Enabling
the energy
transition
VH GLOBAL SUSTAINABLE
ENERGY OPPORTUNITIES PLC
Annual Report and Accounts
For the year ended 31 December 2022
OUR PURPOSE
3 Overview
3 Highlights
4 About the Company
6 Investment Timeline
8 Strategic Report
8 Chair’s Statement
14 At a Glance
16 Business Model and Strategy
22 Victory Hill's Strategy
24 Investment Adviser’s Report
37 Key Performance Indicators
39 Stakeholder Engagement
42 Principal Risks and
Uncertainties
50 Going Concern and
Viability Statement
52 Sustainability
52 Our approach to ESG
59 Finance Stability Board Task
Force on Climate-Related
Financial Disclosures (TCFD)
68 Operational ESG
Performance
74 Governance
75 Meet the Board
76 Meet the Victory Hill
Investment Team
78 Directors’ Report
84 Corporate Governance
Statement
88 Report of the
Audit Committee
91 Directors’
Remuneration Report
95 Report of the
Nomination Committee
98 Report of the Management
Engagement Committee
99 Statement of Directors’
Responsibilities
101 Financial Statements
103 Independent Auditor’s Report
111 Statement of
Comprehensive Income
112 Statement of
Financial Position
113 Statement of Changes
in Shareholders’ Equity
114 Statement of Cash Flows
115 Notes to the
Financial Statements
138 Alternative Performance
Measures
140 Additional
Information
141 SFDR – Annex V
149 Glossary
151 Shareholder Information
153 Company Information
154 Annual General
Meeting
155 Notice of Annual
General Meeting
Our investment objective is to
generate stable returns, principally
in the form of income distributions,
by investing in a diversied
portfolio of global sustainable
energy infrastructure assets
Annual Report and Accounts 2022
HIGHLIGHTS
Market capitalisation
£426.7m
Capital raised in 2022
£122.0m
Dividend coverage
1
1.4x
Dividend per share for FY 2022
5.13p
NAV
£457.2m
NAV per share
1
108.2p
Total NAV return since IPO
(Feb 2021)
1
15.5%
Total NAV return for the
year
1
7.6%
Number of sustainable
energy assets globally
28
Number
of technologies
2
5
Clean energy
generated
35,117MWh
Tonnes
of carbon avoided
14,349t
1
Alternative performance measures are dened on pages 138 and 139
2
Terminal storage, solar PV & battery energy storage systems, solar PV, hydro, exible power with CCR
3
ABOUT THE COMPANY
VH Global Sustainable Energy Opportunities plc‘s (GSEO
or the “Company”, “Investment Company”) investment
objective is to generate stable returns, principally in the
form of income distributions, by investing in a diversied
portfolio of global sustainable energy infrastructure assets,
predominantly in countries that are members of the EU,
OECD, OECD Key Partner countries or OECD Accession
Countries.
The Company’s investment policy states that it aims to
achieve diversication principally by making a range
of sustainable energy infrastructure investments
across a number of distinct geographies and a mix of
proven technologies that align with the UN Sustainable
Development Goals (‘SDGs’) where the investments are
a direct contributor to the acceleration of the energy
transition towards a net zero carbon world.
The Company’s investments in proven technologies will
include exposure to power generation (renewable and
conventional), biomass, transmission, distribution, storage
and waste-to-energy. These investments are in operational,
construction or ‘ready-to-build’ assets but will not include
assets that are under development or in pre-consent stage.
No investment is made in projects involving the extraction
of fossil fuels or minerals.
Investment company with
a specialist mandate to
support the global energy
transition
Annual Report and Accounts 2022
|
Overview
4
WHY INVEST IN GSEO?
A vehicle presenting a distinctive
combination of access, return and impact.
Access
•
Access to global private markets energy investments
•
A geographically and technologically diversied portfolio
of actively managed, high-impact investments
Return
•
Targeting attractive risk-adjusted returns from around
the world whilst ensuring an eective and just climate
transition
•
A highly diversied mix of assets driving both long-term
capital growth and income
•
High degree of ination linkage with over 90% of
revenues that are ination-linked
Impact
•
Creating environmental and social impact transforming
lives and communities without compromising on returns
•
Transparent impact reporting
•
SFDR Article 9 fund
5
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
INVESTMENT TIMELINE
DEC – 20 MAR – 21 JUN – 21 SEPT – 21 DEC – 21 MAR – 22
JUN – 22 SEP – 22 DEC – 22 MAR – 23 JUN – 23 DEC – 23 2024 ONWARDS —
>
SEPT – 23
Completed In process Next steps Subject to due diligence/pipeline
Agreement signed
(£52m)
1
: 18x assets
COD:
3x assets
Estimate COD:
8x assets (Q3 -23)
COD:
1x asset
COD: 6x assets
Brazilian solar PV
assets
IPO
£243m
Placing
£70m
Placing
£122m
Capital raising activities
Agreement signed
(£50m)
Phase 1/2 (£7.3m) :
1x asset (operational)
Estimate COD:
Phase 1/2 BESS (Q2-23)
Phase 1/2 (£5m):
1x asset
Phase 3
(£15.7m):
3x assets
Estimate COD:
Phase 3 (Q3-23)
Phase 4-8
Australian solar PV with
battery storage assets
Agreement signed
(£106m): 2x assets
Phase 2 (£78m):
1x 35MW asset
Estimate COD:
Phase 1 (Q4-23)
Estimate COD:
Phase 2 (Q3 - 24)
Phase 1:
1x 10MW asset
First Power:
Phase 1 (Q2-23)
UK flexible power with CCR assets
Agreement
signed
Transaction
completion
(£110.8m)
2
Regulatory approvals Concession renewal (H1-27)
Brazilian hydro facility
Agreement
Signed
Contract
Optimisation
Motus T2 Expansion
(+£29m)
1
Motus T1 Phase 2
Expansion (Q2-23)
(c.£31m)
1
Commercial Operational Date (COD) T1 Phase 1
Expansion (Q3 -22)
Acquisition Completed
(£50m)
1
: Motus T1 & T2
Project Leverage
(14%)
COD: T2
Expansion
(Q4 -22)
Estimate COD: T1
Expansion (Q2 -24)
US terminal storage assets
1
Foreign exchange rates as at 31 December 2022 were used for the purposes of this timeline. (USD:GBP was 1.2098:1, AUD:GBP was 1.7750:1)
2
7 December 2022 spot rate
Annual Report and Accounts 2022
|
Overview
6
DEC – 20 MAR – 21 JUN – 21 SEPT – 21 DEC – 21 MAR – 22 JUN – 22
SEP – 22 DEC – 22 MAR – 23 JUN – 23 DEC – 23 2024 ONWARDS —
>
SEPT – 23
Completed In process Next steps Subject to due diligence/pipeline
Agreement signed
(£52m)
1
: 18x assets
COD:
3x assets
Estimate COD:
8x assets (Q3 -23)
COD:
1x asset
COD: 6x assets
Brazilian solar PV
assets
IPO
£243m
Placing
£70m
Placing
£122m
Capital raising activities
Agreement signed
(£50m)
Phase 1/2 (£7.3m) :
1x asset (operational)
Estimate COD:
Phase 1/2 BESS (Q2-23)
Phase 1/2 (£5m):
1x asset
Phase 3
(£15.7m):
3x assets
Estimate COD:
Phase 3 (Q3-23)
Phase 4-8
Australian solar PV with
battery storage assets
Agreement signed
(£106m): 2x assets
Phase 2 (£78m):
1x 35MW asset
Estimate COD:
Phase 1 (Q4-23)
Estimate COD:
Phase 2 (Q3 - 24)
Phase 1:
1x 10MW asset
First Power:
Phase 1 (Q2-23)
UK flexible power with CCR assets
Agreement
signed
Transaction
completion
(£110.8m)
2
Regulatory approvals Concession renewal (H1-27)
Brazilian hydro facility
Agreement
Signed
Contract
Optimisation
Motus T2 Expansion
(+£29m)
1
Motus T1 Phase 2
Expansion (Q2-23)
(c.£31m)
1
Commercial Operational Date (COD) T1 Phase 1
Expansion (Q3 -22)
Acquisition Completed
(£50m)
1
: Motus T1 & T2
Project Leverage
(14%)
COD: T2
Expansion
(Q4 -22)
Estimate COD: T1
Expansion (Q2 -24)
US terminal storage assets
1
Foreign exchange rates as at 31 December 2022 were used for the purposes of this timeline. (USD:GBP was 1.2098:1, AUD:GBP was 1.7750:1)
2
7 December 2022 spot rate
7
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
Leading the energy
transition and driving
positive impact on the
environment and society
CHAIR’S STATEMENT
Annual Report and Accounts 2022
|
Strategic Report
8
CHAIR’S STATEMENT
I am pleased to present the second
Annual Report for VH Global
Sustainable Energy Opportunities plc
(the “Company” or “GSEO”) for the
year ended 31 December 2022.
This year under review has continued
to witness global economic challenges,
a growing energy crisis exacerbated
by Russia’s invasion of Ukraine, and
a sharp increase in the cost of living
that is severely aecting families and
households. The current environment
presents a very attractive opportunity
for the Company investing in
solutions that facilitate the energy
transition, enable renewable energy
technologies, improve energy security
and aordability, while having a
meaningful impact in the economies
where it deploys capital.
The global energy transition is a
critical and ongoing process that
aims to shift the world’s energy
systems away from fossil fuels and
towards cleaner, renewable sources.
This transition is driven by a need to
combat climate change, reduce air
pollution, and ensure energy security.
The use of renewable energy sources
such as solar, wind, and hydropower
is central to the energy transition.
These sources are abundant,
sustainable, and produce little or no
greenhouse gas emissions. They also
oer the potential for signicant cost
reductions over time, making them
increasingly competitive with fossil
fuels. However, the transition also
involves the use of other clean energy
technologies such as natural gas with
carbon capture and re use, which
can provide reliable and low-carbon
energy.
The energy transition is also about
more than just generating energy.
It involves a transformation of the
entire energy system, including the
way energy is distributed, stored,
and consumed. This includes the
integration of renewable energy
into the grid, the development of
energy storage solutions, and the
implementation of energy eciency
measures.
A successful capital raise in July
2022 helped to ensure that GSEO
had funds available to deploy into
its enhanced pipeline of assets, as
it has continued to do since IPO, to
work towards its strategic goals. We
were also delighted to welcome new
shareholders to the register on this
occasion.
GSEO represents the rst publicly
listed investment trust in the UK
with a global focus on the energy
transition. The Company’s ability to
invest in a range of technologies,
across a broad geographical scope
mitigates the risk of weather patterns
and prevents reliance on any single
regulatory regime or currency.
We believe these characteristics
help us with the objective to oer
shareholders attractive risk-adjusted
returns combined with high impact,
through exposure to the global energy
transition.
Financial performance
The Company’s net asset value (NAV)
per share performance was 108.2p
as at 31 December 2022, an increase
of 4.04% from the previous year.
This increase was notably driven by
movements in valuation of the assets
and foreign exchange, albeit FX was
a detractor in the nal quarter of
the year as sterling strengthened
against the basket of currencies in
the portfolio, namely the US dollar,
Australian dollar and Brazilian real.
However, due to the long-term
ination-linked revenues stemming
from investments, the Company does
not hedge the principal value of the
investments.
The Company focuses on investing in
a diverse range of projects across the
energy value chain, including energy
infrastructure such as renewable energy,
transmission and distribution,
and energy storage that have a
clear path to commercialisation
and scalability.
Bernard Bulkin
Chairman
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
9
FINANCIAL STATEMENTS
CHAIR’S STATEMENT CONTINUED
The macroeconomic environment
in the second half of 2022 was
characterised by rising ination,
interest rates, energy prices and
changes in foreign exchange rates.
The asset value creation and
ination-linked revenues mitigated
any negative impact stemming from
macroeconomic environment.
Higher interest rates had a limited
impact on the Company’s investment
performance given relatively low
levels of gearing at mainly xed
rates within the debt held at project
level. As at the end of the nancial
year, there is only 14% debt on the
US terminal storage assets and
no gearing at the Company level.
However, higher rates did impact
valuations as applied to projected
future cashows. The average
discount rates for operational assets
as at the end of the year are 8.4% in
the US, 8.6% in Australia, 10.5% for
the Brazilian hydro facility and 13.1%
for the Brazilian solar PV assets. The
UK exible power with CCR assets
are in construction and therefore
currently held at cost.
GSEO’s prot after tax for the year
was £28.2 million (2021: £20.4 million)
resulting in earnings per share of
7.7pence (2021: earnings per share
of 10.5 pence). Removing unrealised
movements on investments at fair
value, the adjusted prot before
tax is £24.1 million (2021: loss of
£1.7million), equivalent to 6.55 pence
per share (2021: loss of 0.87 pence).
Cash received from the portfolio
assets by way of distributions, which
includes interest and dividends,
was £28.8 million during the year
(2021: £1.7 million). After operating
and nance costs, cash ow from
operations of the Company was
£22.0 million, covering the cash
dividends paid for the 2022 nancial
year of 5.13p per share resulting in
a normalised dividend coverage of
1.4x. Details on the Company’s overall
nancial and operational performance
can be found in the Investment
Adviser’s Report.
Dividend
The Board was pleased to declare
total dividends of 5.13p per ordinary
share in respect of the 2022 nancial
year, with the fourth interim dividend
paid in March 2023.
In line with the Company’s progressive
dividend policy and based on
projected investment cash ows from
the current portfolio as prepared
by the Investment Adviser and
approved by the Board, the Company
announced a dividend of 1.38p per
share with respect to the period
from 1 October 2022 to 31 December
2022, an increase of over 10% vs.
the prior quarter, bringing the total
dividend declared for the nancial
year ending 31 December 2022 to
5.13p per ordinary share, exceeding
the dividend target of 5p per ordinary
share. The Company is targetting
quarterly dividends of 1.38p or 5.52p
in total for the 2023 nancial year.
The long-term sustainability of the
Company’s dividend remains a priority
for the Board.
The total NAV return including
reinvestment of dividends in the
nancial year is 7.6%. Since IPO, the
total NAV return at 31 December 2022
is 15.5%.
Investment activity
The Company is dedicated to
deploying capital towards sustainable
energy infrastructure that drive the
global transition towards cleaner and
more sustainable sources of power.
The Company focuses on investing in
a diverse range of projects across the
energy value chain, including energy
infrastructure such as renewable
energy, transmission and distribution,
and energy storage. We have a
thorough due diligence process in
place to ensure that we invest in high-
quality assets that have a positive
impact on the environment and
society.
We are committed to supporting the
growth and development of these
assets through active involvement in
their strategic decision-making and
providing access to our network of
industry experts and partners. We
also strive to promote sustainable
business practices and to minimise
the environmental impact of our
assets.
The Company believes that by
deploying capital towards sustainable
energy infrastructure, we can make
a meaningful impact on the global
eort to combat climate change while
also generating attractive returns
for our investors. We are dedicated
to investing in projects that provide
long-term and stable cash ows, while
also contributing to the transition to a
low-carbon economy.
Our investment strategy seeks to take
advantage of the energy transition
by investing in a diverse portfolio of
energy assets. Diversication is a key
part of the strategy. The Company’s
ability to invest in EU, OECD and
OECD Accession and Key Partner
countries allows us to take advantage
of reduced correlation in energy and
power prices. We also aim to minimise
concentration risk via investing across
a large number of projects.
During the year under review, the
Company announced investment
commitments in both new and
existing projects. Investment activity
during the course of the year
included:
•
Nine solar PV sites across ve
Brazilian states were completed
following a period of construction.
These sites represent a generation
capacity of 24.5MWp. All the sites
have contract lengths of 20 years
and are ination-linked.
•
A further £28million was
committed in May to the second UK
exible power plant as part of the
Company’s programme to support
the UK’s energy transitions plans
to net zero. This increases the total
commitment to the programme
from £78million to £106million
across two sites. In October, the
Company also signed a 15 year CO
2
Otake Agreement for its rst UK
exible power plant with carbon
capture. This 15-year term contract
is believed to be one of the rst of
its kind and contrasts with the 1-3
year terms typically agreed.
Annual Report and Accounts 2022
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Strategic Report
10
•
The completion of the acquisition
of three solar PV sites of 5MW
each located in New South Wales,
Australia was announced in
October. This is part of the existing
£50million commitment to its
Australian solar PV with battery
storage assets. Construction
has begun with completion and
commissioning still on track for Q2
2023.
•
The last investment of the year
was made on 7 December (rst
announced in August), being the
completion of the acquisition of a
198MW hydro facility in Brazil, the
portfolio’s fth programme. The
acquisition of the Mascarenhas
Hydro Electric Facility (the “Brazilian
hydro facility”) in the state of
Espírito Santo, Brazil was for a total
consideration of BRL 708million,
which is subject to post-closing
adjustments. In addition, BRL
425million is payable subject to the
conditions established under the
process of renewal of the Brazilian
hydro facility concession in H1
2027.
The Company continues to follow a
low-gearing strategy in comparison to
the wider infrastructure peer group,
with outstanding debt across the
group representing approximately 3%
of NAV at 31 December 2022. This is
markedly lower than what is provided
for in the Company’s prospectus,
whereby the Company may make use
of long-term limited recourse debt for
investments and not exceed 60% of the
prevailing Gross Asset Value.
As at the end of the reporting period,
the Company is 93% deployed or
committed. The Board is pleased with
the timely deployment of capital into
new and follow-on investments during
the year, which have been consistent
with the Company’s targeted
technologies and geographic markets.
This success demonstrates the
Investment Adviser's ability to source
and secure attractive investments
that meet the Company’s investment
strategy and objectives.
Corporate governance
The Board recognises the importance
of strong corporate governance
that meets the requirements of the
Listing Rules of the Financial Conduct
Authority and the Association of
Investment Companies (‘AIC’) Code of
Corporate Governance.
The Company aims to maintain
an open dialogue with investors
regarding its strategic objectives, both
nancial and operational, and how
they are executed. During the period
since IPO, the Investment Adviser and
the Company's corporate brokers
engaged with shareholders through
meetings (including a well attended
Capital Markets Day in November),
market announcements and diverse
written materials.
Board composition is regularly
discussed by the Board’s Nomination
Committee to ensure that the
Company’s non-executive Directors
have a diverse range of relevant
expertise and experience to apply
to the oversight of the Company
and to engage eectively with the
Investment Adviser. With that, and
in a post-period update, the Board
was delighted to appoint Daniella
Carneiro as an independent non-
executive Director of the Company.
Born and educated in Brazil and
the UK, Daniella has over 30 years
of global experience in project
development, governance, strategy,
tax and M&A with major companies
including KPMG and Shell. She brings
a depth of experience in key target
markets, especially Brazil, and a direct
understanding of the local impact
of the Company's investments. Her
experience will help strengthen the
Board's ability to ensure investments
are aligned with the global transition
to net zero.
Share capital
In June 2022, the Company raised
£122 million via an institutional
placing and retail oer. This was at
an issue price of 110p per share,
representing a premium of 3.4% to
the end of Q1 2022 NAV. The Board
was pleased with the result in what
was a volatile period for public
markets, notably the second half
of June. This highlights the growing
demand for exposure to global
sustainable energy infrastructure and
gives a strong endorsement of the
Company’s strategy.
The fund raise underpinned the
acquisition of the Brazilian hydro
facility which was one of the assets
highlighted to investors in the
Company’s prospectus as one of the
'enhanced pipeline' assets. The Board
is delighted with the Investment
Adviser's ability to originate and gain
exclusivity to sustainable energy
infrastructure assets resulting in
ecient capital deployment.
The Board would like to take this
opportunity to thank our existing
investors for their continuing support
and welcome new institutional and
retail investors to the Company’s
shareholder register.
Sustainability and ESG
Climate change and sustainability
are two of the most pressing issues
facing our planet today. Climate
change, caused by the release of
greenhouse gases, poses a signicant
threat to our environment and to
human health and well-being. It has
the potential to cause widespread
damage to ecosystems, economies
and communities around the world.
Sustainability, on the other hand, is
the practice of meeting the needs of
the present without compromising
the ability of future generations to
meet their own needs. It is a holistic
approach to economic, social and
environmental development that
aims to create a more equitable and
resilient world.
Our goal is to make a positive
impact as we deploy capital into
sustainable energy projects around
the world, and ensure that ESG
criteria are incorporated into all of our
investment decisions. This is reected
across our investment philosophy and
approach, including the selection of
our investment adviser, Victory Hill
Capital Partners LLP (the “Investment
Adviser” or “Victory Hill”), which is
dedicated to the energy transition. As
a signatory to the UN Principles for
Responsible Investment and the Net
Zero Asset Managers Initiative, Victory
Hill has integrated ESG risks as well
as opportunity assessments across
every single stage of its investment
process in sustainable assets around
the world, reecting the sustainable
11
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
CHAIR’S STATEMENT CONTINUED
culture of both Victory Hill and the
Company. GSEO has been proactively
tracking metrics such as carbon
emissions avoided, renewable energy
generated and life cycle analysis, and
continually seeks ways to improve
its reporting and transparency for
investors.
The Board recognises that
impact investing is also becoming
increasingly important for investors
so we will be aiming to report in a
transparent way, making it easier
for investors to assess and quantify
the positive impact that GSEO is
having on communities around the
world and the environment more
broadly. Furthermore, we intend
to adopt reporting standards as
they are developed and adopted by
the industry, such as those being
developed by the Task Force on
Climate-related Financial Disclosures
(‘TCFD’) and the Sustainable Finance
Disclosure Regulation (‘SFDR’).
The Company has sustainable
investment as its objective. Article
9 Funds under the Sustainable
Finance Disclosure Regulation
(SFDR) are products that have a
sustainable investment objective.
As of 31 December 2022, 24% of
the Company’s investments were
aligned with EU Taxonomy economic
activities. 25.9% of the Company’s
investments were EU taxonomy
eligible and undergoing technical
screening. The remaining 50.1% were
invested in economic activities with a
dierent environmental objective or in
activities not EU taxonomy eligible.
The disclosures related to TCFD and
SFDR, and how they are incorporated,
including outputs, can be found in the
dedicated Sustainability section of this
report on page 51.
Principal risks and
uncertainties
The Board and the Investment Adviser
monitor and, where practicable,
mitigate a range of risks to GSEO’s
strategy.
These risks are expanded on in the
principal risks and uncertainties
section on pages 42 to 49.
