TIDMGV2O
RNS Number : 2985O
Gresham House Renewable EnergyVCT2
31 January 2023
31 January 2023
Gresham House Renewable Energy VCT 2 PLC
(the "VCT" or the "Company")
Full Year Results
The VCT is pleased to announce its full year results for the
year ended 30 September 2022.
The Company's Annual Report and Financial Statements for the
year ended 30 September 2022 will be posted to shareholders who
have elected to receive hard copies. In accordance with Listing
Rule 9.6.1 copies of the document have been submitted to the UK
Listing Authority and will shortly be available to view on the
Company's corporate website at
https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/gresham-house-renewable-energy-vct-2-plc/
and have also been submitted to the UK Listing Authority and will
be shortly available for inspection from the National Storage
Mechanism at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
- -
Gresham House Renewable Energy VCT 2 PLC - LEI:
213800GQ3JQE2M214C75
For further information, please contact:
Gresham House Asset Management Renewablevcts@greshamhouse.com
Investor Relations Tel: 020 7382 0999
JTC (UK) Limited - Company Secretary GreshamVCTs@jtcgroup.com
Ruth Wright Tel: 020 3846 9774
Chairman's Statement
I am pleased to present the Annual Report of Gresham House
Renewable Energy VCT2 plc (VCT) for the year ended 30 September
2022.
The Company entered a Managed Wind-Down in the previous
financial year having adopted a New Investment Policy which had the
objective of realising the Company's investments in a manner that
achieves a balance between maximising the net value received from
the sale of assets and making a timely return of capital to
Shareholders. Having initially entered exclusivity with one
interested party early in the financial year it had been
anticipated that a sale of most of the assets would be completed by
the end of the financial year. However, during the due diligence
process several issues were uncovered, many of which related to the
age of the assets and that required further remediation. These
points, and both market turmoil following the Russian Federation's
invasion of Ukraine and instability within the UK Government,
resulted in a much more protracted process and required further
negotiation with the potential purchaser. Whilst many of the issues
identified have been closed off, the Board and the Investment
Adviser are continuing to work through the remaining issues and it
is hopeful that a conclusion will be reached over the course of
2023.
In terms of the performance of the portfolio, following
extensive remedial works carried out at several sites and that
commenced in the prior financial year, performance of the entire
estate has improved significantly, with performance now being in
line with expectations. Despite higher irradiation over the summer
months, the significantly more favourable power purchase agreements
(PPAs) negotiated and agreed during the year as well as the
portfolio's inflation linked subsidies, the NAV per share has
remained broadly stable over the year at 91.3p per share (2021:
89.3p per share). This is because whilst the NAV per share reflects
the valuation of the portfolio at 30 September 2022, it takes into
account the Electricity Generator Levy (EGL), a 45% tax. This was
expected to impact the value as at the 30 September although the
exact details were not announced by the UK Government until after
the year end, and that would likely be payable by the acquirer of
these assets as well as the rise in corporation tax to 25%. It is
the Board's opinion that it is right to take into consideration the
impact of the EGL given the New Investment Policy adopted in July
2021 and delivers a NAV that reflects the fair value of the
portfolio's assets. Shareholders should take note that if, as in
previous years, a portfolio value based purely on the cashflows
generated by the assets were to be used, it would result in a value
that would be considerably higher as the Company would not be
subject to the EGL. This is because the Company's generation output
falls below the threshold for the EGL, and the revenues are within
the GBP10mn allowance.
Should high inflation be sustained for the longer term and/or
the security of gas supply from Russia remain the key factor in
European energy markets leading to continued high power prices, it
is expected that the value of these assets will remain at a higher
level and could increase. However, the assets do have a limited
market compared with newer solar assets as given their age they can
be challenging to manage, and have complex financing arrangements
which any buyer must take over.
At the year-end, Giles Clark resigned and stepped down from the
Board. I thank him for his valuable contribution. It is not the
intention to replace him given the Managed Wind-Down. Giles Clark
was appointed a Director of Gresham House Renewable Energy VCT1 Plc
on 30 September 2022.
Investment portfolio
At the year end, the VCT held a portfolio of 16 investments,
which were valued at GBP28.0mn. One-follow on investment was made
during the year, investing an additional GBP67,500 into bio-bean
Limited to fund the growth and development of the business. There
have been no exits during the year.
The portfolio is analysed (by value) between the different types
of assets as follows:
Ground mounted solar 85.8%
Rooftop solar 8.7%
Small wind 4.1%
Non-renewable assets 1.4%
The Board has reviewed the investment valuations at the year end
and notes that the valuation of the portfolio has increased by
GBP0.5mn or 1.9%. As indicated earlier, the underlying portfolio
has been positively impacted by the increase in power prices as
well as increases in inflation projections as most of the revenue
that the solar farms in the Company's portfolio receive is linked
to RPI which increases profitability and therefore the valuation of
the assets.
Through the renegotiation of several PPAs, significantly higher
power prices have been locked into the portfolio which will
generate stronger returns over the next two years. On the other
hand, the discount rates applied have increased in line with recent
rises in the Bank of England base rate. In addition, the UK
Government has announced a levy on revenue from the sale of
electricity, the EGL, which effectively increases the marginal rate
of taxation on electricity revenues above GBP75 per megawatt-hour
to 70%. Whilst the Company is below the de minimis threshold at
which the EGL applies, any future buyer of the Company's solar
farms is likely to be within the scope of the EGL, as currently
proposed, and this would reduce the fair market value at which any
disposal would be likely to take place.
As referred to previously a problem has arisen in relation to
the connection of the South Marston solar farm to its off taker.
This arose from the decision of the off taker (Honda) to cease
business at the site South Marston supplies and to sell the site to
a third party. It has taken considerable time and effort to resolve
the issue. Whilst the new owner of the site, a provider of logistic
facilities, says they want to use the power from South Marston they
cannot commit until they have planning permission (not yet granted
) and customers on site. In order to resolve the uncertainty around
this situation a new grid connection has been negotiated so
removing this impediment to the potential sale of the asset and the
others within the same loan structure.
Venture Capital investments
The VCT also holds two investments that are not in renewable
energy. As indicated earlier a follow-on investment of GBP67,500
was made into bio-bean Limited (bio-bean) in December 2021 to fund
the growth and development of the business. However, despite demand
being strong, trading performance since this investment has been
below expectations due to supply shortages. As a result, the
valuation of bio-bean has decreased by GBP0.4mn or 53.2%, while the
valuation of the VCT's investment into Rezatec has also decreased
by GBP1.1mn or 94.4% due to continued underperformance against
budget and few new contract wins.
Further detail on the investment portfolio is provided in the
Investment Adviser's Report.
Net asset value and results
At 30 September 2022, the Net Asset Value (NAV) per Ordinary
Share stood at 91.2p and the NAV per 'A' Share stood at 0.1p,
producing a combined total of 91.3p per "pair" of Shares. The
movement in the NAV per share during the year is detailed in the
table below:
Pence per
'pair' of
shares
---------------------------- ----------
NAV as at 1 October 2021 89.3
Plus NAV increase 2.0
---------------------------- ----------
NAV as at 30 September 2022 91.3
---------------------------- ----------
The NAV Total Return (NAV plus cumulative dividends) has
increased by 1.4% in the last year and at the year end stands at
148.4p excluding the initial 30% VCT tax relief, compared to the
cost to investors in the initial fundraising of GBP1.00 or 70.0p
net of income tax relief.
The profit on ordinary activities after taxation for the year
was GBP0.5mn (2021: GBP2.7mn loss), comprising a revenue profit of
GBP80,000 (2021: GBP23,000) and a capital profit of GBP445,000
(2021: capital loss of GBP2.7mn) as shown in the Income
Statement.
Dividends
On 21 December 2022, the Board declared a dividend in respect of
the year ended 30 September 2022 of 2.0p per Ordinary Share. This
dividend was paid on 27 January 2023 to Shareholders on the
register at 6 January 2023. Following the payment of this dividend,
total dividends paid to date for a combined holding of one Ordinary
Share and one 'A' Share will increase to 59.1p (2021: 57.1p). This
level of dividend is lower than has been paid historically in years
up to 2020 (no dividend was paid in 2021) but the Company has faced
exceptional costs in the past two financial years. These costs have
mainly been associated with the need for remediation work on the
portfolio of solar assets, which are ageing and hence needed
expenditure to replace old equipment to restore their performance
levels. The Board is pleased to report that the results of these
works have been positive and that indications are that performance
levels are satisfactory and in line with expectations. In addition,
there have been costs associated with the proposed winding down of
the Company and the sale of investment assets in accordance with
Shareholders wishes as expressed in the Continuation Vote in March
2021. The improvement in returns for Shareholders discussed in this
Report are expected provide additional resources to improve
distributions to Shareholders in future should the sale of the
assets not be achieved as planned.
To increase the Company's distributable reserves and facilitate
future dividend payments, the Directors will seek shareholder
approval for a reduction of certain non-distributable reserves at
the forthcoming AGM. The implementation of such a reduction of
reserves is a Court led process that is likely to take some months.
The Board intends to continue the payment of dividends as soon as
distributable reserves are increased.
2022 Annual General Meeting (AGM)
The VCT's eleventh AGM was held on 23 March 2022 at 11.30 a.m.
and all resolutions were passed by way of a poll.
2023 Annual General Meeting (AGM)
The VCT's twelfth AGM will be held at The Scalpel, 52 Lime
Street, London EC3M 7AF on 21 March 2023 at 12.00 pm.
Share Buybacks
As noted in previous Reports, the Board has decided that the VCT
will not be buying in Shares for the foreseeable future. The Board
will keep this under review as required.
Outlook
As noted earlier, the Board has not been able to progress the
sale of the Company's assets as quickly as Shareholders may have
expected. It would like to reassure Shareholders that it has been
making every effort to ensure that returns are maximised at the
point of sale. The Board remains optimistic that significant
progress and a conclusion can be reached in 2023.
In the meantime, the improvement in power prices and the rise in
inflation has been very beneficial for the Company's assets. The
Board therefore believes that the outlook for the portfolio, as a
whole, is positive.
Christian Yates
Chairman
30 January 2023
Investment Adviser's Report
Portfolio Highlights
Gresham House Renewable Energy VCT 2 plc (VCT) remains
principally invested in the renewable energy projects that the VCT
and Gresham House Renewable Energy VCT 1 plc (VCT1) have co-owned
for a period of eight to eleven years, depending on the asset, with
the value of these projects representing close to 99% of the value
of the portfolio. The total generation capacity of assets co-owned
by the VCT is 34.4MW. The VCT also has two venture capital
investments.
During the year the sale process of the solar energy projects
that are owned jointly with VCT 1, was progressed but has not yet
concluded. The two VCTs had appointed EY to prepare and run the
sales process in the previous financial year. A number of parties
carried out initial due diligence on the portfolio in the autumn of
2021, and submitted non-binding offers subject to further due
diligence. One potential buyer was granted exclusivity to perform
detailed due diligence and negotiations with that party continued
throughout the financial year. The significant uncertainties in the
short and longer term, caused by a combination of macro and more
portfolio-specific circumstances including economic and political
turmoil in the UK during the summer and autumn of 2022 at the top
of the UK Government, the impact on energy markets of The Russian
Federation's invasion of Ukraine, various windfall tax structures
or iterations, issues relating to remediation works, and in
particular relating to the long-term certainty of the South Marston
ground-mounted solar asset's grid connection, all prevented the
sale process from being finalised during the financial year.
The Investment Adviser, in the meantime, continued to manage the
assets with the objective of deriving the best possible yield from
them, whilst also supporting the Board of the VCT and its advisers
in advancing the sale process and evaluating the non-binding offers
that were received.
The Investment Adviser has undertaken a valuation exercise for
the purpose of determining the Net Asset Value and has provided the
Directors with several valuation scenarios based on different
assumptions for the key variables governing future performance. It
is the Directors of the VCT that have the responsibility of valuing
these assets. In light of the ongoing sales process, the valuation
presented in this annual report necessarily reflects the Directors'
view of the fair value of the assets which incorporates potential
costs (such as the Electricity Generator Levy (EGL)) an acquirer
may incur through holding the assets as well as their view on the
levels of the assumptions that determine future operational and
financial performance.
The vast majority of the assets held by the VCT produce solar
power. The solar portfolio is older than well over 90% of the total
installed solar capacity in the UK, but this means that the VCT's
solar assets have higher government-backed incentives than most
other solar installations.
During the year, the total revenue from renewable energy
generation was GBP13.1mn (2021: GBP10.5mn) and of this, GBP11.5mn
(2021: GBP9.4mn) was from government incentives and
inflation-linked contracts. The total revenue from the renewable
assets was 4.4% ahead of budget due to higher irradiation and
higher power prices.
The downside of the relatively old age of the VCT's solar assets
is the additional maintenance required to keep them operating
effectively. Projects to repair or replace certain components
across the three worst performing older assets were completed
during the previous financial year. Performance since completion of
those works has been encouraging, with consistently increased
output and reliability at Kingston Farm, Lake Farm and Beechgrove
Farm with new, 10-year warranties on some of the key equipment
(e.g. new inverters) and UK based technical staff available for
ongoing repairs or maintenance. Successful warranty claims at
Beechgrove Farm and South Marston led to additional remedial works
that also improved performance, particularly at Beechgrove
Farm.
In terms of available resources, the year benefited from strong
solar irradiation which came in 6.7% ahead of budget. This should
have resulted in better generation performance but there were
technical issues and downtime caused by remedial works at three of
the ground mounted sites (Beechgrove, South Marston and Ayshford
Court, as described below) and poorer than expected performance of
the roof mounted portfolio. These legacy issues have been addressed
through successful warranty claims and repair works.
Whilst all works had to be suspended on residential roof mounted
solar installations in the previous financial year as engineers
were not permitted to enter homes during Covid lockdowns and
restrictions that carried through into the financial year, much of
these have now been carried out. Housing Associations, the
landlords of the majority of the properties, were more cooperative
in their approach in permitting access for the contractors for
remedial works.
In terms of the macroeconomic environment, the effects on the
portfolio are summarised below:
-- Power prices were significantly reduced through the initial
months of the pandemic and price fixes were therefore sought in
2020 and early 2021, as soon as Power Purchase Agreement (PPA)
providers began offering above the budgeted levels at the time.
Fixing the prices under PPAs provided security of revenues.
However, the fixed prices meant that the portfolio could not then
benefit from the increases in wholesale power prices during the
autumn of 2021 and the further increases experienced immediately
after the Russian Federation's invasion of Ukraine. However, these
PPAs expired during the financial year and all but one were
replaced with new PPAs, with a 1-2 year fixed term, with prices at
a multiple of the previous levels.
-- With much of the portfolio's revenue being inflation linked,
higher and more sustained inflation increased the profitability of
the assets and therefore their value, even though most of the cost
base and the debt facilities are also inflation-linked.
The VCT also holds newer investments in growth businesses;
bio-bean Limited (bio-bean), the world's largest recycler of waste
coffee grounds, which produces sustainable, clean fuels as well as
advanced biochemicals for use in the food industry; and Rezatec
Limited (Rezatec), a climate technology company and software
developer. Rezatec applies Artificial Intelligence based algorithms
to a range of earth observation data sources (satellite imagery,
soil data, weather data, topographic data etc.) to generate an
information services platform to help monitor land-based assets in
the forestry, agriculture and infrastructure sectors.
Both businesses went through challenging times in the year.
Rezatec failed to meet the revenue growth rate in its business plan
and to secure institutional funding. This resulted in an emergency
funding round subscribed to by some of the existing investors and a
drive to bring down the company's cost base. The company's value
has therefore been written down by 94.4% to GBP0.07mn.
bio-bean also failed to meet its revenue targets due to lower
than expected deliveries of its feedstock and less demand for its
core product due to a warmer than usual winter. Emergency funding
had to be secured from some of its existing investors and the
company has now engaged an adviser to explore options for a trade
sale. It has also been written down in value to GBP0.3mn, a fall of
53.2%.
Portfolio Composition
Portfolio Composition by Asset Type and Impact on Net Asset
Value (NAV)
30 September 2022 30 September 2021
------------------------- -------------------------
Value % of Portfolio Value % of Portfolio
Asset Type kWp ('000) value ('000) value
---------------------------- ------ --------- -------------- --------- --------------
Ground mounted solar
(FiT)* 20,325 GBP20,745 74.1% GBP19,341 70.6%
Ground mounted solar
(ROC)** 8,699 GBP3,262 11.7% GBP2,472 9.0%
Total ground mounted
solar 29,024 GBP24,007 85.8% GBP21,813 79.6%
Rooftop solar (FiT) 4,297 GBP2,425 8.7% GBP2,602 9.5%
Total solar 33,321 GBP26,432 94.5% GBP24,415 89.1%
Wind assets (FiT) 1,030 GBP1,156 4.1% GBP1,171 4.3%
Total renewable generating
assets 34,351 GBP27,588 98.6% GBP25,586 93.4%
Venture Capital investments N.A. GBP392 1.4% GBP1,814 6.6%
---------------------------- ------ --------- -------------- --------- --------------
TOTAL 34,351 GBP27,980 100.0% GBP27,400 100.0%
---------------------------- ------ --------- -------------- --------- --------------
* Feed in Tariff (FiT)
** Renewables Obligation Certificate (ROC)
The 34.4MWp of renewable energy projects in the portfolio of the
VCT and VCT 1 generated 33,378,218 kilowatt-hours of electricity
over the financial year, sufficient to meet the annual electricity
consumption of circa 8,442 homes. The Investment Adviser estimates
that the carbon dioxide savings achieved by generating this output
from solar and wind versus gas-fired power, are equivalent to what
circa 19,400 mature trees would remove from the atmosphere.
Portfolio Summary
Approximately 99% of the portfolio value, and all of the income
for the portfolio, is derived from the renewable energy generation
assets.
Renewable energy revenue by asset type
The performance against budget is shown below:
Portfolio revenues in the FYE 30 September 2022 by Asset Type
(GBP Sterling)
Budgeted Actual Revenue
Asset type revenue revenue performance
--------------------------- ----------- ----------- ------------
Ground mounted solar (FiT) 9,510,159 9,950,021 104.6%
Ground mounted solar (ROC) 1,406,636 1,673,400 119.0%
Roof mounted solar 1,248,280 1,191,092 95.4%
Wind assets 375,675 278,776 74.2%
--------------------------- ----------- ----------- ------------
TOTAL 12,540,750 13,093,289 104.4%
--------------------------- ----------- ----------- ------------
The revenue is affected by:
-- renewable energy resources (solar irradiation or wind, as relevant);
-- the performance of the assets in converting the resources
into revenue (i.e. how the assets are performing, any technical
issues, etc); and
-- the revenue per unit of energy generated.
These themes will be expanded on below.
It is clear from the table above that the positive variance at
the ground-mounted solar farms was most material with actual
revenues benefitting from more generation as well as higher power
prices. This is detailed in the chart within the Annual Report:
VCT GM Solar Portfolio Revenue Analysis 2021/2022
The old equipment, inverters and transformers that had been
causing the reduction in output last year were replaced in the
prior financial year. Successful warranty claims against Jinko
Solar who supplied the solar modules for Beechgrove and South
Marston resulted in remedial works being carried out to the modules
and associated cabling over the summer months. The positive results
of this significant remedial work became apparent in the ensuing
generation numbers.
The slight underperformance at technical level, when adjusted
for the high irradiation, was caused by the ROC-remunerated Priory
Farm and Ayshford Court assets underperforming due to poor service
from the Operations & Maintenance (O&M) contractor that
substantially increased response times. The issues at the Ayshford
Court asset were addressed in the first half year but the Priory
Farm asset suffers from regular short duration outages that require
manual intervention. A new O&M contractor is in the process of
being appointed.
Overall, 88% of income was inflation linked (either through the
FiT, ROC or contracts for the sale of electricity), with the ROC
assets having the highest price exposure. Thus, they benefited more
from the renewal of the PPAs at higher prices.
These themes will be expanded on below.
Renewable energy resources
The portfolio is heavily weighted to solar (96% by capacity of
the renewable assets, and 94% of total portfolio by value).
During the year the assets benefited from better solar resources
than budgeted, with solar irradiation being 6.7% ahead for the
year.
However, better solar resources do not automatically imply
better generation as the performance of solar panels is also
adversely affected by heat. The exceptionally hot weather over the
summer months, particularly in July 2022, resulted in some
deterioration in technical performance.
Technical performance
The table below shows the technical performance, including the
impact of the higher irradiation, for each of the groups of
assets.
(in the
Budgeted Actual Technical same period
Asset Type output output performance last year)
--------------------------- ----------- ----------- ------------ ------------
Ground mounted solar (FiT) 20,392,254 20,445,981 100.3% 17,303,047
Ground mounted solar (ROC) 8,316,605 8,675,945 104.3% 8,661,522
Roof mounted solar 3,574,175 3,480,607 97.4% 3,498,469
Wind assets 1,045,301 775,684 74.2% 791,970
--------------------------- ----------- ----------- ------------ ------------
TOTAL 33,328,335 33,378,218 100.2% 30,255,008
--------------------------- ----------- ----------- ------------ ------------
The ground mounted solar (FiT) assets performed ahead of budgets
and significantly ahead of the prior financial year.
