GBP GBP
Depreciation charge 22,573 24,625
Interest on lease liabilities 855 2,638
Expenses relating to short term leases 120 -
23,548 27,263
------ ------
20.3 Amounts recognised in statement of cashflows
2022 2021
GBP GBP
Interest on lease liabilities 855 2,638
Repayment of lease principal 23,455 23,882
Total cash outflow for leases 24,310 26,520
------ ------
21. Share capital
(i) Number of shares
0.5 p Ordinary 0.5 p Deferred 4.5 p Deferred 4.0 p Deferred
shares shares shares shares
Shares at 1 January
2021 3,715,100,693 388,496,747 17,373,523 9,737,353
Issue of shares 242,313,442 - - -
Shares at 31 December
2021 3,957,414,135 388,496,747 17,373,523 9,737,353
-------------- -------------- -------------- --------------
Issue of shares - - - -
Shares at 31 December
2022 3,957,414,135 388,496,747 17,373,523 9,737,353
-------------- -------------- -------------- --------------
( ii) Value in GBP
0.5 p Ordinary 0.5 p Deferred 4.5 p Deferred 4.0 p Deferred Share Capital
shares shares shares shares
GBP GBP GBP GBP GBP
At 1 January 2021 18,575,503 1,942,483 781,808 389,494 21,689,288
Issue of shares 1,211,568 - - - 1,211,568
At 31 December
2021 19,787,071 1,942,483 781,808 389,494 22,900,856
-------------- -------------- -------------- -------------- -------------
Issue of shares - - - - -
At 31 December
2022 19,787,071 1,942,483 781,808 389,494 22,900,856
-------------- -------------- -------------- -------------- -------------
All ordinary shares of the Company rank pari-passu in all
respects.
The deferred shares do not carry any voting rights or any
entitlement to attend general meetings of the Company. They carry
only a right to participate in any return of capital once an amount
of GBP100 has been paid in respect of each ordinary share.
On 21 January 2021, the Company issued 181,818,182 ordinary
shares of 0.5p each ("Ordinary shares") in the Company at a price
of 5.5p each amounting to GBP10,000,000 before issue costs. The
Company also granted 9,090,910 warrants to subscribe for Ordinary
Shares at the issue price of 5.5p to its broker.
On 26 January 2021, the Company issued 4,895,260 ordinary shares
of 0.5p each in the Company further to the exercise of warrants for
proceeds amounting to GBP122,382.
On 9 February 2021, the Company issued 6,000,000 ordinary shares
of 0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP36,000.
On 24 February 2021, the Company issued 1,600,000 ordinary
shares of 0.5p each in the Company further to the exercise of
options for proceeds amounting to GBP12,000.
On 4 March 2021, the Company issued 6,000,000 ordinary shares of
0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP45,000.
On 17 March 2021, the Company issued 500,000 ordinary shares of
0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP3,000.
On 19 April 2021, the Company issued 6,000,000 ordinary shares
of 0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP36,000.
On 22 July 2021, the Company issued 8,000,000 ordinary shares of
0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP48,000.
On 19 August 2021, the Company issued 13,500,000 ordinary shares
of 0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP81,000.
On 7 October 2021, the Company issued 7,000,000 ordinary shares
of 0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP42,000.
On 9 December 2021, the Company issued 7,000,000 ordinary shares
of 0.5p each in the Company further to the exercise of options for
proceeds amounting to GBP42,000.