Annual Report and Accounts 2022
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Strategic Report
12
The Company’s ability to invest in a range of technologies,
across a broad geographical scope mitigates the risk
of weather patterns and prevents reliance on any
single regulatory regime or currency. We believe these
characteristics help us with the objective to oer
shareholders attractive risk-adjusted returns combined
with high impact.
Outlook
Looking forward, there are fresh
challenges for investors, within
the current period of uncertain
macroeconomic outlook and
geopolitical tension. With the portfolio
benetting from signicant ination
protection via index-linked revenues,
the Board remains optimistic on the
ability of the Investment Adviser
to continue to add growth to the
portfolio through its asset value
creation strategy. Whilst the Board
remains mindful of the construction
exposure in the portfolio, the Board
believes new infrastructure must be
built in order to achieve the ambitious
net zero targets, which in turn creates
additional capital growth as assets
move through the stages of a project's
life cycle.
GSEO is well-positioned to capitalise
on the global shift towards cleaner,
more sustainable sources of power.
The demand for renewable energy is
rapidly increasing as countries and
corporations commit to achieving
net zero emissions and governments
implement policies to support the
transition to a low-carbon economy.
We have a diversied portfolio
of assets and projects across
technologies and geographies that
allows the Company to participate in
multiple growth markets and provides
a hedge against regulatory and
technological risks.
With the need for new sustainable
energy infrastructure as urgent
as ever to meet global goals, and
the strong pipeline of investment
opportunities identied by the
Investment Adviser, the Company is
well positioned to continue growing,
providing genuine positive impact,
whilst delivering attractive returns
to investors. The current investment
pipeline has a good balance of
opportunities across technologies and
geographies, often involving bilateral
negotiations where the Investment
Adviser has a particular strength or
relationship, which is advantageous to
the Company. The Investment Adviser
maintains robust pricing discipline
when conducting due diligence on
any opportunities within its target
markets.
On behalf of the Board, I would
like to thank shareholders for their
continued support and I am condent
that GSEO’s business model, which
has successfully prevailed in 2022,
will enable the Company to continue
to generates sustainable returns and
contribute towards a net zero carbon
future.
Bernard Bulkin
Chair
27 March 2023
13
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
13
AT A GLANCE
Victory Hill continues to
demonstrate that it has a unique
insight into the energy sector. e
Company’s continued performance
and selective expansion has also
benetted from our robust execution
capabilities.
The Company’s investment
strategy, and particularly its
approach to joint venture
partnerships with experienced
energy developers around the
world, has served it very well
over the period. The selection of
joint venture partners rests on
our investment team’s ability to
discern unique and dierentiated
commercialisation strategies in
hand-picked energy markets.
At the same time, our joint
venture partners’ development
and operations expertise has
provided invaluable support in
managing construction as well
as some commercial risks, thus
vindicating our investment model.
Our dierentiated sustainability
framework, which has been
developed using an industrial
energy lens, has helped us
maintain our promise to the
Company’s shareholders, to
support the energy transition.
Our thematic investment criteria
have also been key drivers to
uncovering appropriate joint
venture partners that have a
competitive and dierentiated
approach to capturing the
opportunities arising from the
energy transition in their local
energy markets.
Over the period our investment
team has doubled in human
capital terms, which has
increased our capacity to execute
the investment strategy and
monitor the Company’s portfolio
as it continues to grow. Our
commitment to further growth
and enhancement of Victory
Hill’s operation is already serving,
and will continue to serve, the
Company well.
Over time we intend to continue
to diversify the Company’s
portfolio, both technologically
and geographically. We continue
to bring value to shareholders
through the expansion of further
joint venture programmes with
new developer/operators and
uncover less obvious and lesser-
known sources of investment
returns.
Anthony Catachanas
Chief Executive Ocer
Victory Hill Capital
Partners LLP
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14
Investment decision process
Opportunity-specic UN SDGS
Investment pathways
Climate
change
Energy
access
Energy
eciency
Market
liberalisation
Gate 1
Assessment of opportunity and
relevance to the Company’s
investment pathways
Gate 2
Assessment of whether there is
any material breach of non-core
UN SDGs
Gate 3
Assessment of the
investment itself
Investment decision gates
We start with
sustainability and look
for investments
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
15
FINANCIAL STATEMENTS
Victory Hill continues
to guide the Company's
investment strategy
BUSINESS MODEL AND STRATEGY
The Company group structure
The Company is an investment company
incorporated in England and Wales and its
ordinary shares trade on the premium segment
of the Main Market of the London Stock
Exchange. The Company’s investments are
held indirectly via its sole direct subsidiary and
main investment vehicle, VH GSEO UK Holdings
Limited (“GSEO Holdings” or “HoldCo”), a limited
company incorporated in England and wholly-
owned by the Company, (the Company and
GSEO Holdings, together, the “Group”). GSEO
Holdings is itself an investment entity and is
therefore measured at fair value.
The Company has an independent Board of
Directors, has no employees and has appointed
Victory Hill to advise on investments and G10
Capital Limited (AIFM) to manage investments on
its behalf.
Apex Fund and Corporate Services (UK) Limited
(“Apex”, “Administrator” or “Company Secretary”)
has been appointed by the Company as a third
party service provider via an administration
agreement.
•
In order for the Company to achieve its
investment objective, it makes its investments
via its sole investment vehicle, GSEO Holdings,
and its direct and indirect subsidiaries.
–
GSEO Holdings typically invests in project
special purpose entities (SPEs) around
the world. The project SPEs normally
provide local energy transition solutions
to counterparties globally, often through
long-term contracts. Each SPE, and by
implication the portfolio of investments
as a whole, therefore has a lifetime over
which it provides target returns to GSEO
Holdings and ultimately the Company.
These SPEs are typically structured such
that the Company has a majority stake and
the operating partner has a minority stake
or prot share.
–
The Company has a 31 December nancial
year end, and expects to announce its full
year results in March and half year results
in September.
–
The Company intends to pay dividends
quarterly.
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16
Specialised energy
developer & operator
(United States)
Liquid storage
investment holding
company
Project SPEs
United States
Specialised energy
developer & operator
(United Kingdom)
Flexible power
investment holding
company
Project SPEs
United Kingdom
Specialised energy
developer & operator
(Brazil 1)
Distributed solar
investment holding
company
Project SPEs Brazil 1
Specialised energy
developer & operator
(Brazil 2)
Hydropower
investment holding
company
Project SPEs Brazil 2
Specialised energy
developer & operator
(Australia)
Distributed hybrid solar
investment holding
company
Project SPEs Australia
VH GSEO UK Holdings Ltd.
SHAREHOLDERS
Independent Board
VH Global Sustainable Energy
Opportunities plc
Victory Hill Capital
Partners LLP
(Investment Adviser)
Company service
providers
•
AIFM
•
Broker
•
Fund Administrator
•
Depositary
•
Fund Counsel
•
Registrar
•
Company Secretary
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
17
FINANCIAL STATEMENTS
BUSINESS MODEL AND STRATEGY CONTINUED
Governance
The Board is responsible for the
overall governance of the Company.
As an investment company, the
Company’s purpose is expressed
in its investment objective. Its
investment policy describes the
strategy adopted by the Company to
achieve its objective. The investment
objective and policy stated below
should be considered in conjunction
with the Chairman’s statement, the
Investment Adviser’s report and the
other disclosures within this Strategic
Report which provide an in-depth
review of the Company’s performance
and strategy.
The Board acknowledges that good
governance is integral to ensuring the
Company’s success and sustainability.
It always works towards ensuring
that its decisions are in the best
interests of the shareholders and
other stakeholders. This is achieved
by eectively utilising the diversity of
skills, expertise and experience on the
Board. The Board aims to follow high
standards of governance and establish
a culture based upon openness,
integrity, trust, mutual respect and
constructive challenge. This culture of
openness and constructive challenge
extends to the Board’s interaction
with the Company’s third party service
providers, particularly the Investment
Adviser.
The Company has put in place a
number of policies and procedures
which assist with maintaining a
culture of good governance. These
include policies relating to directors’
share dealings, directors’ conicts
of interest, anti-money laundering,
anti-bribery and corruption, and
prevention of facilitation of tax
evasion. Compliance with these
policies is monitored regularly
through Board meetings and an
annual evaluation process.
Investment objective
The Company’s investment objective is
to generate stable returns, principally
in the form of income distributions,
by investing in a diversied portfolio
of global sustainable energy
infrastructure assets, predominantly
in countries that are members of
the EU, OECD, OECD Key Partner
Countries or OECD Accession
Countries.
Investment policy
The Company seeks to achieve its
investment objective by making
sustainable energy infrastructure
investments across the EU and OECD
group of nations predominantly,
including but not limited to OECD
Key Partner Countries and OECD
Accession Countries. The Company’s
investments in global sustainable
energy infrastructure must be:
i. investments in sustainable energy
infrastructure that support the
attainment and pursuit of the
United Nations Sustainable
Development Goals (the “SDGs”,
each an “SDG”) where energy and
energy infrastructure investments
are a direct contributor to the
acceleration of the energy
transition towards a net zero
carbon world; and
ii. investments that can be
categorised into one or more of
the four investment pathways that
guide the Company’s investment
strategy. These investment
pathways are (1) Addressing
Climate Change, (2) Energy Access,
(3) Energy Eciency, and (4)
Market Liberalisation,
and must also fall into one or
a combination of the following
categories:
i. power, heat and green gas
producing assets reliant on,
but not limited to, wind, solar,
biomass, natural gas and
hydropower technologies;
ii. production and renement of
fuels derived from biomass
sources;
iii. energy storage infrastructure
such as containment and
non-processing facilities for
liquid and gas fuel sources,
power storage utilising battery or
gravity-based technologies;
iv. energy transportation
infrastructure such as
pipelines, interconnectors and
micro-distribution grids;
v. distributed energy sources (heat,
power, gas and steam) which are
produced close to where it will
be used, rather than at a large
centralised plant elsewhere,
delivered through a centralised
grid infrastructure; and/or
vi. equipment that is installed at
the premises or on site, directly
connected to the premises
including, but not limited to, CHP
units, CCHP plant schemes, HVAC
units, lighting equipment, biomass
boilers and steam raising boilers
(including intermediate pressure
(IP) steam processors),
in each case, either already operating,
in construction or ready-to-build
(‘‘Sustainable Energy Infrastructure
Investments’’).
The Company looks to achieve NAV
growth by investing in higher yielding
Sustainable Energy Infrastructure
Investments that are operational, in
construction or “ready-to-build” but
does not invest in assets that are
under development (that is assets
that do not have in place required
grid access rights, land consents,
planning and regulatory consents and
commercial arrangements).
The Company acquires a mix of
controlling and non-controlling
interests in Sustainable Energy
Infrastructure Investments that
are held within SPEs which the
Company invests through equity
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18
and/or shareholder loan instruments.
Incertain instances, the SPE may
hold one or more Sustainable Energy
Infrastructure Investments of a similar
type.
The Company invests in SPEs
structured as joint venture
investments (JVs) or co-investments,
including through minority stakes,
where this approach is the only
viable approach. Where the Company
participates in a JV or a co-investment,
it seeks to secure its rights through
obtaining protective provisions in
shareholders’ agreements, joint
venture agreements, co-investment
agreements or other transactional
documents, as well as board
representation for the Investment
Adviser, and with the aim of trying
to ensure that the investment
is managed in a manner that is
consistent with the Investment Policy.
Diversication
The Company aims to achieve
diversication principally by making
a range of Sustainable Energy
Infrastructure Investments across a
number of distinct geographies and
a mix of proven technologies that
facilitate the achievement of the
SDGs by way of Sustainable Energy
Infrastructure Investments.
Investment restrictions
The Company can invest (calculated at
the time of investment) up to:
•
25% of Gross Asset Value in
any one Sustainable Energy
Infrastructure Investment;
•
40% of Gross Asset Value in a single
technology;
•
35% of Gross Asset Value in assets
that are in construction or “ready-
to-build”;
•
40% of Gross Asset Value in assets
that are located in any one country;
•
30% of Gross Asset Value in assets
that are owned or operated by a
single developer;
•
10% of Gross Asset Value in assets
that are located in countries that
are not members of the EU, OECD,
OECD Key Partner Countries or
OECD Accession Countries; and
•
10% of Gross Asset Value in other
closed-ended investment funds
which are listed on the Ocial List.
No investments are made in
extraction projects for fossil fuel or
minerals.
Non-compliance resulting from
changes in the price or value of
Sustainable Energy Infrastructure
Investments following investment will
not be considered as a breach of the
investment restrictions.
The Company holds its investments
through one or more SPEs and the
investment restrictions are applied on
a look-through basis.
In the event of any breach of the
investment restrictions applicable to
the Company, shareholders will be
informed of the remedial actions to be
taken by the Company through an RIS
announcement.
Cash management
Whilst it is the intention of the
Company to be fully or near fully
invested in normal market conditions,
uninvested cash or surplus capital
or assets may be invested on a
temporary basis in:
•
cash or cash equivalents, namely
money market funds (as dened
in the ‘Guidelines on a Common
Denition of European Money
Market Funds’ published by the
Committee of European Securities
Regulators (CESR) and adopted
by the European Securities and
Markets Authority (ESMA)) and
other money market instruments
(including certicates of deposit,
oating rate notes and xed rate
commercial paper of banks or
other counterparties having a
“single A” or higher credit rating as
determined by any internationally
recognised rating agency selected
by the Board which, may or may
not be registered in the EU); and
•
any “government and public
securities” as dened for the
purposes of the FCA Rules,
provided that not more than 20% of
the Gross Asset Value, calculated at
the time of investment, may be so
invested, following the deployment of
the Company's net issue proceeds.
Borrowing policy
The Company may make use of
long-term limited recourse debt for
Sustainable Energy Infrastructure
Investments to provide leverage for
those specic Sustainable Energy
Infrastructure Investments. Such
long-term limited recourse debt will
not, in aggregate (calculated at the
time of entering into or acquiring any
new long-term limited recourse debt),
exceed 60% of the prevailing Gross
Asset Value.
In addition, the Company may make
use of short-term debt, such as a
revolving credit facility, to assist
with the acquisition of suitable
opportunities as and when they
become available. Such short-term
debt will be subject to a separate
gearing limit so as not to exceed 30%
of the Gross Asset Value at the time of
entering into (or acquiring) any such
short-term debt.
In circumstances where these
aforementioned limits are exceeded
as a result of gearing of one or more
Sustainable Energy Infrastructure
Investments in which the Company
has a non-controlling interest, the
borrowing restrictions will not be
deemed to be breached. However, in
such circumstances, the matter will be
brought to the attention of the Board
who will determine the appropriate
course of action.
19
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
BUSINESS MODEL AND STRATEGY CONTINUED
Use of derivatives
The Company may enter into hedging
transactions for the purposes of
ecient portfolio management, which
may include (as relevant) short-term
currency hedging (as described in
the last published prospectus of the
Company), interest rate hedging and
power price hedging. The Company
does not intend to use hedging or
derivatives for investment purposes
but may from time to time use risk
management instruments such
as forward contracts and swaps
(collectively ‘‘Derivatives’’) to protect
the Company from any uctuations
in the relative value of currencies
against Pound Sterling, as well as
to hedge against interest rates and
power prices. The Derivatives must
be traded by private agreements
entered into with nancial institutions
or reputable entities specialising in
this type of transaction and will be
limited to maturities no longer than
12 months. The Company will target
investments that provide sucient
asset-level returns to compensate for
longer term uctuations in exchange
rates. Furthermore, asset level returns
where possible will be linked to local
ination rates.
Derivatives may be employed either
at the level of the Company, at the
level of the relevant SPE or at the level
of any intermediate wholly owned
subsidiary of the Company.
All hedging policies of the Company
will be reviewed by the Board and
the AIFM on a regular basis to
ensure that the risks associated
with the Company’s investments are
being appropriately managed. Any
derivative transactions carried out will
only be for the purpose of ecient
portfolio management and will not be
carried out for speculative purposes.
Amendment to investment policy
As required by the Listing Rules, any
material change to the investment
policy of the Company will be made
only with the approval of the FCA and
shareholders, by ordinary resolution
and will be notied to HMRC. If a
change to the investment policy is
material for the purposes of the AIFM
Rules, the AIFM will need to notify
the FCA prior to the implementation
of such change and the change may
not be implemented until the period
of time prescribed in the AIFM Rules
has elapsed without the FCA having
objected to the change.
Status of the Company
The Company was incorporated on
30 October 2020. It is registered as
a public limited company and is an
investment company within the terms
of section 833 of the Companies Act
2006. It has been approved by HMRC
as an investment trust company in
accordance with sections 1158/1159
of the Corporation Tax Act 2010. The
Directors are of the opinion that the
Company has conducted its aairs in
compliance with sections 1158/1159
during the year ended 31 December
2022 and intends to continue to do so.
The Company’s shares trade on the
premium segment of the Main Market
of the London Stock Exchange. It
is a member of the Association of
Investment Companies (the “AIC”).
The Company and the Board are
governed by its Articles of Association
(the “Articles”). Any amendments
to the Articles must be approved
by shareholders by way of a special
resolution.
Employees, human rights,
social and community issues
The Board recognises the requirement
under Companies Act 2006 to detail
information about human rights,
employees and community issues,
including information about any
policies it has in relation to these
matters and the eectiveness of
these policies. These requirements,
which may apply to the Company’s
investments, do not apply to the
Company as it has no employees,
allthe Directors are non-executive
and it has outsourced all its functions
to third party service providers. The
Company has therefore not reported
further in respect of these provisions.
The Company is not within the scope
of the Modern Slavery Act 2015
because it has not exceeded the
turnover threshold and therefore no
further disclosure is required in this
regard. The Directors are satised
that, to the best of their knowledge,
the Company’s principal suppliers
comply with the provisions of the
Modern Slavery Act 2015 and maintain
adequate safeguards in keeping with
the provisions of the Bribery Act 2010
and Criminal Finances Act 2017.
Details about the Company’s approach
to ESG are set out on pages 52 to 58.
Diversity
As at 31 December 2022, the Board
comprised two female and two male
Directors.
It is the Company’s aim to have an
appropriate level of diversity on the
Board. The Board welcomes the
recommendations from the FTSE
Women Leaders Review on gender
diversity on boards and the Parker
Review about ethnic representation
on boards. The Company was already
conforming with the gender diversity
targets during the year under review
and the Board is pleased to report
that following the appointment of Ms
Carneiro post year end, it is now also
compliant with the ethnic diversity
targets. See pages 96 and 97 for
further details of the Board’s diversity
policy and compliance with the
recommended diversity targets.
As the Company has no employees,
there is nothing further to report in
respect of gender representation
within the Company.
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20
Investment Adviser – Victory
Hill Capital Partners LLP
•
Advises the Company and the AIFM
on the portfolio of sustainable
energy infrastructure assets to
achieve the Company’s investment
objective
•
Sources, evaluates and implements
a pipeline of new investments
as well as monitoring of existing
investments
•
Monitors nancial performance
against Company targets and
forecasts
•
Advises the Company’s Board on
investment strategy and portfolio
composition to achieve the desired
target returns within the agreed
risk appetite
•
Manages the process and analysis
for quarterly valuations of the
Company’s portfolio
•
Ensures good nancial and cash
management of the Company
and its assets having regard to
accounting, tax and debt usage and
covenants
•
Manages the Company’s investor
reporting and broader investor
relations activities
21
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
VICTORY HILL'S STRATEGY
Competitive advantages: Operating model Value created
Investment Adviser:
Victory Hill has a highly experienced team with
decades of collective experience in advising
energy market participants around the world.
Company’s global investment programme:
Unique partnership model allows us to access
assets in multiple jurisdictions across proven
technologies
Experience ensuring SPEs benet from strong
governance and the highest standards of
industry practice and sustainability practices.
Sustainability:
Potential new investments must meet a strict
SDG-driven process and assured externally
before investment due diligence begins.
Existing portfolio:
The Company has an established portfolio
of assets which have the benet of strong
operational track records and predictable,
wholly or partially ination-linked cash ows
supported by long-term contracts as well as
a construction element driving underlying
growth.
01
Asset identication
and selection
02
GSEO acquires
investments through
acquisition
and construction
03
Construction, operation
and maintenance
by specialist local
operating partner
04
Asset value creation,
governance and
sustainability best practice
driven by Victory Hill
05
Hold assets over the long
term to support the dividend
and capital return target
Investors:
Income and capital growth for GSEO shareholders.
Our partners:
Continue to bring new projects within the Company’s
existing programmes.
Communities and customers:
Immediate social benets within the communities
where assets are located such as job creation.
Environmental benets:
Helping achieve the energy transition via investments
in sustainable energy infrastructure.
Sustainability considerations
Sustainability criteria are an integral part across the entire project life cycle.
The Investment Adviser assesses each opportunity of its relevance to the
Company’s pathways and core SDGs, of which there are six, as well as
assessing whether there is any material breach to the remaining eleven.
Following investment due diligence and acquisition of an asset, the
Investment Adviser seeks to improve and incorporate ESG best practices
across the portfolio during ownership including throughout the
construction process. There is a continuous monitoring of alignment
of the SDGs and measuring both environmental and social impact.
All underpinned by risk management, strong corporate governance and nancial management.
Geographies: Diversied across EU and OECD countries including OECD Key Partner and Accession countries.
Diversied across proven technologies. No technology risk in the Company’s portfolio.
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22
Competitive advantages: Operating model Value created
Investment Adviser:
Victory Hill has a highly experienced team with
decades of collective experience in advising
energy market participants around the world.
Company’s global investment programme:
Unique partnership model allows us to access
assets in multiple jurisdictions across proven
technologies
Experience ensuring SPEs benet from strong
governance and the highest standards of
industry practice and sustainability practices.
Sustainability:
Potential new investments must meet a strict
SDG-driven process and assured externally
before investment due diligence begins.
Existing portfolio:
The Company has an established portfolio
of assets which have the benet of strong
operational track records and predictable,
wholly or partially ination-linked cash ows
supported by long-term contracts as well as
a construction element driving underlying
growth.
01
Asset identication
and selection
02
GSEO acquires
investments through
acquisition
and construction
03
Construction, operation
and maintenance
by specialist local
operating partner
04
Asset value creation,
governance and
sustainability best practice
driven by Victory Hill
05
Hold assets over the long
term to support the dividend
and capital return target
Investors:
Income and capital growth for GSEO shareholders.