The results of the successful repowering works at Kingston Farm
and Lake Farm (each with 4.98MW capacity, FiT assets) were evident
with Kingston Farm performing better than budget, even when
adjusting for higher irradiation. The figures for Lake Farm were
slightly lower than budget when adjusted for irradiation but
nevertheless a significant improvement compared to the previous
year.
Beechgrove's (3.98MW, FiT) repowering works were completed just
before the end of the last financial year, however performance was
held back by another issue, namely cracking connectors at the back
of its solar panels which in turn were causing isolation faults on
the system. Following a root cause analysis, this degradation of
the connectors was found to be caused by the high salt content in
the air due to the site's proximity to the sea. A successful
warranty claim against Jinko Solar, the manufacturer, resulted in
the replacement of all original connectors with ones made from an
improved polymer, which can withstand the marine environment, over
the summer. The ensuing generation data suggests that the issue has
been resolved.
Overall, the replacement works are expected to have a payback of
under five years and the assets benefit from ten-year warranties
from Huawei, the inverter manufacturer who has a strong customer
service team in the UK.
South Marston (4.97MW FiT) has historically sold all its power
to a Honda production plant adjacent to the site at Swindon. Honda
closed down this facility and its exit is leading to changes of
contractual arrangements for the sale of power to the businesses
that will move into the site, and potentially to the multi-part
agreement governing the access to and use of the grid connection.
The Investment Adviser is working with Honda, the commercial real
estate developer that intends to acquire the site from Honda, and
various advisers to ensure the continuity of supply of power by the
solar farm.
The purchaser of the site is very keen to make the solar power
available to its future tenants when they are expected to move onto
the site in the second half of 2024 and has maintained in its
planning submission for the new development that it will retain the
existing infrastructure including the switchgear through which
South Marston connects to the electricity grid. Nevertheless, South
Marston's contractual rights need to be bolstered to satisfy any
buyer of the VCT's assets that there is zero risk of the project
losing its ability to export. The Investment Adviser is pursuing
multiple avenues to fully de-risk the grid connection. These
include accepting a grid connection offer from Southern Electric
Power Distribution plc for a brand new and dedicated connection
outside the former Honda site, putting in place contingent
liability insurance and negotiating with the new purchaser of the
site to improve the contractual position. A provision for the cost
of the new grid connection has been made in the financial forecast
that forms the basis of the valuation in this Report.
The ground mounted solar (ROC) assets also performed ahead of
budgets, similar to the previous year. These assets were not
repowered and did not suffer long outages needed for remedial works
in the prior financial year, making the comparison more
straightforward.
Ayshford Court (5.45MW, ROC) also exhibited lower than expected
performance in the first half of the financial year. This was
caused by a small number of failing solar modules taking down
entire strings across several modules. The string-based
configuration of many solar plants means that a small number of
module failures can take large parts of the plant offline. The
solution to this is close monitoring and a rearrangement and
redistribution of the solar modules such that the faulty modules
are grouped together, thereby minimising the number of impacted
modules. These works were carried out in March and April 2022 and
have delivered successful results. A warranty claim is also in
progress against the manufacturer.
Overall, the benefit of high irradiation was offset by heat
effects, planned outages to carry out the works and lower technical
performance for some of the assets, but generation was still above
budget.
Generation of the rooftop solar portfolio was 2.6% lower than
budget and slightly below the same period last year. Irradiation
cannot be measured at roof mounted solar installations as it is not
cost effective to install pyranometers but one can assume that the
irradiation at these sites was in line with the irradiation at the
ground mounted assets. The Investment Adviser continues to work
with the O&M contractors and landlords to get access to the
rooftop installations that are underperforming, in order to effect
repairs as soon as possible, and have these repairs completed in a
cost-effective manner.
The small wind portfolio performed 25.8% lower than budget,
continuing the poor performance experienced in recent years. The
Investment Adviser attributes the poor performance to the turbines'
ability to capture the resource having been overstated at the time
of installation. Small wind accounts for only 3% of the portfolio
in terms of capacity.
The entire portfolio is composed of R9000 wind turbines, which
have generally performed satisfactorily and have the support of an
experienced O&M contractor with easy access to spare parts and
maintenance crews.
Revenue per kilowatt hour of renewable energy generated
The UK Government has used several mechanisms to encourage
investment into renewable energy generation, including the FiT and
ROC support mechanisms.
The VCT's renewable assets benefit from these schemes which
provide revenues predominantly linked to the Retail Price Index
(RPI). As the solar asset class has matured and both the costs and
perceived risks of building new renewable energy generating
capacity have fallen, so have the value of the incentives offered
for new installations. For example, an asset that generates
electricity from solar power that was commissioned and accredited
for the FiT before the end of July 2011 currently receives over 40p
for every kilowatt hour (kWh) of electricity it produced (with the
added extra of a floor price support to ensure it may also sell
this power at a reasonable price), with inflation taking that above
45p from 1 April 2023. The incentives for new capacity have fallen
consistently since the assets owned by the VCT were commissioned,
and new solar installations built today receive no such incentives
and must rely on selling power at market prices for their
income.
VCT Solar Portfolio, Revenue split for year 2021/2022
Of total revenues generated in the year, 81.5% was earned from
government backed incentives for generating renewable electricity.
Included within export revenue above, a further 4% is inflation
linked, either through the FiT export floor price for selling
electricity or contracts for the sale of electricity, taking the
government backed or RPI linked revenues to 85% of the total.
The high proportion of income that is fixed by the government,
is RPI linked and is not exposed to wholesale power prices, a
significant driver of value in this portfolio. This enabled the
portfolio to be largely insulated from the very significant
reduction in the wholesale price of electricity experienced during
the initial months of the pandemic in 2020. Whilst predictable,
government backed revenues reduce the risk, given the low power
prices through the first few months of the pandemic, when prices
increased the assets entered into fixed price contracts of various
lengths to sell power. This further reduced the risk of variability
in revenues from wholesale power price fluctuations. This was
beneficial when coming out of the pandemic but it also meant that
the assets missed out on the increase in wholesale power prices
until the fixed price contracts started expiring in April 2022. The
PPA contracts were replaced or updated with new prices valid for
1-2 years as they expired during the financial year.Total (power
price sales and subsidies) revenues per kWh generated by the solar
assets were 39.4p for the year ended 30 September 2022. These are
projected to rise by over 50% to 60.9p in the financial year ending
30 September 2023 and to 64.2p in the financial year ending 30
September 2024.
Operating costs
The majority of the cost base is fixed and/or contracted under
long-term contracts and includes rent, business rates, and regular
O&M costs.
Many of these costs have also risen in line with inflation. A
minority of the leases for the ground-mounted solar assets contain
clauses that require supplemental rent to be paid to the landlords
in the event of revenues exceeding set thresholds, and these
thresholds will be exceeded in the new financial year due to high
power prices.
The main cost item that shows variability from year-to-year is
repair and maintenance costs. Repair and maintenance spend
involving solar panels and inverters, the key components of a solar
project, is covered by cash held in the maintenance reserves. At
the financial year end reserves totalling GBP1.0mn were in place
for all the ground mounted solar assets and for the majority of the
roof mounted solar assets, and additional amounts will be deposited
in the reserves in the future. These provisions were revised
upwards following a technical review that was commissioned early in
the financial year looking at historic experience of repairs.
Feedback from the sales process indicated that third parties
would charge more in the future for managing the SPVs (to account
for the complexity of managing a portfolio of this type and age and
which includes leverage and a large number of distributed,
roof-mounted solar assets) than the Investment Adviser has
historically modelled to date. The Investment Adviser therefore
increased the cost assumptions used in the portfolio valuation by
100% at the time of the half year valuation. This increase does not
apply to ongoing cashflow that the assets earn until the portfolio
is sold.
Venture Capital investments
The VCT holds an investment of GBP0.7mn (at cost, including the
GBP67,500 additional investment made in the year) in bio-bean, the
world's largest recycler of waste coffee grounds. bio-bean sources
waste coffee grounds from major retail coffee chains by offering
the cheapest and most sustainable avenue for disposing of them.
bio-bean then converts these into coffee logs for use in wood
burning stoves as well as into pellets for combustion in
biomass-fed energy generators. It sells the logs online, through
large supermarkets and through home improvement chains. bio-bean
also markets and sells dried coffee grounds for use in a diverse
set of applications including cosmetics, bioplastics and the
automotive industry.
Demand for the coffee logs (the main product) remained strong,
albeit with the temporary impact of warmer weather in the second
half of last winter. However, bio-bean was not able to benefit as
much as was hoped from the surge in the price of gas (and therefore
the cost of indoor heating) that took place following the Russian
Federation's invasion of Ukraine. Its coffee logs compete mainly
against sawdust-derived heat logs rather than gas-fuelled heating.
bio-bean was also constrained, especially in the first few months
of the financial year by reduced deliveries of waste coffee
grounds, its primary feedstock.
The new, higher margin dried coffee grounds is a developing
market, with first revenues achieved during the year and a pipeline
of business development opportunities that could lead to a
significantly improved profit outlook, but have not had a
meaningful impact on financial performance so far.
bio-bean required additional funding from its investors in the
spring of 2022. The VCT chose not to participate on the basis of
bio- bean's vulnerability to weather patterns, its heavy dependence
on timely and low-cost feedstock deliveries and its lack of pricing
power for coffee logs, even in an exceptional environment where
energy and heating became very expensive. bio-bean's board decided
to explore an exit for Shareholders through a trade sale, and
mandated an advisory firm in September to assist. The Investment
Adviser believes a buyer will be found but recognises that there is
significant uncertainty in relation to the achievable price. The
valuation of the VCT's stake has been marked down by 52% to reflect
this uncertainty.
The VCT's other growth investment, Rezatec Limited, also ran
into difficulties. Rezatec's management managed to achieve steady
growth but far from the rate envisaged in the business plan on the
basis that the VCT invested in January 2020. This, coupled with a
cost base that was handled with less prudence than the Investment
Adviser would have liked, led to Rezatec requiring a significant
amount of new investment in the financial year. A process led by
KPMG failed to secure the necessary amount and management had to
approach the existing investor base for emergency funding.
The VCT decided not to participate as it was not convinced of
management's ability to deliver the original business plan and
achieve a successful exit. Investors that chose to participate did
so on the basis of terms that gave them as much protection as
possible in the event of no upturn in performance.
Although, the investment by the VCT had been structured in a way
that initially provided an element of protection against slower
than expected growth and the dilution that can come with additional
funding rounds, this protection had to be in large part surrendered
as a condition of the emergency funding round.
The company has now been put up for a trade sale as it is
believed that its software, algorithms and customer base could be
useful to commercial satellite owners in monetising the value of
the large amount of geospatial data they generate.
The value of this investment has therefore been marked down to
close to GBPnil to reflect the Board's belief that a negative
outcome is far more likely than a positive outcome for the
company.
Regardless of these regrettable developments for the two venture
capital investments, it would always have been a challenge to
realise these investments in line with the disposal of the other
VCT assets. The market for secondary stakes in private, venture
capital funded companies is less liquid than the market for
renewable energy investments.
Portfolio valuation
Whilst the Investment Adviser is supporting the proposed sale of
the VCT's renewable assets and notes that a firm (i.e. binding)
offer to purchase the assets will be the best indication of value,
consistent with prior years the NAV of the renewable portfolio is
imputed from the valuation of future projected cash flows generated
by the renewable energy assets, as well as the cash held by the
companies in the portfolio and the cash held by the VCT. The NAV of
the overall portfolio also includes the now marked down value of
the venture capital investments into bio-bean and Rezatec.
The future cash flow projections for renewable assets are
impacted by:
-- Renewable resources. Despite this year enjoying higher solar
irradiation than budgeted, the assumptions on irradiation have not
been changed.
-- Technical performance. As noted above, the repairs at Lake
Farm, Kingston Farm and Beechgrove Farm largely resolved their
historic performance issues, however expectations for future
generation were slightly marked down at the half year point to
assume a more prudent position. Ayshford Court, South Marston and
Priory Farm suffered technical issues that were addressed. The
O&M contractor for Ayshford Court, Priory Farm, Wychwood and
Parsonage is in the process of being replaced and this is expected
to lead to better and more timely maintenance of these assets.
-- Power prices. Power price forecasts that were initially
adversely impacted by COVID-19 have now risen to the highest levels
in the lifetime of the VCT due to acceleration of demand post the
COVID-19 lockdowns and restrictions ending coinciding with the
Russian Federation's invasion of Ukraine and the ensuing disruption
to European power markets. The Investment Adviser was able to
capitalise on these by entering into new PPAs that have locked in
high prices for the next one to two years.
The Investment Adviser also decided to reflect the growing
proportion of solar power in the UK energy mix in assumptions for
prices the solar assets would earn in the future. Solar power is
available throughout daylight hours which do not always cover peak
price periods. A solar asset therefore has to sell a greater
(compared to a provider of "baseload" power) proportion of its
power at times in the day when prices are lower due to demand being
lower and power being more plentiful due to all the solar plants
generating at the same time. This is known as the solar capture
price.
The latest generation-weighted forecasts provided by a leading
market consultant, and current offers for PPAs from purchasers for
the power generated are used to value the assets.
The UK Government responded to the cost-of-living crisis, caused
in part by high energy bills for households and businesses, by
introducing the Electricity Generator Levy (EGL) that imposes a 45%
charge on exceptional receipts generated from the production of
wholesale electricity where exceptional receipts will be defined as
wholesale electricity sold at an average price in excess of GBP75
per MWh over an accounting period. This does not cover revenues
earned from government subsidies such as ROCs and FiTs. The EGL
will only apply to exceptional receipts exceeding GBP10mn in an
accounting period. There is also a de minimis threshold of 50GWh of
annual generation at portfolio level below which the EGL is not
charged. The VCT is in the fortunate position that its portfolio
falls below this level. However, almost all potential buyers,
including all of the parties who submitted offers during the sales
process, would not be exempt from the EGL and would therefore have
to account for its impact in their offer prices. The EGL will be in
effect from 1 January 2023 until 31 March 2028, and will apply to
pro-rated profits for accounting periods between those dates. The
levy will be administered via the Corporation Tax system and paid
by the responsible company in a group of companies.
-- Asset Life. The assets are valued taking into account the
duration of the subsidies, the leases and the planning permissions,
without assuming extensions. It will be appropriate as the end of
the lease terms get closer to approach landowners and local
planning authorities with a view to negotiating extensions.
Although power prices in the future are projected to decline from
the current high levels, falling costs of equipment and the fact
that most of the investment has already been incurred, would enable
additional returns in the longer term from such life
extensions.
-- Costs. Up-to-date costs for the assets are included,
reflecting all commercial negotiations, expectations for lower
maintenance costs after the older assets are repaired and the need
to provision for the costs of repairs to equipment such as
switchgear and transformers that may be needed in the future. The
asset management costs going forward have been doubled from those
charged by the Investment Adviser, following feedback from the
sales process.
-- Corporation tax . The actual corporation tax paid will impact
on the cash available to Shareholders.
-- Inflation. With most of the revenues being linked to RPI, any
increase in inflation projections increases the overall
profitability, and therefore valuation of the assets. This is
countered, to some degree, by debt service for the two debt
facilities also being indexed to inflation, with an increase in
inflation resulting in higher interest charges.
It is particularly challenging to forecast the future direction
of inflation. Central Banks around the world have raised interest
rates in a bid to quell inflation. Financial markets are pricing
inflation well in excess of 3% even in the medium to long-term. A
more prudent long run forecast of 3% has been used in the
calculation of the NAV.
Once the free cash projected to be generated by the assets is
calculated, the value of these cash flows has to be estimated. The
Investment Adviser notes that these cash flows are supported by a
very high proportion of government backed and index linked
revenues. In the current financial market, such cash flows are
dependable and therefore valuable. With greater certainty of output
at the three large ground mounted solar assets that comprise 40% of
the installed capacity there is greater visibility on the returns
on these assets. The discount rates used reflect the Investment
Adviser's experience in the market and evidence of third-party
transactions, as well as based on feedback from other independent
advisers.
The discount rates used to value the future cash flows have been
increased by 1.5% for the solar asset portfolio since the end of
the financial year (2021: 5.5% to 5.75%) to reflect the increase in
the risk-free rate as a result of the Bank of England raising
interest rates. An increase of equal magnitude has been applied to
the wind assets.
The value of the investments in bio-bean and Rezatec has been
determined using International Private Equity Valuation Guidelines.
Due to the highly dilutive emergency funding round and the
company's diminished future prospects, Rezatec's valuation was
marked down to less than 53% of investment cost to reflect its
continued, despite nearing the end of the pandemic, to variability
in feedstock supply, as well as weather patterns. The business has
improved in many respects including better margins, increased
demand for its core product, good traction in a new product, but
success is highly dependent on sustained and growing deliveries of
feedstock at low prices. Bio bean's valuation has also been marked
down to reflect its continued, despite the end of the pandemic,
variability in feedstock supply, as well as weather patterns. The
business has improved in many respects including better margins,
increased demand for its core product, good traction in a new
product, but success is highly dependent on sustained and growing
deliveries of feedstock at low prices.
Overall, a GBP1.9mn increase in the value of the renewable
generation assets was offset by a GBP1.4mn reduction in the value
of the venture capital investments.
Outlook
The Investment Adviser's continued focus is to ensure that the
assets operate at or above budget whilst it supports the Directors'
efforts to maximise exit value for Shareholders.
Addressing the contractual status of the grid connection
arrangement at South Marston and de-risking the low probability
(but high potential impact) loss of this grid connection remains a
key priority. In recent months, new avenues in the form of an offer
from the local Distribution Network Operator for South Marston to
connect to the grid at dedicated Point of Connection outside the
former Honda site, and contingent liability insurance have emerged.
The discussions between the parties involved, on new arrangements
once the new owner of the site is in place, have also
progressed.
The repairs of the underperforming assets that were completed in
the last financial year appear, from this year's generation data,
to have been successful, as have warranty claims for the Beechgrove
ground mounted solar asset and these have provided greater
visibility and reliability of revenues. A new O&M contractor is
about to be formally engaged for four of the eight ground-mounted
solar assets and this is expected to improve reliability for those
assets. The generation outlook for the portfolio has improved since
the beginning of the last financial year.
There is an observable impact of age on many of the assets that
have not yet been repowered in the portfolio. The Investment
Adviser remains vigilant for the purpose of spotting any signs of
degradation early so that the impact on availability can be managed
and reduced. Further maintenance provisions have been incorporated
into the financial model to cover the risk of higher maintenance
expenditure on roof mounted assets.
The higher inflation outlook, whilst of concern from the point
of view of the wider UK and global economies, is positive for the
owners of subsidised UK renewable assets. Although most costs also
rise in line with inflation, as does the cost of servicing the two
debt facilities, the net benefit of increased inflation is strongly
positive since it increases the inflation linked revenues more than
it increases the costs. The portfolio has been enjoying the benefit
of higher inflation from 1 April 2022 when subsidy levels rose,
with even higher inflation figures raising tariffs from 1 April
2023.
All but one of the eight ground mounted solar assets came out of
their fixed price PPAs during the financial year, which coincided
with the spike in power prices following the Russian Federation's
invasion of Ukraine. The Investment Adviser entered into new fixed
price PPAs for one or two year durations for each of these
assets.
The combined effect of inflation and power prices locked in at
high levels should translate into significantly improved revenue
and cashflow over the next two years. Total revenues per kWh
generated by the solar assets are expected to rise to 60.9p in the
new financial year and 64.2p in the financial year ending 30
September 2024, from 39.4p in the last financial year ending 30
September 2022. Should generation stay at the same levels as in the
financial year, total revenues will increase in the same
proportion, with a corresponding impact on cashflow after debt
service.
Beyond the one to two year term for the fixed power prices, it
becomes very challenging to predict the future course of inflation
and power prices, with a wide range of forecasts for medium to
long-term inflation. There are plausible future scenarios that
could bring the levels of inflation as well as power prices down
substantially from current levels, which are already down from the
highest levels experienced in recent months.
The VCT is very fortunate that the EGL introduced by the UK
Government with effect from 1 January 2023 does not apply to the
VCT, as the total generation of its portfolio falls below the de
minimis threshold of 50GWh per year.
However, most likely buyers of the VCT's assets already have
renewable energy portfolios and would not therefore be able to
avoid paying the EGL as a result of the de minimis. Accordingly, a
fair value has been determined with the assets valued for the
purposes of the NAV as if the EGL would need to be paid.
The venture capital investments that accounted for close to 7p
of the NAV have been marked down by slightly under 6p, which is a
disappointing outcome. Whilst fortunes can turn around, the
Investment Adviser is not at this time expecting to recover the
original amounts invested.