22. Other reserves
Merger relief Share premium
reserve account
GBP GBP
As at 1 January 2021 36,117,711 52,592,934
Issue of shares - 9,519,495
Share issue costs - (822,719)
Reserve transfer - goodwill impairment - -
------------- -------------
At 31 December 2021 36,117,711 61,291,710
------------- -------------
Issue of shares - -
Share issue costs - -
Reserve transfer - goodwill impairment (36,117,711) -
At 31 December 2022 - 61,291,710
------------- -------------
23. Accumulated deficit
2022 2021
GBP GBP
As at 1 January (65,224,306) (63,544,097)
Loss for the year (46,198,679) (1,870,496)
Share based payments (18,629) 190,287
Reserve transfer - goodwill impairment 36,117,711 -
(75,323,903
At 31 December ) (65,224,306)
------------ ------------
24. Share based payments
The expense recognized for share-based payments during the year
is shown in the following table:
2022 2021
GBP GBP
Share based payment charge recognised in Income
Statement
Expense arising from equity-settled share-based
payment transactions:
- Share options for Directors and employees - 34,829
- Shares issued for third party services - -
-------- ---------
Total share-based payment charge in Income
Statement - 34,829
Share based payment charge recognised in Share
Premium Account
Warrants for third party services - 419,138
-------- ---------
Total share-based payment charge in Share Premium
Account - 419,138
Total share-based payment charges recognised - 453,967
Other share-based payment movement
Exercise of share options by Directors and
employees - (186,982)
Exercise of warrants for third party services - (76,698)
Shares option lapsed in Jan 22 (18,629) -
-------- ---------
Total share-based payment (18,629) (190,287)
-------- ---------
There were no liabilities recognised in relation to share based
payment transactions.
25.1 Share options for Directors and employees
The Company has put in place various options schemes for
Directors and employees as follows:
On 8 December 2014, the Company granted 11,000,000 options over
ordinary shares to the Board. The options may be exercised between
the grant date and the tenth anniversary of the grant date and will
lapse if not exercised during that period.
On 7 March 2016, the Company granted 15,000,000 options over
ordinary shares to the Board. The options may be exercised between
the grant date and the fifth anniversary of the grant date and will
lapse if not exercised during that period.
On 6 March 2018, the Company granted 32,100,000 options over
ordinary shares to employees, including a Board member, under the
Powerhouse Energy Group PLC 2018 EMI Option Scheme. The options
vest to the employees over a period of 24 months and are
exercisable between the relevant vesting dates and the tenth
anniversary of the grant date and will lapse if not exercised
during that period. These options had all been exercised or
forfeited by 31 December 2019.
On 6 March 2018, the Company granted 60,000,000 options over
ordinary shares to Board members under the Powerhouse Energy Group
PLC 2018 non-employee Share Option Plan. The options vest to the
Board members over a period of 24 months and are exercisable
between the relevant vesting dates and the tenth anniversary of the
grant date and will lapse if not exercised during that period.
On 23 April 2021, the Company granted 1,773,239 share options in
ordinary shares of 0.5p each in the Company to two Directors of the
Company in lieu of part or all of their fees to which they are
entitled. The options have an exercise price of 6.3p each and lapse
3 years from the date of grant.
The movement of share options in the year are as follows:
2022 2022 2021 2021
Number WAEP (pence) Number WAEP (pence)
----------- ------------- ------------- -------------
Outstanding at
1 January 16,062,692 1.33 75,000,000 0.77
Granted during
the year - - 1,773,239 6.3
Forfeited during
the year (481,337) 6.3 (5,100,547) 2.55
Exercised during
the year - - (55,600,000) 0.62
----------- ------------- ------------- -------------
Outstanding at
31 December 15,581,355 1.13 16,062,692 1.33
----------- ------------- ------------- -------------
Exercisable at
31 December 15,581,355 1.13 16,062,692 1.33
The weighted average remaining contractual life for the share
options outstanding as at 31 December 2022 was 4.4 years (2021: 5.3
years)
No share options were granted during the year (2021:
1,773,239).
The range of exercise prices for options outstanding at the
year-end was 0.6p to 6.3p (2021: 0.6p to 6.3p).