Our partners:
Continue to bring new projects within the Company’s
existing programmes.
Communities and customers:
Immediate social benets within the communities
where assets are located such as job creation.
Environmental benets:
Helping achieve the energy transition via investments
in sustainable energy infrastructure.
Sustainability considerations
Sustainability criteria are an integral part across the entire project life cycle.
The Investment Adviser assesses each opportunity of its relevance to the
Company’s pathways and core SDGs, of which there are six, as well as
assessing whether there is any material breach to the remaining eleven.
Following investment due diligence and acquisition of an asset, the
Investment Adviser seeks to improve and incorporate ESG best practices
across the portfolio during ownership including throughout the
construction process. There is a continuous monitoring of alignment
of the SDGs and measuring both environmental and social impact.
All underpinned by risk management, strong corporate governance and nancial management.
Geographies: Diversied across EU and OECD countries including OECD Key Partner and Accession countries.
Diversied across proven technologies. No technology risk in the Company’s portfolio.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
23
FINANCIAL STATEMENTS
Market developments /
market backdrop in 2022
In 2022, the world experienced the rst global energy
crisis of this millennium, precipitated by Russia’s invasion
of Ukraine, the eects of which will not only be felt for the
present day, but for decades to come. Russia’s actions
have worsened the fundamentals of economic recovery
emerging from the post-pandemic times, straining global
supply chains, creating a global energy crisis, and by
extension causing inationary pressures and the sparks of
a global recession.
Russia has been one of the largest exporters of oil and
gas in the world, and the stoppage of its supply of oil
and particularly natural gas as a result of its decision and
European sanctions are being felt in economies across
Europe and beyond, exposing nations of consumers to
higher energy bills and supply shortages. Governments
in developed economies have sought to soften the blow
to consumers from the impact of this crisis to the tune
of US$500bn, as well as implementing other short term
measures such as securing alternative fuel supplies, relying
more on coal and fuel oil generation, extending the lifetime
of nuclear power plants and accelerating the ow of new
renewable projects in their territories.
Clearly the focus for governments for much of 2022 has
been energy security in their national economies, and
within this context the question is relevant as to whether
the energy crisis is a setback for the clean energy transition
or it will promote a hastening of it.
Some observers have blamed international climate policies
and net zero targets as contributing to the increase in
energy prices during the crisis. However the IEA in their
2022 Outlook report does not see evidence of this, and
indeed has concluded that regions with higher shares of
renewable generation were correlated with lower electricity
prices on average, and demand side energy eciency
schemes in homes and the grid provided some buer to
costs for consumers.
We believe the question of whether the transition continues
to be relevant for society at large in light of the crisis has
been comprehensively settled in its favour. Fundamentally,
the shape and behaviour of society’s consumption of
energy is moving away from conventional fuel-based supply
to electrication, and this is aligned with the growth in the
global implementation of renewable power generation that
has created a new energy economy.
Electricity’s share of the world’s nal energy consumption
has risen steadily over recent decades and currently stands
at 20%. As the pace of climate-related energy transition
picks up in future years, it will account for around 50% of
nal energy use by 2050, according to the IEA. Given that
electricity delivers useful energy services better than other
fuels, the contribution of electricity is even higher than
these numbers suggest.
In the view of Victory Hill, in this new energy economy the
market for clean technology will continue to be a major
area for investment and international competition, and
secular events such as the cessation of exports of Russian
oil and gas in light of the Ukraine conict is unlikely to stop
this momentum.
The IEA estimates in their 2022 Outlook report that, if
the world is on track to net zero emissions by 2050, and
national policies in major energy markets are leading the
way, then annual clean energy investment will double to
US$2 trillion by 2030, with the US Ination Reduction Act of
2022 being in large part responsible for increasing annual
solar and wind capacity additions in the US by 2.5 times
current levels, with EV sales at seven times the size of sales
INVESTMENT ADVISER’S REPORT
Eduardo Monteiro
Co-Chief Investment Ocer
Victory Hill Capital Partners LLP
Richard Lum
Co-Chief Investment Ocer
Victory Hill Capital Partners LLP
Annual Report and Accounts 2022
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Strategic Report
24
today. Meanwhile, according to IEA expectations, faster
deployment of renewables and eciency improvements
in the European Union are expected, resulting in the
reduction of EU natural gas and oil demand by 20% this
decade, and coal demand by 50%. It is expected that the
push will be given additional impetus by the need to nd
new sources of economic and industrial advantage beyond
Russian gas.
Victory Hill strongly believes that the successful
implementation of energy security as part of the transition
will require real action which acknowledges the following
points, namely:
i. Vulnerabilities in the prevalence of highly concentrated
clean energy supply chains will need to be addressed.
Demand for key minerals for the production of clean
energy technologies including wind and solar PV
generation and battery storage is set to rise sharply
in the coming years, more than doubling from today
to 2030. High reliance on individual countries such as
China as a supplier of raw materials is a risk for the
implementation of the transition;
ii. During the transition, the functioning of clean and
conventional energy technologies will need to
continue to provide uninterrupted supply of energy
to consumers, even though their proportions of
supply will change over time. According to the IEA,
technologies such as gas-red power plants will be
needed for peak electricity needs, and sophisticated
reneries will be required to provide cleaner fuels for
transportation, and the removal of this could have
negative consequences for energy security.
”The shape and behaviour of society’s
consumption of energy is moving away
from conventional fuel-based supply to
electrication, and this is aligned with
the growth in the global implementation
of renewable power generation that has
created a new energy economy.“
Richard Lum, Co-Chief Investment Ocer
In Victory Hill's view, existing technologies deployed in a
commercially astute way can bring benets to all parties
involved without requiring the government to provide
underlying support with incentives and subsidies. Take
distributed generation, for example. With current costs for
solar panels, building small-scale solar PV plants at end
users premises has become viable, even when considering
energy sales contracts that represent discounts in the
energy bills of these end users. With the current volatility
in energy prices, the demand for viable behind the meter
(BTM) solutions will continue to increase.
Apart from the impetus towards sustainable and secure
energy systems, 2022 has also brought back ination
concerns to the global economy. Driven by a combination
of unusual factors such as supply chain disruptions
post COVID-19 and shocks due to geopolitical instability,
ination has become temporarily uncontrollable for central
banks. With the signicant impact on cost of living in many
countries, demand for government intervention has led to
further scal pressures around the world which in turn will
lead to additional inationary drive.
In an environment in which ination is rampant and energy
security concerns are high, building sustainable energy
infrastructure will be critical to protect investors’ wealth and
to contribute to a more stable global economy.
How Victory Hill has addressed
the transition in 2022
GSEO is at the forefront of the private initiative involvement
in the energy transition with a global focus to enable
sustainable energy projects with long-term equity capital.
Victory Hill’s global approach means our attention will
be centred around dierent themes depending on the
geography, as each market requires a dierent approach to
the energy transition.
In the UK, we have progressed with GSEO’s investments in
grid balancing initiatives. The advent of the Ukraine crisis
combined with unseasonally low wind yields has brought
to prominence the importance of grid rming activities
provided in particular by gas-red power plants in Q1 and
Q2 of 2022. This has sent power prices skyrocketing and
many renewable facilities which do not have fuel costs to
bear have benetted from windfall pricing exceeding their
short run marginal costs for operating, when they are able
to generate.
The commercial structure of GSEO’s investment in the UK
CHP project will ensure that we will benet from higher
commodity prices, when the rst plant comes online to
generate power in Q2 2023, given the embedded power to
gas price hedge in the PPA. We remain condent that the
Company’s UK programme will contribute meaningfully to
the grid stability required given the increased penetration
of renewable power production in the market.
In the US and Mexico border, the need to maintain
momentum in the clean-up of Mexican fuel will remain as
strong as ever. The Mexican government will continue to
push on the agenda to support state owned enterprises
which control the fuels value chain and the power
generation segment. These entities depend greatly on
the ability to clean domestic fuel to avoid environmental
disasters associated with the burning of untreated
indigenous fuel.
In Brazil, the commitment to renewable energy penetration
will continue to go from strength to strength. The incoming
government has a strong commitment to the environment
which will continue to benet the proliferation of
distributed generation solar PV plants. These plants will play
a crucial role in supplying the Brazilian economy with clean
and aordable energy at a time when electricity prices
continue to cause a lot of pain on Brazilian households.
The volatility caused by high commodity prices in the
Australian energy market is likely to persist over the short
to medium term. Until such time that sucient renewable
power, energy storage and gas-red power generation
enter the grid at scale, the market will experience
signicant spikes in power prices at peak times, as coal
plants continue to run o production and close. The global
25
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
economic backdrop for GSEO’s investments therefore
remains buoyant, with the opportunity to install battery
storage onsite at the next stage of development of Solar
PV assets, ensuring that our investments will be able to
access the “duck curve” margin in energy arbitrage at peak
times as well as participate in the ancillary services market,
including frequency response.
Portfolio highlights
GSEO continued on its journey to enable sustainable energy
projects in 2022. In the US, we have increased the capacity
of the Company’s terminals to be able to contribute to
more cleaning of essential fuels used in Mexico. In Brazil,
nine solar projects have started injecting clean energy into
the grid and we have also completed the acquisition of a
198MW hydro power plant from Energias de Portugal (EDP).
The plant is operational and provides reliable and clean
energy to Brazil’s economy. In Australia, we have added
three solar sites to the Company’s Australian programme
and continue to build storage capacity for the assets
already in operation.
In November, we held our rst Capital Markets Day during
which the operating partners for each of GSEO’s investment
programmes presented their capabilities and the impact of
the projects they promote.
Portfolio performance
The Company’s investment portfolio performance
remained resilient during the period, with limited nancial
impact from the eects of the COVID-19 pandemic and
disruptions to the energy market due to the Russian
invasion of Ukraine. We remain diligent in minimising the
Company’s exposure to additional macroeconomic factors
such as supply chain disruption and energy availability.
Whilst ination is one of these factors, it is worth
highlighting over 90% of the Company’s revenue is ination-
linked with no caps.
Victory Hill places a considerable emphasis on monitoring
and asset managing GSEO’s investment portfolio through
our asset management function, not only to protect the
value of each investment but also to pursue opportunities
to create further value for stakeholders through our asset
value creation initiatives.
The operational assets within the portfolio provided
key services to essential industries and economies and
continue to operate with minimal disruption. Overall,
the portfolio remains relatively insulated from negative
macroeconomic factors and therefore there has been no
material impact to performance.
Portfolio optimisation
Active management of assets is a key component of our
strategy. In collaboration with the Company’s operating
partners, we seek to maximise earnings opportunities at
the assets we invest in.
In the US, we have re-contracted with the main tenant
PEMEX in June, with improved contract terms for the
Company, leading to signicantly higher protability.
In the UK, we secured a long-term power otake and gas
supply contract with Axpo and have worked with Axpo
and the Company’s operating partner to secure excellent
margin hedges for the power generation component of the
project. We have also secured highly attractive long-term
contracts for the sale of food-grade bottled CO
2
with an
industrial gas specialist rm from Germany.
In Australia we launched the expansion of the Mobilong
solar farm with the addition of battery storage to turn this
asset into a hybrid system and optimize its commercial
potential.
Construction part of portfolio / supply chain
UK: Construction of the rst project has advanced through
the past year. The EPC contractor providing a full wrap on
construction risk has readied the site and major pieces of
equipment have been delivered by the manufacturers for
containerisation. The power side of the facility is expected
to be completed in Q2 2023 and will start generating
power and revenues. The carbon capture facility requires
subsequent installation over several months and the fully-
integrated facility is expected to be commissioned in Q4
2023.
Australia: During 2022, the main construction activity for
the Mobilong DC-coupled solar and battery storage hybrid
system was the procurement of the BESS. The equipment
has been manufactured in China and has now been
delivered to site without supply chain disruption thanks
to a successful proactive procurement and engagement
with the suppliers. The hybrid solar and storage system is
expected to be commissioned in Q2 2023. 2022 also saw
the start of construction for the three new sites acquired
in New South Wales. The orders were promptly placed
to all suppliers to avoid potential supply chain disruption
and equipment is currently being manufactured. The solar
farms are expected to be commissioned in Q3 2023.
During 2022 we completed nine of the 18 solar distributed
generation sites in Brazil. All remaining sites are due to be
completed in Q3 2023, two of which are being relocated in
Brazil to improve operational performance.
INVESTMENT ADVISER’S REPORT CONTINUED
Annual Report and Accounts 2022
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Strategic Report
26
NAV Bridge for the year-ended 2022 (£’m)
550.0
500.0
450.0
400.0
350.0
300.0
250.0
200.0
150.0
100.0
50.0
Opening NAV at
01/01/2022
311,589,799
104.0
422,498,890
108.2
Shares in issue
NAV/share (pence)
Net equity
raise proceeds
Dividends
paid
Fund
expenses
Movement
in valuation
FX on
investments
Closing NAV
at 31/12/2022
Increase Decrease Total
119.5
16.2
16.8 457.2
323.9
(14.5)
(4.7)
Net asset value
The NAV of the Company increased from £323.9m at
31December 2021 to £457.2m on 31 December 2022. The
total NAV return including reinvestment of dividends in the
nancial year is 7.6%. Since IPO, the total NAV return at
31December 2022 is 15.5%. The key NAV drivers were:
•
A gross equity raise of £122.1m (net £119.5m) on 1 July
2022.
•
Total fund expenses for the year of £4.7m or 1.3% in
ongoing charges ratio have shown strong cost discipline
in the period.
•
A net increase in the value of investments of £16.2m,
mainly as a result of assets moving from construction
to operational phase during the year, with the main
contributor being the US terminal storage assets and
strong cash ow generation from the investments in
the US, Brazil and Australia. Underlying contracts with
third-parties are ination-linked, therefore short-term
ination volatility has increased the valuation of
operational assets. Assets in operation also beneted
from operational improvements during the year which
have resulted in an increase in valuations across the
portfolio.
•
The weakness of GBP to the basket of currencies,
including the USD, AUD, and BRL during the 12-month
period to 31 December 2022, resulting in an FX gain of
£16.8m in aggregate.
As at year end, the Company had deployed 66% of its total
commitment, including the US terminal storage assets
and the Brazilian hydro facility. 6% of existing deployment
relates to delays in the construction of the Brazilian solar
PV assets. The remaining committed funds are expected to
be deployed within the rst six months of 2023.
Key sensitivities
The below chart illustrates the sensitivity of the Company’s
NAV per share to changes in key input assumptions for
assets in operation as at the year end. In performing the
sensitivity analysis, it is assumed that potential changes
occur independently of each other with no eect on any
other assumption, and that the number of investments in
the portfolio remains static throughout the modelled life.
27
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
INVESTMENT ADVISER’S REPORT CONTINUED
Portfolio
update
Brazilian solar
PV assets
Brazilian
hydro facility
UK flexible power
with CCR assets
US terminal storage
assets on the Texas
gulf coast
Australian solar PV
with battery
storage assets
Annual Report and Accounts 2022
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Strategic Report
28
Brazilian solar
PV assets
Brazilian
hydro facility
UK flexible power
with CCR assets
US terminal storage
assets on the Texas
gulf coast
Australian solar PV
with battery
storage assets
Deployed
Cash
AU
11.0%
Cash
6.1%
USA
23.4%
UK
23.6%
Brazil
35.9%
Delayed
Committed, not deployed
23.4%
27.1%
3.1%
5.7%
7.5%
3.5%
6.3%
17.3%
6.1%
Portfolio by geography and deployment
Terminal Storage
Flexible Power + CCR
AU
11.0%
Cash
6.1%
USA
23.4%
UK
23.6%
Brazil
35.9%
Solar PV & Battery Storage
Solar PV
Hydro Cash
23.4%
11.5%
24.4%
11.0%
23.6%
6.1%
Portfolio by geography and technology
USA
UK
Construction
16.5%
Cash
6.1%
Operational
53.5%
Committed,
not deployed
23.9%
BR
AU
23.4%
2.1%
28.0%
6.3%
4.8%
5.4%
17.3%
3.1%
3.5%
6.1%
Portfolio by deployment and currency
US terminal storage assets and Brazilian hydro facility represented
at fair value. All other assets represented at cost. Cash adjusted for
2022 fourth interim dividend and committed not deployed funds.
29
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
NAV sensitivity
Discount rate
(+1.0%/-1.0%)
Inflation
(-1.0%/+1.0%)
Operating expenses
(+5.0%/-5.0%)
FX
(+10.0%/-10.0%)
Asset life
(-1 yr/+1 yr)
.p
.%
.%
.p
.%
.p
.%
.p
%
.p
%
.p
.%
.p
.%
.p
.%
.p
.%
Discount rate
A range of discount rates is applied in calculating the
fair value of the investments, considering risk free rates,
country-specic and asset-specic risk premia and betas.
Discount rates for operational assets at 31December 2022
are 8.4% in the US, 8.6% in Australia, 10.5% for the Brazilian
hydro facility and 13.1% for the Brazilian solar PV assets.
A 1.0%increase (decrease) in discount rates across the
portfolio decreases (increases) NAV by 4.64p (5.36p).
Ination
The sensitivity assumes a 1% increase or decrease in long-
term ination relative to the base case of 2.0% for the US
assets, 2.5% for the Australian assets and 3.0% for the
Brazilian assets for each year of asset life. A 1.0% increase
(decrease) in ination rates across the portfolio increases
(decreases) NAV by 4.32p (4.41p).
Operating expense
The sensitivity assumes a 5% increase or decrease
in operating expense relative to respective contracts
and budgets for each asset. A 5% increase (decrease)
in operating expenses across the portfolio decreases
(increases) NAV by 1.60p (1.55p).
Foreign exchange
The sensitivity assumes a 10% increase or decrease in
foreign exchange movements against the sterling.
The Company seeks to manage its exposure to foreign
exchange movements by hedging short-term distributions
from non-sterling investments to maintain a healthy
dividend cover but, due to long-term ination-linked
revenues stemming from these investments, the Company
does not hedge the principal value of the investments. A
10%increase (decrease) in foreign exchange rates across
the portfolio decreases (increases) NAV by 6.06p (7.40p).
Asset life
The sensitivity assumes a 1 year increase or decrease in
asset life relative to the base cases of 30 years for the US
terminal storage assets, 25 years for the Australian solar
PV with battery storage assets, Brazilian solar PV assets
and Brazilian hydro facility. A 1 year increase (decrease) in
asset lives across the portfolio increases (decreases) NAV by
0.77p (0.76p).
Resource sensitivity
The portfolio has little resource risk sensitivity given the
availability based nature of the US terminal storage assets,
the base load generation prole of the Brazilian hydro
facility, the UK exible power with CCR assets, and the
addition of battery storage to the Australian solar PV assets
to mitigate solar intermittency risk.
INVESTMENT ADVISER’S REPORT CONTINUED
Annual Report and Accounts 2022
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Strategic Report
30
Pipeline
We continue to originate sustainable energy opportunities
globally, as was set out in the announcements we made for
the follow-on capital raise in early July 2022. Our focus for
the deployment of capital from the rst three raises to date
and from future raises will be on biomethane, geothermal,
wind and battery opportunities in a broad range of
geographies, including UK, US and South East Asia. We see
great potential to continue to deliver on a portfolio that is
diversied by geography and by technology. Thanks to a
very robust pipeline, we are able to prioritise opportunities
according to the shape of the portfolio.
Outlook
Sustainable energy is here to stay and will become more
and more a natural choice for economic growth. A lot of
exciting initiatives are taking place and we will continue to
see strong news ow in relation to innovative solutions.
However, the evolution that truly motivates us is the
proliferation of smaller-scale distributed sustainable energy
projects directly contracted with end users on a global
scale. We call this trend the quiet revolution, as it does not
grab the same headlines as the large multi-billion dollar
projects being announced in the energy space day to day.
The quiet revolution will continue to gather pace and new
opportunities in dierent markets will emerge.
At Victory Hill Capital Partners LLP, we will continue to
uncover unique opportunities that will benet from the
macro trends aecting the global economy. In the short
to medium term, we expect to see political and economic
instability. However, investing in sustainable energy
infrastructure will play a great part in bringing stability back
to the global economy.
Our robust pipeline continues to increase and we will
continue to seek opportunities to optimise our existing
portfolio. With support from the Company‘s shareholders,
we expect to contribute in a material way to the
sustainability agenda.
31
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
z
CASE STUDY
Brazilian
hydro facility
Annual Report and Accounts 2022
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Strategic Report
32
z
Asset prole:
Capacity:
198MW
Acquisition price:
BRL 708m
Location:
SE Brazil,
State of
Espirito Santo
Hydropower in Brazil
Brazil has one of the world's largest
hydrological resources and is a global
leader in hydropower generation.
The country has attracted large
amounts of capital investment in
the hydropower sector making it
one of the most established and
prominent hydropower markets
in the world. In Brazil, hydropower
generation continues to have systemic
importance. Hydropower plants
provide a reliable and continuous
source of clean energy for a power
system which needs to meet ever
growing demand.
This form of power generation
can help rm and stabilise the
grid in times of increased supply
volatility caused by the growing
penetration of intermittent solar
and wind power generation in the
energy system. The penetration of
intermittent renewables is still in its
infancy in Brazil, yet it is the fastest
growing source of power generation.
Hydropower will continue to play
a critical role in enabling further
penetration of those intermittent yet
necessary technologies to achieve
what could become one of the world's
most balanced and sustainable energy
systems.
The hydropower sector in Brazil is
underpinned by a unique regulatory
framework which seeks to mitigate
hydrological resource risk for
individual hydropower generators.
The framework pools hydrological
resources into a nationwide
consortium of eligible hydropower
generators of systemic importance.
Members of the hydropower
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
33
FINANCIAL STATEMENTS
z
consortium benet from the output of the whole pool of
eligible hydropower generation irrespective of an individual
member's actual production. Therefore, the idiosyncratic
risk of a single hydro plant is mitigated by the output of the
pool.
Facility features:
The facility is a run-of-river hydropower plant with a
nameplate capacity of 198MW. It is located in the state
of Espírito Santo and has been operational since 1974.
Since it was rst commissioned, the hydro facility has
been maintained and managed to a very high standard.
The energy regulator in Brazil ranks over 140 hydro plants
across the country based on a number of factors to assess
their quality of operation and has recently ranked this
facility as a top 10 hydro plant in Brazil.