The last financial year has certainly been notable in terms of
the outlook for renewable generation in the UK and the rest of the
world. In particular, the Russian Federation's invasion of Ukraine
exposed Europe and the UK's vulnerability to energy price shocks
and this is expected to add an additional impetus to the deployment
of renewable energy. The low power price and low inflation
environment changed rapidly allowing renewable asset owners to
benefit, before the impact of the EGL, from selling their power at
much higher rates, and those with subsidy-backed assets enjoying
higher inflation as well. These have been reflected in the
renewable generation portfolio's valuation.
For this specific portfolio, that has had successful upgrades
implemented on many of its assets, the outlook is very positive it
remains to be seen whether this can be translated into a successful
sale in 2023.
Gresham House Asset Management Limited
30 January 2023
Review of Investments
Portfolio of investments
The following investments were held at 30 September 2022:
Valuation
Qualifying and movement
part-qualifying Cost Valuation in year % of
investments Operating sites Sector GBP'000 GBP'000 GBP'000 portfolio
---------------------- ---------------------- ----------------- -------- --------- --------- ----------
South Marston, Ground mounted
Lunar 2 Limited* Beechgrove solar 1,330 15,271 1,163 54.6%
Kingston Farm, Ground mounted
Lunar 1 Limited* Lake Farm solar 125 2,403 185 8.6%
New Energy Era Wychwood Solar Ground mounted
Limited Farm solar 884 1,835 50 6.6%
Ayshford Solar Ground mounted
(Holding) Limited* Ayshford Farm solar 826 1,740 378 6.2%
Tumblewind Limited* Priory Farm Small wind/solar 1,188 1,521 410 5.4%
Vicarage Solar Ground mounted
Limited Parsonage Farm solar 871 1,236 7 4.4%
Gloucester Wind
Limited Gloucester Wind Roof solar 1,000 789 (68) 2.8%
Hewas Solar
Limited Hewas Solar Roof solar 1,000 743 (88) 2.7%
HRE Willow Limited HRE Willow Small wind 875 709 9 2.5%
St Columb Solar
Limited St Columb Solar Roof solar 650 529 (4) 1.9%
Penhale Solar
Limited Penhale Solar Roof solar 825 365 (16) 1.3%
bio-bean Limited** Cambridgeshire Clean energy 695 325 (370) 1.2%
Minsmere Power
Limited Minsmere Small wind/solar 975 311 (14) 1.1%
Small Wind Generation
Limited Small Wind Generation Small wind 975 136 (11) 0.5%
Rezatec Limited** United Kingdom Clean energy 1,000 67 (1,119) 0.2%
Ground mounted
Lunar 3 Limited* solar 1 0 0 0.0%
---------------------------------------------- ---------------- -------- --------- --------- ----------
13,220 27,980 512 100.0%
--------------------------------------------------------------- -------- --------- --------- ----------
Cash at bank
and in hand 1 0.0%
----------------------------------------------------------------- -------- --------- --------- ----------
Total investments 27,981 100.0%
----------------------------------------------------------------- -------- --------- --------- ----------
* Part-qualifying investment
** These investments were permanently impaired during the
financial year. GBP370,000 of the valuation movement in bio-bean
Limited and GBP933,000 of the valuation movement in Rezatec Limited
have been recognised as a realised loss.
All venture capital investments are incorporated in England and
Wales.
Gresham House Renewable Energy VCT1 plc, of which Gresham House
Asset Management Limited (GHAM) is the Investment Adviser, holds
the same investments as above.
Investment movements for the year ended 30 September 2022
Purchases
Valuation Valuation
Cost at at Additions at
30 September 30 September during the 30 September Realised
2021 2021 year 2022 loss
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------- ------------- ----------- ------------- --------
VCT qualifying investments
bio-bean Limited 628 628 67.5 325 (370)*
--------------------------- ------------- ------------- ----------- ------------- --------
Total 628 628 67.5 325 (370)
--------------------------- ------------- ------------- ----------- ------------- --------
* This was recognised as a permanent impairment and as a realised loss in the financial year.
Disposals
No investments were disposed of during the financial year.
The basis of valuation for the largest investments is set
out.
Further details of the ten largest investments (by value):
Lunar 2 Limited
Lunar 2 Limited is a holding company of FiT remunerated
ground-mounted solar farms of 5MW (Wiltshire), 4MW (near
Hawkchurch) and 0.64MW (Ilminster, Somerset).
Cost at 30/09/22: GBP1,330,000
Cost at 30/09/21: GBP1,330,000
Date of first investment: Dec 2013
Valuation at 30/09/22: GBP15,271,000
Valuation at 30/09/21: GBP14,108,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP1,330,000
Proportion of equity held: 50%
Summary financial information from
statutory accounts (non-consolidated): 31 March 2022
Turnover: *
Operating profit/(loss): *
Net assets: GBP2,880,000
*This information is not publicly available
Lunar 1 Limited
Lunar 1 Limited is a holding company of FiT remunerated
ground-mounted solar farms of two 5MW (Wiltshire) and one 0.7MW
(Oxfordshire).
Cost at 30/09/22: GBP125,000
Cost at 30/09/21: GBP125,000
Date of first investment: Dec 2013
Valuation at 30/09/22: GBP2,403,000
Valuation at 30/09/21: GBP2,218,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP125,000
Proportion of equity held: 5%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBPnil
Operating loss: GBP(9,000)
Net assets: GBP884,000
New Energy Era Limited
New Energy Era Limited owns a FiT remunerated solar farm of
0.7MW near Shipton-under- Wychwood, Oxfordshire.
Cost at 30/09/22: GBP884,000
Cost at 30/09/21: GBP884,000
Date of first investment: Nov 2011
Valuation at 30/09/22: GBP1,835,000
Valuation at 30/09/21: GBP1,785,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP884,000
Proportion of equity held: 45%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP342,000
Operating profit: GBP187,000
Net assets: GBP2,234,000
Ayshford Solar (Holding) Limited
Ayshford Solar (Holding) Limited is the holding company of a ROC
remunerated ground-mounted solar farm of 5.5MW near Tiverton,
Devon.
Cost at 30/09/22: GBP826,000
Cost at 30/09/21: GBP826,000
Date of first investment: Mar 2012
Valuation at 30/09/22: GBP1,740,000
Valuation at 30/09/21: GBP1,362,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP827,000
Proportion of equity held: 50%
Summary financial information from
statutory accounts (non-consolidated): 31 March 2022
Turnover: GBP3,000
Operating loss: GBP(23,000)
Net assets: GBP498,000
Tumblewind Limited
Tumblewind Limited owns a portfolio of FiT remunerated wind
turbines on largely farmer owned sites located throughout East
Anglia. The Total capacity of the wind assets owned by Tumblewind
Limited is 160kW. Tumblewind also owns Priory Farm Solar Farm
Limited, which owns a ROC remunerated solar farm of 3.2MW near
Lowestoft.
Cost at 30/09/22: GBP1,188,000
Cost at 30/09/21: GBP1,188,000
Date of first investment: Nov 2011
Valuation at 30/09/22: GBP1,521,000
Valuation at 30/09/21: GBP1,111,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP790,000
Loan stock: GBP398,000
Proportion of equity held: 50%
Proportion of loan stock held: 68%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP52,000
Operating profit: GBP6,000
Net assets: GBP856,000
Vicarage Solar Limited
Vicarage Solar Limited is the holding company of a FiT
remunerated solar farm of 0.7MW near Ilminster, Somerset.
Cost at 30/09/22: GBP871,000
Cost at 30/09/21: GBP871,000
Date of first investment: Mar 2012
Valuation at 30/09/22: GBP1,236,000
Valuation at 30/09/21: GBP1,229,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP871,000
Proportion of equity held: 45%
Summary financial information from
statutory accounts (non-consolidated): 31 March 2022
Turnover: *
Operating loss: *
Net assets: GBP1,944,000
* This information is not publicly available
Gloucester Wind Limited
Gloucester Wind Limited owns a portfolio of FiT remunerated
roof-mounted solar assets located on residential housing stock
across the UK. The total capacity of the solar assets owned by
Gloucester Wind Limited is 1,121kW.
Cost at 30/09/22: GBP1,000,000
Cost at 30/09/21: GBP1,000,000
Date of first investment: Apr 2012
Valuation at 30/09/22: GBP789,000
Valuation at 30/09/21: GBP857,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP800,000
Loan stock: GBP200,000
Proportion of equity held: 50%
Proportion of loan stock held: 50%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP217,000
Operating profit: GBP6,000
Net assets: GBP1,526,000
Hewas Solar Limited
Hewas Solar Limited owns a portfolio of FiT remunerated
roof-mounted solar assets located on housing stock owned by two
housing associations. The total capacity of the solar assets owned
by Hewas Solar Limited is 1,978kW.
Cost at 30/09/22: GBP1,000,000
Cost at 30/09/21: GBP1,000,000
Date of first investment: Aug 2011
Valuation at 30/09/22: GBP743,000
Valuation at 30/09/21: GBP831,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP1,000,000
Proportion of equity held: 50%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP637,000
Operating profit: GBP181,000
Net assets: GBP356,000
HRE Willow Limited
HRE Willow owns a portfolio of FiT remunerated wind turbines on
largely farmer-owned sites located throughout East Anglia. The
total capacity of the wind assets owned by HRE Willow Limited is
420kW.
Cost at 30/09/22: GBP875,000
Cost at 30/09/21: GBP875,000
Date of first investment: Jun 2011
Valuation at 30/09/22: GBP709,000
Valuation at 30/09/21: GBP700,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP875,000
Proportion of equity held: 44%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP149,000
Operating profit: GBP17,000
Net assets: GBP1,205,000
St Columb Solar Limited
St Columb Solar Limited owns a portfolio of FiT remunerated
roof-mounted solar assets located on housing stock owned by two
housing associations. The total capacity of the solar assets owned
by St Columb Solar Limited is 838.5kW.
Cost at 30/09/22: GBP650,000
Cost at 30/09/21: GBP650,000
Date of first investment: Sep 2011
Valuation at 30/09/22: GBP529,000
Valuation at 30/09/21: GBP533,000
Valuation method: Discounted cash flows (business)
Investment comprises:
Ordinary shares: GBP650,000
Proportion of equity held: 50%
Summary financial information from
statutory accounts: 31 March 2022
Turnover: GBP360,000
Operating profit: GBP98,000
Net assets: GBP948,000
Explanatory notes
The summary financial information has been sourced from the
statutory accounts of the underlying investee companies. The net
asset/liability figures presented therefore do not approximate a
valuation.
The proportion of equity held in each investment also represents
the level of voting rights held by the VCT in respect of the
investment.
Summary of loan stock interest income
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Loan stock interest income in the period
bio-bean Limited - 15
Tumblewind Limited 32 32
Minsmere Power Limited 11 11
Small Wind Generation Limited 11 11
----------------------------------------- ------------- -------------
53 69
----------------------------------------- ------------- -------------
Strategic Report
The Directors present the Strategic Report for the year ended 30
September 2022. The Board have prepared this report in accordance
with the Companies Act 2006.
Business model
The VCT acts as an investment company, investing in a portfolio
of businesses within the renewable and clean energy sectors and
operating as a VCT to ensure that its Shareholders can benefit from
the tax reliefs available.
Business review and developments
The VCT's business review and developments during the year,
including an update on the wind down process for the VCT, are set
out in the Chairman's Statement, Investment Adviser's Report, and
the Review of Investments.
During the year to 30 September 2022, the renewable investments
held increased in value by GBP2,001,000 and the non-renewable
investments held decreased in value by GBP1,489,000. Investment
realisations totalled GBPnil.
Income over expenditure for the year resulted in a net profit,
after accounting for capital expenses, of GBP525,000 (2021:
GBP2,679,000 loss).
The total gain for the year was GBP525,000 (2021: GBP2,679,000
loss) and net assets at the year-end were GBP23.9mn (2021:
GBP23.4mn). A dividend of 2 pence per Ordinary Share for the year
to 30 September 2022 has been declared and was paid on 27 January
2023.
The Directors initially obtained provisional approval for the
VCT to act as a Venture Capital Trust from HM Revenue &
Customs. The Directors consider that the VCT has continued to
conduct its affairs in a manner such that it complies with Part 6
of the Income Tax Act 2007.
Investment advisory and administration fees
Gresham House Asset Management Limited (Gresham House) provides
investment advisory services to the VCT, at a fee equivalent to
1.15% of net assets. The agreement is for a minimum term of two
years, effective from 7 November 2017, with a nine month notice
period on either side thereafter.
The Board has reviewed the services to be provided by Gresham
House and has concluded that it is satisfied with the strategy,
approach and procedures which are to be implemented in providing
investment advisory services to the VCT. The Board is also of the
opinion that the allocation of the investment advisory fee between
capital and revenue of the VCT, as described in Note 4 to the
financial statements, is still appropriate.
JTC (UK) Limited (JTC) acts as Administrator and Company
Secretary. JTC provides administration and accounting services to
the VCT for a fee of GBP40,000 (plus VAT, if applicable) per annum.
It also provides company secretarial services for a fee of
GBP40,000 (plus VAT, if applicable) per annum. The agreement shall
continue in force until determined by either party, with a six
month notice period on either side.
Trail commission
Historically the VCT had an agreement to pay trail commission
annually to Hazel Capital LLP, in connection with the funds raised
under the Offers for subscription. This was calculated at 0.4% of
the net assets of the VCT at each year end. Out of these funds
Hazel Capital LLP was liable to pay trail commission to financial
intermediaries. The trail commission was payable to Hazel Capital
LLP until the earlier of (i) the sixth anniversary of the closing
of the Offers and (ii) the Investment Advisory Agreement being
terminated.
Upon the appointment of Gresham House as Investment Adviser on 7
November 2017, the agreement with Hazel Capital LLP was reissued
and the new Investment Adviser agreed to pay further trail
commission to Haibun Partners LLP (Haibun) and CH1 Investment
Partners LLP (CH1) with an agreement in place effective from 11
July 2019. Payment of trail commission under this agreement is not
deemed to be a related party transaction and is therefore not
disclosed in Note 21 to the financial statements.
Pursuant to historic financial intermediary arrangements with
Hazel Capital LLP, Haibun, of which Stuart Knight (Director of
Gresham House Renewable Energy VCT1 plc until his resignation on 30
September 2022) is a Designated Member, and CH1 , of which Matthew
Evans is a Designated Member, will continue to receive trail
commission from Gresham House. The trail commission payable is
equal to 0.15% of the net asset value of the Shares issued by the
VCT and its sister company, VCT1, to Haibun and CH1 clients under
each of the 2010, 2012 and 2014 Offers. The amounts payable to
Haibun and CH1 by Gresham House, in aggregate across both the VCT
and VCT2, are as follows:
Year ended 30 September 2022
--------------------------------
Haibun CH1 Total
GBP GBP GBP
----------- ---------- --------- ---------
2010 Offer 17,196 22,635 39,831
2012 Offer 2,435 1,580 4,015
2014 Offer 943 1,900 2,843
----------- ---------- --------- ---------
Total 20,574 26,115 46,689
----------- ---------- --------- ---------
Investment policy
General
In the previous financial year, at the General Meeting held on
13 July 2021, 99.59% of the Shareholders resolved to approve the
New Investment Policy of the Company to reflect a realisation
strategy and the Company ceasing to make any new investments. The
new Investment Policy replaced the previous Investment Policy in
its entirety.
The Directors believed that being prescriptive as regards the
timeframe for realising the Company's investments could prove
detrimental to the value achieved on realisation. Therefore, it was
the Board's view that the strategy for the realisation of the
Company's investments would need to be flexible and may need to be
altered to reflect changes in the circumstances of a particular
investment or in the prevailing market conditions.
Once all, or substantially all, of the Company's investments
have been realised and an initial distribution in respect thereof
made, the Company will, at an appropriate time, seek Shareholders'
approval for it to be placed into members' voluntary
liquidation.
Since inception to 13 July 2021
Up to 13 July 2021, the VCT's objectives were to maximise tax
free capital gains and income to Shareholders from dividends and
capital distributions by investing the VCT's funds in:
-- a portfolio of clean technology and environmentally
sustainable investments, primarily being in the UK and the EU, that
have attractive income and growth characteristics, with investments
in existing asset-backed renewable generation projects as the core
of the portfolio; and
-- a range of non-qualifying investments, comprised from a
selection of cash deposits, fixed income funds, securities and
secured loans and which will have credit ratings of not less than A
minus (Standard & Poor's rated)/A3 (Moody's rated). In
addition, as the portfolio of VCT qualifying investments will
involve smaller start-up companies, non-qualifying loans could be
made to these companies to negate the need to borrow from banks
and, therefore, undermine the companies' security within the
conditions imposed on all VCTs under current and future VCT
legislation applicable to the VCT.
13 July 2021 to 30 September 2022
Following shareholder approval at the General Meeting on 13 July
2021, the New Investment Policy of the VCT is that the Company will
be managed with the intention of realising all remaining assets in
the Portfolio in a prudent manner consistent with the principles of
good investment management and with a view to returning cash to
Shareholders in an orderly manner, whilst protecting the tax
position of Shareholders.
The Company will pursue its investment objective by effecting an
orderly realisation of its assets in a manner that seeks to achieve
a balance between maximising the value received from those assets
and making timely returns of capital to Shareholders. This process
might include sales of individual assets or running off the
portfolio in accordance with the existing terms of the assets, or a
combination of both.
The Company will cease to make any new investments or to
undertake capital expenditure except where, in the opinion of both
the Board and the Investment Adviser (or, where relevant, the
Investment Adviser's successors):
-- the investment is a follow-on investment made in connection
with an existing asset in order to comply with the Company's
pre-existing obligations; or
-- failure to make the follow-on investment may result in a
breach of contract or applicable law or regulation by the Company;
or
-- the investment is considered necessary to protect or enhance
the value of any existing investments or to facilitate orderly
disposals; or
-- any cash received by the Company as part of the realisation
process prior to its distribution to Shareholders will be held by
the Company as cash on deposit and/or as cash equivalents.
Investment strategy
Investee companies generally reflect the following criteria:
-- a well-defined business plan and ability to demonstrate
strong demand for its products and services;
-- products or services which are cash generative;
-- objectives of management and Shareholders which are similarly aligned;
-- adequate capital resources or access to further resources to
achieve the targets set out in its business plan;
-- high calibre management teams;
-- companies where the Investment Adviser believes there are
reasonable prospects of an exit, either through a trade sale or
flotation in the medium term; and
-- a focus on small and long-term renewable energy projects that utilise proven technology.
In the previous financial year, at the General Meeting held on
13 July 2021, the new Investment Policy was adopted to reflect a
realisation strategy and the Company ceasing to make any new
investments.
Asset allocation
During the year the VCT was required to hold 80% of its funds in
VCT qualifying investments. At 30 September 2022, the VCT had a
significant margin over the 80% qualifying holdings requirement.
The VCT aims to maintain a level of up to 90% and therefore its
maximum exposure to qualifying investments will be 90%. The VCT
intends to retain the remaining funds in non-qualifying investments
to fund the annual running costs of the VCT to reduce the risk
profile of the overall portfolio of its fund and to provide
investments which can be realised to fund any follow-on investments
in the investee companies.
It is expected that the VCT shall hold at least eight
investments to provide diversification and risk protection. During
the Managed Wind-Down the number of investments will decrease
following the sale of the VCT's assets. In relation to the VCT, no
single investment (including most loans to investee companies) will
represent more than 15% of the aggregate net asset value of its
fund save where such investment is in an investee company which has
acquired or is to acquire, whether directly or indirectly,
securities in the following companies: AEE Renewables UK 3 Limited,
AEE Renewables UK 26 Limited, South Marston Solar Limited,
Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar
Limited.
Risk Diversification
During the year, the structure of the VCT's funds, and its
investment strategies, have been designed to reduce risk as much as
possible.
The main risk management features include:
-- portfolio of investee companies - the VCT seeks to invest in
at least eight different companies, thereby reducing the potential
impact of poor performance by any individual investment. During the
Managed Wind-Down the number of investments will decrease following
the sale of the VCT's assets;
-- monitoring of investee companies - the Investment Adviser
will closely monitor the performance of all the investments made by
the VCT in order to identify any issues and to enable necessary
corrective action to be taken; and
-- the VCT will ensure that it has sufficient influence over the
management of the business of the investee companies, in
particular, through rights contained in the relevant investment
agreements and other shareholder/constitutional documents.
In respect of the VCT's investment in Lunar 1 Limited and Lunar
2 Limited, the VCT has followed the above risk diversification
strategy with regard to their investments in AEE Renewables UK 3
Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited,
Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar
Limited.
Gearing
It is not intended that the VCT will borrow (other than from
investee companies). However, it will have the ability to borrow up
to 15% of its net asset value * save that this limit shall not
apply to any loan monies used to facilitate the acquisition by the
VCT, whether directly or indirectly, of any shares or securities in
the operational asset / holding companies. **
The VCT has ensured that Lunar 1 Limited and Lunar 2 Limited
have borrowed no more than 90% of their respective net asset values
to facilitate the acquisition, whether directly or indirectly, of
any shares or securities in the following: AEE Renewables UK 3
Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited,
Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar
Limited.