The number of options outstanding at 31 December 2022 and the
movements in the year are as follows:
Date Granted Share price Exercised Forfeited At 31 Exercise Exercise
of on grant Dec price period
grant 2022
9 Dec 2014
8 Dec until 8 Dec
2014 6,000,000 1.875p - (3,000,000) 3,000,000 2.5p 2024
8 Mar 2016
7 Mar until
2016 9,000,000 0.55p (7,600,000) (1,400,000) - 0.75p 7 Mar 2021
7 Mar 2018
6 Mar until
2018 60,000,000 0.57p (48,000,000) - 12,000,000 0.6p 8 Dec 24*
23 Apr 2021
22 Apr until
2021 1,773,239 5.58p - (1,191,884) 581,355 6.3p 22 Apr 2024
----------- ------------ ------------- ------------ -----------
Total 76,773,729 (55,600,00) (5,591,884) 15,581,355
-----------
*The expiry date of the option granted on 6 March 2018 was
adjusted by the board due to a director leaving the Company in June
2022. The expiry date was adjusted from 6 Mar 2028 to the 8 Dec
2024. Refer to note 27 in the financial statements.
The estimated fair value of the options issued was calculated by
applying the Black-Scholes option pricing model. The assumptions
used in the calculation were as follows:
8 December 2014 6 March 2018 22 April 2021
Options in issue 31
December 2022 3,000,000 12,000,000 581,355
Exercise price 2.5p 0.6p 6.3p
Expected volatility 127.56% 70.00%** 214.8%**
Contractual life 10 years 10 years 3 years
Risk free rate 2% 1.49% 0.15%
Estimated fair value 1.79p 0.32p* 3.87p*
of each option
* the calculation applies a 25% discount for small companies
** expected volatility based on historic volatility at the point
of grant.
25.2 Warrants for third party services
The Company has issued warrants in respect of services provided
by consultants as part of their service arrangements. It has also
issued warrants to participating shareholders in respect of certain
fund raises. No share-based payment charge is recognised for
warrants issued to participating shareholders as they are outside
of the scope of IFRS 2.
Details of warrants which have been issued during the year are
as follows:
On 15 September 2020, the Company granted 5,395,260 warrants to
the Company's broker as part of its service arrangement in relation
to the fund raise arising on that date. The options may be
exercised between the grant date and the third anniversary of the
grant date and will lapse of not exercised during that period. At
the date of grant the share price was 3.3p and the warrants have an
exercise price of 2.5p per share.
On 21 January 2021, the Company granted 9,090,910 warrants to
the Company's broker as part of its service arrangement in relation
to the fund raise arising on that date. The options may be
exercised between the grant date and the third anniversary of the
grant date and will lapse of not exercised during that period. At
the date of grant the share price was 8.6p and the warrants have an
exercise price of 5.5p per share.
Warrants in respect of services provided:
The movement of warrants issued for share-based payments in the
year are as follows:
2022 2022 2021 2021
Number WAEP (pence) Number WAEP (pence)
Outstanding at 1 January 9,590,910 5.3 5,395,260 2.5
Granted during the year - - 9,090,910 5.5
Forfeited during the - - - -
year
Exercised during the
year - - (4,895,260) 2.5
---------- ------------- ------------ -------------
Outstanding at 31 December 9,590,910 5.3 9,590,910 5.3
---------- ------------- ------------ -------------
Exercisable at 31 December 9,590,910 5.3 9,590,910 5.3
The weighted average remaining contractual life for the share
warrants outstanding as at 31 December 2022 was 1.0 years (2021:
2.1 years)
The range of exercise prices for warrants outstanding at the
year-end was 2.5p to 5.5p (2021: 2.5p to 5.5p).
The number of warrants, which have been included for share-based
payment purposes, outstanding at 31 December 2022 and the movements
in the year are as follows:
Date of Granted Share Exercised Forfeited At 31 Exercise Exercise
grant price Dec Price period
on grant 2022
16 Sep 2020
until 15
15 Sep 2020 5,395,260 3.3p - - 500,000 2.5p Sep 2023
22 Jan 2021
until
21 Jan 2021 9,090,910 8.6p - - 9,090,910 5.5p 21 Jan 2024
----------------- ----------- ---------- ---------- ---------- ---------- --------- -------------
Total 14,486,170 - - 9,590,910
The Company is required to assess the fair value of instruments
issued in respect of services received, with such value charged to
the Income Statement. The estimated fair value of the warrants
issued during the year was calculated by applying the Black-Scholes
option pricing model. The assumptions used in the calculation were
as follows:
Warrants issued for 15 Sep 2020 21 Jan 2021
services
In issue 31 December
2022 500,000 9,090,910
Exercise price 2.5p 5.5p
Expected volatility* 92.10% 161.6%
Contractual life 3 years 3 years
Risk free rate 0.07% (0.07%)
Estimated fair value
of each option 1.57p 4.6p
* expected volatility based on historic volatility at the point
of grant.