This facility benets from a portfolio of over 30 long-term
ination-linked PPAs with creditworthy counterparts
in the regulated utilities market representing c. 85% of
the plant's total revenues. It also has the potential to
commercialise power with large energy consumers in the
self-consumption ("auto-consumo") segment of the energy
market.
Value creation:
Victory Hill and our operating partner have agreed a
commercialisation strategy which is designed to capture
additional value in the self-consumption market. These
self-consumption contracts are typically shorter-term and
allow us to capture some merchant exposure. Furthermore,
the operating partner has already identied some areas
for operational improvements that should contribute to
generating additional value.
ESG impact:
Since the commissioning of the facility, a thriving local
community has emerged that is now permanently
established and supports the economic ecosystem around
the hydro facility and the region. The direct impacts of this
facility are readily identiable with 22 full-time jobs, an
expected 944,472 MWh of clean, aordable and reliable
energy generation which avoids an estimated 91,578t of
CO
2
per year.
The river itself, its fauna, ora, banks and sediments
are key to the livelihoods of the local communities that
rely on them for shing, irrigation, transportation and
other activities. As a result we are undergoing a series of
initiatives to improve the social and environmental impacts
of the facility. For example, we are seeking to achieve
certication of the facility under the IHA (International
Hydropower Association) Hydropower Sustainability
Standard. We are also working with our operating partner
to develop community outreach programmes to improve
the dialogue with local communities and ensure that our
investment activity remains sensitive to the needs of local
stakeholders.
Our operating partner:
Paraty Energia Ltda. is a fast growing energy development
and commercialisation company established in early 2020.
The company is headquartered in Sao Paulo and is 100%
founder-owned and counts over 50 members of sta as
at 31 December 2022. Paraty is an active participant in
the Brazilian energy sector specialising in energy trading,
project advisory and operations. The company has a strong
operating track record in the Brazilian energy sector,
underpinned by a deep understanding of the Brazilian
energy regulatory framework.
Annual Report and Accounts 2022
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34
z
Brazilian solar PV assets
Brazilian solar PV assets: Of these assets, nine sites
have been generating clean and aordable energy as we
reached the end of 2022. The sites are located in remote
areas of Brazil, in the states of Para, Paraiba, Rio Grande
do Norte, Rio de Janeiro, Sao Paulo and Sergipe. The states
in the northeast region have predominantly agricultural
economies with large rural areas which tend to be poorly
served in terms of energy supply. While the sites are
contracted with top tier customers the communities in
these remote locations derive a direct benet from the
power generated by our plants, reiterating the importance
of this programme not only in terms of returns but also
with regards to the socioeconomic impact it can have.
Of the remaining nine sites that were expected to be
generating power in 2022, one has reached operational
phase in early 2023. The other eight have experienced
signicant delays caused by global supply chain issues.
These issues predominantly stemmed from widespread
Covid-19 outbreaks in China, consequently impacting
equipment importation schedules into Brazil and severely
impacting the business of the selected engineering
procurement and construction company (EPC) that was
appointed to those sites. Both Victory Hill and our operating
partner have since identied new EPC candidates to nalise
the development. Furthermore, two of these sites are being
relocated in Brazil to improve operational performance.
Victory Hill continues to work with our operating partner
and advisers in Brazil to resolve these delays and enforce
contractual rights. In this respect, the Company has
beneted from the operating partner's local presence,
strong operational competence, and Victory Hill's proactive
engagement in mitigating further project delays. The
combined eorts to manage and resolve construction
delays in country should ensure that the remainder of the
sites in the program will be completed in Q3 2023.
Australian solar PV with battery storage assets
Australian solar PV with battery storage assets: Starting
with a high-dependency on coal-red generation, Australia
is experiencing a fast and disorderly transition with the
accelerated decommissioning of coal-powered units,
the quick penetration of intermittent renewable energy
generation in certain parts of the network and the slow
deployment of grid-rming technologies to help stabilise
the market with this increased structural volatility. In 2022,
the increase in commodity prices culminated and the
regulator had to intervene in the market at the end of Q2
2022 to stabilise trading and prices. This programme in
Australia is building a portfolio of decentralised hybrid solar
and battery assets providing additional renewable energy
and energy storage capacity, both critically needed by the
energy system in Australia. Coupling both technologies
should allow optimisation of each technology to better
serve the needs of the Australian market in its transition
and generate dierentiated returns for GSEO. This
portfolio is being implemented in the distribution network,
therefore avoiding curtailment risk from the congestion on
the already stressed high voltage network and providing
further relief in a system already stressed. We are working
closely with the network operators in South Australia,
Queensland and New South Wales for the deployment of
this portfolio. The battery system is currently being added
at the South Australia site and completion is expected in Q2
2023. Three additional ready-to-build sites were acquired
in New South Wales and construction of the solar farms
promptly commenced. Three new solar farms are expected
to be completed in Q3 2023 and in the meantime our
operating partner is conducting development work to study
implementation of co-located battery storage on each site.
Programme updates
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
35
FINANCIAL STATEMENTS
UK exible power with CCR assets
UK exible power CCR assets: The UK’s success in asset
industries, subsidies and nancing towards large scale
deployment of renewable infrastructure can be a point of
national pride. More renewable generation capacity will be
needed to continue the transition and this high penetration
of intermittent renewable energy generation in the system
is putting the power system under high stress while
commodity price volatility that same year further deepened
the issue in 2022. The UK exible power with CCR assets
bring a net zero solution to rming the grid beyond the
capacity of typical battery systems, thanks to a highly
ecient and exible gas-red generation capacity with
carbon capture and reuse technology on site. Construction
of the rst site has steadily progressed in 2022. Major
pieces of equipment are already on site being readied
for rst power and rst revenues in Q2 2023. The carbon
capture and reuse system is expected to be installed and
commissioned within the months following rst power.
The full commissioning of the integrated plant is expected
in Q4 2023. Over the past year a 15-year power otake
and gas supply agreement was signed with Axpo and a
rst batch of sparkspread hedges were secured, locking
in healthy margins for the project. In addition, a 15-year
otake agreement for food-grade CO
2
was also signed on
attractive terms with an industrial gas specialist group. Our
operating partner Landmark Power Holdings has advanced
the development of the second project representing
around three times the size of the rst project and which is
currently under due diligence.
US terminal storage assets
US terminal storage assets: In Mexico, vehicles are
burning fuel with high sulfur content, resulting in the
creation of signicant PM2.5 air pollution and causing
health problems, particularly in highly populated areas
such as Mexico City. The same fuel is also being used in
power generation close to large populated areas where
the power is being consumed. The US terminal assets
aim to reduce the environmental and health threats that
high sulfur fuels have on human health by reducing the
availability of high sulfur fuel oil for domestic consumption
in Mexico and displacing it with cleaner less pollutive
products, reducing PM2.5, SO
2
, and NO
2
emissions. The
US terminal assets provide an aggregation point and
facilitate the transfer of high sulfur oil currently produced
at a surplus in the Mexican fuel market. As a result of the
terminals’ proximity, northbound ows are destined for
greater and more ecient rening capacity in the United
States. Once rened the PM2.5 contribution of the fuels is
reduced materially to levels experienced in Europe and the
United States. Since its acquisition in 2021, we have been
working closely with our operating partner Motus Energy
LLC to expand the storage capacity of the terminals.
Expansion of Terminal 2 has been completed. In Q32022
a 150,000 bbls tank capacity was commissioned, and an
additional 5 tanks totalling 190,000 bbls of capacity were
commissioned during Q4 2022, reaching a total storage
capacity of 640,000 bbls. The new capacity has been
allocated to new and existing tenants. Additionally, two
15,000bbls tanks were commissioned and signed with an
existing tenant in Terminal 1, bringing the total combined
capacity of the programme to 895,000 bbls.
Victory Hill Capital Partners LLP
27 March 2023
Annual Report and Accounts 2022
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Strategic Report
36
The Company sets out below its nancial, operational and climate-related KPIs which it uses to track the performance of
the Company over time against the objectives, as described in the Strategic Report. Although the Company is not required
to report under the recommendations of the TCFD, many of those recommendations are followed in order to enhance the
Company’s disclosures. The Board believes that the KPIs detailed below provide shareholders with sucient information
to assess how eectively the Company is meeting its objectives. Prior year KPIs have not been provided as the portfolio is
in its initial build out phase and prior year comparatives are potentially misguiding. The Board monitors these KPIs on an
ongoing basis.
Financial KPIs
NAV per share (%)
+4.04%
Denition
NAV divided by number of shares outstanding as at
31December 2022.
Commentary
The NAV has increased to 108.2p since 31 December
2021. Alternative performance measures are dened on
pages138 to 139.
Share price (%)
–5.61%
Denition
Closing share price as at 31 December 2022.
Commentary
The share price has decreased to 101.0p since 31
December 2021.
Total NAV return since IPO (%)
15.5%
Denition
A measure of performance that includes both income
and capital returns. This takes into account capital gains
and any dividends paid out by the Company since IPO in
February 2021.
Commentary
Total return reects continued underlying delivery to
shareholders. Alternative performance measures are
dened on pages138 to 139.
Ongoing charges ratio (%)
1.30%
Denition
Annualised ongoing charges (i.e. excluding investment costs
and other irregular costs) divided by the average published
undiluted NAV in the period, calculated in accordance with
AIC guidelines.
Commentary
The Company has incurred less ongoing charges than
anticipated. Alternative performance measures are dened
on pages138 to 139.
Dividend per share (pence)
5.13p
Denition
Aggregate dividends declared per share in respect of the
nancial year.
Commentary
The Company’s target was to pay a dividend of 5.00 pence
per ordinary share in respect of the year to 31 December
2022. With the declaration of the interim dividend of 1.38
pence per ordinary share on 22 February 2023, the total
dividend per share for 2022 is 5.13 pence per ordinary
share, exceeding the dividend target for the year.
Total NAV return for the year
7.6%
Denition
A measure of performance that includes both income and
capital returns. This takes into account capital gains and
any dividends paid out by the Company during the year.
Commentary
Total return reects continued underlying delivery to
shareholders. Alternative performance measures are
dened on pages138 to 139.
KEY PERFORMANCE INDICATORS
37
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Operational KPIs Climate-related KPIs
Weighted average project life (years)
27.3
Denition
Weighted average number of years which are assumed to
be the remaining project life of operational assets in the
Company’s investment portfolio.
Commentary
Useful life is applied as an assumption in determining the
investment valuation of operational assets.
1
Average electricity consumption in the UK of 3898 kWH from UK BEIS Energy Consumption in the UK 2022
report https://www.gov.uk/government/statistics/energy-consumption-in-the-uk-2022
2
c.7,000 cars calculated based on the UK emission factor of 0.26kgCO
2
e/mile. Car emission factor is dened in
the website https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2022
Largest investment as a % of NAV
23.2%
Denition
Value of largest investment divided by NAV at period end.
Commentary
The largest investment within the Company’s portfolio is
the US terminal assets.
Largest 3 investments as a % of NAV
54.5%
Denition
Value of the three largest investments divided by the NAV
at period end.
Commentary
The three largest investments are the US terminal assets,
Brazilian solar PV and the Brazilian hydro asset.
Total avoided carbon emissions (tonnes CO
2
e)
14,349
Denition
A measure of our success in investing in projects that have
a positive environmental impact and reduce energy usage,
equivalent to removing about 7,000 average sized cars from
UK roads.
Commentary
The portfolio’s total avoided emissions in tCO
2
e from
displacing fossil fuel derived electricity.
2
Weighted average carbon intensity per $1m
invested (tonnes CO
2
e / $m)
96.01
Denition
Portfolio’s exposure to carbon-intensive companies,
expressed in tonnes CO
2
e/$m revenue.
Commentary
The calculation covers operational scope 1 and 2 emissions
which includes imported electricity to solar farms.
Emissions from assets under construction are not factored
into the calculations.
Total renewable
energy generated (MWh)
35,117
Denition
Underlying portfolio energy generated from renewable
assets in KWh.
Commentary
The portfolio’s generation for 2022 in MWh, equivalent of
the annual electricity use of approximately 9,000 UK homes.
1
KEY PERFORMANCE INDICATORS CONTINUED
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38
STAKEHOLDER ENGAGEMENT
Overview
This section of the annual report covers the Board’s
considerations and activities in discharging their duties
under section 172 of the Companies Act 2006, in promoting
the success of the Company for the benet of the members
as a whole.
Stakeholders are integral to the long-term success of the
Company. The Directors recognise that, both individually
and collectively as the Board, their overarching duty is to
act in good faith and in a way that is most likely to promote
the success of the Company. As set out in section 172 of
the Companies Act 2006, the Directors act for the benet
of shareholders and in the interests of stakeholders as a
whole, having regard, amongst other matters, to:
•
the likely consequences of any decision in the long term;
•
the need to foster the Company’s business relationships
with suppliers, customers and others;
•
the impact of the Company’s operations on the
community and the environment;
•
the desirability of the Company maintaining a reputation
for high standards of business conduct; and
•
the need to act fairly between shareholders of the
Company.
All Board discussions include consideration of the
longer-term consequences of any key decisions and their
implications for the relevant stakeholders.
Stakeholders
A company’s stakeholders are normally considered
to comprise its shareholders, employees, customers,
suppliers, as well as the wider community in which the
company operates and impacts. The Company is dierent
in that as an investment trust it has no employees and, in
terms of suppliers, it receives professional services from
a number of dierent providers, principal amongst them
being the Investment Adviser.
Through regular engagement with its stakeholders, the
Board aims to gain a rounded and balanced understanding
of the impact of its decisions.
The Company recognises the importance of maintaining
high standards of business conduct and seeks to ensure
that these are applied in all of its business dealings and
in its engagement with stakeholders. These engagement
mechanisms are kept under review by the Directors and are
discussed on a regular basis at Board meetings to ensure
that they remain eective. The importance of stakeholders
is taken into account at every Board meeting, with
discussions involving careful consideration of the longer-
term consequences of any decisions and their implications
for stakeholders. Details of how the Board seeks to
understand the needs and priorities of the Company’s
stakeholders and how these are taken into account during
all its discussions and as part of its decision-making are set
out overleaf.
Key decision made during the year
Placing of ordinary shares
On 9 June 2022, the Company published a Prospectus in
respect of an initial placing, initial open oer, initial oer for
subscription and initial intermediaries oer of new ordinary
shares in the Company, together with the implementation
of a 12-month Share Issuance Programme.
On 9 June 2022, the Company also published a Circular and
Notice of General Meeting to shareholders regarding the
Share Issuance Programme. The Circular provided details
around the potential investment opportunities which the
Investment Adviser had identied and the pipeline assets,
and the shareholders voted overwhelmingly in favour of
the resolutions at the General Meeting held on 28 June
2022. Pursuant to this Share Issuance Programme, gross
proceeds of £122 million were raised by way of an issue of
110,909,091 new ordinary shares at a price of 110 pence
per share. Further information on the Share Issuance
Programme is set out in the Circular, which is available on
the Company’s website, and details of the share issuance
are included on page 79.
39
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Stakeholder Importance How the Company engages
Shareholders Continued shareholder
support and
engagement are critical
to the existence of
the Company and the
delivery of its long-term
strategy. The Board
and the Investment
Adviser give a high
priority to ensuring
that shareholders
understand the
Company’s strategy
and goals and
can monitor its
performance through
the robust corporate
governance processes
established by the
Company.
The Board welcomes shareholders’ views and is committed to
maintaining open and transparent channels of communications with
them. The Board is responsible for the content of communication
regarding corporate issues and for conveying its views to shareholders.
It aims to ensure that shareholders are provided with sucient
information to understand the risk/reward balance to which they are
exposed by investing in the Company. The channels of engaging with
shareholders include:
Publications
The Annual and Half-Yearly Reports are made available on the
Company’s website. These reports provide shareholders with a clear
understanding of the Company’s portfolio and nancial position.
In addition to the Annual and Half-Year Reports, the investor
presentations made by the Investment Adviser and any prospectuses
and circulars issued by the Company are also available on the
Company’s website. The Company provides regular updates on
portfolio acquisitions, capital raises and any other relevant matter by
way of market announcements.
Annual General Meeting
All shareholders are encouraged to attend and vote at the AGM and
at any general meetings of the Company, during which the Board and
the Investment Adviser are available to discuss issues aecting the
Company and answer any questions. The Investment Adviser attends
the AGM and provides a presentation on the Company performance
and its future outlook. The Company values any feedback and
questions it may receive from shareholders ahead of and during the
AGM and takes action, as appropriate.
Shareholder meetings
The Investment Adviser, along with the Broker, regularly meets with
the Company’s shareholders to provide Company updates and to
foster regular dialogue. Feedback from all shareholder meetings and
investors’ views are shared with the Board on a regular basis. During
the year, the Company held a Capital Markets Day in November
where the Investment Adviser and the Chair presented and the other
Board members were also present on the day, engaging directly with
shareholders. The event gave shareholders the opportunity to ask
questions to the Board, the Investment Adviser as well as all of the
operating partners from around the world that were also presenting.
Shareholder concerns
Shareholders wishing to communicate directly with the Board or the
Investment Adviser to raise any issues or concerns, should contact the
Company Secretary at the registered oce address. The Chair and
the other Directors are available throughout the year to meet with
shareholders to understand their views on the Company’s performance
and governance where they wish to do so. Relations with shareholders
are also considered as part of the annual Board evaluation process.
Investor relations updates
The Board regularly monitors the shareholder prole of the Company.
With the majority of shareholders being a combination of institutional
investors and private client brokers, the Board receives regular
updates on investors’ views and attitudes from the Company’s
Broker and the Investment Adviser. The results of these meetings are
reported to the Board as part of the formal reporting undertaken by
both the Investment Adviser and Brokers. The details of substantial
shareholdings in the Company are included on page79.
STAKEHOLDER ENGAGEMENT CONTINUED
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40
Stakeholder Importance How the Company engages
Investment
Adviser
The Investment
Adviser’s performance
is critical for the
Company to achieve
positive and consistent
long-term returns in
line with its investment
objective.
The Board believes that maintaining a close and constructive working
relationship with the Investment Adviser is crucial to promoting the
long-term success of the Company in an eective and responsible way.
Representatives of the Investment Adviser attend Board meetings
and provide reports on the current and future activities, portfolio
investments, performance, operational and administrative matters.
An open discussion regarding such matters is encouraged, both at
Board meetings and by way of ongoing communication between the
Board and the Investment Adviser, facilitating a positive environment
for constructive challenge and cooperative development of solutions.
Board members are encouraged to share their knowledge and
experience with the Investment Adviser and they recognise that
the long-term health of the Investment Adviser is in the interests of
shareholders as a whole.
The Board, through the Management Engagement Committee, keeps
the ongoing performance of the Investment Adviser under continual
review and conducts an annual appraisal to consider its terms of
engagement. Details regarding the continuing appointment of the
Investment Adviser are set out on page81.
Other key
service
providers
As an investment
company, all services
are outsourced to third
party service providers.
The Board is conscious
that it is critical to
foster good working
relationships with
them.
The Board believes that strong relationships with its other key
service providers, namely the AIFM, the Company Secretary, the
Administrator, the Depositary, the Broker and the Registrar, are
important for the long-term success of the Company. The Board
maintains regular contact with its key external providers and receives
regular reporting from them, both through the Board and Committee
meetings, as well as outside of the regular meeting cycle. Their advice,
as well as their needs and views, are routinely taken into account.
Through its Management Engagement Committee, the Board formally
assesses their performance, fees and continuing appointment at least
annually to ensure that the key service providers continue to function
at an acceptable level and are appropriately remunerated to deliver
the expected level of service. The Audit Committee also reviews
and evaluates the control environment in place at each key service
provider.
Lenders Availability of funding
and liquidity are crucial
to the Company’s ability
to take advantage
of investment
opportunities as they
arise.
The Company does not make use of structural debt in order to
achieve its yield and total return targets. To date, the portfolio has
been fully equity funded allowing for ecient asset acquisition.
Once assets have been acquired and are operational, the Investment
Adviser, through its extensive international network of funding
partners, seeks the most ecient debt funding on a non-recourse
basis. Any leverage is therefore currently held at asset level only.
Society and the
environment
It is of utmost
importance to the
Company that it
positively impacts
local communities
through its sustainable
environmental
initiatives, investment
in areas undergoing
regeneration and local
employment practices.
As an investor in sustainable energy, the Company’s assets have
an impact on the environment. The Company has a Sustainability
Framework which is published on the Company’s website and our
approach to ESG is set out on pages52 to 58. The Board seeks to
understand the impact of projects on local communities in accordance
with the SDG investment mandate and has appointed an additional
board member with experience and understanding of the impact of
projects in Brazil.
41
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES
The Board, through delegation to the Audit Committee,
has undertaken a robust assessment and review of the
emerging and principal risks facing the Company, together
with a review of any new risks which may have arisen
during the year, including those that would threaten its
business model, future performance, solvency or liquidity.
These risks are formalised within the Company’s risk matrix,
which is regularly reviewed by the Audit Committee. As part
of its risk management process, the Audit Committee seeks
to identify emerging risks to ensure that they are eectively
managed as they develop and recorded in the risk matrix.
During the year under review, the Directors have not
identied, nor been advised of, any failings or weaknesses
which they have determined to be of a material nature.
The principal risks and uncertainties which the Company
faces are set out below. The Directors do not consider the
likelihood or impact of the below risks to have changed in
the year.
Information about the Company’s internal control and risk
management procedures are detailed in the Corporate
Governance Statement on page87. The principal nancial
risks and the Company’s policies for managing these risks,
and the policy and practice with regard to the nancial
instruments, are summarised in note 12 to the nancial
statements.
Risk Description of risk Risk impact Mitigation
1. Risks relating to the Company
Reliance on
Investment Adviser
The Company relies on
the Investment Adviser
for the achievement of its
investment objective.
The departure of some
key individuals or all of
Victory Hill’s investment
professionals could
prevent the Company
from achieving its
investment objective.
There can be no
assurance that the
Directors will be able to
nd a replacement adviser
if Victory Hill resigns.
If a successor cannot be
found, the Company may
not have the resources
it considers necessary
to manage the portfolio
or to make investments
appropriately and, as a
result, there may be a
material adverse eect
on the performance of
the Company’s NAV,
revenues and returns to
shareholders.