The long-term creditors shown on the Balance Sheet represent
amounts owed to investee companies, which the Board expect to be
repaid in the future by way of dividends from, or the sale of,
these companies.
As at 30 September 2022, the VCT had the ability to borrow
GBP4.5mn in accordance with the articles, and had actual borrowings
of GBPnil.
The VCT has no intention to borrow any funding in the
foreseeable future.
Listing rules
In accordance with the Listing Rules:
(i) the VCT may not invest more than 10%, in aggregate, of the
value of the total assets of the VCT at the time an investment is
made in other listed closed-ended investment funds except listed
closed-ended investment funds which have published investment
policies which permit them to invest no more than 15% of their
total assets in other listed closed-ended investment funds;
(ii) the VCT must not conduct any trading activity which is
significant in the context of the VCT; and
(iii) the VCT must, at all times, invest and manage its assets
in a way which is consistent with its objective of spreading
investment risk and in accordance with its published investment
policy set out in this document. This investment policy is in line
with Chapter 15 of the Listing Rules and Part 6 of the Income Tax
Act.
The Listing Rules have been complied with for the year ended 30
September 2022.
Directors and senior management
Up until 30 September 2022, the VCT had four Non-Executive
Directors, comprising four males. On this date, one Director
retired. The VCT has no employees.
Key performance indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the VCT's success in meeting its
objectives. The Board has identified the VCT's key performance
indicators as Net Asset Value (NAV) Total Return and dividends per
share, the performance of which during the year are in the table
below:
Year ended Year ended
30 September 30 September
2022 2021
----------------------------- ------------- -------------
Net Asset Value Total Return 1.4% (6.7)%
Dividends per share 2.0p nil p
----------------------------- ------------- -------------
See Note 24 for details of the introduction of the Electricity
Generator Levy. On the basis of the scope to which this levy
applies, there is no impact on the current or future revenues
received by the VCT, however the fair value of the portfolio
incorporates the potential additional costs a purchaser may
incur.
These are defined as follows:
Net Asset Value Total Return: the sum of NAV per Ordinary Share,
NAV per 'A' Share and cumulative dividends paid.
Net Asset Value per Ordinary Share: The closing total net asset
position of the VCT as at the reporting date less the total par
value of all 'A' Shares in issue at the reporting date divided by
the total number of Ordinary Shares in issue at the reporting
date.
Net Asset Value per 'A' Share: Par value per 'A' Share.
Cumulative dividends paid: The gross total of all dividends paid
for both Ordinary and 'A' Shares from inception up to the reporting
date.
The total net asset position of the VCT as at the reporting date
is as per the Balance Sheet, while the total number of shares in
issue for both Ordinary and 'A' Shares is disclosed in Note 15.
In addition, the Board considers the VCT's performance in
relation to other VCTs.
The position of the VCT's Net Asset Value Total Return as at 30
September 2022 is shown earlier. A Summary of dividends per Share
is shown on earlier. The VCTs dividend policy is to distribute
surplus funds generated by the underlying investments, subject to
maintaining an appropriate cash reserve within the VCTs to meet
anticipated future requirements. The VCT has an objective of paying
dividends of 5p per share per annum.
Principal risks and uncertainties
Schedule of principal and emerging risks
The other principal and emerging risks faced by the VCT, along
with the steps taken to mitigate these risks, are shown in the
table below. These principally apply during the period until the
underlying assets are sold during the Wind-down process.
Principal Context Specific Possible Mitigation
Risk risks impact
Investment The VCT holds Poor investment Reduction The Investment Adviser
Performance investments decisions in the NAV has significant
in unquoted or strategy of the VCT experience in the
UK businesses or poor monitoring, and the inability renewable energy
in the renewable management of the VCT sector. The Investment
energy sector. and realisation to pay dividends. Adviser also actively
of investments. manages the portfolio,
Adverse weather engaging reputable
conditions, and experienced
low inflation Operations and Maintenance
rates and/or (O&M) contractors.
low power The assets have
prices resulting limited exposure
in below forecast to power prices,
investment due to the use of
returns. the Feed in Tariff
(FiT) and Renewable
Obligation Certificate
(ROC) regimes.
The Board regularly
reviews the performance
of the portfolio,
alongside the Board
of the sister company.
The higher inflation
outlook, whilst
of concern from
the point of view
of the wider UK
and global economy,
is positive for
the owners of subsidised
UK renewable assets.
Although most costs
also rise in line
with inflation,
as does the cost
of servicing the
two debt facilities,
the net benefit
of increased inflation
is strongly positive
since it increases
the inflation linked
revenues more than
it increases the
costs.
------------------------ -------------------- ---------------------- ----------------------------
Loss of The VCT must Breach of The loss of The VCT Qualification
VCT status maintain continued any of the VCT status is actively monitored
compliance rules could would result by the Investment
with the VCT result in in dividends Adviser and the
Regulations, the loss of becoming taxable Administrator, who
which prescribe VCT status. and new Shareholders liaise with the
a number of losing their designated VCT Status
tests and initial tax Adviser. The VCT
conditions. relief. Status Adviser also
The VCT must produces twice yearly
maintain continued reports for the
compliance Board.
with the VCT
Regulations,
which prescribe
a number of
tests and
conditions.
------------------------ -------------------- ---------------------- ----------------------------
Legislative In recent A change in The loss of Both the Investment
years, the government VCT status Adviser and the
changes to policy could would result Administrator closely
VCT Regulations result in in dividends monitor developments
have narrowed a cessation becoming taxable and attend AIC conferences.
the breadth of tax reliefs and new Shareholders The VCT Status Adviser
of permitted or reduction losing their also has significant
investments. of the amount initial tax experience in this
VCTs were of tax relief relief. field and works
established available closely with HMRC.
to encourage to investors Further commentary
private individuals which would on VCT Status is
to invest make them provided.
in early stage less attractive The Investment Adviser
companies to investors. engages with HMT
that are considered and industry representative
to be risky bodies to demonstrate
and have limited the cost benefit
funding options. of VCTs to the economy
The state in terms of employment
provides these generation and taxation
investors revenue.
with tax relief.
------------------------ -------------------- ---------------------- ----------------------------
Regulatory As a listed Any breaches Reduction The VCT Secretary
and compliance entity, the of relevant in the NAV and Administrator
VCT is subject regulations of the VCT have a long history
to the UK could result due to financial of acting for VCTs.
Listing Rules in suspension penalties The Board, Investment
and related of trading and a suspension Adviser and Administrator
regulations. in the VCT's of trading also employ the
shares or in its Shares, services of reputable
financial also leading lawyers, auditors
penalties. to loss of and other advisers
VCT status. to ensure continued
compliance with
its regulatory obligations.
------------------------ -------------------- ---------------------- ----------------------------
Operational The VCT relies Inferior provision Errors in The VCT, the Investment
- VCT level on the Investment of these services, Shareholder Adviser and the
Adviser, Administration thereby leading records, incorrect Administrator engage
Manager and to inadequate mailings, experienced and
other third systems and misuse of reputable service
parties to controls or data, non-compliance providers, the performance
provide many inefficient with key legislation, of which is reviewed
of its services management loss of assets, on an annual basis.
at the VCT of the VCT's breach of The Directors and
level. assets and legal duties the Investment Adviser
its reporting and inadequate regularly review
requirements. financial the service providers
Service providers, reporting. and the procedures
predominantly and policies they
the Registrar, have in place for
hold Shareholders' preventing cyber
personal data attacks.
and there
is a risk
of a cyber
attack on
a provider.
------------------------ -------------------- ---------------------- ----------------------------
Operational At the portfolio Inferior provision Poor investment The VCT, the Investment
- portfolio level, the of these services, performance Adviser and the
level VCT uses third thereby leading due to assets Administrator engage
party O&M to inadequate being offline experienced and
contractors systems and and non-revenue reputable service
managing the controls or generating. providers, the performance
various sites. inefficient of which is reviewed
management on an ongoing basis.
of the VCT's At the portfolio
assets. level, technical
Maintenance reviews and studies
and repairs are conducted on
not carried the assets as appropriate.
out in a timely Repair and reconfiguration
manner. work is carried
out and O&M procedures
are revised to reduce
dependence on overseas
contractors and
specialists.
------------------------ -------------------- ---------------------- ----------------------------
Economic, The VCT's Retrospective A significant The Investment Adviser
political investments changes to negative impact and Board members
and other are heavily the regimes. on performance closely monitor
external exposed to Changes in in respect policy and geo-political
factors the Feed in energy prices of regime developments. However,
Tariff (FiT) and inflation. changes, low the UK Government
and Renewable An increase inflation has a general policy
Obligation in inflation and energy of not introducing
Certificate results in prices can retrospective legislation.
(ROC) regimes. higher interest reduce portfolio The Investment Adviser
Events such charges for revenues. and Board regularly
as the Russian the two debt review the valuation
Federation's facilities. model and its inputs.
invasion of Higher energy prices
Ukraine, inflation and inflation can
and climate improve portfolio
change can performance as returns
also have are directly linked
impacts on to both factors.
portfolio
performance.
------------------------ -------------------- ---------------------- ----------------------------
Change to The VCT operates The current A significant The Investment Adviser
Energy Market within the or future negative impact continuously monitors
regulation UK Energy UK Government of the renewable the regulatory landscape
and policies market which may decide energy generation in the UK. If an
is governed that subsidies assets revenue action that retroactively
by UK regulation provided to reducing the targets these subsides
and could renewable cash availability it would join forces
be subject energy generation of the VCT. with other owners
to change. assets in The Chancellor of these assets
the form of announced and vigorously challenge
feed-in-tariffs at the Autumn such retroactive
(FiTs) and Statement law changes in the
renewable 2022 the introduction courts. All of the
obligation of the Electricity sites owned by the
certificates Generator VCTs are fully-accredited
(ROCs) pose Levy (EGL) which means that
too big a effective there is no risk
burden on 1 January of an individual
electricity 2023. asset losing its
consumers subsidy. The EGL
and reduce does not impact
or even eliminate the VCT's portfolio
them retroactively. given its smaller
Similarly, size, but any potential
other measures acquirer may subsequently
that achieve incur this levy.
a similar
effect such
as special
taxes, a cap
on applicable
inflation
rates, limits
on generated
KWhs that
earn FiTs
and ROCs.
------------------------ -------------------- ---------------------- ----------------------------
Since inception to 13 July 2021
The principal financial risks faced by the VCT, which include
interest rate, market price, investment valuation, credit and
liquidity risks, are summarised within Note 18 to the financial
statements.
Note 18 includes an analysis of the sensitivity of valuation of
the portfolio to changes in each of the key inputs to the valuation
model.
Other principal risks faced by the VCT have been assessed by the
Board and grouped into the key categories outlined below:
-- underperformance;
-- loss of VCT status;
-- VCT regulations;
-- regulatory and compliance;
-- operational;
-- economic, political and other external factors; and
-- government intervention in the renewables market.
13 July 2021 to 30 September 2022
In approving a new Investment Policy for the Company, a number
of risks which are material and currently known to the Company have
been disclosed. Additional risks and uncertainties not currently
known to the Company, or that the Company deems immaterial, may
also have an adverse effect on the Company.
The main risks identified as part of the new Investment Policy
of the Company are:
Risk identified Context Mitigation
Asset diversification In a Managed Wind-Down, None identified.
the value of the portfolio
will be reduced as investments
are realised and concentrated
in fewer holdings, and
the mix of asset exposure
will be affected accordingly.
---------------------------------- -------------------------------------
Ownership All of the VCT's main solar The VCTs will sell their
assets are owned 50:50 shares in each asset simultaneously,
between the VCT and VCT1 so that no VCT holds more
and there are no rights than 50% of the underlying
attached to such ownership assets.
that would allow one company
to force the other to sell
its share in each asset.
---------------------------------- -------------------------------------
Volatility The VCT might experience None identified.
in NAV and/or increased volatility in
share price its Net Asset Value and/or
its share price as a result
of possible changes to
the Portfolio structure
following the adoption
of the new Investment Policy.
---------------------------------- -------------------------------------
Sale of assets The VCT's assets may not The Board has engaged several
be realised at their carrying experts in this field to
value, and it is possible ensure an appropriate sale
that the VCT may not be price is reached. The Directors
able to realise some assets will ensure that the sale
at any value. The VCT's price reflects the best
assets' fair value is linked available offer for the
to estimates and assumptions Company's assets taking
about a variety of matters, into account future income
including macroeconomic generation by the portfolio
considerations, which assumptions and the age and condition
may prove to be incorrect of the assets.
and which are subject to
change. A material change
of governmental, economic,
fiscal, monetary or political
policy, may result in a
reduction in the value
of the VCT's assets on
sale.
---------------------------------- -------------------------------------
Sale of assets Sales commissions, liquidation The Investment Adviser
costs, taxes and other prepares detailed cashflow
costs associated with the forecasts which are presented
realisation of the VCT's to the Board quarterly.
assets together with the The forecasts include the
usual operating costs of additional costs expected
the VCT will reduce the to be incurred during the
cash available for distribution managed wind-down of the
to the Shareholders. VCT.
---------------------------------- -------------------------------------
Sale of assets A sale of the VCT's assets The Board has engaged several
may prove materially more experts in this field,
complex than anticipated, to ensure against an extended
and the distribution of handover period. If an
proceeds to Shareholders extended handover period
may be delayed by a number occurs then it is the Directors
of factors, including, intention to ensure that
without limitation, the the sale value obtained
ability of a liquidator will ultimately be in Shareholders
to make distributions to interests.
Shareholders.
---------------------------------- -------------------------------------
Viability statement
In accordance with Provisions 33 and 36 of the 2019 AIC Code of
Corporate Governance, the Directors have carried out a robust
assessment of the emerging and principal risks facing the VCT that
would threaten its business model, future performance, solvency or
liquidity, and have assessed the prospects of the VCT over a longer
period than the 12 months required by the 'Going Concern'
provision.
The Board has conducted this review for a period of three years
from the balance sheet date as developments are considered to be
reasonably foreseeable over this period. The period of review has
been shortened from the prior year due to the commencement of the
Managed Wind-Down of the VCT. Following the results of the
continuation vote at the 2021 AGM and the Shareholders' subsequent
approval of the Managed Wind-Down of the Company at the 2021
General Meeting, the Board still considers that the VCT remains
viable up until the point at which its assets are fully sold, or
the voluntary liquidation completed, and as such the Board are
satisfied that a three-year viability assessment remains
applicable.
In making the viability assessment, the Board has taken the
following factors into consideration:
-- the nature and liquidity of the VCT's portfolio (long-term, revenue generating fixed assets);
-- the sales process currently underway to realise the VCT's renewable assets;
-- the potential impact of the Principal Risks and Uncertainties;
-- maintaining VCT approval status;
-- operating expenditure; and
-- future dividends.
The Board is satisfied that the underlying assets held by the
SPVs have been built to a sufficient quality and there are no
current indications that the assets will degrade substantially over
the period. It is also considered highly unlikely that the
renewable portfolio would suffer from such poor irradiation and
severe degradation that it would be unable to generate income over
the period. The improvement in power prices and the benefit of
higher inflation on the portfolio performance has improved the
prospects for returns materially. Asset life, along with the other
inputs to the valuation model, are discussed further in Note 2.
The Board also noted that the SPVs have very good debt cover and
that there are sufficient cash reserves at the SPV level, available
to be paid up to the VCT through dividends, reverse loans or the
repayment of existing shareholder loans, to cover debt and running
costs over the review period.
The Board have assessed the VCT's ability to cover its annual
running costs under several stress scenarios evaluating the impact
of receiving lower dividends from the SPV level and the impact of
higher VCT and SPV level running costs. The Board noted that under
none of these scenarios was the VCT unable to cover its costs.
The Directors believe that the VCT is well placed to manage its
business risks successfully. Based on the results, the Board
confirms that, taking into account the VCT's current position and
subject to the principal risks faced by the business, the VCT will
be able to continue in operation and meet its liabilities as they
fall due for a period of at least three years from the balance
sheet date, notwithstanding that the VCT is currently undergoing a
Managed Wind-down and may be wound up in this timeframe.
Directors' remuneration
It is a requirement under The Companies Act 2006 for
Shareholders to vote on the Directors' remuneration every three
years, or sooner if the VCT wants to make changes to the policy.
The Directors' remuneration policy for the three-year period from
25 June 2020 is set out in the Remuneration Report.
Annual running costs cap
The annual running costs for the year are capped at 3.0% of net
assets; any excess will either be paid by the Investment Adviser or
refunded by way of a reduction of the Investment Adviser's fees.
Annual Running Costs for the year to 30 September 2022 were 2.3%
(2021: 2.4%) and therefore less than 3.0% of net assets.
Performance Incentive
The structure of the 'A' Shares, whereby Management owns one
third of the 'A' Shares in issue (known as the "Management 'A'
Shares"), acts as a Performance Incentive mechanism. The allocation
to the 'A' shares of any revenue or capital dividends declared by
the VCT, will be increased if, at the end of each year, the hurdle
is met, which is illustrated below:
i) Shareholders who invested under the offer for subscription
receive dividends in excess of 5.0p per Ordinary Share in any one
financial period; and
ii) one Ordinary Share and one 'A' Share has a combined net asset value of at least 100.0p.
The Performance Incentive is calculated each year and is not
based on cumulative dividends paid.
A summary of how proceeds are allocated between Shareholders and
Management, before and after the hurdle is met, and as dividends
per Ordinary Share increase is as follows:
Hurdle criteria:
---------------------------------------------------------
Annual dividend per Ordinary Share 0-5p 5-10p >10p
Combined NAV Hurdle N/A >100p >100p
----------------------------------- ------ ----- -----
Allocation:
---------------------------------------------------------
Shareholders 99.97% 80% 70%
Management 0.03% 20% 30%
----------------------------------- ------ ----- -----
As the NAV as at 30 September 2022 was below 100p, the NAV
hurdle for the year was not met and no dividend was paid during the
year, therefore there was no Performance Incentive paid.
Pursuant to historic financial intermediary arrangements with
Hazel Capital LLP, Haibun , of which Stuart Knight (Director of
Gresham House Renewable Energy VCT1 plc until his resignation on 30
September 2022) is a Designated Member, and CH1, of which Matthew
Evans is a Designated Member, receive approximately 8.0% of the
Performance Incentive payments made to Management in respect of the
'Management 'A' Shares' by the VCT and its sister company,
VCT1.
VCT status
The VCT has reappointed Philip Hare & Associates LLP (Philip
Hare) to advise it on compliance with VCT requirements, including
evaluation of investment opportunities as appropriate and regular
review of the portfolio. Although Philip Hare works closely with
the Investment Adviser, they report directly to the Board.
Compliance with the VCT regulations for the year under review is
summarised as follows:
Position
at the
year ended
30 September
2022
------------------------------------------------------------ -------------
1... To ensure that the VCT's income in the period
has been derived wholly or mainly (70% plus) from shares
or securities; 100.0%
2... To ensure that the VCT has not retained more than 22.4%*
15% of its income from shares and securities; - see
note below
3... To ensure that the VCT has not made a prohibited
payment to Shareholders derived from an issue of shares
since 6 April 2014; 0.0%
4... To ensure that at least 80% by value of the VCT's
investments has been represented throughout the period
by shares or securities comprised in qualifying holdings
of the VCT; 84.9%
5... To ensure that at least 70% by value of the VCT's
qualifying holdings has been represented throughout
the period by holdings of eligible shares (disregarding
investments made prior to 6 April 2018 from funds raised
before 6 April 2011); 93.4%
6... To ensure that, of funds raised on or after 1 Complied
October 2018, at least 30% has been invested in qualifying
holdings by the anniversary of the end of the accounting
period in which the shares were issued;
7... To ensure that no holding in any company has at Complied
any time in the period represented more than 15% by
value of the VCT's investments at the time of investment;
8... To ensure that the VCT's ordinary capital has Complied
throughout the period been listed on a regulated European
market;
9... To ensure that the VCT has not made an investment Complied
in a company which causes it to receive more than the
permitted investment from State Aid sources;
10. To ensure that since 17 November 2015, the VCT Complied
has not made an investment in a company which exceeds
the maximum permitted age requirement;
11. To ensure that since 17 November 2015, funds invested Complied
by the VCT in another company have not been used to
make a prohibited acquisition; and
12. To ensure that since 6 April 2016, the VCT has Complied
not made a prohibited non-qualifying investment.
------------------------------------------------------------ -------------
* As the VCT has negative revenue reserves, the Company's VCT
status adviser has confirmed that this requirement is deemed to
have been met for VCT compliance purposes.
The Directors, with the help of the Investment Adviser, actively
monitor and ensure the investee companies have less than GBP5mn
state backed financing in a 12-month period listed in order to
remain compliant with the VCT regulations.
Share Buybacks
The Board has decided that the VCT will not be buying in Shares
for the foreseeable future as highlighted in the Interim Results,
as the VCT needs to conserve such cash as it generates for the
managed wind-down of the VCT and the payment of dividends.