Warrants issued to participating shareholders
Warrants issued to participating shareholders are outside the
scope of IFRS 2 and no share-based payment charges have been
recognised on them. On initial recognition the warrants' cost was
deducted from equity as it represents the cost of shares issued to
investors. As the agreements had a fixed-for-fixed requirement,
they are also recognised as equity at the same time. As such, there
is GBPnil net impact on equity and has not been included in the
statement of changes in equity.
The number of warrants issued to participating shareholders,
which have not been included for share-based payment purposes,
outstanding at 31 December 2022 and the movements in the year are
as follows:
Date Granted Share Exercised Forfeited At 31 Dec Exercise Exercise
of grant price 2022 price period
on grant
16 Sep 2020
15 Sep until 15
2020 371,510,069 3.3p - - 371,510,069 2.75p Sep 2022
Total 371,510,069 - - 371,510,069
The estimated fair value of the warrants issued was calculated
by applying the Black-Scholes option pricing model. The assumptions
used in the calculation were as follows:
Warrants issued to participating 15 Sep 2020
shareholders
In issue 31 December 2022 371,510,069
Exercise price 2.75p
Expected volatility* 106.20%
Contractual life 2 years
Risk free rate 0.04%
Estimated fair value of each
option 1.46p
* expected volatility based on historic volatility at the point
of grant.
All warrants
The number of all warrants outstanding at 31 December 2022 and
the movements in the year are as follows:
Date Granted Share As at Exercised Forfeited At 31 Exercise Exercise
of price 1 Jan Dec 2021 price period
grant on grant 2022
16 Sep
2020 until
15 Sep 15 Sep
2020 5,395,260 3.3p 500,000 - - 500,000 2.5p 2023
16 Sep
15 Sep 2020 until29
2020 371,510,069* 3.3p 371,510,06 - - 371,510,069 2.75p Apr 2023
22 Jan
2021 until
21 Jan 21 Jan
2021 9,090,910 8.6p 9,090,910 - - 9,090,910 5.5p 2024
Total 385,996,239 381,100,979 - - 381,100,979
*Please see the Post Balance Sheet Event note on Peel
warrants
26. Material risks
The Company is subject to various risks relating to political,
economic, legal, social, industry, business and financial
conditions. Risk assessment and evaluation is an essential part of
the Company's planning and an important aspect of the Company's
internal control system. The Company's approach to these risks is
detailed in the Strategic Report.
27. Directors' remuneration and share interests
The Directors who held office at 31 December 2022 had the
following interests, including any interests of a connected party
in the ordinary shares of the Company:
Number of ordinary shares Percentage of
of 0.5p each voting rights
----------- --------------------------- --------------
Keith Riley 12,128,986 <0.5
The remuneration of the Directors of the Company paid or payable
for the year or since date of appointment, if later, to 31 December
2022 is:
2022 2022 2022 2022 2022 2021
GBP GBP GBP GBP GBP GBP
Salary/Fee Pension Share based Other Total Total
payments
---------------------------- ----------- -------- ------------ ------ ------- -------
Tim Yeo 54,000 - - 5,500 59,500 127,944
David Ryan - - - - - 97,996
William Cameron Davies - - - - - 7,500
Paul Emmitt 64,906 2,000 - - 66,906 -
James John Pryn Greenstreet 15,000 - - - 15,000 30,000
Hugh Mcallister 27,232 - - - 27,232 -
Paul Drennan-Durose 251,026 8,714 - - 259,740 -
Gillian Weeks 24,296 - - - 24,296 -
Russell Ward 18,899 - - - 18,899 -
Myles Howard Kitcher 25,667 - - - 25,667 -
Allan Vlah 7,500 - - - 7,500 37,500
Kirsten Gogan - - - - - 23,468
Keith Riley 92,546 - - - 92,546 8,167
Mark Berry - - - - - 17,500
---------------------------- ----------- -------- ------------ ------ ------- -------
Total 581,072 10,714 - 5,500 597,286 350,075
---------------------------- ----------- -------- ------------ ------ ------- -------
Total remuneration includes share-based payments arising from
the issue of options amounting to nil in 2022 (2021: GBP40,000).