The Investment Adviser consists of ve
managing partners supported by six
investment professionals. Overall the
Investment Adviser has 19 full-time
sta, which include the investment,
nance, legal & compliance and
investor relations teams. A collegiate
approach is taken to investment
advisory activities with the team having
a broad range of skills to support
the pursuance of the Company’s
investment objective.
The performance of the Company’s
Investment Adviser is closely monitored
by the Board.
In addition, at least once a year the
Management Engagement Committee
performs a formal review process to
consider the ongoing performance of
the Investment Adviser and makes a
recommendation on the continuing
appointment of the Investment Adviser
to the Company.
The initial term of the Investment
Advisory Agreement is ve years.
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42
Risk Description of risk Risk impact Mitigation
Reliance on third
party service
providers
The Company has
no employees and
the Directors have all
been appointed on a
non-executive basis.
Therefore, the Company
is reliant upon its third
party service providers
for the performance of
certain functions.
Service provider control
failures may result in
operational and/or
reputational problems
and may have an adverse
eect on the Company’s
NAV, revenues and
returns to shareholders.
The Board oversees and keeps under
review the provision of services
by each of the Company’s service
providers on an ongoing basis.
The Management Engagement
Committee performs a formal review
process to consider the ongoing
performance of its service providers.
Currency risks The Company will make
investments which
are based in countries
whose local currency
may not be Sterling and
the Company may make
and/ or receive payments
that are denominated
in currencies other than
Sterling.
When foreign currencies
are translated into
Sterling there could
be a material adverse
eect on the Company’s
protability, the NAV and
the price of shares.
Investments are held for the long
term.
The Company intends to enter into
hedging arrangements for periods
of up to 12 months to hedge against
short-term currency movements.
Currency risk is taken into
consideration at the time of
investment and is included in the
Investment Adviser’s assessment
of minimum hurdle rate from
investments.
2. Risks relating to the portfolio investment strategy
Illiquidity of
investments
The Company’s
investments in
Sustainable Energy
Infrastructure
Investments are illiquid
and may be dicult to
realise at a particular time
and/or at the prevailing
valuation.
Shareholder returns
could be materially
negatively impacted
should the Company
be required to realise
them in the near term
(requirement for early
liquidity).
The Company is expected to hold
most of its investments on a long-term
basis. The Investment Adviser and the
Board will monitor the position on a
regular basis.
3. Risks relating to investments
Construction risks Construction project
risks associated with
the risk of inaccurate
assessment of a
construction opportunity,
delays or disruptions
which are outside the
Company’s control,
changes in market
conditions, and the
inability of contractors to
perform their contractual
commitment.
Failure to complete
projects in accordance
with expectations could
adversely impact the
Company’s performance
and shareholder returns.
The Investment Adviser monitors
construction carefully and reports
frequently to the Board and the AIFM.
The Investment Adviser undertakes
extensive due diligence on
construction opportunities and seeks
to have appropriate insurances in
place to mitigate any costs relating
to delays. In addition, the Investment
Adviser seeks to utilise EPC contractors
that can provide single point, lump
sum turnkey arrangements wherever
possible.
43
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Risk Description of risk Risk impact Mitigation
Due diligence Due diligence may not
identify all risks and
liabilities in respect of an
investment.
Failure to identify risks
and liabilities may
impact the protability
or valuation of the
investment.
The senior management team at the
Investment Adviser has extensive
experience in executing strategies
similar to that of the Company.
Where appropriate, due diligence
conducted by the Investment Adviser
may be supplemented, for example,
by independent legal, tax, accounting,
commercial and technical advisers.
Demand, usage and
throughput risks
Residual demand, usage
and throughput risk can
aect the performance
of infrastructure
investments.
The actual return to
shareholders may be
materially lower than the
target total return.
The Investment Adviser performs
extensive due diligence on the project
economics vs. alternative energy
options before entering into a project.
Furthermore, project revenues are
largely contracted for the medium to
long term.
The Investment Adviser constantly
reviews assumptions made regarding
the demand, usage and throughput vs.
actual results.
Meteorology risks Dependency on
meteorology,
meteorology forecasts
and other feedstocks may
have a negative impact on
the performance of the
Company’s investments.
The actual return to
shareholders may be
materially lower than the
total target return.
The Investment Adviser performs
extensive due diligence on
meteorology and other feedstocks
before entering into a project. This
includes long-term climate changes to
weather patterns.
The Investment Adviser regularly
reviews meteorology and feedstock
factors and will action any potential
remedies.
Counterparty risks Counterparties defaulting
on their contractual
obligations, suering
an insolvency event or
causing reputational
damage.
The failure by a
counterparty to make
contractual payments
or perform other
contractual obligations
or the early termination
of the relevant contract
due to the insolvency
of a counterparty may
have an adverse eect
on the Company’s
NAV, revenues, returns
to shareholders and
reputation.
Due diligence on counterparty risk
is performed before entering into
projects and counterparty risk is
monitored on a regular basis.
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
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44
Risk Description of risk Risk impact Mitigation
Uninsured loss
and damage
The risk that an
investment may be
destroyed or suer
material damage, and
the existing insurances
may not be sucient to
cover all the losses and
damages.
The actual return to
shareholders may be
materially lower than the
target total return.
An independent insurance adviser is
appointed for each project to review
project risks in conjunction with the
Investment Adviser and to ensure that
appropriate insurance arrangements
are in place.
Insurance requirements are reviewed
on an ongoing basis.
Curtailment risks Investments may be
subject to the risk
of interruption in
grid connection or
irregularities in overall
power supply.
In such cases, aected
investments may
not receive any
compensation or only
limited compensation.
Extensive due diligence is performed
on each project before investment.
The Investment Adviser regularly
reviews curtailment risks.
Commodity
price risks
The operation and
cash ows of certain
investments may depend
upon prevailing market
prices for electricity and
fuel, and particularly
natural gas.
The actual return to
shareholders may be
materially lower than the
target total return.
The Company intends to mitigate
these risks by entering into (i) hedging
arrangements; (ii) extendable short,
medium and long-term contracts; (ii)
xed price or availability based asset-
level commercial contracts.
4. Risks relating to the Company’s shares
Discount to NAV The share price may not
reect the underlying
NAV.
Discount management
provisions being unable
to be satised may result
in a signicant share price
discount to NAV.
Lack of liquidity in the
Company’s shares could
negatively impact on
shareholder returns.
The Board, Broker and Investment
Adviser monitor the discount or
premium to NAV at which the shares
trade.
If, in any rolling 3-month period, the
ordinary shares have, on average,
traded at a discount in excess of 5%
to the Net Asset Value per ordinary
share. The Company intends to use
50% of net cashows to repurchase
ordinary shares, subject always to the
impact that such repurchase may have
on the ability of the Company to meet
its Target Total Return (which includes
the target dividend) or other economic
factors that the Board consider it
prudent to take into account at the
relevant time.
45
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risk Description of risk Risk impact Mitigation
5. Risks relating to regulation
Regulation The Company is exposed
to the risk that the
competent authorities
may pass legislation
that might hinder or
invalidate rights under
existing contracts as
well as hinder or impair
the obtaining of the
necessary permits or
licences necessary
for Sustainable
Energy Infrastructure
Investments in the
construction phase.
The actual return to
shareholders may be
lower than the target
total return.
The Company aims to hold a
diversied portfolio of Sustainable
Energy Infrastructure Investments and
so it is unlikely that all assets will be
impacted equally by a single change in
legislation.
The Investment Adviser endeavours
to ensure that the vast majority
of contracts are not in receipt of
government subsidies, thus mitigating
exposure to policy risks linked to
contract pricing.
There is also strong public demand for
support of the renewables market to
hit ‘net zero’ carbon emission targets.
The Investment Adviser monitors the
position and provides regular reports
to the Board on the wider macro
environment.
6. Operational risks
Operation and
management risks
of the portfolio
of assets
Poor management or
operational performance
of an asset by the
Company’s operating
partners and selected
operations and
maintenance providers.
The actual return from
single portfolio assets
may be lower than the
target total return for the
asset.
Operating partners operate to an
annual budget and a series of key
performance indicators.
The Investment Adviser monitors
the performance vs. annual budget
and KPIs on a monthly basis. On an
annual basis the operating partners
are subject to an annual performance
review across operational, ESG and
nancial KPIs.
The Investment Adviser provides
quarterly reports to the Board on
asset-level performance.
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46
Risk Description of risk Risk impact Mitigation
Valuation risks Valuation of the portfolio
of assets is based on
nancial projections and
estimations of future
results.
Actual results may vary
signicantly from the
projections, which may
reduce the protability
of the Company leading
to reduced returns to
shareholders and a fall in
the Company’s NAV.
The Company has adopted a valuation
policy which was disclosed in the
Company’s prospectus.
Fair value for each investment is
calculated by the Investment Adviser.
However, if considered necessary and
appropriate, the Board may appoint an
independent valuer.
The Investment Adviser has signicant
experience in the valuation of energy
assets.
The Investment Adviser has an
independent valuation working group
to perform and challenge valuations.
In addition, the Investment Adviser
partnership committee reviews and
challenges valuations.
The Board and the AIFM review the
valuations provided quarterly by the
Investment Adviser. As part of the
annual audit, the Company's auditor
reviews the valuations.
7. Climate-related risks
Physical risks
Longer-term changes in
climate patterns, e.g.,
reduction or increase
in wind levels, decrease
solar optimal days
impacting renewable
output and associated
earnings.
Increased occurrence of
extreme weather events
such as cyclones, storms,
ooding and heatwaves
causing damage to
assets, disruption to
feedstocks, value chain,
outputs and associated
earnings.
Reduction in output from
assets leading to reduced
income stream. This risk
may increase over the
long term in the absence
of climate mitigation
1
.
The Company is investing in a
diversied portfolio of energy
transition infrastructure by geography,
technology and capability. These
investments are targeted at the energy
transition to net zero. This will provide
a buer against variable weather
patterns across the portfolio.
The Company also mitigates risk
through project revenues being
contracted for the medium and long
term.
At the asset level, weather conditions
are monitored and many of the
renewable projects have battery
storage capabilities to optimise energy
input to the grid. Meteorology and
feedback due diligence is undertaken
before investment and reviewed
regularly.
All assets have crisis management
and business continuity plans to
respond to disruptions. The assets
are also required to have continuous
improvement management systems
to build capability and capacity in the
local teams and operations.
47
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Risk Description of risk Risk impact Mitigation
Increased insurance
premium for assets in
high-risk locations.
Increased cost of doing
business.
When making investments, the due
diligence process accounts for climate
change risk and impacts.
The Investment Adviser employs an
insurance specialist when making
investments and seeks to have
appropriate contractual indemnities
and insurance provisions in place to
mitigate any costs relating to delays
or operation disruption. Insurance
requirements are reviewed on an
ongoing basis.
Transition risks Market shifts may
dampen ability to engage
investors on a broader
portfolio of energy
transition projects than
a traditional European
renewable focus including
dierent geographies
and new technologies,
e.g., carbon capture and
reuse.
Reduced access to capital. The Company is expected to hold
most of its investments on a long-
term basis, and the Board and the
Investment Adviser monitor the
position on a regular basis.
The senior management team at the
Investment Adviser has extensive
experience in executing strategies
similar to that of the Company.
Policy shift may introduce
regulation around climate
change, e.g., increased
disclosure, taxes etc.
Increased cost of doing
business.
Reduced access to capital.
The Company is supportive of
the policy aims of the Disclosure
Regulation and will comply with and
monitor changes.
The Company engages with partners
and stakeholders to gather data
and drive action to improve ESG
management and support disclosure
and policy requirements. This includes
monthly metric reporting on climate-
related KPIs, including energy used
and generated, mitigation actions
for risks and impacts, as well as
any energy reduction projects. IFC
performance standards are used to
guide these interactions.
The Company’s investment strategy
targeting the energy transition is
aligned with global policy movements
on climate change which would limit
impact.
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
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Strategic Report
48
Risk management
The risk management framework established by the Board
has been designed to identify, evaluate and mitigate the
signicant risks faced by the Company. A risk management
framework can only provide reasonable, not absolute,
assurance. The Board has contractually delegated the
management of the investment portfolio, the registration
services, administrative services and other services to third
party service providers and reliance is therefore placed
on the internal controls of those service providers. Risk
assessments are performed on a regular basis and this is
facilitated through the use of a detailed risk assessment
programme which categorises the risks identied and the
controls in place to mitigate those risks.
Risk appetite
The Board’s risk appetite is aligned with the Company’s
investment objective and policy for which the Board has
ultimate responsibility. The investment objective and the
investment policy of the Company are included in the
Strategic Report on pages 18 to 20. Identication and
management of risks is integrated into the Investment
Adviser’s investment process.
Emerging risks
As part of its risk assessment, the Board, via the Audit
Committee, considers the emerging risks and any such
risks identied are included in the detailed risk assessment
programme.
Climate risk and TCFD
Climate risk and TCFD disclosures are included on pages59
to 67.
49
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
GOING CONCERN AND VIABILITY STATEMENT
Going concern
The Directors have reviewed the nancial position of the
Company and its future cash ow requirements, taking
into consideration current and potential funding sources,
investment into existing and near-term projects and the
Company’s working capital requirements.
The Directors, in their consideration of going concern,
have reviewed the nancial position and comprehensive
future cash ow models for the Company prepared by the
Company’s Investment Adviser, taking into consideration
current and potential funding sources, investment into
existing and near-term projects and the Company’s working
capital requirements. Furthermore, the Directors have
considered a worst case scenario in which the Company
is assumed to meet all of its remaining investment
commitments within the next 12 months, in addition to
dividend payments and ongoing operating expenses.
Even in this unlikely scenario, the Company has sucient
headroom to meet all expected cash outows with its
existing cash balances. Based on these forecasts and the
assessment of principal risks described in this report, that
it is appropriate to prepare the nancial statements of the
Company on the going concern basis.
The Directors believe that there are currently no material
uncertainties in relation to the Company’s ability to
continue for a period of at least 12 months from the date of
the approval of the nancial statements and, therefore, has
adopted the going concern basis in the preparation of the
nancial statements.
Viability statement
In accordance with Principle 21 of the AIC Code, the
Directors have assessed the prospects of the Company over
a period longer than 12 months required by the relevant
“Going Concern” provisions. The Directors have considered
the nature of the Company’s assets and liabilities, and
associated cash ows, and have determined that ve
years, up to 31 December 2027, is the timescale over
which the performance of the Company can be forecast
with a material degree of accuracy and therefore is the
appropriate period over which to consider the viability.
The Investment Adviser has considered the sensitivity of
the nancial projections to a range of key assumptions,
such as a reduction in cash ows from portfolio companies,
delays in construction, cost overruns, no debt availability,
and an inability for the Company to raise additional equity.
The results of this stress testing showed that the Company
would be able to withstand the impact of these scenarios
occurring over the ve-year period.
The Directors conrm they have carried out a robust
assessment of the emerging and principal risks facing
the Company, including those that would threaten its
business model, future performance, solvency, liquidity,
and dividend cover for a ve-year period. The Directors’
assessment has been made with reference to the principal
risks and uncertainties and emerging risks summarised on
pages42 to 49 and how they could impact the prospects of
the Company.
As an Investment Company, part of the Company’s
objective is to produce stable dividends while preserving
the capital value of its investment portfolio. Following
regular pipeline updates from the Investment Adviser,
the Directors believe that the Company is well placed to
manage its business risks successfully over both the short
and long term period, the Directors have a reasonable
expectation that the Company will be able to continue in
operation and to meet its liabilities as they fall due for a
period of at least ve years.
Approval of the Strategic Report
The Strategic Report was approved by the Board of
Directors and signed on its behalf by:
Bernard Bulkin
Chair
27 March 2023
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50
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
51
FINANCIAL STATEMENTS
OUR APPROACH TO ESG
VH Global Sustainable Energy
Opportunities plc, through
its energy infrastructure asset
investments, seeks to accelerate
the energy transition to a low
carbon future, aligned with the
UN Sustainable Development
Goals
Eleanor Fraser-Smith
Head of Sustainability
Victory Hill Capital Partners LLP
The Company‘s energy transition
investment strategy is coupled with our
local stewardship approach so that we
can drive environmental impact while
improving local environmental and
community outcomes and maximise value.
Through 2022 we have strengthened our
sustainability and ESG due diligence, asset
management and disclosure processes to
help meet our aims.
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Sustainability
52
According to the International Energy Agency
(IEA), the SDGs that are directly impacted by
energy are: the achievement of universal access
to energy (SDG 7), the reduction of the severe
health impacts of air pollution (SDG 3) and
tackling climate change (SDG 13). Other SDGs
are also impacted by investment in sustainable
energy globally including the promotion of
decent working environments and economic
growth, industry, innovation, and infrastructure
as well as partnerships for the goals (SDGs 8, 9
and 17).
Company investments are technology agnostic
and aim to address specic energy transition
challenges such as imbalances and structural
gaps in OECD Accession and OECD Key Partner
countries‘ energy markets. Investments in
renewable energy generation support SDG 13
on climate action through grid decarbonisation
and SDG 7 by providing aordable energy
access. The strategic US terminal storage assets
support SDG 3 on health and wellbeing through
displacing air pollution and associated health
impacts. The UK exible power with CCR assets
which are under construction will provide grid
balancing services that supports renewable
energy grid penetration while capturing carbon
dioxide.
The Company takes a life cycle approach to
managing its energy generation assets to
understand environmental impact including
scope 3 and embodied emissions as well as
the social opportunities and impacts in the
supply chain. The value chain is a strategic
consideration in the US terminal storage assets
as the investment facilitates the displacement of
high sulfur fuel oil from the Mexican market.
The sustainability-focused investment strategy
delivers positive environmental and social
benets, and through active ownership of
the assets, that ensures good management
practices, local environmental and social value
is also created. The Company’s relationship with
operating partners is a central facet to delivering
the energy transition investment strategy.
Through 2022 the Company continued to
successfully deploy capital and manage
investments in a range of sustainable energy
infrastructure assets aligned with the company’s
investment strategy as detailed on page18.
The sustainability impact delivered from
1January to 31 December 2022 included:
35,117 MWh
of renewable energy generation
(equivalent to powering over 9000 average UK
homes with clean energy)
14,349 tonnes
of avoided carbon emissions
(equivalent to removing from over 7,000 average
UK petrol cars per year)
20,613 tonnes
of sulfur dioxide emissions displaced
The Company‘s sustainable investment
strategy is delivered through a robust
governance framework which ensures oversight
and accountability, risk based social and
environmental due diligence, prioritisation
of material risks and opportunities, and
engagement with stakeholders and operating
partners to mitigate impacts and drive
continuous improvement.
53
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
ESG governance
The Company governance structure and composition
is described in the Corporate Governance Structure on
page84 and the Company group structure on pages16and
17.
The Company‘s independent Board has a dedicated
board member with oversight responsibility for ESG and
sustainability issues. The Board reviews principal risks
including ESG and climate-related risks.
The Investment Adviser, Victory Hill, has been appointed
by the independent Board to advise on investments and
perform asset management activities. As part of that
role, Victory Hill has oversight of the development and
implementation of ESG policies, processes and resourcing
to support the Company investment process and asset
management.
Oversight is accomplished through several Investment
Adviser administered committees. The Investment
Committee ensures inclusion of ESG due diligence in
the investment process as described on page15. The
Committee also plays an important role in overseeing
stewardship activities and ensuring stewardship priorities
are adhered to at an asset level.
The Risk, Operations and Compliance Committee ensures
principal ESG risks, including climate related physical and
transition risks, are identied and controls implemented.
The ESG working group advises on ESG strategy and
monitors and tracks the ESG performance of investments.
The ESG working group provides input as required into
other Investment Adviser committees including the
Partnership Committee, Risk, Operations and Compliance
Committee and Investment Committee.
The Investor Adviser‘s sustainability policy and investment
process as described on page15 underpin the Company‘s
commitments to sustainable investments. The policy
sets out commitments to track environmental and
social performance of investments. ESG materiality, risk
management and due diligence processes identify ESG
issues and incorporate actions into the Company‘s assets
and operating partners‘ business practices through a
continuous improvement management cycle.
The Investment Adviser has appointed a dedicated head
of sustainability to support the investment and asset
management teams in embedding ESG policy and strategy.
Every member of the investment and asset management
teams is responsible for implementing the Company
investment policy and the stewardship of assets during the
investment evaluation, execution, and asset management
phases of the investment life cycle. Team training is
undertaken to ensure that team members have the
appropriate knowledge to carry out their responsibilities.
Diversity, equality and inclusion are also important
elements of governance and resourcing of stewardship
activities with the recognition that a diverse workforce
brings dierent backgrounds and ideas and strengthens
decision-making.
Adherence to the investment policy and sustainability
policy, and contributions to initiatives that support
sustainability are considered in individual sta members‘
performance assessments, which directly impact overall
remuneration. Individuals' participation in professional
development and training is provided and encouraged to
enhance our ESG capabilities continually.
An external assurance rm is used to verify that
investments are aligned with the core SDGs and the energy
transition and whether the project also “does no signicant
harm” to the other 11 SDGs. This process includes
reviewing material issues and potential supply chain risks.
The external assurance rm was also tasked in 2022 to
review eligibility against the EU Taxonomy of sustainable
economic activities and undertake technical screening to
achieve alignment.
Operating partners are required to have SPE-level ESG
processes to manage and mitigate asset associated
environmental and social issues. This is identied in an
asset-specic sustainable action plan (SAP) which includes
expectations for dedicated resourcing for ESG issues,
management systems such as ISO 14001 and 4500, key
performance indicator reporting and target setting. Limited
assurance was obtained on core ESG data submitted by
operating partners in 2022.
The Investment Adviser updated its operating policy
handbook during 2022 to reect the expanding business.
ESG policies covered are shown in the table below.
Operating partners are expected to have corresponding
commitments.
OUR APPROACH TO ESG CONTINUED
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54
Environmental
Energy
Biodiversity and habitat
Emissions
Waste
Water
Natural resource use
Social
Health & Safety
Worker rights
Human Rights
Community relations
Responsible sourcing
Diversity and inclusion
Governance
Anti bribery & anti
corruption
Whistleblowing
and grievance
mechanisms
Code of ethical
conduct
Conict of interest
Stakeholder engagement
The Company’s investment strategy includes alignment
with SDG 17 ‘Partnership for the Goals’ recognising that the
SDGs can only be met if all stakeholders work together to
mobilise nancial resources globally. This is the Company’s
approach to investment. The values of honesty and
integrity, transparency and partnership are integral to
stakeholder engagements.