Future prospects
The Board's assessment of the outlook and future strategy of the
VCT are set out in the Chairman's Statement and Investment
Adviser's Report.
Sustainable Investing
The VCT seeks to conduct its affairs responsibly and the
Investment Adviser is encouraged to consider environmental, social
and community issues, where appropriate, when making investment
decisions and the Board will continue to monitor the Adviser's
progress in these areas.
The Board is conscious of its potential impact on the
environment as well as its social and corporate governance
responsibilities. The Investment Adviser has presented its
Environmental, Social and Governance (ESG) strategy to the
Board.
The VCT, whilst not having an explicit sustainable investment
objective, demonstrates clear promotion of environmental
characteristics by investing in technologies that contribute to
climate change mitigation by supporting a decarbonisation of the
energy system in the UK and a net zero economy underpinned by cheap
clean electricity.
Sustainable Investing at Gresham House
Gresham House, the Investment Adviser, is committed to
sustainable investment as an integral part of its business
strategy. In 2021, Gresham House further enhanced its approach to
sustainability by publishing its first Corporate Sustainability
Strategy (CSS) which supports its GH25 ambition to "become a leader
in sustainable investment, including Environmental, Social and
Governance (ESG)". The CSS details objectives and actions to ensure
its progresses against its ambition to be a leader in sustainable
investment and that ESG factors and stewardship responsibilities
continue to be integrated into the management of each asset
division. More information on Gresham House's sustainability
approach and CSS can be found in its Sustainable Investment
Report.
Policies and processes
Gresham House publishes a Sustainable Investing Policy along
with asset specific policies, including the New Energy Sustainable
Investment Policy, which covers Gresham House's sustainable
investment commitments, how the investment processes meet these
commitments and the application of the Sustainable Investment
Framework.
The Sustainable Investment Team assesses adherence to the
commitments in the Sustainable Investment Policies on an annual
basis and provides updates on the findings of these assessments to
the Sustainability Executive Committee and Board Sustainability
Committee.
Sustainability Executive Committee
The Investment Adviser's Sustainable Investing Committee (SIC),
formed at the start of 2020, evolved in 2021 to become the
Sustainability Executive Committee (Sustainability ExCo). The aim
of this evolution was to elevate responsibility for sustainability
to senior executive level, reflecting the importance and
materiality of sustainability to the business. The Sustainability
ExCo meets regularly to drive sustainability related deliverables
outlined in the CSS, as well as providing a forum to share best
practice, ideas and education. The Committee is chaired by the
Director of Sustainable Investment and has representation from the
Gresham House Group Management Committee (GMC) and heads of
divisions including investment divisions, sales, compliance and
marketing.
New Energy Sustainable Investment Committee
In 2022, the New Energy division evolved its structures with
regards to the ownership and development of Sustainable Investment
objectives and actions for the division by creating a New Energy
Sustainable Investment Committee (NESIC). The purpose of the New
Energy Sustainability Committee's purpose is to provide leadership,
strategic direction and implement processes to enhance the
integration of sustainability across the New Energy division,
supporting the achievement of fund-specific objectives and the
CSS.
The core objectives of the NESIC include:
-- To become the experts in sustainability within the New Energy
division and apply their knowledge to their areas of business.
-- To be advocates for sustainable investment and innovation for the division.
-- To set and oversee the New Energy sustainability objectives
and targets at fund and divisional level, aligned to Gresham House
Corporate Sustainability Strategy.
-- To ensure key sustainability related risks and opportunities
are proactively identified and managed by the division.
-- To ensure that New Energy SI-related tools, processes,
framework and data remain relevant and meet commitments made in the
New Energy Sustainable Investment Policy to ensure the division is
able to evidence SI contribution and progress to external
parties.
New Energy Sustainability Objectives
The NESIC developed and agreed a set of sustainability
objectives for the division applicable to all assets under
management. The objectives were determined by identifying the ESG
topics deemed most material to the assets. They were also selected
to align with the core topics and objectives in the Investment
Adviser's 2025 Corporate Sustainability Strategy.
The objectives will focus future sustainability-related
activities for the division to 2025 and are detailed below. The
funds will provide updates against the objectives in future
reporting.
Table 1: New Energy Sustainability Objectives
Topic 2025 Objective
G: Commitment to Sustainability Meet all relevant regulatory sustainability
requirements.
----------------------------------------------------
G: Risk and Compliance Become a leader in the measurement and disclosure
of ESG risks and outcomes.
----------------------------------------------------
Have a comprehensive set of ESG KPIs to support
investment and asset management decisions
and regularly report these to stakeholders.
----------------------------------------------------
G: Marketplace Responsibility Have market-leading Sustainable Investment
policies and processes and ensure all investment
activities meet commitments at a high-quality
level.
----------------------------------------------------
G: Governance & Ethics Engage with key counterparties to increase
capacity of renewable energy or battery storage
and the contribution of these assets to a
low carbon economy.
----------------------------------------------------
E: Climate Change Demonstrate the role of New Energy in the
& Pollution energy transition and understand the carbon
footprint of the full lifecycle of assets.
----------------------------------------------------
E: Natural Capital Fully understand natural capital impacts
and dependencies and aim to demonstrate enhancement
of biodiversity for all sites.
----------------------------------------------------
S: Supply Chain Management Determine best-in-class suppliers to work
with long-term, and encourage more responsible
supplier practices, reducing supply chain
sustainability risks.
----------------------------------------------------
E: Waste Management Incorporate full lifecycle analysis into
investment and supplier decision making (product
design, construction, operation and end-of-life
use) to reduce negative environmental and
social impacts of assets.
----------------------------------------------------
Develop a market-leading approach to end-of-life
use.
----------------------------------------------------
Risk and Compliance: Embedding ESG factors
As the assets within the VCTs are all well-established, the
assessment of ESG is applied as part of our asset management
activities. All Operations & Maintenance providers are required
to report on various ESG factors, including Health & Safety and
Environmental risks or incidents. Any significant incidents must be
reported to us within 24 hours. Furthermore, they are also expected
to be proactive and to make recommendations for improvements.
There is work underway to expand the ESG key performance
indicators (KPIs) measured, reported, and monitored by the New
Energy division for all assets under management. This includes the
VCTs. This reflects increased investor and regulatory demand for
ESG data and the Adviser's ambitions to enhance ESG data and
transparency. It is anticipated that the expanded ESG data will be
used by investment teams and asset management teams to increase
their understanding of the operational ESG performance of assets
under management and to identify any material ESG risks. It is
expected that the asset management team will aim to improve ESG
metrics over time, as feasible within the context of the existing
fund mandate. Examples of expanded ESG factors to be measured
include biodiversity and supply chain-related data.
Supply Chain Management
The Investment Adviser published its first Supply Chain Policy
in 2020. The Supply Chain Policy covers material ESG topics and
places obligations on suppliers (including contractors) to ensure
their own compliance, as well as the compliance of their
subcontractors, with the Policy. It also requires suppliers to
monitor and report any non-compliance to the Investment
Adviser.
Since July 2021, all new supplier contracts have been updated to
include clauses specifically mandating suppliers to declare that
they have not been involved in any practices linked to modern
slavery and that they will permit on-site audits at any time should
we have reason to suspect instances of slavery and human
trafficking. Any VCT suppliers with contracts due for renewal will
be obliged to update clauses relating to modern slavery within
their contract terms.
In addition, all operators of Gresham House managed renewables
projects were asked to complete a modern slavery questionnaire to
assess modern slavery related risk to the New Energy division's
renewables assets in 2021. An updated version of this questionnaire
is due to be sent out after the publication of this report to
determine any material changes regarding the risk profile
associated with this topic. Responses to the questionnaire will be
reviewed and potential engagement topics for suppliers
identified.
Climate Change & Pollution
Based on the renewable electricity generated by the VCT wind and
solar assets, 33,378MWh, it is estimated that the fund avoided
14,419 tonnes of CO (2) 1 and powered circa 8,442 homes 2 during
the reporting period.
As a UK quoted company the VCT is required to report on its
Greenhouse Gas (GHG) Emissions. Emissions can be broken down into
three categories by the Greenhouse Gas Protocol:
-- Scope 1: all direct emissions from the activities of the VCT or under its control.
-- Scope 2: indirect emissions from electricity purchased and used by the VCT.
-- Scope 3: all other indirect emissions from activities of the
VCT, occurring from sources that it does not use or control.
The VCT does not itself produce any Scope 1 or Scope 2 carbon
emissions as it does not itself directly or indirectly create
carbon emissions by generating or purchasing electricity for its
own use. The reporting of Scope 1 and 2 carbon emissions for the
fund as 0 tCO (2) e is in line with industry standards and guidance
by an external consultant that supported the Adviser in the carbon
footprint measurement for all Gresham House financed emissions. The
Investment Adviser continues to consider how best to monitor and
measure the Scope 3 emissions relevant to the VCT and is working
with an external carbon consultant to progress this at time of
publication.
Director's Duties
Directors must consider the long-term consequences of any
decision they make. They must also consider the interests of the
various stakeholders of the VCT, the impact the VCT has on the
environment and community, and operate in a manner which maintains
their reputation for having high standards of business conduct and
fair treatment between Shareholders.
Fulfilling this duty naturally supports the VCT in its
Investment Objective to maximise tax-free capital gains and income
to Shareholders and helps ensure that all decisions are made in a
responsible and sustainable way. In accordance with the
requirements of the Companies (Miscellaneous Reporting) Regulations
2018, and the AIC Code, the information overleaf explains how the
Directors have individually and collectively discharged their
duties under section 172 of the Companies Act 2006.
Section 172
The Section 172 statement forms part of the Strategic
Report.
The Directors consider that in conducting the business of the
VCT over the course of the year they have complied with Section
172(1) of the Companies Act 2006 (the Act) by fulfilling their duty
to promote the success of the VCT and to act in the way they
consider, in good faith, would be most likely to promote the
success of the VCT for the benefit of its members as a whole,
whilst also considering the broad range of stakeholders who
interact with and are impacted by the VCT's business, especially
with regard to major decisions.
Role of the Board
The Board, which comprised of four independent Non-Executive
Directors during the financial year and, following the Directorate
change effective from 30 September 2022, comprised of three
independent Non-Executive Directors at the year end, with a broad
range of skills and experience, retains responsibility for taking
all decisions relating to the VCT's principal objectives, corporate
governance and strategy, and for monitoring the performance of the
VCT's service providers.
The Board aims to ensure that the VCT operates in a transparent
culture where all parties are able to contribute to the decisions
made and challenge where necessary with the overall aim of
achieving the expectations of Shareholders and other stakeholders
alike.
In discharging their section 172 duties the Directors have
regard to the likely consequences of any decisions during the
managed Wind-Down process; the need to foster the VCT's business
relationships with suppliers, customers and others; the impact of
the VCT's operations on the community and environment; and the
desirability of the VCT maintaining a reputation for high standards
of business conduct, and need to act fairly as between members of
the VCT.
The Board works very closely with the Investment Adviser and
Company Secretary to ensure there is visibility and openness in how
the affairs of the VCT are being conducted. The VCT co-owns all its
assets with Gresham House Renewable Energy VCT1 plc (VCT1).
The VCT is an investment vehicle, externally managed, has no
employees, and is overseen by an independent Non-Executive Board of
Directors. As such the Board considers its stakeholders to be the
Shareholders, the service providers, including the Investment
Adviser, and regulatory bodies.
Following the adoption of the new Investment Policy from 13 July
2021, the VCT's principal objective is to manage the Company with
the intention of realising all remaining assets in the portfolio in
a prudent manner consistent with the principles of good investment
management and with a view to returning to Shareholders in an
orderly manner.
Key Stakeholders
Shareholders
The Board engages with the VCT's Shareholders in a variety of
ways, including annual and half-yearly reports and accounts, an AGM
and information provided on the Investment Adviser's website as
well as ad hoc communications with shareholders. The Registrar is
available to help Shareholders to manage their shareholding.
The VCT welcomes and encourages attendance and participation
from Shareholders at the AGM and values any feedback and questions
it may receive from Shareholders ahead of and during the AGM.
The Board communicates with its Shareholders through the
publication of Annual and Half-Year reports which are available on
the VCT's website
(https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/)
and sent to Shareholders.
The Board is also happy to respond to any written queries made
by Shareholders during the course of the period, or to meet with
major Shareholders if so requested. In addition to the formal
business of the AGM, representatives of the Investment Adviser and
the Board are available to answer any questions a Shareholder may
have. During the period the Board engaged with Shareholders on
several matters, including the update on the Sale of Solar Assets.
Details of this is included in the Chairman's statement.
Investment Adviser
The Board has delegated authority for day-to-day management of
the VCT to the Investment Adviser. The Board then engages with the
Adviser in setting, approving and overseeing the execution of the
business strategy and related policies. The Investment Adviser
attends Valuation Forums, Board meetings and Audit Committee
meetings to update the Directors on the performance of the
portfolio. At every Board meeting a review of financial and
operational performance, as well as legal and regulatory
compliance, is undertaken. Since the General Meeting held in the
previous financial year on 13 July 2021, the Managed Wind-Down of
the Company has been reviewed at each quarterly Board meeting and
at ad hoc board meetings being held as and when required. The Board
also reviews other areas over the course of the financial year
including the VCT's business strategy; key risks;
stakeholder-related matters; diversity and inclusion; environmental
matters; corporate responsibility and governance, compliance and
legal matters.
The Investment Adviser's performance is critical for the VCT to
successfully deliver its investment strategy and meet its
objectives.
Service Providers
The VCT has a limited pool of service providers which include
the Investment Adviser, the Administrator, the Registrar, the Legal
Advisers, the Auditor, the Tax Adviser and the VCT Status
Advisers.
These service providers are fundamental to ensuring that as a
business the VCT meets the high standards of conduct that the Board
sets. The Board meets at least annually to review the performance
of the key service providers and receives reports from them at
Board and Committee meetings.
The Board has regular contact with the two main service
providers: the Investment Adviser and Administrator through
quarterly Board meetings, with the Chairman and Audit Chairman
meeting more regularly. The Audit Committee also reviews the
controls of the VCT's service providers on an annual basis to
ensure that they are performing their responsibilities in line with
Board expectations and providing value for money.
Regulators/Government
The Board regularly considers how it meets regulatory and
statutory obligations and follows voluntary and best-practice
guidance, including how any governance decisions it makes impact
its stakeholders both in the shorter and in the longer-term.
The VCT engages an external adviser to report half-yearly on its
compliance with the VCT rules and a Company Secretary report is
tabled quarterly at Board meetings.
Environmental, Social and Governance (ESG)
Details on ESG are included above.
Key Board decisions and specific examples of Stakeholder
consideration during the year
The Board is fully engaged in both oversight and the general
strategic direction of the VCT. During the year, the Board's main
strategic discussions focused around the below items.
Managed Wind-Down process
Following the General Meeting held during the previous financial
year on 13 July 2021, the Shareholders resolved to approve the
Managed Wind-Down of the Company and associated amendments to the
Company's Investment Policy. Under the Managed-Wind Down process,
the Company will be managed with the intention of realising all
assets in its Portfolio in a prudent manner consistent with the
principles of good investment management and with a view achieving
fair value for the Company's assets and subsequently returning cash
to Shareholders in an orderly manner.
The Board takes seriously its responsibilities to uphold the
highest standards of corporate governance and is open to
constructive dialogue with Shareholders and shareholder bodies.
By order of the Board
JTC (UK) Limited
Company Secretary
Company number: 04301763
Registered office:
The Scalpel, 18th Floor
52 Lime Street
London EC3M 7AF
30 January 2023
Report of the Directors
The Directors present the twelfth Annual Report and Accounts of
the VCT for the year ended 30 September 2022.
The Corporate Governance Report forms part of this report.
Share capital
At the year end, the VCT had in issue 26,133,036 Ordinary Shares
and 39,463,845 'A' Shares. There are no other share classes in
issue.
All shares have voting rights; each Ordinary Share has 1,000
votes and each 'A' Share has one vote. Where there is a resolution
in respect of a variation of the rights of 'A' Shareholders or a
Takeover Offer, the voting rights of the 'A' Shares rank pari-passu
with those of Ordinary Shares.
Pursuant to the articles and subject to a special resolution,
the VCT is able to make market purchases of its own shares, up to a
maximum number of shares equivalent to 14.99% of the total number
of each class of issued shares from time to time.
Substantial interests
As at 30 September 2022, and the date of this report, the VCT
had not been notified of any beneficial interest exceeding 3% of
the issued share capital.
Results and dividends
Pence Pence
per Ord per 'A'
GBP'000 Share Share
--------------------- ------- -------- --------
Profit for the year 525 2.0 -
30 Sep 2022 Dividend 523 2.0 -
--------------------- ------- -------- --------
Directors
The Directors of the VCT during the year and their beneficial
interests in the issued Ordinary Shares and 'A' Shares at 30
September 2022 and at the date of this report are detailed in the
Remuneration Report.
It is the Board's policy that Directors do not have service
contracts, but each Director is provided with a letter of
appointment. The Directors' letters of appointment, are terminable
on three months' notice by either side. They are available on
request at the Company's registered office during business hours
and will be available for 15 minutes prior to and during the
forthcoming AGM.
The Articles of Association require that each Director retires
by rotation every three years and being eligible, offer themselves
for re-election. Accordingly, Matthew Evans will stand for
re-election in 2023.
The Directors' appointment dates and the date of their last
election are shown below:
Date of Most recent
original date of
Director appointment re-election
-------------------------- ------------ ------------
Christian Yates (Chairman) 28/09/2010 22/03/2021
Matthew Evans 07/11/2017 25/06/2020
Giles Clark* 31/01/2017 22/03/2021
Andrew Donovan 07/12/2020 22/03/2021
-------------------------- ------------ ------------
* Giles Clark resigned as a Director on 30 September 2022.
The Directors believe that the Board has an appropriate balance
of skills, experience, independence and knowledge of the Company
and the sector in which it operates to enable it to provide
effective strategic leadership and proper guidance of the
Company.
The Board confirms that, following the evaluation process set
out in the Corporate Governance Statement, the performance of the
Directors is, and continues to be, effective and demonstrates
commitment to the role.
Each Director is required to devote such time to the affairs of
the VCT as the Board reasonably requires.
Annual general meeting
The VCT's twelfth Annual General Meeting (AGM) will be held at
The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF at 12.00
pm on 21 March 2023. The Notice of the Annual General Meeting and
Form of Proxy will be circulated with this Annual Report.
Any change of format will be notified via the company's website
and Regulatory Information Service.
Auditor
At the 2022 AGM, the Shareholders approved the re-appointment of
BDO LLP as the auditor. Separate resolutions will be proposed at
the 2023 AGM to re-appoint BDO LLP and to authorise the Directors
to determine their remuneration.
Directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors, the Directors' Remuneration
Report and the financial statements in accordance with applicable
law and regulations. They are also responsible for ensuring that
the Annual Report includes information required by the Listing
Rules of the Financial Conduct Authority.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom accounting standards and applicable law), including
Financial Reporting Standard 102, the financial reporting standard
applicable in the UK and Republic of Ireland (FRS 102). Under
company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the VCT and of the profit or loss
of the VCT for that period.
In preparing these financial statements the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the VCT will continue in
business. As explained in Note 1 to the financial statements, as
last year, following the continuation vote on 13 July 2021, the
Directors do not believe the going concern basis to be appropriate
and, in consequence, these financial statements have not been
prepared on that basis.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the VCT's
transactions, to disclose with reasonable accuracy at any time the
financial position of the VCT and to enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the VCT and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
In addition, each of the Directors considers that the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for Shareholders to assess the
VCT's position and performance, business model and strategy.
Directors' statement pursuant to the disclosure and transparency
rules
Each of the Directors, confirms that, to the best of each
person's knowledge:
-- the financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice and the
2014 Statement of Recommended Practice (updated in April 2021),
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' give a true and fair view of the assets,
liabilities, financial position and profit or loss of the VCT;
and
-- that the management report, comprising the Chairman's
Statement, Investment Adviser's Report, Review of Investments,
Strategic Report, and Report of the Directors includes a fair
review of the development and performance of the business and the
position of the VCT together with a description of the principal
risks and uncertainties that it faces.
Insurance cover
Directors' and Officers' liability insurance cover is held by
the VCT in respect of the Directors.
Website publication
The Directors are responsible for ensuring the Annual Report and
the Financial Statements are made available on a website. Financial
statements are published on the website of the Investment Adviser
(https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/)
in accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The Directors'
responsibility also extends to the on-going integrity of the
financial statements contained therein.
Corporate governance
The VCT's Corporate Governance statement and compliance with,
and departures from the 2019 AIC Code of Corporate Governance which
has been endorsed by the Financial Reporting Council
(www.frc.org.uk) is shown in the Governance Report.
Other matters
Information in respect of risk management and risk
diversification has been disclosed within the Strategic Report.
Information in respect of greenhouse emissions which is normally
disclosed within the Report of the Directors has been disclosed
within the Strategic Report.