There have been no awards of shares to Directors under long term
incentive plans during the year.
The Directors' social security costs for the year amounted to
GBP54,026 (2021: GBP29,965) resulting in a total remuneration
expense of GBP651,312 (2020: GBP380,040).
Prior to their resignations from the Board, Tim Yeo, William
Cameron Davies, James John Pryn Greenstreet, Allan Vlah, Kirsten
Gogan and Mark Berry had service contracts that could be terminated
by the provision of three months' notice. David Ryan had a service
contract that could be terminated by the provision of six months'
notice.
Keith Riley has a service contract which can be terminated by
providing three months' written notice.
Rivermill Partners Limited, a company wholly owned by Tim Yeo
and his associates, provided executive corporate management
services during the year the value of which is included in the
above remuneration. These services are contracted for on an annual
basis as required.
Share options held by the Directors who served during the year
are as follows:
Options Forfeited Exercised Options Exercise Earliest and
at at 31/12/22 price latest date
1/1/22 of exercise
---------------- ---------- --------- --------- ------------ -------- -----------------
Options granted
8 Dec 2014
James John Pryn
Greenstreet 3,000,000 - - 3,000,000 2.5p 9/12/14 - 8/12/24
Options Forfeited Exercised Options Exercise Earliest and
at at 31/12/22 price latest date
1/1/22 of exercise
---------------- ---------- --------- --------- ------------ -------- -----------------
Options granted
6 March 2018
James John Pryn
Greenstreet 12,000,000 - - 12,000,000 0.6p 7/3/18 - 8/12/24*
Options Forfeited Exercised Exercise Earliest and
granted or not Options price latest date
/1/22 vested at 31/12/22 of exercise
---------------- ---------- --------- --------- ------------ -------- -----------------
Options granted
22 April 2021
Allan Vlah 581,355 - - 581,355 6.3p 23/4/21 - 22/4/24
---------------- ---------- --------- --------- ------------ -------- -----------------
*On the 29(th) September 2022 the board agreed to align the
termination/expiry dates for both sets of options for James
Greenstreet to 8(th) Dec 2024
Highest Paid Director
Paul Drennan-Durose was the highest paid Director in the year.
There were no shares received or receivable by him in respect of
qualifying services under long term incentive schemes.
28. Related parties
Rivermill Partners Limited, a corporate management services
company, wholly owned by Tim Yeo and his associates, was a related
party for the 12 month period after which Tim Yeo was a Director of
the Company. During that period, Rivermill provided executive
corporate management services amounting to GBP54,000 (2021:
GBP48,000) and the Company agreed a termination settlement of
GBP5,500.
Engsolve Limited, an engineering solutions company, was a
related party until 30 June 2021 due to a Director's family member
being part of its key management personnel, and from 12 August 2021
when the Company acquired 48.39% of its share capital. Engsolve
provided engineering services to the Company during the year
amounting to GBP596,172 (2021: GBP621,968). Amounts outstanding at
year end for services provided and included in these accounts
amounted to GBP31,778 (2021: GBP41,058).
During 2021 Hydrogen Utopia International entered into an
exclusivity agreement with Powerhouse Energy Group Plc. This
exclusivity agreement covered Hungry, Greece & Poland. During
2022 Hydrogen Utopia International paid GBP38,983 for this
Exclusivity Agreement (2021 GBP71,829). This exclusivity agreement
covering Hungary, Greece and Poland ended in March 2022.