Applying a value chain view to investment impacts on
the Company’s stakeholders is an important element
of the Investment Adviser’s ESG risk identication and
management process. ESG opportunities, risks and impacts
on both the company and from company activities on
stakeholders are in scope.
Key performance indicators and the requisite focus on
sustainable value creation are communicated to operating
partners through contractual requirements and instructed
in the asset agreed SAP. The SAP is based on the external
SDG assessment, due diligence and materiality analysis.
Strengthening operating partners governance frameworks,
implementing management systems including local
stakeholder engagement, and enhancing data reporting
processes were identied in the asset SAP’s for 2022.
ESG policy topics
55
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Investors
•
The Company invests capital to deliver projects that
facilitate the energy transition to net zero while
managing ESG impacts.
Partners
•
The Company collaborates closely with delivery partners
and suppliers to ensure quality, reliable and sustainable
assets that deliver on the energy transition to net zero.
Communities and customers
•
The Company provides energy infrastructure to enable
aordable energy access.
•
The Company measures and manages project economic,
environmental and social impact.
•
The Company is committed to acting with cultural and
local awareness and integrity.
Employees
•
The commitment, quality and integrity of sta of the
Investment Adviser drives the Company’s success.
•
The Investment Adviser’s sustainable development
culture ensures a diverse and inclusive workplace
focused on health and wellbeing with continual
investment in capabilities through training, learning and
development.
Environment
•
The Company drives responsible business practices
beyond commercial objectives across geographic
footprint and focused on the SDGs.
•
The Company measures the carbon and environmental
footprint of its investments.
•
The Company seeks to make a positive contribution in
operating regions.
Our stakeholders
OUR APPROACH TO ESG CONTINUED
Key performance indicators
are reported by the asset on a
monthly basis to track progress
and identify requirements for
intervention.
Performance targets are set
on key metrics to support this
eort and drive continuous
environmental and social
improvement at the asset level.
ESG risk identication and
management process
Gaps in management
practices and opportunities for
improvement are identied.
Actions to implement changes
and close gaps are included in
an asset specic Sustainable
Action Plan (SAP).
Operating partners will be
self-assessed and audited by
priority to assess strength of
management practices.
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56
Investment
Strategy
SDG analysis
EU taxonomy
eligibility
Monitoring
Action
Planning
Materiality
Analysis
Risk, Opportunity
and Impact
Assessment
Risk Based
Approach
Investments must pass
sustainability eligibility criteria
– part of project due diligence
and are assessed against EU
Taxonomy eligibility.
An external assurance rm
assesses the investment against
the SDGs and EU Taxonomy.
The International Finance
Corporation performance
standards, the Global ESG
Benchmark for Real Assets and
the Sustainability Accounting
Standards Board, have
identied material energy
sector and infrastructure risks
and impacts. The Company
assesses each investment
against these specic risks and
impacts, as well as regional
and geographic risks to identify
the environmental, social and
governance (ESG) issues most
relevant for the investment.
All investments are sustainability focused. Energy
infrastructure investments must align with the SDGs
and accelerate the energy transition towards a net
zero carbon world and follow the four investment
pathways.
Material and systemic issues are assessed to
prioritize ESG risks and impacts related to:
•
The sector of operation.
•
The region and country of operation such as those
identied by Transparency International, Freedom
House, country climate pledges, Global Slavery
Index and ILO Labour Rights.
•
The operational proximity to local communities,
indigenous peoples, cultural heritage and
ecological and biodiversity habitats.
•
The operational activities such as noise, light, water
use, discharge and waste.
•
The stakeholders interacting with the operation
including employees, contractors and customers.
•
The operating partner company resourcing and
policies for ESG management.
The asset is risk assessed on this basis, accounting
for the probability of impacts and the quality of
controls that operator has in place.
57
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
OUR APPROACH TO ESG CONTINUED
Material topics
The diverse nature of the portfolio is reected in a varied range of operational priorities. The systemic
issues identied for the energy sector include energy generated, greenhouse gas emissions produced
and avoided, pollutant air emissions produced and avoided, supply chain management and climate risk.
See The Task Force on Climate-Related Financial Disclosures (TCFD) on page59 for further information on
climate-related risks and metrics. Topics that may be identied as material are explained in the table below.
Impact Description of company action
Greenhouse gas emissions The Company will report GHG emissions and avoidance and put in place reduction
measures where necessary aligned with net zero goals.
Climate physical risk and
vulnerability
The Company will assess asset vulnerability to climate related physical risks and
implement appropriate adaptation measures.
Energy The Company will manage and report on energy consumption and generation from
non-renewable and renewable sources.
Air pollution The Company will measure and reduce air pollution from operations where applicable.
Hazardous substances The Company will disclose and mitigate the production or use of substances that can
pose human health and environmental harm.
Water use and discharges The Company will use water eciently and disclose the quantity and method of
withdrawal and responsible disposal.
Waste The Company will implement a waste management hierarchy to promote reuse,
recycling, and responsible disposal to minimize environmental impact.
Material sourcing and eciency The Company will account for the environmental and social impacts of the products
and materials procured and their eciency in use with the aim of limiting impacts in
the value chain.
End of life management The Company will take a life cycle approach to management and consider the disposal
and recyclability of equipment and plant at the end of life.
Biodiversity and habitat The Company will take a do no signicant harm approach to biodiversity and habitat
and manage any impacts to ecologically rich areas from operations.
Health and safety The Company will manage hazards and risks to those that interact with the assets
through operational health and safety policies, management plans, training, and
reporting processes.
Employment The Company will engage employees through policies and benets to support
retention, and provide jobs and build capacity locally.
Inclusion and diversity The Company will put in place policies and plans to promote diversity of boards and
employees, equal opportunity and anti- discrimination, and reporting progress.
Forced or compulsory labour The Company will implement processes to prevent, identify and manage modern
slavery risks to operations and value chains.
Community development The Company will take an active role in the local communities to mitigate any negative
impacts and leave a positive legacy.
ESG oversight and resourcing The Company will appropriately resource to manage ESG related issues with eective
reporting to the Board.
Cybersecurity and data protection The Company will protect information technology from unauthorized use or attacks,
and protect customer privacy and their data from misuse and theft.
Whistle-blower protection The Company will implement procedures to enable stakeholders to raise issues such as
unethical and dangerous practices, and to protect those who do raise these issues.
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58
The GSEO Board has oversight of
the business model and strategy.
It meets at least four times a
year and is responsible for the
ongoing process of identifying,
carrying out a robust assessment
of, and managing and mitigating
the principal risks faced by the
company.
The Board’s Audit Committee, which is comprised of four independent Directors,
meet at least twice a year and has responsibility for reviewing the Company’s risk
management systems. The Committee reviews and updates the Company’s risk
register which includes climate-related issues.
Louise Kingham CBE, is the Board member with responsibility for ESG and
sustainability matters for the Company.
The Board has oversight of the Investment Adviser and the AIFM.
The Investment Adviser (together
with the AIFM) has responsibility
for implementing the Company’s
investment strategy, managing
the Company investments and
reporting to the Board.
There are three relevant
subcommittees at the Investment
Adviser level which address climate-
related issues.
The Risk, Operations and Compliance Committee ensures risks are identied and
control measures are put in place to mitigate the risk
The ESG working group gives recommendations on ESG integration into the
investment strategy and asset management throughout an asset’s life. This includes
appropriate ESG target setting, monitoring and reporting.
The Investment Adviser and AIFM investment committees evaluate investment
opportunities aligned with the SDGs with the purpose of accelerating the energy
transition towards a net zero carbon world. An external assurance consultant is used
to advise on this project selection following a robust due diligence process.
The Investment Adviser works
closely with operating partners
through regular meetings and
monthly reports covering climate-
related issues.
Operational carbon footprints are calculated including life cycle analysis of energy
generation projects to understand their contribution to the Company net zero target.
Actions are put in place to reduce operation emissions and other environmental
impacts, including understanding supply chain and value chain impacts. Operating
partners conrm their compliance with relevant policies.
For construction assets, operating partners are required to ensure ESG management
practices are aligned with the Investment Adviser’s sustainable development culture.
FINANCE STABILITY BOARD TASK FORCE ON
CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD)
The Company is not required to disclose under TCFD however it is the Company's intention to include
in its annual nancial report climate-related disclosures in accordance with the ethos of the TCFD
recommendations and it is committed to strengthening disclosures over time. As 2022 is the baseline
year for operational data, climate-related targets will be based on this performance and will be
published through the Net Zero Asset Managers Initiative (NZAMI). The Company is also developing its
scenario capabilities and aims to provide quantitative analysis in the future.
Governance pillar
An orderly energy transition towards climate change goals is the key opportunity for the Company.
The Company’s strategy is to target direct investments in energy infrastructure assets that support
the SDGs, specically those that address themes that include climate change, energy access, energy
eciency and market liberalisation. Climate change issues are therefore intrinsically considered by
both the Board and the Investment Adviser.
59
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Strategy pillar
The Company’s investment policy is to deploy the Company’s funds into a diversied portfolio of global
sustainable energy infrastructure assets that support the attainment and pursuit of the SDGs where energy and
energy infrastructure investments are either a direct contributor to the acceleration of the energy transition
towards a net zero carbon world or can be categorised into one or more of the four “Investment Pathways” that
constitute its investment themes. These Investment Pathways are:
FINANCE STABILITY BOARD TASK FORCE ON
CLIMATE-RELATED FINANCIAL DISCLOSURES (TCFD) CONTINUED
Pathway I – Addressing climate change
The objective is to reduce the impact of greenhouse gases (GHGs) through investing in
renewable energy technologies and fuel sources. As such, the Company will invest a large
portion of its deployable capital into renewable energy infrastructure assets involved in
power generation, energy storage, and alternative fuel sources.
Pathway II – Energy access
Energy is vital for our quality of life but globally there is not universal access. According
to the UN, 800 million people are without electricity or power, and 2.6bn people have no
access to clean fuels for cooking. Growth in access to energy, which also adheres to other
SDGs such as Climate Change, is a key challenge for governments, investors and businesses
alike. There is an acknowledgement that a level of pragmatism is required in meeting SDG
policies. Traditional non-renewable energy sources are likely to continue playing a role in
the energy mix of world economies. Investment in distributed technologies that generate
electricity at or near where it is used such as solar panels or combined heat and power with
carbon capture technology will enable this access.
Pathway III – Energy eciency
Energy eciency reduces GHGs and reduces demand for energy imports into domestic
markets, thereby lowering the cost of energy to households, businesses and the economy
overall. Energy eciency may also be achieved at the grid and national levels through
investment in some of the following areas, which the Company may consider as part of its
investment focus:
1. Power interconnectors
2. Grid resilience and frequency response
3. Investment in ageing grid systems which were developed as one-way transmission
systems.
Pathway IV – Market liberalisation
SDG 7, speaks of ensuring universal access to aordable, reliable and modern energy
supply. The liberalisation of energy markets is the rst stage in the development and
modernisation process of an energy market.
1
2
3
£
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60
The Company’s investments inherently improve
environmental performance; for example, in Brazil,
investment in a portfolio of solar PV assets will accelerate
the growth of a sustainable energy system by improving
and securing localised access to clean energy and helping
to lower Brazilian energy prices. The UK exible power
with CCR assets will use a less pollutive fuel in natural
gas, as well as reduce emissions through ecient carbon
capture and reuse technologies. The Company’s energy
infrastructure assets are long term in nature.
The Company has aligned its time horizons with the NZAMI
which supports the goal of net zero GHG emission by 2050
where:
•
Long term time horizon 2050 (25-30 years)
•
Mid term time horizon 2030 (10–15 years)
•
Short term time horizon 2025 (3-5 years).
Risk management
The Company’s principal risk management process, as
well as the risk and opportunity-based approach to ESG
management described on page56, is how the relevant
climate risks and opportunities are identied. These risks
are outlined in the table below. This is considered within
the selection and screening of energy infrastructure
investments. The risk management process considers
type of infrastructure and geographic risks. Local partners
are engaged to assess environmental management
practices and processes, and to broaden understanding of
stakeholder perspectives.
In 2022 the Investment Adviser contracted an expert third
party sustainability consultant to conduct physical climate
risk and vulnerability assessments (CRVA) for each of the
Company’s investments.
The CRVA was conducted in accordance with the criteria of
the EU Commission Delegated Regulation (EU) 2021/2139
which form the Technical Screening Criteria of the EU
Taxonomy. Specically, to accord with the requirements of
Appendix A of the above regulation, the Generic Criteria for
Do No Signicant Harm to Climate Change Adaptation.
The CRVA was carried out using climate projections across
dierent Representative Concentrations Pathways used by
the Intergovernmental Panel on Climate Change (IPCC) fth
assessment report (AR5).
Climate modelling of regional impacts on the locations
where each of the Company’s assets are situated was
used. The impacts of these changes were interpreted in
order to understand the physical hazards the assets might
experience over their lifetime. The sustainable energy
infrastructure investments considered under the CRVA
have expected lifespans greater than 10 years.
Vulnerability of the assets to projected climate-related
hazards was considered based on asset design standards,
site locations and risk to climate-related impacts as well
as historic climate-related issues which may have been
experienced in the region. The Company also considers the
type of asset and whether it will be impacted by changes
in weather (e.g., wind and solar power), supply chain
disruption (e.g., energy supply), and market demands.
Adaptation solutions were identied based on the outputs
of the CRVA. These adaptations show how the resilience
of the asset is improved to withstand such vulnerabilities.
The most common hazards identied was the potential
for wildre or ood. All assets have appropriate drainage
designed and in some cases enhanced to move excess
water away from sites. All sites also have appropriate
reghting equipment installed.
There is uncertainty in terms of how climate change will
impact individual operations as well as the impact of
global eorts to achieve an orderly energy transition.
Initially the company has taken a qualitative approach to
identifying climate-related physical and transition risks and
opportunities. As the Company matures, it aims to develop
understanding of the potential nancial impacts under
dierent transition scenarios from these physical and
transition risks on global assets. Generally the Company’s
nancial materiality threshold for climate-related risks and
opportunities is 3% NAV after considering risk mitigation.
However, the unpredictability of climate-related weather
events means that the Company takes a more cautious
approach to asset management and insurance to mitigate
this in the longer term.
For transition risks, the Company’s investment process
selects projects that align to the energy transition to net
zero. Various parameters are considered including policy
and regulatory changes and stringency, technology and
energy mix, energy demand and capacity changes and
associated costs or prots to the business.
Investments are considered under several scenarios
relevant to the Company’s diverse energy infrastructure
investments including:
•
IEA World Energy Model Net Zero Energy 2050
•
IEA World Energy Model Stated Policies Scenario
•
UNPRI Inevitable Policy Response
•
Network for Greening the Financial System (NGFS)
climate scenarios
•
IPCC Shared Socioeconomic Pathways (SSP) 1, 2 and 5
•
IPCC Representative Concentration Pathways (RCP)
61
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Risk Potential impact Mitigation
Physical risks
Longer term changes in
climate patterns, e.g.,
reduction or increase
in wind levels, drought,
decrease in solar optimal
days impacting renewable
output and associated
earnings.
Increased occurrence of
extreme weather events
such as cyclones, storms,
ooding and heatwaves
causing damage to assets,
disruption to feedstocks,
value chain, outputs and
associated earnings.
Reduction in output from
assets leading to reduced
income stream. This risk
may increase over the long
term in the absence of
climate mitigation.
The Company invests in a portfolio of energy transition
infrastructure assets, diversied by geography,
technology and capability. These investments are
targeted at the energy transition to net zero. This will
provide a buer against variable weather patterns
across the portfolio.
The Company also mitigates risk through project
revenues being contracted for the medium- and long-
term.
At the asset level weather conditions are monitored
and many of the renewable projects have battery
storage capabilities to optimise energy input to the grid.
Meteorology and feedback due diligence is undertaken
before investment and reviewed regularly.
All assets have crisis management and business
continuity plans to respond to disruptions. The
assets are required to have continuous improvement
management systems to build capability and capacity in
the local teams and operations.
Increased insurance
premium for assets in high-
risk locations.
Increased cost of doing
business.
When making investments the due diligence process
accounts for climate change risk and impacts.
The Investment Adviser employs an insurance
specialist when making investments and seeks to have
appropriate contractual warranties, indemnities and
insurance provisions in place to mitigate any costs
relating to delays or operation disruption. Insurance
requirements are reviewed on an ongoing basis.
Transition risks
Market shifts may dampen
ability to engage investors
on a broader portfolio of
energy transition projects
than a traditional European
renewable focus including
dierent geographies and
new technologies e.g.,
carbon capture and reuse.
Reduction in the availability
of capital to invest in
energy transition projects.
There is strong public demand for support of the
renewable energy market towards net zero carbon
emission targets.
The Company is expected to hold most of its
investments on a long-term basis and the Board and
the Investment Adviser monitor the position on a
regular basis.
The senior management team of the Investment
Adviser has extensive experience in executing
strategies similar to that of the Company.
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62
Risk Potential impact Mitigation
Policy shift may introduce
regulation around climate
change e.g., increased
disclosure, taxes etc.
Increased cost of doing
business.
Reduction in the availability
of capital to invest in
energy transition projects.
The Company is supportive of the policy aims of
disclosure regulation and will comply with it and
monitor changes.
The Company, via the Investment Adviser, engages
with partners and stakeholders to gather data and
drive action to improve ESG management and support
disclosure and policy requirements. This includes
monthly metric reporting on climate-related KPIs
including energy used and generated, mitigation
actions for risks and impacts, as well as any energy
reduction projects.
The Company investment strategy targeting the energy
transition is aligned with global policy movements on
climate change which would limit impact.
Transition opportunities
Decarbonisation policy and
market shifts will drive new
renewable energy, new
fuels and energy storage
opportunities. This is
aligned with the Company’s
strategy to invest in energy
transition infrastructure.
Increased need for global
energy access from a mix
of sources as developing
countries expand grid
access to populations.
Increased availability
and deal origination as
well as capital directed
towards energy transition
opportunities in support of
the Company’s investment
strategy.
A pipeline of investments is constantly being identied
and refreshed, with the Investment Adviser regularly
reporting to the Board on this pipeline.
Increased investment
in energy eciency grid
infrastructure leading to
increase in opportunities
for investment.
Reinforcement of intangible
benets such as reputation,
brand and goodwill,
together with employee,
partner and stakeholder
engagement.
The Investment Adviser uses the extensive experience
of its senior management team in executing strategies
similar to that of the Company to raise funds and
successfully invest.
Market liberalisation in
developed and developing
economies is creating
opportunity for market
share in renewable
and alternative energy
opportunities in new
geographies.
Access to new markets
leading to an enhanced
competitive position
and improved resource
eciency reducing
operating costs.
The Investment Adviser has engaged globally with
various companies and investors to support expansion
of the Company and sustainable energy infrastructure
investments.
Decentralisation of energy
generation creating
new opportunities for
investment in renewable
and other sustainable
energy infrastructure.
Enhanced competitive
position reecting shifting
preferences and increased
revenues through new
solutions, access to new
markets, diversication,
resilience planning,
relationships.
A pipeline of investments is constantly being identied,
with the Investment Adviser regularly reporting to the
Board on this pipeline.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Climate Risk
Low = 1, Medium = 2, High = 3
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Scenario Asset class Physical risk (RCP) Transition risk (IEA)
Paris ambitious 1.5 degrees Solar PV 1 1
Hydro 1 1
Terminal Storage 1 2
Flexible power with CCR 1 2
Disorderly/inevitable policy
response below 2 degrees
Solar PV 2 1
Hydro 2 1
Terminal Storage 2 2
Flexible power with CCR 2 2
Business as usual/current policies Solar PV 3 1
Hydro 3 1
Terminal Storage 3 1
Flexible power + CCR 3 1
The analysis of the Company’s business strategy under
dierent scenarios took into consideration the current
geographic locations of assets and critical Tier 1 supply
chain companies such as solar panel manufacturers. The
Company’s business strategy supports a transition scenario.
The nancial impact and resilience of the Company’s
investment strategy to dierent climate scenarios is
inherent in the Investment Adviser’s nancial modelling
processes. It is the Company’s objective to accelerate an
orderly transition via its investments. It is also expected
that the investments would be resilient in case of a failure
to achieve the energy transition. The Investment Adviser’s
nancial and valuation models include the impact of
dierent variables such as energy demand and future
mix, key commodity prices, and demographic shifts such
as population growth. The models are also geographically
tailored, as the national mandated targets for renewable
and other energy source penetration in the energy mix, as
well as carbon reduction policies of the investment country
and region are critical in understanding investment impact
and suitability.
Metrics and targets
The Company’s goal is to enable the transition to net zero
through its strategic focus on sustainable energy assets
that align with the SDGs. The Company aims to meet
the Paris Agreement target and achieve net zero carbon
emissions in its portfolio by 2050.
The risks and opportunities to a project’s underlying strategy have been considered qualitatively under
dierent physical and transition climate scenarios as described on page61. This was considered over a
longer-term time horizon of 25-30 years to understand the resilience of the Company’s position. The table
below shows the assessed risk to investment opportunities by asset class in dierent energy transition
scenarios described above and the physical climate risk under dierent RCPs. This assumes no adaptation
measures. The CRVA identied good mitigation measures for assets so under business-as-usual scenarios
the assets have appropriate adaptation in place for worst case physical climate risks.
Annual Report and Accounts 2022
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64
The Company reports on energy generation, consumption
and associated carbon emissions. In 2022 the Investment
Adviser became signatory to the NZAMI and commissioned
an external adviser to develop a road map towards a 2050
net zero goal with a target for the Company portfolio.
The carbon intensity of the Company’s portfolio is low.
The Company predicts the majority of emissions that will
require reduction by 2050 will be Scope 3. The Company
will publish its net zero 2050 target and associated road
map for operational assets in 2023 which we will be
updated based on 2022 baseline emissions.
The Company takes a life cycle approach to understand
carbon impact and footprint of each of the renewable
power generation investments and the future carbon
capture project. The Company conducted a life cycle
assessment (LCA) of embodied emissions of the energy
generation assets in the portfolio. This data was rst
published in the 2021 annual report. This analysis was
updated with the acquisition of the Mascarenhas Brazilian
hydro facility at the end of 2022 and is included in the
table below. This analysis was completed by a third party
sustainability expert with the methodology described below.