During the year, the VCT did not have any employees (2021: nil)
and therefore there is no comparison data available for the change
in Directors' remuneration to average change in employee
remuneration.
Events after the end of the reporting period
Following the period end the VCT paid a dividend in respect of
the year ended 30 September 2022, of 2p per Ordinary Share. This
dividend was paid on 27 January 2023 to Shareholders on the
register at 6 January 2023.
Statement as to disclosure of information to the Auditor
The Directors in office at the date of the report have
confirmed, as far as they are aware, that there is no relevant
audit information of which the Auditor is unaware. Each of the
Directors has confirmed that they have taken all the steps that
they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that it
has been communicated to the Auditor.
For and on behalf of the Board
Christian Yates
Chairman
30 January 2023
Directors' Remuneration Report
Annual statement of the remuneration committee
The Remuneration Committee consists of each of the VCT
Directors. The Remuneration Committee assists the Board to fulfil
its responsibility to Shareholders to ensure that the remuneration
policy and practices of the VCT reward directors' fairly and
responsibly, with a clear link to corporate and individual
performance, having regard to statutory and regulatory
requirements. The Remuneration Committee meets as and when required
to review the levels of Directors' remuneration. The Committee is
also responsible for considering the need to appoint external
remuneration consultants.
During the financial year 2020/2021, in recognition of the
increased oversight responsibilities, the Remuneration Committee
approved additional special payments to the Chairman, Audit
Chairman and Giles Clark (as the previous Audit Chairman),
calculated at 25% of their annual fee. The additional special
payments were split into two payment tranches. The first tranche
was paid during the 30 September 2021 financial year for the
additional oversight responsibilities relating to the 2021
financial year and the second tranche was paid in October 2021 for
additional oversight responsibilities relating to the 2022
financial year. Neither the Chairman, the Audit Chairman or Giles
Clark voted upon their own additional special payments.
Giles Clark was the Audit Committee chairman until 10 May 2021,
stepping away from this position to manage the sales process, and
Andrew Donovan was then appointed as the chairman of the Audit
Committee with effect from 11 May 2021.
Following a review of the remuneration during the financial year
2021/2022, the Remuneration Committee recommended a 5% increase in
the directors' remuneration which was approved by the Board. These
increases took effect from 1 October 2022. The changes to the
Directors' remuneration are outlined in this report.
Details of the specific levels of remuneration to each Director
as well as the fee increases are outlined in the report.
Report on remuneration policy
Below is the VCT's remuneration policy. This policy applies from
25 June 2020. Shareholders must vote on the remuneration policy
every three years, or sooner, if the VCT want to make changes to
the policy. The policy was last approved by Shareholders at the
2020 AGM and will be presented to the Shareholders for approval
again at the 2023 AGM. There are currently no planned changes to
the remuneration policy.
The VCT's policy on Directors' remuneration is to seek to
remunerate Board members at a level appropriate for the time
commitment required and degree of responsibility involved and to
ensure that such remuneration is in line with general market rates.
Non-Executive Directors will not be entitled to any performance
related pay or incentive.
Directors' remuneration is also subject to the VCT's Articles of
Association which provide that:
(i) the aggregate fees will not exceed GBP100,000 per annum
(excluding any Performance Incentive fees to which the Directors
may be entitled from time to time); and
(ii) the Directors shall be entitled to be repaid all reasonable
travelling, hotel and other expenses incurred by them respectively
in or about the performance of their duties as Directors.
Agreement for services
Information in respect of the Directors' agreements has been
disclosed within the Report of the Directors.
Performance incentive
The structure of 'A' Shares, whereby Management (being staff of
the Investment Adviser) owns one third of the 'A' Shares in issue
(known as the "Management 'A' Shares"), enables a payment, by way
of a distribution of income, of the Performance Incentive to the
Management Team.
The NAV hurdle was not met for the financial year end 30
September 2022 and no dividend was paid during the year, therefore
there was no Performance Incentive.
Annual report on remuneration
The Board has prepared this report in accordance with the
requirements of the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 (SI2008/410) and the
Companies Act 2006.
Under the requirements of Section 497 of the Companies Act 2006,
the VCT's Auditor is required to audit certain disclosures
contained within the report. These disclosures have been
highlighted and the audit opinion thereon is contained within the
Auditor's Report.
Directors' remuneration (audited)
Directors' remuneration for the VCT for the year under review is
shown in the table below.
The basic annual fees of the Directors during the year were
GBP26,500 for the Chairman, GBP24,000 for the Audit Committee
Chairman and GBP21,500 for the other Non-Executive Directors. In
addition, as reported above, an additional special payment was made
to the Chairman, Audit Chairman and Giles Clark in October 2021 for
additional oversight responsibilities relating to the 2022
financial year.
Effective 1 October 2022, an increase of 5% will be applied to
director fees. This increase is within the limit set by the
Remuneration Policy and is show in the table below:
Additional Additional
Special Special
Payment Total Payment Total
Year ended for the Year ended Year ended for the Year ended
Current 30 September year end 30 September 30 September year end 30 September
Annual 2022 30 September 2022 2021 30 September 2021
Fee fee 2022 fee fee 2021 fee
GBP GBP GBP GBP GBP GBP GBP
--------------- ------- ------------- ------------- ------------- ------------- ------------- -------------
Christian
Yates 27,825 26,500 N/A 26,500 26,500 5,482 31,982
Matthew
Evans 22,575 21,500 N/A 21,500 21,500 N/A 21,500
Andrew Donovan 25,200 24,000 406 24,406 18,533 1,945 20,478
Giles Clark - 21,500 630 22,130 23,020 3,019 26,039
--------------- ------- ------------- ------------- ------------- ------------- ------------- -------------
Totals 75,600 93,500 1,036 94,536 89,553 10,446 99,999
--------------- ------- ------------- ------------- ------------- ------------- ------------- -------------
No other emoluments, pension contributions or life assurance
contributions were paid by the VCT to, or on behalf of, any
Director. The VCT does not have any share options in place.
Annual Percentage Change in Directors' Remuneration
The following tables sets out the annual percentage change in
Directors' fees for the year up to 30 September 2022:
% change % change % change
for the year for the year for the year
to to to
30 September 30 September 30 September
2022 2021 2020
---------------- ------------- ------------- -------------
Christian Yates 0 6 0
Matthew Evans 0 7.5 0
Andrew Donovan 0 N/A N/A
Giles Clark 0 6.7 0
---------------- ------------- ------------- -------------
Directors' Shareholding (Audited)
The Directors of the VCT during the year and their beneficial
interests in the issued Ordinary Shares and 'A' Shares at 30
September 2022 and at the date of this report were as follows:
At the date At At
of 30 September 30 September
Directors this report 2022 2021
---------------- ---- ------------ ------------- -------------
Christian Yates Ord 27,789 27,789 27,789
----------------
'A' 2,624,185 2,624,185 2,624,185
--------------------- ------------ ------------- -------------
Matthew Evans Ord - - -
----------------
'A' - - -
--------------------- ------------ ------------- -------------
Giles Clark* Ord - - -
----------------
'A' - - -
--------------------- ------------ ------------- -------------
Andrew Donovan Ord - - -
----------------
'A' - - -
--------------------- ------------ ------------- -------------
* On 30 September 2022, Giles Clark resigned from the Board.
Statement of voting at AGM
Remuneration report
At the AGM on 23 March 2022, the votes in respect of the
resolution to approve the Director's Remuneration Report were as
follows:
In favour 89.60%
----------- -----------
Against 10.40%
----------- -----------
Withheld nil votes
----------- -----------
Remuneration policy
At the 2020 AGM, when the remuneration policy was last put to a
Shareholder vote, 99.78% voted for the resolution, showing
significant shareholder support.
Relative importance of spend on pay
The difference in actual spend between 30 September 2022 and 30
September 2021 on Directors' remuneration in comparison to
distributions (dividends and share buybacks) and other significant
spending are set out in the chart within the Annual Report.
2022/2023 remuneration
The remuneration levels for the forthcoming year for the
Directors of the VCT are shown in the above table.
Performance graph
The graph within the Annual Report represents the VCT's
performance over the reporting periods since the VCT's Ordinary
Shares and 'A' Shares were first listed on the London Stock
Exchange and shows share price total return and net asset value
total return performance on a dividends reinvested basis. All
returns are rebased to 100 at 10 January 2011, being the date the
VCT's shares were listed.
The Numis Smaller Companies Index has been chosen as a
comparison as it is a publicly available broad equity index which
focuses on smaller companies and is therefore more relevant than
most other publicly available indices.
Matthew Evans
Remuneration Committee Chairman
30 January 2023
Corporate Governance
The Board of Gresham House Renewable Energy VCT2 plc has
considered the Principles and Provisions of the 2019 AIC Code of
Corporate Governance (the AIC Code). The AIC Code addresses the
Principles and Provisions set out in the UK Corporate Governance
Code (the UK Code), as well as setting out additional Provisions on
issues that are of specific relevance to Gresham House Renewable
Energy VCT2 plc.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council, provides more relevant information to
Shareholders.
Compliance with the Principles and Provisions of the AIC Code by
the VCT is detailed in the Governance Report.
The AIC Code is available on the AIC website (www.theaic.co.uk).
It includes an explanation of how the AIC Code adapts the
Principles and Provisions set out in the UK Code to make them
relevant for investment companies.
The Board
At the start of the year, the VCT had a Board comprising four
Non-Executive Directors, chaired by Christian Yates. Giles Clark
and Andrew Donovan were independent from the Investment Adviser,
while Matthew Evans was not considered independent as he is a
Designated Member of CH1 Investment Partners LLP, which receives
trail commission from the Investment Adviser. Christian Yates was
independent on appointment, however, he is no longer considered
independent as he has been on the Board for over 9 years. The VCT
has not appointed a Senior independent Director.
On 30 September 2022, Giles Clark resigned from the Board.
Biographical details of all Board members (including significant
other commitments of the Chairman) are shown.
Full Board meetings take place quarterly and the Board meets or
communicates more regularly to address specific issues. The Board
has a formal schedule of matters specifically reserved for its
decision which includes, but is not limited to: considering
recommendations from the Investment Adviser; making decisions
concerning the acquisition or disposal of investments; and
reviewing, annually, the terms of engagement of all third party
advisers (including the Investment Adviser and Administrator).
The Board has also established procedures whereby Directors
wishing to do so in the furtherance of their duties may take
independent professional advice at the VCT's expense.
All Directors have access to the advice and services of the
Company Secretary. The Company Secretary provides the Board with
full information on the VCT's assets and liabilities and other
relevant information requested by the Chairman, in advance of each
Board meeting.
The Board has decided that the VCT will not be buying Shares for
the foreseeable future as the VCT wishes to conserve such cash as
it generates for the managed wind-down of the VCT and the potential
payment of dividends.
The capital structure of the VCT is disclosed in Note 19 to the
financial statements.
During the period under review, all the Directors of the VCT
were Non-Executive and served on each committee of the Board.
Andrew Donovan was the chairman of the Audit Committee and Matthew
Evans is the chairman of the Remuneration and Nomination
Committees. The Audit Committee normally meets twice yearly, and
the Remuneration and Nomination Committees meet as required. The
Board has delegated a number of areas of responsibility to its
committees and each committee has defined terms of reference and
duties.
Audit Committee
The Audit Committee is responsible for reviewing the half-year
and annual accounts before they are presented to the Board, the
terms of appointment of the Auditor, together with their
remuneration, as well as a full review of the effectiveness of the
VCT's internal control and risk management systems.
In particular, the Committee reviews, challenges (where
appropriate) and agrees the basis for the carrying value of the
unquoted investments, as prepared by the Investment Adviser, for
presentation within the half-year and annual accounts.
The Committee also takes into consideration comments on matters
regarding valuation, revenue recognition and disclosures arising
from the Report to the Audit Committee as part of the finalisation
process for the annual accounts.
The Committee is also responsible for reviewing the going
concern assessment and viability statement including consideration
of all reasonably available information about the future financial
prospects of the VCT, the possible outcomes of events and changes
in conditions and realistic possible responses to such events and
conditions.
The Audit Committee met four times during the year. The
Committee reviewed the internal financial controls and concluded
that they were appropriate.
As the VCT has no staff, other than the Directors, there are no
procedures in place in respect of whistle blowing. The Audit
Committee understands that the Investment Adviser and Administrator
have whistle blowing procedures in place.
External Auditor
The Committee reviews and agrees the audit strategy paper,
presented by the Auditor in advance of the audit, which sets out
the key risk areas to be covered during the audit and confirms
their status on independence.
The Committee confirms that the main area of risk for the period
under review is the carrying value of investments.
The Committee, after taking into consideration comments from the
Investment Adviser and Administrator, regarding the effectiveness
of the audit process; immediately before the conclusion of the
annual audit, will recommend to the Board either the re-appointment
or removal of the Auditor.
Under the Competition and Markets Authority regulations, there
is a requirement that an audit tender process be carried out every
ten years and mandatory rotation at least every twenty years. The
VCT undertake an audit tender in respect of the audit required for
the year ended 30 September 2021 and, following a competitive
tender process in early 2021, BDO was re-appointed.
Board and Committee Meetings
The following table sets out the Directors' attendance at the
Board and Committee meetings during the year:
Quarterly Audit Nomination Remuneration
Board Committee Committee Committee
meetings meetings meetings meetings
attended attended attended attended
---------------- --------- ---------- ---------- ------------
(4 held) (4 held) (1 held) (1 held)
---------------- --------- ---------- ---------- ------------
Christian Yates 4 4 1 1
Giles Clark 4 4 1 1
Matthew Evans 4 4 1 1
Andrew Donovan 4 4 1 1
---------------- --------- ---------- ---------- ------------
In addition the Directors attended a number of ad hoc board
meetings, mainly to discuss the managed wind-down of the VCT.
Remuneration Committee
The Committee meets as and when required to review the levels of
Directors' remuneration. The Committee is also responsible for
considering the need to appoint external remuneration
consultants.
During the period, the Committee recommended an increase in
board remuneration which was approved by the Board. These increases
took effect from 1 October 2022. Details of the specific levels of
remuneration to each Director as well as the fee increases are set
out in the Directors' Remuneration Report.
Financial reporting
The Directors' responsibilities statement for preparing the
accounts is set out in the Report of the Directors and a statement
by the Auditor about their reporting responsibilities is set out in
the Independent Auditor's report.
Nomination committee
The Nomination Committee's primary function is to make
recommendations to the Board on all new appointments and also to
advise generally on issues relating to Board composition and
balance. The Committee meets as and when appropriate. Before any
appointment is made by the Board, the Committee shall evaluate the
balance of skills, knowledge and experience, and consider
candidates on merit, against objective criteria, and with due
regard for the benefits of diversity on the Board. Diversity
includes and makes good use of differences in knowledge and
understanding of relevant diverse geographies, peoples and their
backgrounds including race or ethnic origin, sexual orientation,
gender, age, disability or religion.
During the period, the Committee carried out a rigorous board
evaluation during which it assessed the effectiveness of the Board
and its committees. The Committee found that the Board was
functioning well and that all directors contributed to the
discussions at meetings. A number of topics were raised and
discussed and overall, the Board and its committees were found to
be performing satisfactorily.
Relations with Shareholders
Shareholders have the opportunity to meet the Board at the AGM.
The Board is also happy to respond to any written queries made by
Shareholders during the course of the period, or to meet with major
Shareholders if so requested.
In addition to the formal business of the AGM, representatives
of the Investment Adviser and the Board are available to answer any
questions a Shareholder may have. The notice of the twelfth AGM and
proxy form will be circulated with this Annual Report.
The terms of reference of the Committees and the conditions of
appointment of Non-Executive Directors are available to
Shareholders on request.
Internal control
The Directors are fully informed of the internal control
framework established by the Investment Adviser and the
Administrator to provide reasonable assurance on the effectiveness
of internal financial control.
The Board is responsible for ensuring that the procedures to be
followed by the advisers and themselves are in place, and they
review the effectiveness of the internal controls, based on the
report from the Audit Committee, on an annual basis to ensure that
the controls remain relevant and were in operation throughout the
year.
The Board also reviews the perceived risks faced by the VCT in
line with relevant guidance on an annual basis and implements
additional controls as appropriate.
The Board also considered the requirement for an internal audit
function and considered that this was not necessary as the internal
controls and risk management in place were adequate and
effective.
Although the Board is ultimately responsible for safeguarding
the assets of the VCT, the Board has delegated, through written
agreements, the day-to-day operation of the VCT (including the
Financial Reporting Process) to the following advisers:
Investment Adviser
Gresham House Asset Management
Limited
Administrator and Company Secretary
JTC (UK) Limited
Anti-bribery policy
In order to ensure compliance with the UK Bribery Act 2010, the
Directors confirm that the VCT has zero tolerance towards bribery
and a commitment to carry out business openly, honestly and
fairly.
Going concern
In assessing the VCT as a going concern, the Directors have
considered the forecasts which reflect the proposed strategy for
portfolio investments and the results of the continuation votes at
the AGM and General Meeting held on 22 March 2021 and 13 July 2021
respectively. At the meeting on 13 July 2021, the proposed special
resolution was approved by Shareholders, resulting in the VCTs
entering a managed wind-down and a new investment policy replacing
the existing investment policy. The Board agreed to realise the
VCTs' investments in a manner that achieves balance between
maximising the net value received from those investments and making
timely returns to Shareholders.
Given a formal decision has been made to wind the VCT up, the
financial statements have been prepared on a basis other than going
concern. The Board notes that the VCT has sufficient liquidity to
pay its liabilities as and when they fall due, during the managed
wind-down, and that the VCT has adequate resources to continue in
business until the formal liquidation and wind-up commences.
Share capital
The VCT has two classes of share capital: Ordinary Shares and
'A' Shares. The rights and obligations attached to those shares,
including the power of the VCT to buy back shares and details of
any significant shareholdings, are set out in the Report of the
Directors.
Compliance statement
The Listing Rules require the Board to report on compliance with
the AIC Code provisions throughout the accounting period. With the
exception of the limited items outlined below, the VCT has complied
throughout the accounting year ended 30 September 2022 with the
provisions set out in Section 5 to 9 of the AIC Code.
a) The VCT has no major Shareholders so Shareholders are not
given the opportunity to meet any new Non-Executive Directors at a
specific meeting other than the AGM. (5.2.3)
b) Due to the size of the Board and the nature of the VCT's
business, a senior independent director has not been appointed.
(6.2.14)
c) Due to the size of the Board and the nature of the VCT's
business, the Board considers it appropriate for the entire Board
to fulfil the role of the nomination and remuneration committees.
(7.2.22, 9.2.37)
d) Due to the size of the VCT, the Board thought it would be
unnecessarily burdensome to establish a separate management
engagement committee to review the performance of the Investment
Adviser. (6.2.17, 7.2.26)
e) Due to the size of the Board and the nature of the VCT's
business, the Board considers it appropriate for the entire Board,
including the chair, to fulfil the role of the audit committee.
(8.2.29)
f) The Directors are not subject to annual re-election but must
be re-elected every three years. A Director may retire at any
Annual Meeting following the Annual General Meeting at which he
last retired and was re-elected provided that he must retire from
office at or before the third Annual General Meeting following the
Annual General Meeting at which he last retired and was re-elected.
(7.2.23)
By order of the Board
JTC (UK) Limited
Company Secretary
Company number: 0430176
Registered office:
The Scalpel, 18th Floor
52 Lime Street
London EC3M 7AF
30 January 2023
Income Statement
For the year ended 30 September 2022
Year ended 30 September Year ended 30 September
2022 2021
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---- -------- -------- -------- -------- -------- --------
Income 3 712 - 712 591 - 591
Gain/(loss) on investments 10 - 512 512 - (2,628) (2,628)
----------------------------- ---- -------- -------- -------- -------- -------- --------
712 512 1,224 591 (2,628) (2,037)
Investment advisory
fees 4 (202) (67) (269) (221) (74) (295)
Other expenses 5 (430) - (430) (347) - (347)
----------------------------- ---- -------- -------- -------- -------- -------- --------
(632) (67) (699) (568) (74) (642)
----------------------------- ---- -------- -------- -------- -------- -------- --------
Profit/(loss) on
ordinary activities
before tax 80 445 525 23 (2,702) (2,679)
Tax on total comprehensive
income/(loss) and
ordinary activities 7 - - - - - -
----------------------------- ---- -------- -------- -------- -------- -------- --------
Profit/(loss) for
the year and total
comprehensive income/(loss) 80 445 525 23 (2,702) (2,679)
----------------------------- ---- -------- -------- -------- -------- -------- --------
Basic and diluted
earnings/(loss)
per share:
Ordinary Share 9 0.3p 1.7p 2.0p 0.1p (10.3p) (10.2p)
'A' Share 9 - - - - - -
----------------------------- ---- -------- -------- -------- -------- -------- --------
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were discontinued during the
year. The total column within the Income Statement represents the
Statement of Total Comprehensive Income of the VCT prepared in
accordance with Financial Reporting Standards (FRS 102). The
supplementary revenue and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued in
November 2014 (updated in April 2021) by the Association of
Investment Companies (AIC SORP).