Keith Riley was a Non-Executive Director, Interim Chairman and
acting Chief Executive Officer of the Company during 2022. Keith
was also an active director in Engsolve Ltd in 2022. Keith joined
Hydrogen Utopia PLC as Technical Director on 6th January 2022 and
resigned on 26th May 2023. Keith was also a director of HU2021
International UK Ltd from 18th January 2022 until 31st May 23.
Howard White is a shareholder in the Company and also a
strategic Consultant to the Company, having received GBP60,000.00
for his services in 2022. Howard White is also an active Board
Member and shareholder of Hydrogen Utopia International.
Hugh McAlister was a Non-Executive Director of the Company
during 2022 and also owned shares in Hydrogen Utopia
International.
29. Events after the reporting period
On 16 March 2023 the Company entered into a lease agreement for
a building to house the forthcoming Powerhouse Technology Centre.
The lease term is 10 years with a break option at 5 years, at a
rental of GBP46,000 per annum.
On 21 March 2023, the Company announced it had entered into a
Joint Venture agreement with Hydrogen Utopia International Plc for
the proposed joint development of a non-recyclable plastic
waste-to-hydrogen facility site at Longford, County Longford in the
Republic of Ireland. The joint venture is entered into with equal
shareholding by each party and development costs being contributed
on a 50:50 basis. PHE has agreed to pay HUI a non-returnable
payment of up to GBP400,000 in cash in recognition of HUI's
contribution to identifying the Longford Project, securing the
option to lease and progressing the project. This cash payment
comprises an initial payment of GBP100,000 on signing the heads of
terms and a further payment of GBP100,000 upon finalisation of the
project documentation between HUI and PHE - principally comprising
a development agreement and a shareholder agreement. PHE has agreed
to make a further payment of GBP200,000 in cash to HUI once
planning permission has been granted for the Longford Project on
the Longford Site.
The Company announced that it had acquired full ownership of
Protos Plastics to Hydrogen No.1 Ltd on 28 April 2023 from Peel NRE
Ltd for a nominal payment of GBP1. The Protos Plastics to Hydrogen
Peel NRE is a special purpose vehicle and owner of the development
of the Protos plant, the first proposed commercial application of
the Company's DMG (TM) technology. Powerhouse Energy Group Plc had
previously provided a loan facility of GBP3.8m to support the
Protos plant development and construction. Loans made under the
facility at Dec 22 amounted to GBP2.159m (incl. Loan interest) and
trade debtors amounted to GBP1.18m. Due to the acquisition of the
Protos SPV by the company the loan balance of GBP2.159m and the
debtors balance of GBP1.18m were impaired as at December 2022.
On 2 May 2023 the Company announced that the subscription and
warrant agreement dated September 2020 made between Peel holdings
(IOM) Ltd and the Company had expired on 29 April 2023. This
warrant agreement included 371,510,069 options exercisable at
2.75p.
On 30 May 2023, the Company announced that it had entered into
an agreement with Noage Energy Ltd to act as representative of PHE
in Northern Ireland. PHE paid Noage a fee of GBP50,000 on entering
the agreement. Noage will also receive a number of success related
fees, payable on completion of specified milestones, giving it the
possibility of receiving total fees of GBP1.725 million for a fully
implemented project (including the initial fee).The Agreement has
an initial term of five years, but can be extended for a further
two years on the request of Noage. Under the arrangement, however,
all contractual commitments with third parties will be with PHE
directly and Noage will not be able to give commitments on PHE's
behalf.
On 12 August 2021, the Company acquired a 48.39% interest in
Engsolve Limited, an engineering consultancy company incorporated
and operating in the UK. On 21 June 2023, the Company completed the
acquisition of the entire outstanding shareholding of Engsolve for
a cash consideration of GBP572,896. The Company considers this a
strategic acquisition as it brings Engineering expertise in house
and enables it to generate a regular income stream through the
providing and development of Engineering Services into the UK
market.
30. Ultimate controlling party
There is no controlling party of the Company.
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END
FR ZZGZVNLNGFZM
(END) Dow Jones Newswires
June 30, 2023 02:00 ET (06:00 GMT)
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