The data was calculated on a 25-year life cycle and
includes import and export data that is indicative of full
life emissions avoided. The LCA process for each asset was
completed using actual and predicted asset data as far as
possible supported with data derived from the EcoInvent
3.8 database. This approach enabled the embodied
CO
2
e emissions within each asset to be calculated. These
include emissions associated with raw material extraction,
manufacture, transport, construction, operations and
decommissioning and recycling. The objective was to
understand the true avoided emissions for each asset and
account for emissions associated with the development of
each asset.
The avoided emissions calculations take in to account local
factors such as carbon intensity of the energy type being
replaced at a local level and local irradiance levels. The
expected decarbonisation of traditional baseload energy
supply aligned with country commitments towards net zero
by 2050 was also factored in. The calculations therefore
accounted for expected decarbonisation trajectory of grid
supplied energy and the CO
2
e avoided gures at all phases
of the asset life cycle for each country in which assets are
located. However, a declining grid carbon intensity has not
been carried through for Brazil as the grid has established
low carbon intensity and Brazil is not considered aligned
to net zero by 2050. The Brazilian calculations therefore do
not account for the type and carbon intensity of electricity
generation being displaced by the solar PV assets, nor
the benets of distributed power generation. A reduction
in electricity losses along transmission and distribution
lines means the remote solar PV assets in Brazil will
provide a more ecient and cleaner source of energy
locally, supporting future growth and energy access. The
Company is tracking progress on carbon emission payback
as calculated in the LCA. Considering the estimated and
actual energy generation and associated avoided emission
calculations the ’payback‘ period for the Australian solar PV
with battery storage assets has reduced to 4.2 years. The
Brazilian hydro facility was commissioned in 1974 and has
a short 'payback' period for its embodied emissions which
means the facility is providing zero emission electricity into
the grid.
2022 emissions data
The Company strategy is focused on supporting climate
action by accelerating the energy transition through its
investments in climate resilient energy infrastructure. The
management of investment impacts including measuring
an asset’s carbon footprint and taking action to decarbonise
is an important element in the company’s climate action
approach.
As the rst full year for the Company’s operational assets,
2022 is the baseline year for data collection. This data will
inform specic actions to meet net zero targets. The table
below covers the Company’s scope 1, scope 2 and scope
3 emissions from the operational assets including the
Australian solar PV assets, Brazilian solar PV assets which
commissioned in 2022 and USA terminal storage assets.
Data collection and calculations were completed in line
with the Company’s basis of ESG reporting document which
is informed by the GHG protocol and Global Reporting
Initiative guidance. Assets under construction or were
acquired with fewer than 6 months data were not included
in the reporting scope for assurance.
All sites provide operational data however gaps remain in
calculating scope 3 emissions due to diculties sourcing
data from the asset value chain, for example destinations
of freight for the US terminal storage assets. For the solar
PV assets the scope 3 emissions from transmission and
distribution (T&D) are accounted for.
Energy generation assets carbon life cycle analysis
Units UK Australia Brazil (solar) Brazil (hydro) Portfolio
Embodied emissions Kg CO
2
e 1,321,045 79,655,870 114,276,353 175,381,510 370,634,778
Operational emissions Kg CO
2
e 93,210,017 1,133,373 12,867,804 1,865,990 109,077,184
Total life cycle emissions Kg CO
2
e 94,531,062 80,789,243 127,144,157 177,247,500 479,711,962
Emissions avoided Kg CO
2
e 246,557,717 321,997,694 197,048,974 9,157,834,560 9,923,438,946
Net emissions avoided over lifetime Kg CO
2
e 152,026,655 241,208,451 69,904,817 8,982,453,050 9,443,726,984
Average savings per annum Kg CO
2
e 9,862,309 12,879,908 7,881,959 91,578,346 122,202,521
CO
2
Payback Year 9.6 6.4 16.1 1.9 4
65
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The FY22 social metrics and scope 1, 2 and 3 emissions within this report annotated with a ± symbol have been
independently assured through a limited assurance engagement conducted in accordance with the International
Standard on Assurance 3000 (ISAE 3000) and International Standard on Assurance 3410 “Assurance engagements on
greenhouse gas statements” (ISAE 3410).
Portfolio energy use and GHG emissions for 2022
Scope
Energy use
(KWh)
GHG emissions
(tonnes CO
2
e)
Scope 1 21,729,405 3,950
±
Scope 2 2,492,317 909
±
Total Operational (scope 1&2) 24,221,722 4859
±
Scope 3 7,103
±
Avoided emissions 14,349
±
GHG emissions scope denitions
and methodology
The Company collects GHG emission data monthly from its wholly owned operational subsidiaries and reports totals
annually. The Company is strengthening its reporting process to include construction assets in future reports. Figures
reported currently only include operational assets where indicated.
The Company uses the following standards to report its GHG emissions: the World Business Council for Sustainable
Development (WBCSD) and the World Resources Institute (WRI) GHG Protocol as of 31 December 2014, the GHG Protocol
Scope 2 Guidance, and the Carbon Disclosure Standards Board. The Company denes its emissions boundary as those
under majority ownership (+50%). The Company assets are wholly owned by the company and therefore 100% of
emissions reported are under the Company’s nancial control.
The operational carbon footprint of assets is calculated from absolute energy consumption reported by the assets.
Scope 1 comprises direct emissions from Company owned and controlled plant and equipment, including natural gas,
propane, diesel and automotive fuel.
Scope 2 comprises indirect emissions from purchased renewable and non-renewable electricity using location based
calculation method.
Scope 3 comprises indirect emissions from non-Company owned and controlled plant and equipment, including rail and
truck fuel freight inbound to the storage terminal, waste, water use and fuel and energy related activities not included in
scope 1 and 2.
Regional and country specic emission factors are used to calculate GHG emissions provided through the data collection
software Diligent (previously Accuvio). These factors can be accessed on the Diligent ESG reporting system and included
IEA, UK BEIS, US EPA and Australian National Greenhouse Accounting factors.
Avoided emissions from renewable energy generated by solar PV assets are calculated using WRI/WBCSD guidelines for
quantifying GHG reductions from grid-connected electricity projects accounting for T&D losses.
Under the TCFD asset managers are required to provide the weighted average carbon intensity for the investment strategy.
This metric with other carbon footprinting metrics using formula provided by the TCFD are included in the table below.
The source of operational emissions includes imported electricity from the grid, fuel used in asset owned vehicles and
natural gas for heating and operations.
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66
TCFD carbon footprinting and exposure metrics
Portfolio‘s exposure to carbon-intensive companies, expressed in tonnes CO
2
e/$M
revenue
68 tCO
2
e/$M
The absolute greenhouse gas emissions associated with a portfolio, expressed in
tonnes CO
2
e
1,710 tCO
2
e
Total carbon emissions for a portfolio normalized by the market value of the portfolio,
expressed in tonnes CO
2
e/$M invested
3 tCO
2
e/$M
Carbon footprinting and exposure metrics for the portfolio operating assets were calculated using formula recommended by the TCFD for asset owners
and asset managers published in ‘Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures’, June 2017, section D
supplemental guidance for the nancial sector.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
OPERATIONAL ESG PROGRESS
Environmental
Through asset ownership and active engagement with operating partners the Company is committed to minimising the
environmental footprint of its assets by reducing resource consumption. 2022 is the baseline year for data collection and
targets will be set and reported on in 2023.
The table below provides absolute gures of the material environmental metrics. Water is used in some operational
processes, however no assets in 2022 were located in regions of water stress. Waste was produced due to construction
activities predominantly. Minimal waste is produced during normal operations. A recycling company is used to remove
waste from the US terminal storage assets.
Renewable energy generated from the solar PV assets is a key impact metric for the Company strategy. Over 35,000
megawatt hours were produced in 2022 the equivalent to powering over 9000 average sized UK homes. This data is
collected at the site level and assurance provided at the portfolio level.
Metric Unit Australia Brazil USA Portfolio
Water used megalitres n/a n/a 45 45
Waste produced tonnes n/a n/a 31 31
Renewable energy MWh 22,853 12,265 n/a 35,118
±
GHG emissions avoided tonnes CO
2
e 13,204 1,145 n/a 14,349
±
Nitrous Oxides (NOx)
avoided
tonnes n/a n/a 2,048 2,048
±
Sulfur Oxides (SOx) avoided tonnes n/a n/a 20,613 20,613
±
Particulate Matter (PM) 10
avoided
tonnes n/a n/a 1,049 1,049
±
Particulate Matter (PM) 2.5
avoided
tonnes n/a n/a 770 770
±
Pollutant emissions factors published by ’European Monitoring and Evaluation Programme / European Environment Agency Air Pollutant Emission Inventory
Guidebook 2019‘ for both HSFO and ULSD are used to calculate avoided NOx, SOx and PM emissions, using ’Heavy Fuel Oil‘ as the base fuel for HSFO and
emissions through ’Diesel Large SUV Euro 6‘ as the base fuel for ULSD.
There were no chemical spills, wildlife fatalities, habitat loss or environmental nes or ndings of noncompliance at
Company assets in 2022. For greenhouse gas emissions calculations and carbon intensity metrics see the TCFD section on
page59.
The avoided emissions calculated and reported from displacing the HSFO from the Mexican market, the strategic aim of
the US terminal storage assets, focus on benecial air emissions reductions including SOx, NOx and PM. This is calculated
by comparing the emissions from combusting HSFO compared to those from ULSD combustion where there is a reduction.
The quantity of PM removed was the equivalent of removing over 6 million average cars from the Mexican roads.
The Company reports on these pollutants because of the benets to human health and the environment from their
removal. This includes a reduction in acid rain and associated respiratory diseases and ill health.
Social
The assets do not employ site workers, however the operating partner does. The social data reported and assured below
includes operating partner contracted workers who interact with site operations and work directly on site. This is reported
as full time equivalent (FTE) for the nancial year 2022. This excludes temporary workers and managerial employees
working elsewhere on several assets.
The Brazilian solar PV assets were excluded from the social metric limited assurance as no employees were employed by
the operating partner of the assets during nancial year 2022. The Brazilian sites were under construction in 2022 with
workers employed by the engineering, procurement and construction (EPC) company. These EPC number have been
reported for information but have not fallen within the scope of limited assurance.
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68
One worker on the Australian solar PV with battery storage assets was employed on site during 2022 half the year for the
EPC and half for the operating partner and is reected in the data. Figures have been reported at asset and portfolio level.
Employee metrics for 2022
Metric Unit
Total
portfolio
Brazil Australia USA Australia
EPC &
operating
partner
EPC contractors
Operating partner
workers
±
Gender Diversity
Male
% (Average
number FTE
for FY2022)
89 88 100 93
±
100
±
Female 11 12 0 7
±
0
±
Other 0 0 0 0
±
0
±
Employee turnover % 3 0 0 29
±
0
±
Total number of employees FTE 209 185 1 22 1
± Social data under limited assurance.
Health and safety metrics for 2022
Metric Unit Portfolio Brazil Australia USA
EPC & operating
partner
EPC
Operating
partner
Operating
partner
Health and Safety
Total number
of incidents
1
Number of
incidents
2 1 1
±
0
±
Total Case injury
rate (TCIR)
2
Total number of
recordable injuries
x 200,000/ annual
hours worked
1 1 0
±
0
±
1
Incidents are all operational incidents including near misses, accidents and injuries.
2
TCIR is a work related illness or injury as dened by the RIDDOR – Reporting of Injuries, Disease and Dangerous Occurrences Regulations.
Health and safety
Health and safety of asset workers is a priority for the Company. The Company expects all sites to have policies and
management systems in place to drive continuous improvement in health, safety and environmental management. In 2022,
100% of assets had health and safety policies in place.
Due to the diverse businesses and technologies in the Company, material health and safety hazards and actions will vary.
The total case injury rate (TCIR) for the operational assets was zero for 2022. Including the unassured construction sites, the
TCIR was 1.
Health and safety data is reported monthly, and incidents reported within 24 hours of the event. The terminal storage
asset which has the highest number of workers on site recorded no accidents for the second year. There were two health
and safety incidents reported in the portfolio during 2022. There was a near miss event with a small operational re at
one of the Australian solar PV with battery storage assets in January. This did not result in injury so is not included in the
TCIR calculation. A root cause investigation was carried out to discover the fault and as a result all connectors on site were
replaced as a precautionary measure. The incident tested the incident response capabilities of the operating partner and
installed protection and control functionality of the site. The incident resulted in immaterial downtime for the plant.
A minor injury occurred in June at one of the Brazilian solar PV assets when a construction worker injured himself having
misused some equipment resulting in 3 missed work days. The developer partner carried out a root cause investigation and
ensured appropriate training and personal protective equipment was available on site.
The Company aims for zero incidents and is working with all operators to ensure asset appropriate health and safety
management systems are in place, for example the US terminal storage assets are working towards ISO 45001 certication.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Diversity
SDG 5 on gender equality recognises the importance of equal female participation in decision making to achieve the SDGs.
The Company recognises the benets of a diverse workforce to drive creativity, innovation and for cultural sensitivity across
a global portfolio. The Company, through its investments, is committed to providing equal opportunities for all employees
irrespective of race, colour, religion or belief, ethnic or national origins, gender, age, family status, sexual orientation,
disability, or political opinion.
The Investment Adviser has an equality and diversity and inclusion policy which applies to all aspects of employment,
including recruitment and selection, appraisal, training and promotion, pay and conditions and to any dealings with
customers and clients. Selection for employment, promotion, training or any other benet will be based on aptitude
and ability. All operating partners are required to have a comparable policy that addresses equal opportunities and anti-
discrimination. This was self assessed in 2022. The Company recognises that gender diversity is low within its operating-
partners – this is due to the energy industry traditionally being male dominated but also low employment requirements
in the solar industry. A solar PV asset typically has one caretaker that undertakes regular maintenance on site. Employee
turnover was high for the US terminal storage asset and attributed to natural attrition due to the change in management
when the asset was bought. This will continue to be monitored.
The Company board had a 50% gender split in 2022.
Supply chain
Risks in the supply chain are mitigated by selecting reputable suppliers and using appropriate contract language in service
and supplier contracts. For potentially high-risk suppliers, for example, PV panel manufacturers operating in China, the
Investment Adviser has engaged with operators and suppliers to understand any exposure to human rights issues such
as child labour. The Investment Adviser engaged operating partners through 2022 to support roll out of a supplier code of
conduct that addresses ESG expectations where one does not currently exist.
Governance
There were no grievances or whistleblowing reports in 2022. All operating partners continued to implement anti-bribery
and corruption and whistleblowing policies and processes in 2022.
OPERATIONAL ESG PROGRESS CONTINUED
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70
Brazil hydro facility ESG case study:
Developing
a sustainability
action plan
The Company strategy post-investment looks
beyond the asset’s core energy transition activity
to take account of how the asset is operated.
Managing practices should ensure that the asset
contributes to a sustainable future by being
inclusive, ecient and clean. The purpose of an
asset Sustainability Action Plan (SAP or plan) is
to articulate mutually agreed actions to achieve
sustainable management practices. A plan for
Mascarenhas, the Brazilian hydro facility, was
developed with Paraty Energia the operating
partner.
Mascarenhas is a 198MW run of river Hydro
Electric Plants (HPP) on the Doce River in Espirito
Santo, in the Southeast region of Brazil. The
acquisition’s energy transition and sustainability
aims are to maintain and develop the project's
renewable energy generation of the asset. The
facility activity results in GHG emission reductions
by avoiding the dispatch of energy produced
by fossil-fuelled thermal plants to the grid and
supporting new renewable generation by providing
baseload power. The facility also helps avoid
energy import from other states into the project
state improving energy eciency of local electricity
provision.
The facility promotes environmental sustainability
by reducing local air pollution that may otherwise
be emitted and contributes to sustainable
development by hiring local labour, paying
municipal taxes and environmental and
stakeholder engagement through programmes.
The hydro facility became operational in 1974 and
so the aim of the SAP is to create improvement
on the existing social and environmental
baseline. Potential environmental and social
issues identied during a materiality analysis
comprised sedimentation management, watershed
management such as aorestation, community
development and livelihood opportunities, water
quality and pollution management including
cumulative impacts of other activities upstream.
The operating partner agreed to an action plan
which commits the asset to obtaining certication
against the International Hydropower Association
(IHA) sustainability standard within 3 years.
This includes completing an environmental and
social baseline study in the rst year to identify
opportunities for adding value.
The aim is to preserve the facility’s existing
environmental and social value while creating
additional value through active ownership and
stewardship of the investment.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Membership and signatories
The Investment Adviser was accepted as a signatory to the
UK stewardship code in 2022 reecting its commitment
to active ownership and ensuring assets are managed
responsibly aligned with the SDGs. The Investment Adviser
was also accepted as a member of the Global Impact
Investing Network (GIIN) and the Net Zero Asset Managers
Initiative (NZAMI).
THE EU SUSTAINABLE FINANCE DISCLOSURE
REGULATION (SFDR) 2019/2088
SFDR was introduced by the European Commission as
part of a package of legislative measures arising from the
European Commission’s action plan on sustainable nance.
The Company has sustainable investment as its objective
as described on page4. Article 9 funds under SFDR are
products that have a sustainable investment objective.
SFDR imposes mandatory ESG disclosure obligations for
asset managers and other nancial markets participants
with Article 9 funds. The aim is to standardise disclosures
on how ESG factors are integrated into investment decision
processes and how risks and impacts of those investments
are managed in the European Union.
SFDR requires disclosure of information on its website,
in the pre-contractual information and in the periodic
information provided to investors. In anticipation of these
requirements the Investment Adviser published a Principal
Adverse Sustainability Impact Statement (PAIS) on the
company website covering preliminary information
from 2021. This document can be found on the Investment
Adviser's website www.victory-hill.com. The disclosure will
be updated this year to reect 2022 data as described in
this report.
The Investment Adviser considers principal adverse impacts
of its investment advice on investment decisions and
asset management. The material issues that may impact
infrastructure investments and conversely the impacts they
may have on stakeholders and the environment will vary
depending on asset characteristics and geographic location.
The material principal adverse impacts and associated
indicators measured may be specic to individual assets
and may vary across the Portfolio. The Company considers
the systemic ESG risks associated with infrastructure
projects as described on page56.
The company's SFDR Annex V disclosure can be found on
page141.
OPERATIONAL ESG PROGRESS CONTINUED
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Providing
experienced
and focused
leadership
All Directors of the Company are non-executive
and independent of the Investment Adviser
Annual Report and Accounts 2022
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Governance
74
Bernard Bulkin, PHD, OBE
Chair of the Board and Chair of
the Nomination Committee
Over 35 years in the energy industry.
Experienced Board Member and
Chairman. Currently a director of ATN
International Inc, a NASDAQ-listed
company. Business and commercial
roles including chief scientist of BP,
former member of the UK Sustainable
Development Commission and Chair
of The Oce of Renewable Energy of
UK Government.
Richard Horlick
Chair of the Management
Engagement Committee
Over 40 years' experience in the
investment management industry.
Currently the Chair of CCLA
Investment Management, Chair of BH
Macro Ltd and Chair of Riverstone
Energy Limited. Former roles at
Newton Investment Management,
Fidelity International, including CEO of
Fidelity Management Trust Company
and main board member, Global Head
of Investments at Schroders plc.
Margaret Stephens
Chair of the Audit Committee
Qualied Chartered Accountant
and a 28-year career with KPMG. 16
years as a partner focused on global
infrastructure and international M&A.
Currently, Trustee Director and Chair
of Audit of the Nuclear Liabilities
Fund, Non-Executive Director and
Chair of the Remuneration Committee
of AVI Japan Opportunity Trust plc.
Formerly, a non-executive Board
Member and Chair of the Audit and
Risk Committee at the Department for
Exiting the European Union.
Daniella Carneiro
1
Chair of the Remuneration
Committee
Over 30 years of global experience
in project development, governance,
strategy, tax and M&A with major
companies including KPMG and Shell.
A non-executive director and Chair
of the Energy & Decarbonisation
Committee of the Brazilian Chamber
of Commerce in Great Britain. She is
also Chair of the UK Trade Wing of
the global gender equality network
G100 and a specialist advisor at the
Department for Business and Trade.
1
appointed on 18 January 2023
Louise Kingham, CBE
Non-executive Director
30 years' experience in the energy
sector. Currently BP's UK Head of
Country and Senior Vice President
for Europe. Prior to this, Louise was
CEO of the Energy Institute. She was
previously a non-executive board
member of the Energy Saving Trust
and Chair of its charitable Foundation.
She is also an Ambassador for the
POWERful Women and 25x25 gender
diversity initiatives and chair of
Business in the Community's Climate
Action leadership team.
MEET THE BOARD
75
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Richard Lum
Co-Chief Investment Ocer
28 years in natural resource
structured nance and banking.
Worked at Mizuho Financial Group,
Standard Chartered Bank, West LB
Markets and Bayern LB.
Eduardo Monteiro
Co-Chief Investment Ocer
22 years in M&A and corporate
nance advisory. Worked for Mizuho
Financial Group, Société Générale,
ABN Amro Bank and JP Morgan.
Gregory Scopelitis, CFA
Principal - Portfolio
Management
16 years experience in structured
and corporate nance in global
energy and infrastructure. Worked
at International Finance Corporation
(IFC), Mizuho Financial Group, World
Bank in Washington DC, the European
Investment Bank (EIB) in Luxembourg,
Proparco the principal investment
arm of the Agence Francaise du
Development (AFD) based in Bangkok,
the European Bank for Reconstruction
and Development (EBRD) and Société
Générale.
Eleanor Fraser-Smith
Vice President - Head Of
Sustainability
17 years experience in sustainability
and ESG focussing on strategy
development and implementation for
energy and engineering companies.
Worked as Corporate Responsibility
and Sustainability Lead at Cobham
Plc, risk management advisor in
the Corporate Social Responsibility
Organization of Marathon Oil, and
project manager for IPIECA, the
energy industry association.
Norman Huber
Vice President – Portfolio
Management
11 years experience in developing,
structuring and nancing renewable
energy, social and environmental
infrastructure projects across multiple
technologies and jurisdictions.
Worked at Blackstone’s fully-owned
energy and infrastructure platform,
North American Development Bank
(NADB) and Nacional Financiera.