Other than revaluation movements arising on investments held at
fair value through the profit or loss, there were no differences
between the return/loss as stated above and at historical cost.
The accompanying notes form an integral part of these financial
statements.
Balance Sheet
As at 30 September 2022
2022 2021
---------------- ----------------
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---- ------- ------- ------- -------
Current assets
Investments 10 27,980 27,400
Costs incurred on sale
of VCT's assets 11 480 181
Debtors 12 124 176
Cash at bank and in hand 1 30
---------------------------- ---- ------- ------- ------- -------
28,585 27,787
Creditors: amounts falling
due within one year 13 (2,542) (1,461)
---------------------------- ---- ------- ------- ------- -------
Net current assets 26,043 26,326
---------------------------- ---- ------- ------- ------- -------
Creditors: amounts falling
due after more than one
year 14 (2,162) (2,970)
---------------------------- ---- ------- ------- ------- -------
Net assets 23,881 23,356
---------------------------- ---- ------- ------- ------- -------
Capital and reserves
Called up Ordinary Share
capital 15 29 29
Called up 'A' Share capital 15 42 42
Share premium account 16 9,734 9,734
Treasury Shares 16 (3,403) (3,403)
Special reserve 16 4,813 4,813
Revaluation reserve 16 16,869 15,054
Capital redemption reserve 16 1 1
Capital reserve - realised 16 (3,617) (2,247)
Revenue reserve 16 (587) (667)
---------------------------- ---- ------- ------- ------- -------
Total Shareholders'
funds 23,881 23,356
---------------------------- ---- ------- ------- ------- -------
Basic and diluted net
asset value per share
Ordinary Share 17 91.2p 89.2p
'A' Share 17 0.1p 0.1p
---------------------------- ---- ------- ------- ------- -------
The financial statements of Gresham House Renewable Energy VCT2
plc were approved and authorised for issue by the Board of
Directors and were signed on its behalf by:
Christian Yates
Chairman
Company number: 07378395
Date: 30 January 2023
The accompanying notes form an integral part of these financial
statements.
Statement of Changes in Equity
For the year ended 30 September 2022
Funds
held
in
respect
of
Called Shares
up Share not Capital Capital
share Premium Treasury yet Special Revaluation redemption reserve Revenue
capital Account Shares allotted reserve reserve reserve realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------- ------- -------- -------- ------- ----------- ---------- -------- ------- --------
At
30 September
2020 71 9,734 (3,403) - 6,394 16,891 1 (1,433) (639) 27,616
Total
comprehensive
loss - - - - - (2,644) - (7) (28) (2,679)
Transfer
of net realised
loss to
Capital
reserve-realised - - - - - 807 - (807) - -
Transactions
with owners
Dividend
paid - - - - (1,581) - - - - (1,581)
----------------- ------- ------- -------- -------- ------- ----------- ---------- -------- ------- --------
At
30 September
2021 71 9,734 (3,403) - 4,813 15,054 1 (2,247) (667) 23,356
----------------- ------- ------- -------- -------- ------- ----------- ---------- -------- ------- --------
Total
comprehensive
income - - - - - 1,815 - (1,370) 80 525
----------------- ------- ------- -------- -------- ------- ----------- ---------- -------- ------- --------
At
30 September
2022 71 9,734 (3,403) - 4,813 16,869 1 (3,617) (587) 23,881
----------------- ------- ------- -------- -------- ------- ----------- ---------- -------- ------- --------
The accompanying notes form an integral part of these financial
statements.
Cash Flow Statement
For the year ended 30 September 2022
Year ended Year ended
30 September 30 September
2022 2021
Note GBP'000 GBP'000
------------------------------------------- ---- ------------- -------------
Cash flows from operating activities
Profit/(loss) for the financial year 525 (2,679)
(Gain)/loss arising on the revaluation
of investments 10 (512) 2,628
Dividend income (659) (522)
Interest income (54) (69)
Interest income - written off 79 -
Increase in debtors (2) (2)
Increase in creditors 83 148
------------------------------------------- ---- ------------- -------------
Net cash outflow from operating activities (540) (496)
------------------------------------------- ---- ------------- -------------
Cash flows from investing activities
Proceeds from sale of investments/loan
note redemptions 10 - 139
Purchase of investments 10 (68) (13)
Cost incurred as part of the sale of
VCT's assets 11 (109) (19)
Interest received 29 184
Dividend income received 659 315
------------------------------------------- ---- ------------- -------------
Net cash inflow from investing activities 511 606
------------------------------------------- ---- ------------- -------------
Net cash (outflow)/inflow before financing
activities (29) 110
Cash flows from financing activities
Dividends paid - (1,581)
Proceeds from loans - 1,447
------------------------------------------- ---- ------------- -------------
Net cash outflow from financing activities - (134)
------------------------------------------- ---- ------------- -------------
Net decrease in cash (29) (24)
Cash and cash equivalents at start of
year 30 54
------------------------------------------- ---- ------------- -------------
Cash and cash equivalents at end of
year 1 30
------------------------------------------- ---- ------------- -------------
Cash and cash equivalents comprise
Cash at bank and in hand 1 30
------------------------------------------- ---- ------------- -------------
Total cash and cash equivalents 1 30
------------------------------------------- ---- ------------- -------------
The accompanying notes form an integral part of these financial
statements.
Notes to the Accounts
For the year ended 30 September 2022
1. General Information
Gresham House Renewable Energy VCT2 plc (VCT) is a Venture
Capital Trust established under the legislation introduced in the
Finance Act 1995 and is domiciled in the United Kingdom and
incorporated in England and Wales under the Companies Act 2006.
Basis of preparation - financial statements prepared on a basis
other than going concern
During the financial year the Shareholders of the VCT resolved
to seek to sell the VCT's assets and distribute the proceeds in due
course. The VCT has incurred some additional costs since the
beginning of the Managed Wind-Down process in July 2021 up to this
year end, and post year end, related to the sale of its assets.
Should the sale of these assets fall through, the VCT will need to
pay abort costs. The Board and Investment Adviser have plans in
place to manage this scenario should this occur. At the General
Meeting on 13 July 2021 a formal decision was made to wind the VCT
up, therefore as last year the Financial Statements have been
prepared on a basis other than going concern for the year ended 30
September 2022. No further adjustments are required in respect of
this. Liquidation costs cannot currently be reliably estimated but
are not considered to be material. Investments held at fair value
through profit or loss are held as current assets, there have been
no further effects noted.
2. Accounting policies
Basis of accounting
The VCT has prepared its financial statements under FRS 102, the
"Financial Reporting Standard applicable in the UK and Republic of
Ireland" and in accordance with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued by the Association of Investment
Companies (AIC) in November 2014 and revised in April 2021 (SORP)
as well as the Companies Act 2006.
The VCT implements new Financial Reporting Standards (FRS)
issued by the Financial Reporting Council when they become
effective. No new FRS were implemented during the year.
The financial statements are presented in Sterling (GBP).
Presentation of income statement
In order to better reflect the activities of a Venture Capital
Trust and in accordance with the SORP, supplementary information
which analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement.
The net revenue is the measure the Directors believe appropriate in
assessing the VCT's compliance with certain requirements set out in
Part 6 of the Income Tax Act 2007.
Investments
All investments are designated as "fair value through profit or
loss" assets due to investments being managed and performance
evaluated on a fair value basis. A financial asset is designated
within this category if it is both acquired and managed on a fair
value basis, in accordance with the VCT's documented investment
policy. The fair value of an investment upon acquisition is deemed
to be cost. Thereafter investments are measured at fair value in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines (IPEV) together with FRS 102 sections
11 and 12.
For unquoted investments and subsequent to acquisition, fair
value is established by using the IPEV guidelines. The valuation
methodologies for unquoted entities used by the IPEV to ascertain
the fair value of an investment are as follows:
-- multiples;
-- net assets;
-- discounted cash flows or earnings (of underlying business);
-- discounted cash flows (from the investment); and
-- industry valuation benchmarks.
Of the valuation methodologies above, the multiples and
discounted cash flow approaches are applied to the VCT's
investments. Effective 1 January 2019, the IPEV guidelines to
establish fair value were updated whereby the cost or price of a
recent investment are no longer considered valid valuation
methodologies for establishing the fair value of an investment. The
VCT along with its Investment Advisor may, under orderly market
conditions, deem the cost or recent price paid for an investment as
an appropriate fair value for an investment at the time of
acquisition but subsequent to recognition must reconsider the
assigned fair value based on up-to-date market conditions and
performance of the underlying investee company in order to assign a
fair value in line with the IPEV guidelines.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable
data, market inputs, assumptions and estimates in order to
ascertain fair value.
Gains and losses arising from changes in fair value are included
in the Income Statement for the year as a capital item and
transaction costs on acquisition or disposal of the investment are
expensed. Where an investee company has gone into receivership or
liquidation, or administration (where there is little likelihood of
recovery), the loss on the investment, although not physically
disposed of, is treated as being realised.
The investee companies held by the VCT are treated as a
portfolio of investments and are therefore measured at fair value
in accordance with section 9 of FRS 102. The results of these
companies are not incorporated into the Income Statement except to
the extent of any income accrued. This is in accordance with the
SORP and FRS 102 sections 14 and 15 that does not require portfolio
investments, where the interest held is greater than 20%, to be
accounted for using the equity method of accounting.
Income
Dividend income from investments is recognised when the
Shareholders' rights to receive payment have been established,
normally on the ex-dividend date.
Interest income is accrued on a time apportionment basis, by
reference to the principal sum outstanding and at the effective
interest rate applicable and only where there is reasonable
certainty of collection in the foreseeable future.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Income Statement, all expenses have been presented as revenue
items except as follows:
-- expenses which are incidental to the disposal of an
investment are deducted from the disposal proceeds of the
investment; and
-- expenses are split and presented partly as capital items
where a connection with the maintenance or enhancement of the value
of the investments held can be demonstrated. The VCT has adopted a
policy of charging 75% of the investment advisory fees to the
revenue account and 25% to the capital account to reflect the
Board's estimated split of investment returns which will be
achieved by the VCT over the long-term.
Taxation
The tax effects on different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate, using the VCT's effective
rate of tax for the accounting period.
Due to the VCT's status as a Venture Capital Trust and the
continued intention to meet the conditions required to comply with
Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realised or unrealised appreciation of
the VCT's investments which arises.
Deferred taxation, which is not discounted, is provided in full
on timing differences that result in an obligation at the balance
sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the
inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in the accounts.
Other debtors, other creditors and loan notes
Other debtors (including accrued income), other creditors and
loan notes (other than those held as part of the investment
portfolio as set out in Note 10 are included within the accounts at
amortised cost.
3. Income
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------ ------------- -------------
Income from investments
Loan stock interest 53 69
Dividend income 659 522
------------------------ ------------- -------------
712 591
------------------------ ------------- -------------
4. Investment advisory fees
The investment advisory fees for the year ended 30 September
2022, which were charged quarterly to the VCT, were based on 1.15%
of the net assets as at the previous quarter end.
Year ended 30 September Year ended 30 September
2022 2021*
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- -------- -------- -------- --------
Investment advisory
fees 202 67 269 221 74 295
-------------------- -------- -------- -------- -------- -------- --------
5. Other expenses
Year ended 30 September Year ended 30 September
2022 2021
---------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------- -------- -------- --------
Administration
services 96 - 96 98 - 98
Directors' remuneration 103 - 103 102 - 102
Social security
costs 3 - 3 5 - 5
Auditor's remuneration
for audit 48 - 48 37 - 37
Non audit services
- Agreed upon
procedures - - - 3 - 3
Interest written
off 79 - 79 - - -
Other 101 - 101 102 - 102
------------------------ -------- -------- -------- -------- -------- --------
430 - 430 347 - 347
------------------------ -------- -------- -------- -------- -------- --------
The annual running costs of the VCT for the year are subject to
a cap of 3.0% of the net assets of the VCT. During the year ended
30 September 2022, the annual running costs came to 2.3% of net
assets (2021: 2.4%), therefore this cap has not been breached.
6. Directors' remuneration
Details of remuneration (excluding employer's NIC) are given in
the audited part of the Directors' Remuneration Report.
The VCT had no employees during the year. Costs in respect of
the Directors are referred to in Note 5 above. No other emoluments
or pension contributions were paid by the VCT to, or on behalf of,
any Director.
7. Tax on ordinary activities
Year ended Year ended
30 September 30 September
2022 2021
GBP'000 GBP'000
------------------------------------------------------------ ------------- -------------
(a).. Tax charge for the year
* UK corporation tax at 19% (2021: 19%) - -
------------------------------------------------------------ ------------- -------------
...... Charge for the year - -
------------------------------------------------------------ ------------- -------------
(b).. Factors affecting tax charge for the year
* Profit/(loss) on ordinary activities before taxation 525 (2,679)
------------------------------------------------------------ ------------- -------------
* Tax/(tax credit) calculated on loss on ordinary
activities before taxation at the applicable rate of
19% (2021: 19%) 100 (509)
* Effects of:
* UK dividend income (125) (99)
* (Gains)/losses on investments (97) 500
* Excess management expenses on which deferred tax not
recognised 122 108
------------------------------------------------------------ ------------- -------------
...... Total tax charge - -
------------------------------------------------------------ ------------- -------------
Excess management fees, which are available to be carried
forward and set off against future taxable income, amounted to
GBP4,485,000 (25%) (2021: GBP4,697,000) (25%). The associated
deferred tax asset of GBP1,121,000 (2021: GBP1,174,000) has not
been recognised due to the fact that it is unlikely that the excess
management fees will be set off against future taxable profits in
the foreseeable future. The prospective corporation tax rate of 25%
is due to be effective from 1 April 2023.
8. Dividends
No Dividends were paid during the year (2021: nil). However, a
dividend in respect of the year ended 30 September 2022 was
declared and was paid to Shareholders on the Register on 6 January
2023, on 27 January 2023.
9. Basic and diluted earnings per share
Weighted
average Capital
number Revenue profit/
of shares profit Pence (loss) Pence
in issue GBP'000 per share GBP'000 per share
-------------- ----------- ---------- -------- ---------- -------- ----------
Year ended
30 September Ordinary
2022 Shares 26,133,036 80 0.3 445 1.7
'A' Shares 39,463,845 - - - -
-------------------------- ---------- -------- ---------- -------- ----------
Year ended
30 September Ordinary
2021 Shares 26,133,036 23 0.1 (2,702) (10.3)
'A' Shares 39,463,845 - - - -
-------------------------- ---------- -------- ---------- -------- ----------
As the VCT has not issued any convertible securities or share
options, there is no dilutive effect on earnings per Ordinary Share
or 'A' Share. The earnings per share disclosed therefore represents
both the basic and diluted return per Ordinary Share or 'A'
Share.
10. Investments
2022 2021
Unquoted Unquoted
investments investments
GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Opening cost at start of the year 13,152 13,700
Unrealised gains at start of the year 14,248 16,893
-------------------------------------------------- ------------ ------------
Opening fair value at start of the year 27,400 30,593
Movement in the year:
Purchased at cost * 68 228
Disposals proceeds/redemption of loan notes * - (793)
Realised (losses)/gains in the income statement (1,303) 16
Unrealised gains/(losses) in the income statement 1,815 (2,644)
-------------------------------------------------- ------------ ------------
Closing fair value at year end 27,980 27,400
-------------------------------------------------- ------------ ------------
Closing cost at year end 13,220 13,152
Permanent impairment in cost of investments as
at 30 September 2022 (1,303) -
Unrealised gains at year end 16,063 14,248
-------------------------------------------------- ------------ ------------
Closing fair value at year end 27,980 27,400
-------------------------------------------------- ------------ ------------
* The 2021 purchase and disposal of assets includes non-cash transactions.
During the year, the VCT received GBPnil (2021: GBP775,000) from
the disposal of investments comprising of both equity and loan
notes. The cost of these investments at the start of the year was
GBPnil (2021: GBP775,000). These investments have been revalued and
measured at fair value over time, and up until the point of
disposal any realised and unrealised gains or losses were included
in the fair value of the investments.
The VCT has categorised its financial instruments using the fair
value hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation
techniques that are not based on observable market data (unquoted
equity investments and loan note investments).
Level Level Level Level Level Level
1 2 3 2022 1 2 3 2021
------- ------- ------- ------- ------- ------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- ------- ------- ------- ------- -------
Unquoted loan
notes - - 960 960 - - 1,893 1,893
Unquoted equity - - 27,020 27,020 - - 25,507 25,507
---------------- ------- ------- ------- ------- ------- ------- ------- -------
- - 27,980 27,980 - - 27,400 27,400
---------------- ------- ------- ------- ------- ------- ------- ------- -------
During the years ended 30 September 2022 and 30 September 2021
there were no transfers between levels.
A reconciliation of fair value for Level 3 financial instruments
held at the year end is shown below:
Unquoted Unquoted
loan notes equity Total
GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- -------- --------
Balance at 30 September 2021 1,893 25,507 27,400
Movements in the income statement:
Unrealised gains in the income statement - 1,815 1,815
Realised losses in the income statement (933) (370) (1,303)
----------------------------------------- ----------- -------- --------
960 26,952 27,912
Additions at cost - 68 68
----------------------------------------- ----------- -------- --------
Balance at 30 September 2022 960 27,020 27,980
----------------------------------------- ----------- -------- --------
FRS 102 sections 11 and 12 require disclosure to be made of the
possible effect of changing one or more of the inputs to reasonable
possible alternative assumptions where this would result in a
significant change in the fair value of the Level 3 investments.
There is an element of judgement in the choice of assumptions for
unquoted investments and it is possible that, if different
assumptions were used, different valuations could have been
attributed to some of the VCT's investments.
Investments which are reaching maturity or have an established
level of maintainable earnings are valued on a discounted cash flow
basis. This was also the case in the prior year.
The Board and the Investment Adviser believe that the valuation
as at 30 September 2022 reflects the most appropriate assumptions
at that date, giving due regard to all information available from
each investee company. Consequently, the variation in the spread of
reasonable, possible, alternative valuations is likely to be within
the range set out in Note 18.
11. Cost incurred on sale of VCT's assets
Since the beginning of the Managed Wind-Down in the previous
financial year, the VCT has capitalised the professional fees in
relation to the sale of assets. The costs are directly attributable
to the sales process and have been recognised as part of the asset
value.
2022 2021
GBP'000 GBP'000
-------------------------------------- -------- --------
Cost incurred on sale of VCT's assets 480 181
-------------------------------------- -------- --------
480 181
-------------------------------------- -------- --------
12. Debtors
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Prepayments and accrued income 124 176
------------------------------- -------- --------
124 176
------------------------------- -------- --------
13. Creditors: amounts falling due within one year
2022 2021
GBP'000 GBP'000
----------------------------- -------- --------
Other loans 1,935 1,071
Taxation and social security 3 3
Accruals and deferred income 371 387
Creditors 233 -
----------------------------- -------- --------
2,542 1,461
----------------------------- -------- --------
The balance of other loans is made up of amounts borrowed from
the underlying portfolio companies. All loans are interest free.
Other loans falling due within one year are repayable as
follows:
2022 2021
Investee company Repayment date GBP'000 GBP'000
---------------------------------- --------------- -------- --------
Hewas Solar Limited n/a^ 131 131
Gloucester Wind Limited n/a^^ 100 100
Penhale Solar Limited n/a ^^ 105 105
Minsmere Power Limited n/a^^ 65 52
HRE Willow Limited n/a ^^ 336 292
St Columb Solar Limited n/a^ 60 21
---------------------------------- --------------- -------- --------
Lunar 2 Limited n/a^ 768 -
n/a^^ 370 370
-------------------------------------------------- -------- --------
1,138 370
-------------------------------------------------- -------- --------
Amounts repayable within one year 1,935 1,071
--------------------------------------------------- -------- --------
^ The lender may demand full repayment of all amounts
outstanding at any time after 5 years and 1 day from the date of
the initial drawdown of the loan. The loans are interest free.
^^ The VCT and the indicated SPV's (the lender) entered into
loan agreements whereby the lender, at any time, without having to
provide any reason, by one or several demands require immediate
repayment of all or any part of the Loan and all or any accrued
interest thereon. The loans are interest free.
14. Creditors: amounts falling due after more than one year
2022 2021
GBP'000 GBP'000
------------ -------- --------
Other loans 2,162 2,970
------------ -------- --------
2,162 2,970
------------ -------- --------
The balance of other loans is made up of amounts borrowed from
the underlying portfolio companies. An analysis of the maturity
dates of each of the loans is shown below. All loans are interest
free.
Creditors falling due after more than one year are repayable as
follows:
2022 2021
Investee company Repayment date GBP'000 GBP'000
---------------------------------- ---------------- -------- --------
St Columb Solar Limited 2 February 2023 - 40
---------------------------------- ---------------- -------- --------
13 February
Lunar 2 Limited 2023 - 768
18 December
2024 1,481 1,481
14 January 2025 356 356
--------------------------------------------------- -------- --------
1,837 2,605
--------------------------------------------------- -------- --------
Gloucester Wind Limited 14 January 2025 200 200
---------------------------------- ---------------- -------- --------
Penhale Solar Limited 14 January 2025 75 75
---------------------------------- ---------------- -------- --------
Minsmere Power Limited 14 January 2025 50 50
---------------------------------- ---------------- -------- --------
Amounts repayable after more than
one year 2,162 2,970
---------------------------------------------------- -------- --------
15. Called up share capital
2022 2021
GBP'000 GBP'000
------------------------------------------------- -------- --------
Allotted, called up and fully-paid:
26,133,036 (2021: 26,133,036) Ordinary Shares
of 0.1p each 29 29
39,463,845 (2021: 39,463,845) 'A' Shares of 0.1p
each 42 42
------------------------------------------------- -------- --------
71 71
------------------------------------------------- -------- --------
The VCT's capital is managed in accordance with its investment
policy as shown in the Strategic Report, in pursuit of its
principal investment objectives as stated on page ----. There has
been no significant change in the objectives, policies or processes
for managing capital from the previous period.
The VCT has the authority to buy back shares as described in the
Report of the Directors. During the year ended 30 September 2022
the VCT did not repurchase any Ordinary Shares or any 'A'
Shares.
During the year ended 30 September 2022 the VCT issued no
Ordinary Shares and no 'A' Shares.
The holders of Ordinary Shares and 'A' Shares shall have rights
as regards to dividends and any other distributions or a return of
capital (otherwise than on a market purchase by the VCT of any of
its shares) which shall be applied on the following basis:
1) unless and until Ordinary Shareholders receive a dividend of
at least 5.0p per Ordinary Share, and one Ordinary Share and one
'A' Share has a combined net asset value of 100p (the Hurdle),
distributions will be made as to 99.9% to Ordinary Shares and 0.1%
to 'A' Shares;
2) after (and to the extent that) the Hurdle has been met, and
subject to point 3 below, the balance of such amounts shall be
applied as to 40% to Ordinary Shares and 60% to 'A' Shares; and
3) any amount of a dividend which, but for the entitlement of
'A' Shares pursuant to point 2 above, would have been in excess of
10p per Ordinary Share in any year shall be applied as to 10% to
Ordinary Shares and 90% to 'A' Shares.
If, on the date on which a dividend is to be declared on the
Ordinary Shares, the amount of any dividend which would have been
payable to the 'A' Shares (the "A' Dividend Amount'), together with
any previous amounts which were not paid as a result of this clause
(the "A' Share Entitlement'), would together:
a) in aggregate be less than GBP5,000; or
b) be less than an amount being equivalent to 0.25p per 'A' Share
then the 'A' Dividend amount shall not be declared and paid, but
shall be aggregated with any 'A' Share Entitlement and retained by
the VCT until either threshold is reached. No interest shall accrue
on any 'A' Share Entitlement.
The VCT does not have any externally imposed capital
requirements.
16. Reserves
2022 2021
GBP'000 GBP'000
--------------------------- -------- --------
Share premium account 9,734 9,734
Treasury shares (3,403) (3,403)
Special reserve 4,813 4,813
Revaluation reserve 16,869 15,054
Capital redemption reserve 1 1
Capital reserve - realised (3,617) (2,247)
Revenue reserve (587) (667)
--------------------------- -------- --------
23,810 23,285
--------------------------- -------- --------
The Special reserve is available to the VCT to enable the
purchase of its own shares in the market. The Special reserve,
Capital reserve - realised and Revenue reserve are all
distributable reserves from which dividends could be paid. At 30
September 2022, distributable reserves were GBP609,000 (2021:
GBP1,899,000).
Share premium account
This reserve accounts for the difference between the prices at
which shares are issued and the nominal value of the shares, less
issue costs and transfers to the other distributable reserves.
Treasury shares
This reserve represents the aggregate consideration paid for the
Shares repurchased by the VCT.
Revaluation reserve
Increases and decreases in the valuation of investments held at
the year-end against cost are included in this reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the VCT's own shares.
Capital reserve - realised
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments; and
-- expenses, together with the related taxation effect, charged
in accordance with the above accounting policies.
Revenue reserve
This reserve accounts for movements from the revenue column of
the Income Statement and other non-capital realised movements.
17. Basic and diluted net asset value per share
2022 2021 2022 2021
---------- ---------- ------------------- -------------------
Shares in issue Net asset value Net asset value
---------------------- ------------------- -------------------
Pence Pence
per share GBP'000 per share GBP'000
---------------- ---------- ---------- ---------- ------- ---------- -------
Ordinary Shares 26,133,036 26,133,036 91.2 23,842 89.2 23,317
'A' Shares 39,463,845 39,463,845 0.1 39 0.1 39
---------------- ---------- ---------- ---------- ------- ---------- -------
The Directors allocate the assets and liabilities of the VCT
between the Ordinary Shares and 'A' Shares such that each share
class has sufficient net assets to represent its dividend and
return of capital rights as described in Note 15.
As the VCT has not issued any convertible shares or share
options, there is no dilutive effect on net asset value per
Ordinary Share or per 'A' Share. The net asset value per share
disclosed therefore represents both the basic and diluted net asset
value per Ordinary Share and per 'A' Share.
18. Financial instruments
The VCT held the following categories of financial instruments
at 30 September 2022:
2022 2022 2021 2021
Cost Value Cost Value
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------
Assets at fair value through
profit or loss 13,220 27,980 13,152 27,400
Other financial (liabilities)/assets (492) (492) (221) (221)
Cash at bank 1 1 30 30
Other loans (4,097) (4,097) (4,041) (4,041)
------------------------------------- -------- -------- -------- --------
Total 8,632 23,392 8,920 23,168
------------------------------------- -------- -------- -------- --------
The VCT's financial instruments comprise investments held at
fair value through profit or loss, being equity and loan stock
investments in unquoted companies, capitalised costs in relation to
sale of VCT's assets (Note 11), loans and receivables consisting of
short-term debtors, cash deposits and financial liabilities being
creditors arising from its operations. Other financial liabilities
and assets include operational debtors and prepaid expenses and
short-term creditors which are measured at amortised cost. The main
purpose of these financial instruments is to generate cashflow and
revenue and capital appreciation for the VCT's operations. The VCT
has no gearing or other financial liabilities apart from short and
long-term creditors and does not use any derivatives.
The fair value of investments is determined using the detailed
accounting policy as shown in Note 2. The composition of the
investments is set out in Note 10.
The VCT's investment activities expose the VCT to a number of
risks associated with financial instruments and the sectors in
which the VCT invests. The principal financial risks arising from
the VCT's operations are:
-- market risks;
-- credit risk; and
-- liquidity risk.
The Board regularly reviews these risks and the policies in
place for managing them. There have been no significant changes to
the nature of the risks that the VCT was expected to be exposed to
over the year and there have also been no significant changes to
the policies for managing those risks during the year.
The risk management policies used by the VCT in respect of the
principal financial risks and a review of the financial instruments
held at the year end are provided below:
Market risks
As a Venture Capital Trust, the VCT is exposed to investment
risks in the form of potential losses and gains that may arise on
the investments it holds in accordance with its investment policy
and since 13 July 2021, with reference to the New Investment
Policy. The management of these investment risks is a fundamental
part of investment activities undertaken by the Investment Adviser
and overseen by the Board. The Adviser monitors investments through
regular contact with management of investee companies, regular
review of management accounts and other financial information and
attendance at investee company board meetings. This enables the
Adviser to manage the investment risk in respect of individual
investments. Investment risk is also mitigated by holding a
diversified portfolio spread across various operating sites across
several asset classes.
The key investment risks to which the VCT is exposed are:
-- investment price risk; and
-- interest rate risk.
Investment price risk
The VCT's investments which comprise both equity and debt
financial instruments in unquoted investments are concentrated in
renewable energy projects with predetermined expected returns.
Consequently, the investment price risk arises from uncertainty
about the future prices and valuations of financial instruments
held in accordance with the VCT's investment objectives which can
be influenced by many macro factors such as changes in interest
rates, electricity power prices and movements in inflation. It
represents the potential loss that the VCT might suffer through
changes in the fair value of unquoted investments that it
holds.
At 30 September 2022, the unquoted portfolio was valued at
GBP27,980,000 (2021: GBP27,400,000). The key inputs to the
valuation model are discount rates, inflation, irradiation,
degradation, power prices and asset life. The Board has undertaken
a sensitivity analysis into the effects of fluctuations in these
inputs.
The analysis below is provided to illustrate the sensitivity of
the fair value of investments to an individual input, while all
other variables remain constant. The Board considers these changes
in inputs to be within reasonable expected ranges. This is not
intended to imply the likelihood of change or that possible changes
in value would be restricted to this range. The possible effects
are quantified below:
Change in
fair value Change in
of NAV per
Change in investments share
Input Base case input GBP'000 pence
-------------- ---------------- --------- ------------ ---------
Discount rate 7.00% - 8.25% +0.5% (648) (2.5)
-0.5% 688 2.6
------------------------------- --------- ------------ ---------
Inflation 3.0% - 14.0% +1.0% 1,774 6.8
-1.0% (1,627) (6.2)
------------------------------- --------- ------------ ---------
785 - 1,270
Irradiation kWh/m(2) +1.0% 621 2.4
-1.0% (617) (2.4)
------------------------------- --------- ------------ ---------
Degradation 0.30% - 0.40% +0.1% (723) (2.8)
-0.1% 737 2.8
------------------------------- --------- ------------ ---------
Power prices GBP32 - 212/MWh +10.0% 774 3.0
-10.0% (782) (3.0)
------------------------------- --------- ------------ ---------
Asset life
The Board has also considered the potential impact of changes to
the anticipated lives of assets in the portfolio. Close to ninety
percent of the VCT's value is in assets refinanced by debt, and
under the debt facility agreements, reserves are in place for
renewing key equipment as and when required. Key equipment of 3
solar sites were repowered in 2021. Furthermore, the underlying
assets have leases that are valid for the lifetime of the VCT,
which cannot be terminated early, and any extensions to the leases
would require further planning permission. Accordingly, the asset
life assumption is that the asset lives are equal to the length of
the relevant leases and the Board does not consider it appropriate
to disclose a sensitivity analysis in respect of asset life.
Interest rate risk
The VCT accepts exposure to interest rate risk on floating-rate
financial assets through the effect of changes in prevailing
interest rates. The VCT receives interest on its cash deposits at a
rate agreed with its bankers. Where investments in loan stock
attract interest, this is predominately charged at fixed rates. A
summary of the interest rate profile of the VCT's investments is
shown below.
There are three categories in respect of interest which are
attributable to the financial instruments held by the VCT as
follows:
-- "Fixed rate" assets represent investments with predetermined
yield targets and comprise certain loan note investments and
preference shares;
-- "Floating rate" assets predominantly bear interest at rates
linked to The Bank of England base rate or LIBOR and comprise cash
at bank; and
-- "No interest rate" assets do not attract interest and
comprise equity investments, certain loan note investments, loans
and receivables and other financial liabilities.
Average Average
interest period 2022 2021
rate until maturity GBP'000 GBP'000
----------------- --------- --------------- -------- --------
Fixed rate 8% 2,286 days 668 533
Floating rate 0% 1 30
No interest rate 22,723 22,605
----------------- --------- --------------- -------- --------
23,392 23,168
----------------- --------- --------------- -------- --------
The VCT monitors the level of income received from fixed and
floating rate assets and, if appropriate, may make adjustments to
the allocation between the categories, in particular, should this
be required to ensure compliance with the VCT regulations.
It is estimated that an increase of 1% in interest rates would
have increased profit before tax for the year by GBP10 (2021:
GBP300). As at 30 September 2022 the Bank of England (BoE) base
rate was 2.25%, the base rate having increased from 1.75% to 2.25%
on 22 September 2022. The BoE base rate further increased by 0.75%
to 3.00% on 3 November 2022 and by 0.50% on 15 December 2022 to the
current base rate of 3.50%. Any potential further change in the
base rate, at the current level, would be likely to have an
immaterial impact on the net assets and total return of the
VCT.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge a commitment to the VCT made
under that instrument. The VCT is exposed to credit risk through
its holdings of loan stock in investee companies, cash deposits and
debtors. Credit risk relating to loan stock in investee companies
is considered to be part of market risk as the performance of the
underlying SPVs impacts the carrying values.
The VCT's financial assets that are exposed to credit risk are
summarised as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------ -------- --------
Investments in loan stocks 960 1,893
Cash and cash equivalents 1 30
Interest, dividends and other receivables 115 169
------------------------------------------ -------- --------
1,076 2,092
------------------------------------------ -------- --------
The Investment Adviser manages credit risk in respect of loan
stock with a similar approach as described under "Market risks".
Similarly, the management of credit risk associated with interest,
dividends and other receivables is covered within the investment
advisory procedures. The level of security is a key means of
managing credit risk. Additionally, the risk is mitigated by the
security of the assets in the underlying investee companies.
Cash is held by the Royal Bank of Scotland plc which is an
investment grade rated financial institution. Consequently, the
Directors consider that the credit risk associated with cash
deposits is low.
There have been no changes in fair value during the year that
are directly attributable to changes in credit risk. Any balances
that are past due are disclosed further under liquidity risk.
Three of the VCT loan investments were extended at the same
terms during the year.
Liquidity risk
Liquidity risk is the risk that the VCT encounters difficulties
in meeting obligations associated with its financial liabilities.
Liquidity risk may also arise from either the inability to sell
financial instruments when required at their fair values or from
the inability to generate cash inflows as required.
The VCT's creditors at year end were GBP607,000 (2021:
GBP390,000) of which GBP 352,000 related to the costs incurred on
sale of VCT's assets and has both short-term and long-term loans
from investee companies (see Note 13 for an analysis of the
repayment terms), which are expected to be repaid by way of future
dividends from, or the sale of, these companies, being GBP4,097,000
(2021: GBP4,041,000). The Board therefore believes that the VCT's
exposure to liquidity risk is low. The VCT always holds sufficient
levels of funds as cash in order to meet expenses and other cash
outflows as they arise. For these reasons the Board believes that
the VCT's exposure to liquidity risk is minimal.
The VCT's liquidity risk is managed by the Investment Adviser in
line with guidance agreed with the Board and is reviewed by the
Board at regular intervals.
The following table analyses the VCT's loan payables by
contractual maturity date:
Due in Due between
less than 1 year and Due after
1 year 5 years 5 years Total
As at 30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ----------- --------- --------
Loans payable to investee companies 1,935 2,162 - 4,097
------------------------------------ ---------- ----------- --------- --------
1,935 2,162 - 4,097
------------------------------------ ---------- ----------- --------- --------
Due in Due between
less than 1 year and Due after
1 year 5 years 5 years Total
As at 30 September 2021 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ----------- --------- --------
Loans payable to investee companies 1,071 2,970 - 4,041
------------------------------------ ---------- ----------- --------- --------
1,071 2,970 - 4,041
------------------------------------ ---------- ----------- --------- --------
Although the VCT's investments are not held to meet the VCT's
liquidity requirements, the table below shows an analysis of the
assets, highlighting the length of time that it could take the VCT
to realise its assets if it were required to do so.
The carrying value of loan stock investments held at fair value
through the profit and loss account at 30 September 2022 as
analysed by the expected maturity date is as follows:
Not later Between Between Between More
than 1 and 2 and 3 and than
As at 30 September 1 year 2 years 3 years 5 years 5 years Total
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- -------- -------- -------- --------
Fully performing
loan stock 960 - - - - 960
Past due loan
stock - - - - - -
------------------- --------- -------- -------- -------- -------- --------
960 - - - - 960
------------------- --------- -------- -------- -------- -------- --------
Not later Between Between Between More
than 1 and 2 and 3 and than
As at 30 September 1 year 2 years 3 years 5 years 5 years Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------- -------- -------- -------- -------- --------
Fully performing
loan stock 1,893 - - - - 1,893
Past due loan
stock - - - - - -
------------------- --------- -------- -------- -------- -------- --------
1,893 - - - - 1,893
------------------- --------- -------- -------- -------- -------- --------
19. Capital management
The VCT's objectives when managing capital are to safeguard the
VCT's ability to provide returns for Shareholders and to provide an
adequate return to Shareholders by allocating its capital to assets
commensurately with the level of risk.
By its nature, the VCT has an amount of capital, at least 80%
(as measured under the tax legislation) of which is and must be,
and remain, invested in the relatively high risk asset class of
small UK companies within three years of that capital being
subscribed. The VCT accordingly has limited scope to manage its
capital structure in the light of changes in economic conditions
and the risk characteristics of the underlying assets. Subject to
this overall constraint upon changing the capital structure, the
VCT may adjust the amount of dividends paid to Shareholders, return
capital to Shareholders, issue new shares, or sell assets if so
required to maintain a level of liquidity.
As the Investment Policy implies, the Board would consider
levels of gearing. As at 30 September 2022 the VCT had loans from
investee companies of GBP4,097,000 (2021: GBP4,041,000). It regards
the net assets of the VCT as the VCT's capital, as the level of
liabilities are small and the management of them is not directly
related to managing the return to Shareholders. There has been no
change in this approach from the previous period.
20. Contingencies, guarantees and financial commitments
At 30 September 2022, conditional on the achieved sale price,
VCT had financial commitments towards the external advisors used
for the sale of the VCT's assets.
21. Controlling party and related party transactions
In the opinion of the Directors there is no immediate or
ultimate controlling party. For total Directors' remuneration
during the year, please refer to Note 5 as well as the Directors'
Remuneration Report.
22. Significant interests
Details of shareholdings in those companies where the VCT's
holding, as at 30 September 2022, represents more than 20% of the
nominal value of any class of shares issued by the portfolio
company are predominantly disclosed in the Review of Investments.
Relevant companies which do not feature in the Review of
Investments are listed below. All of the companies named are
incorporated in England and Wales. The percentage holding in each
class of shares also reflects the percentage voting rights in each
company as a whole.
Proportion Capital Profit/(loss)
Registered Class of Number of and for the
Company office shares held class held reserves year
---------------------- ----------- --------- ------- ----------- ------------ -------------
Penhale Solar
Limited EC4A 3TW Ordinary 299,601 50% GBP596,000 GBP25,000
---------------------- ----------- --------- ------- ----------- ------------ -------------
Minsmere Power
Limited EC4A 3TW Ordinary 200,001 50% GBP93,000 (GBP13,000)
---------------------- ----------- --------- ------- ----------- ------------ -------------
Small Wind Generation
Limited EC4A 3TW Ordinary 840,001 50% (GBP539,000) (GBP27,000)
---------------------- ----------- --------- ------- ----------- ------------ -------------
Lunar 3 Limited EC4A 3TW Ordinary 100 50% GBPnil GBPnil
---------------------- ----------- --------- ------- ----------- ------------ -------------
Explanatory notes
The financial information, Capital and reserves and
Profit/(loss), has been sourced from the statutory accounts of the
underlying investee companies. The financial information disclosed
relates to accounting year ending 31 March 2022.
23. Net debt reconciliation
1 October 30 September
2021 Cashflows 2022
GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ------------
Cash at bank and in hand 30 (29) 1
Other loans 4,041 56 4,097
------------------------- --------- --------- ------------
24. Events after the end of the reporting period
The Chancellor announced at the Autumn Statement 2022 the
introduction of the Electricity Generator Levy. The EGL is an
exceptional and time-limited measure that responds to the effect
that unique geopolitical events, when combined with structural
challenges within the UK market, are having on the prices being
paid for electricity in the UK.
The EGL has been introduced from 1 January 2023 and will remain
in force until April 2028, as announced at Autumn Statement.
The EGL replace the proposal for the Cost Plus Revenue Limit
(CPRL) which was announced in October 2022, powers for which were
taken in the Energy Prices Act 2022. The CPRL will not be taken
forward.
The EGL is limited, through a threshold, to those groups, or
stand-alone companies, generating more than 50 Gigawatt-hours (GWh)
per annum of electricity from in scope generation assets in a
qualifying period. On an ongoing basis, the EGL does not impact the
VCT, however its impact on potential realisation proceeds has been
incorporated into the valuation of the portfolio at 30 September
2022.
No further significant events have occurred between the
statement of financial position date and the date when the
financial statements have been approved, which would require
adjustments to, or disclosure in the financial statements.
* Following the 2018 AGM the articles of the VCT were amended
such that amounts borrowed from investee companies are now excluded
from the calculation of the 15% borrowing restriction.
** AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited,
South Marston Solar Limited, Beechgrove Solar Limited, New Energy
Era Limited and Vicarage Solar Limited.
1 Assuming an "all non-renewable fuels" emissions statistic of
440tCO2/GWh of electricity supplied, BEIS statistics. "Carbon
avoided" calculated using Renewable UK methodology
2 Assuming an average annual household usage of 3.748 MWh, BEIS December 2021 statistics.
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END
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January 31, 2023 02:00 ET (07:00 GMT)
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