MEET THE VICTORY HILL INVESTMENT TEAM
Annual Report and Accounts 2022
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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directors’ report
The Directors are pleased to present their report for the
year ended 31 December 2022. In accordance with the
Companies Act 2006 (as amended) (the “Act”), the Listing
Rules and the Disclosure Guidance and Transparency
Rules, the Corporate Governance Statement, Directors’
Remuneration Report, Reports from the Audit Committee
and Management Engagement Committee, and the
Statement of Directors’ Responsibilities should be read in
conjunction with one another, and the Strategic Report.
As permitted by legislation, some of the matters normally
included in the Directors’ Report have instead been
included in the Strategic Report, as the Board considers
them to be of strategic importance.
Directors
The Directors in oce at the date of this report are as
shown on page 75. Details of the Directors’ terms of
appointment can be found in the Corporate Governance
Statement and the Directors’ Remuneration Report.
Corporate governance
The Corporate Governance Statement on pages 84 to 87
forms part of this Directors’ report.
Dividends
On 5 May 2022, the Company declared an interim dividend
of 1.25p per ordinary share in respect of the period from
1January 2022 to 31 March 2022, which was paid on 10June
2022 to shareholders on the register as at 13 May 2022.
On 5 August 2022, the Company declared an interim
dividend of 1.25p per ordinary share in respect of the
period from 1 April 2022 to 30 June 2022, which was
paidon 16 September 2022 to shareholders on the register
as at 19 August 2022.
On 4 November 2022, the Company declared an interim
dividend of 1.25p per ordinary share in respect of the
period from 1 July 2022 to 30 September 2022, which was
paidon 16 December 2022 to shareholders on the register
as at 18 November 2022.
Post year end, on 22 February 2023, the Company declared
an interim dividend of 1.38p per ordinary share in respect
of the period from 1 October 2022 to 31 December 2022,
which will be paidon 31 March 2023 to shareholders on
the register as at 3 March 2023. Of this amount, 0.24p per
share was designated as an interest distribution.
Therefore, the total dividends paid by the Company
in respect of the year ended 31 December 2022 were
5.13pper ordinary share, exceeding the dividend target of
5p per share.
Dividend policy
The Board expects that dividends will constitute the
principal element of the return to the holders of ordinary
shares. The Company is targeting quarterly dividend
payments of at least 1.38p or 5.52p
1
in total per ordinary
share for the nancial year ending 31 December 2023,
inline with its progressive dividend policy.
Subject to market conditions and the level of the Company’s
net income, it is intended that dividends on the shares will
be payable quarterly, all in the form of interim dividends
(the Company does not intend to pay any nal dividends).
Subject to satisfying the requirements for investment
trust status, the Board reserves the right to retain within a
revenue reserve a proportion of the Company’s net income
in any nancial year, such reserve then being available at
the Board’s absolute discretion for subsequent distribution
to shareholders, subject to the requirements of the
ITRegulations. The dividend policy is subject to an annual
vote at each AGM. The Company may, at the discretion of
the Board, and to the extent possible, pay all or part of any
future dividend out of capital reserves.
The Company may oer with the prior authority of
shareholders and subject to such terms and conditions
as the Board may determine, shareholders (excluding
any holder of treasury shares) the opportunity to elect to
receive ordinary shares, credited as fully paid, instead of
the whole, or some part, of any dividend. The ability to
issue ordinary shares in lieu of cash would provide the
Company with the exibility to retain cash where to do so
would benet the Company.
The Board may designate part of each dividend paid
by the Company insofar as it represents “qualifying
interest income” received by the Company as interest
distributions for UK tax purposes. It is expected that a
variable proportion of the Company’s distributions will take
the form of interest distributions. Prospective investors
should note that the UK tax treatment of the Company’s
distributions may vary for a shareholder depending
upon the classication of such distributions. Prospective
investors who are unsure about the tax treatment that will
apply in respect of any distributions made by the Company
should consult their own tax advisers.
1
This is a target and is based on current market conditions as at the date of this document only and is not a prot forecast. There can be no
assurance that this target will be met or that the Company will make any distributions at all. This target return should not be taken as an indication
of the Company’s expected or actual current or future results. The Company’s actual return will depend upon a number of factors, including but not
limited to, the Company’s net income and the Company’s ongoing charges gure. Potential investors should decide for themselves whether or not
the return is reasonable and achievable in deciding whether to invest in the Company.
79
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Share capital structure
Issue of shares
A Prospectus was issued by the Company on 9 June 2022 in
respect of an Initial Placing, Initial Open Oer, Initial Oer
for Subscription and Initial Intermediaries Oer of new
ordinary shares in the capital of the Company, together
with the implementation of a 12-month Share Issuance
Programme. Pursuant to the Circular published by the
Company on 9 June 2022, at the General Meeting held on
28 June 2022, the shareholders approved the resolutions
in respect of the Share Issuance Programme and the
dis-application of pre-emption rights when allotting those
shares.
Pursuant to the authorities granted under the Share
Issuance Programme, the Company issued 110,909,091
ordinary shares at an issue price of 110 pence per share
on 29 June 2022, with an aggregate nominal value of
£1,109,090.91, raising gross proceeds of £122 million.
Thiscomprised 70,388,725 ordinary shares pursuant to
the Open Oer, 2,307,719 ordinary shares pursuant to
the Excess Application Facility, 10,865,507 ordinary shares
pursuant to the Oer for Subscription, 1,867,895 ordinary
shares pursuant to the Intermediaries Oer and 25,479,245
Shares under the Placing. The shares were issued to
institutional investors and professionally advised private
investors and admitted to trading on the Premium Segment
of the London Stock Exchange’s Main Market on 1 July 2022.
This share issuance was made at a price of not less than
the net asset value per share at the time of issue plus an
amount to cover the cost. The authorities granted under
the Share Issuance Programme will expire on 8 June 2023.
Purchase of shares
At the AGM held on 27 April 2022, the Company was
granted authority to purchase up to 14.99% of its ordinary
share capital in issue, amounting to 46,707,310 ordinary
shares. This authority will expire at the conclusion of,
andrenewal will be sought at, the next AGM of the
Company. Shares bought back by the Company may be
held in treasury, from where they could be reissued at
or above the prevailing net asset value quickly and cost
eectively, or cancelled, at the discretion of the Board.
This provides the Company with additional exibility in
the management of its capital base. The Company did not
purchase any of its ordinary shares during the year, nor did
any nominee or third-party with the Company’s assistance
acquire any shares on behalf of the Company. No shares
were held in treasury during the year or at the year end.
Current share capital
As at 31 December 2022, and at the date of this report, the
Company’s issued share capital comprised 422,498,890
ordinary shares, each of £0.01 nominal value. At general
meetings of the Company, ordinary shareholders are
entitled to one vote on a show of hands and, on a poll,
toone vote for every ordinary share held. At 31 December
2022, and at the date of this report, the total voting rights in
the Company were 422,498,890.
Signicant shareholders
As at 31 December 2022, the Company had been notied of
the following disclosable interests in the share capital of the
Company:
Shareholder
Number of
shares
% of total
voting rights
Quilter Plc 48,198,710 11.41
Sarasin & Partners LLP 38,076,617 9.01
Witan Investment Trust plc 25,350,000 6.00
Newton Investment
Management Limited 24,262,428 5.74
Courtiers Asset Management
Limited 20,045,000 4.74
Since 31 December 2022, the Company has been notied
that Stichting Juridisch Eigendom Privium Sustainable
Impact Fund holds 3.04% of the Company’s shares.
The Company has not been informed of any other changes
to the notiable interests between 31 December 2022 and
27 March 2023, being the last practicable date prior to the
publication of this report.
Shareholder rights
The following information is disclosed in accordance with
The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 and DTR 7.2.6 of
the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules:
• the Company’s capital structure and voting rights and
details of the substantial shareholders in the Company
are set out on this page above;
• an amendment to the Company’s articles of association
and the giving of powers to issue or buy back the
Company’s shares requires an appropriate resolution
to be passed by shareholders. Proposals to grant
powers to the Board to issue and buy back shares are
set out in the Notice of AGM; and
• there are no restrictions concerning the transfer of
securities in the Company; no restrictions on voting
rights; no special rights with regard to control attached
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directors’ report continued
to securities; no agreements between holders of
securities that may restrict their transfer or voting
rights, as known to the Company; and no agreements
which the Company is party to that might aect its
control following a successful takeover bid.
Requirements of the listing rules
Listing Rule 9.8.4 requires the Company to include specied
information in a single identiable section of the Annual
Report or a cross reference table indicating where the
information is set out. The information required under
Listing Rule 9.8.4(7) in relation to allotments of shares is set
out on page 79. The Directors conrm that no additional
disclosures are required in relation to Listing Rule9.8.4.
Independent professional advice, insurance
and indemnity
Details regarding independent professional advice,
insurance and indemnity are set out in the Corporate
Governance Statement on page 86.
Energy and carbon reporting, including
greenhouse gas emissions
The Company’s environmental statements are set out on
pages 52 to 72.
Management arrangements
Alternative investment fund manager (AIFM)
G10 Capital Limited is the Company’s AIFM. It is regulated
in the conduct of investment business by the FCA. The AIFM
is, for the purposes of the Alternative Investment Fund
Manager Directive (AIFMD) and the rules of the FCA, a ‘full
scope’ UK alternative investment fund manager with a Part
4A permission for managing AIFs, such as the Company.
The Company and the AIFM have entered into an
agreement (the “AIFM Agreement”) under which the
AIFM has agreed to provide the Company with portfolio
management and risk management services. Under the
AIFM Agreement, the AIFM receives a fee of £5,000 per
month, payable monthly in advance, and £1,000 in respect
of any investment committee meeting the AIFM was
required to attend in excess of ve investment committee
meetings during a year. No performance fee is payable to
the AIFM.
The AIFM Agreement may be terminated on four months’
written notice, or such shorter period of written notice as
the other party may accept.
Investment Adviser
The Company and the AIFM have appointed Victory
Hill Capital Partners LLP as the Investment Adviser to
the Company to provide certain services in relation
to the Company and its portfolio. Under the terms of
the Investment Advisory Agreement, the Investment
Adviser, inter alia, is responsible for sourcing investment
opportunities in line with the Company’s investment
policy and the monitoring and asset management of the
Company’s portfolio. Details of the Investment Adviser’s
activity and the Company’s performance in the period
under review have been included in the Strategic Report.
Under the terms of the Investment Advisory Agreement,
the Investment Adviser is entitled to a fee payable monthly
in arrears calculated as below.
The investment advisory fees shall be an amount calculated
at the rate of:
a) 1% on the rst £250 million of net asset value;
b) 0.9% on net asset value in excess of £250 million and
up to and including £500 million; and
c) 0.8% on net asset value in excess of £500 million.
Furthermore, if in any fee period, the annual fee paid to the
Investment Adviser exceeds:
a) £3.5 million, the Investment Adviser shall apply 8%
of the annual fee, subject to a maximum amount of
£400,000, to subscribe for or acquire ordinary shares of
£0.01 each in the capital of the Company.
b) £2.5 million, the Investment Adviser shall apply 2%
of the annual fee to be paid as a charitable donation
aimed at promoting sustainable energy, as selected by
the Investment Adviser, provided that if, following the
Investment Adviser’s reasonable endeavours, a suitable
charity cannot be found, this 2% portion of the annual
fee (net of any applicable taxes) will be applied to the
subscription for or acquisition of ordinary shares.
No performance fee is payable to the Investment Adviser.
The Investment Advisory Agreement may be terminated
on 12 months’ written notice, provided that such notice
may not be served before 2 February 2025. The Investment
Advisory Agreement may be terminated with immediate
eect on the occurrence of certain events, including
insolvency or in the event of a material and continuing
breach.
81
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Other service providers
Details of the terms of engagement between the Company
and its other key service providers are set out in the
Prospectus issued by the Company on 9 June 2022.
Continuing appointment of the Investment
Adviser
The Board keeps the performance of the Investment
Adviser under continual review. TheManagement
Engagement Committee conducts an annual review
of the Investment Adviser’s performance and makes
a recommendation to the Board about its continuing
appointment. It is considered that the Investment Adviser
hasexecuted the Company’s investment strategy according
to the Board’s expectations. Accordingly, the Directors
believe that the continuing appointment of Victory Hill
Capital Partners LLP as the Investment Adviser of the
Company, on the terms agreed, is in the best interests of
the Company and its shareholders asawhole. Further
details are set out in the Report from the Management
Engagement Committee on page 98.
Financial risk management
Information about the Company’s nancial risk
management objectives and policies is set out in note 12 to
the nancial statements.
Going concern
The going concern statement can be found on page 50.
Auditor
The Directors conrm that, so far as they are each aware,
there is no relevant audit information of which the
Company’s auditor is unaware; and each Director has
taken all the steps that ought to have been taken as a
Director to make themselves aware of any relevant audit
information and to establish that the Auditor is aware of
that information.
BDO LLP has expressed its willingness to continue in oce
as the Auditor and resolutions for its re-appointment
and to authorise the Audit Committee to determine
its remuneration will be put to shareholders at the
forthcoming Annual General Meeting.
Post balance sheet events
The post balance sheet events can be found in note 20 to
the nancial statements.
Annual General Meeting
The Notice of the AGM to be held on 25 April 2023 (the
“Notice”) is set out on pages 155 to 160. Shareholders are
being asked to vote on the following matters:
• the receipt and adoption of the Strategic Report,
Directors’ Report, Auditor’s Report and the audited
Financial Statements for the year ended 31 December
2022;
• the approval of the Directors’ Remuneration Report;
• the approval of the Company’s dividend policy and
authorisation of the Directors to declare and pay all
dividends of the Company as interim dividends;
• the election/ re-election of Directors;
• the re-appointment of BDO LLP as Auditor and
authorisation of the Audit Committee to determine the
remuneration of the Auditor;
• the granting of authorities in relation to the allotment
of shares;
• the dis-application of pre-emption rights for certain
issues of shares;
• the purchase by the Company of its own shares; and
• holding of general meetings on 14 clear days’ notice.
Resolutions 1 to 12 will be proposed as Ordinary
resolutions and Resolutions 13 to 16 will be proposed as
Special resolutions.
Authority to issue shares
Resolutions 11 and 12, ordinary resolutions as set out in
the Notice, if passed, will renew the Directors’ authority
to allot shares in accordance with statutory pre-emption
rights. These resolutions will authorise the Board to allot:
• ordinary shares generally and unconditionally in
accordance with section 551 of the Act up to an
aggregate nominal value of £422,498.89, representing
approximately 10% of the Company’s issued share
capital (excluding treasury shares) as at the date of the
Notice of AGM or, if changed, the number representing
10% of the issued share capital of the Company at the
date at which this resolution is passed (Resolution 11);
and
• further ordinary shares generally and unconditionally
in accordance with section 551 of the Act up to an
additional aggregate nominal value of £422,498.89,
representing approximately 10% of the Company’s
issued share capital (excluding treasury shares) as
at the date of the Notice of AGM or, if changed, the
number representing 10% of the issued share capital
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directors’ report continued
of the Company at the date at which this resolution is
passed (Resolution 12).
If both these resolutions are passed, shareholders
will be granting the Directors authority to allot up to
20% of the Company’s issued share capital. The Board
believes that passing of Resolutions 11 and 12 is in the
shareholders’ interests as the authority is intended to be
used for funding investment opportunities sourced by
the Investment Adviser, thereby mitigating any potential
dilution of investment returns for existing shareholders,
and the Directors will only issue new ordinary shares at a
price above the prevailing NAV per ordinary share. If only
Resolution 11 is passed and Resolution 12 is not passed,
Directors will only be granted authority to allot up to 10% of
the existing issued ordinary share capital of the Company.
These authorities, if given, will lapse at the conclusion of the
2024 AGM of the Company.
The Directors do not currently intend to allot shares other
than to take advantage of opportunities in the market as
they arise and only if they believe it would be advantageous
to the Company’s shareholders to do so.
Authority to dis-apply pre-emption rights
Resolution 13, a special resolution, is being proposed
to authorise the Directors to disapply the statutory
pre-emption rights of existing shareholders in relation to
the issue of shares under Resolution 11, for cash or the
sale of shares out of treasury up to an aggregate nominal
amount of £422,498.89, being approximately 10% of the
Company’s issued share capital (excluding treasury shares)
as at the date of the Notice of AGM or, if changed, 10% of
the issued share capital immediately upon the passing of
this resolution.
Resolution 14, a special resolution, is being proposed
to authorise the Directors to disapply the statutory
pre-emption rights of existing shareholders in relation to
the further issue of shares under Resolution 12, for cash
or the sale of shares out of treasury up to an aggregate
nominal amount of £422,498.89, being approximately 10%
of the Company’s issued share capital (excluding treasury
shares) as at the date of the Notice of AGM or, if changed,
10% of the issued share capital immediately upon the
passing of this resolution.
In respect of any authority granted under Resolutions 13
and 14, shares would only be issued at a price above the
prevailing NAV per share, intended to at least cover the
costs and expenses of the relevant issuance of shares.
The Directors will only issue shares on a non-pre-emptive
basis if they believe it would be in the best interests of
the Company’s shareholders. If both these resolutions
are passed, shareholders will be granting the Directors
authority to allot up to 20% of the Company’s issued share
capital on a non-pre-emptive basis. The Board believes that
in order to have the maximum exibility to raise nance
to enable the Company to take advantage of suitable
opportunities, the passing of Resolutions 13 and 14 is in the
shareholders’ interests. These authorities, if given, will lapse
at the 2024 AGM of the Company. No shares were held in
treasury during the year or as at the date of the Notice.
Authority to purchase the Company’s own shares
The Act allows companies to hold shares acquired by way
of market purchases as treasury shares, rather than having
to cancel them. This gives the Company the ability to re-sell
shares quickly and eectively thereby improving liquidity
and providing the Company with additional exibility in the
management of its capital base.
At the Annual General Meeting held on 27 April 2022, the
Company was granted authority to purchase up to 14.99%
of the Company’s shares in issue amounting to 46,707,310
shares. No shares were bought back by the Company
during the year pursuant to this authority.
Resolution 15, a special resolution, as set out in the Notice,
if passed, will renew the Directors’ authority to purchase
up to 63,332,583 shares (being 14.99% of the issued share
capital as at 27March 2023), or if less, 14.99% of the
issued share capital immediately following the passing of
the resolution. In accordance with the Listing Rules of the
FCA, the price paid for shares will be not less than £0.01
per share, and not more than the higher of: (i) 105% of the
average of the mid-market quotations of the shares for the
ve business days before the shares are purchased; and (ii)
the higher of the price of the last independent trade and
the highest current independent bid for the shares on the
trading venue where the purchase is carried out.
The Company may use this authority to address any
signicant imbalance between the supply and demand
for the Company’s shares and to manage the discount at
which the ordinary shares trade, and where the Directors
consider it to be in the best interests of shareholders and
the Company. Shares will be repurchased only at prices
below the prevailing NAV per ordinary share and will be
cancelled or placed into treasury at the determination
of the Directors. The authority, if given, will lapse at the
conclusion of the Company’s next AGM after the passing of
this resolution (which must be held no later than 30 June
2024).
Shareholders should note that the purchase of ordinary
shares by the Company is at the absolute discretion of the
Directors and is subject to the working capital requirements
of the Company and the amount of uncommitted
cash resources available to the Company to fund such
83
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
purchases. Accordingly, no expectation or reliance should
be placed on the Directors exercising such discretion on
any one or more occasions. However, the Directors believe
that the exibility for the Company to be able to make such
purchases may be benecial to shareholders in certain
circumstances and, accordingly, is seeking authority for the
Company to make market purchases of its own shares.
Notice period for general meetings
Under the Act, the notice period of general meetings (other
than an AGM) is 21 clear days’ notice unless the Company:
(i) has gained shareholder approval for the holding of
general meetings on 14 clear days’ notice by passing a
special resolution at the most recent AGM; and (ii) oers
the facility for all shareholders to vote by electronic means.
The Company would like to preserve its ability to call
general meetings (other than an AGM) on less than 21 clear
days’ notice.
The shorter notice period proposed by Resolution 16,
a special resolution, would not be used as a matter of
routine, but only where the exibility is merited by the
business of the meeting and is thought to be in the
interests of shareholders as a whole. The approval will be
eective until the date of the AGM to be held in 2024.
Board recommendation
The Directors consider each resolution being proposed
at the AGM to be in the best interests of the Company
and shareholders as a whole and they unanimously
recommend that all shareholders vote in favour of them,
as they intend to do in respect of their own shareholdings
(which represent approximately 0.09% of the Company’s
issued ordinary shares as at 27March 2023).
By order of the Board
Apex Fund and Corporate Services (UK) Limited
Company Secretary
27March 2023
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corporate governance statement
This Corporate Governance Statement forms part of the
Directors’ Report.
Introduction
In this Corporate Governance Statement, the Company
reports on its compliance with the AIC Code of Corporate
Governance (the “AIC Code”), sets out how the Board and
its Committees have operated during the past year and
describes how the Board exercises eective stewardship
over the Company’s activities in the interests of
shareholders. The Board is accountable to shareholders for
the governance of the Company’s aairs and is committed
to maintaining the highest standard of corporate
governance for the long-term success of the Company.
The Company reviews its standards of governance against
the principles and recommendations of the AIC Code, as
published in 2019. The Board considers that reporting
against the principles and recommendations of the AIC
Code provides better information to shareholders as
it addresses all the principles set out in the UK Code of
Corporate Governance (the “UK Code”), as well as setting
out additional principles and recommendations on issues
that are of specic relevance to investment companies,
and is endorsed by the FRC. The terms of the FRC’s
endorsement mean that AIC members who report against
the AIC Code fully meet their obligations under the UK
Code and the related disclosure requirements contained
in the Listing Rules of theFCA. A copy of the AIC Code
can be found at www.theaic.co.uk. A copy of the UK Code
canbeobtained at www.frc.org.uk.
Statement of compliance
Pursuant to the Listing Rules of the FCA, the Company is
required to provide shareholders witha statement on how
the main and supporting principles set out in the AIC Code
have been applied and whether the Company has complied
with the provisions of the AIC Code. The Board recognises
the importance of a strong corporate governance culture
and has established a framework for corporate governance
which it considers to be appropriate to the business of
theCompany as an investment trust.
The UK Code includes provisions relating to:
• the role of the chief executive;
• executive directors’ remuneration; and
• the need for an internal audit function.
The Company is an externally managed investment
company, with all its day-to-day management and
administrative functions outsourced to third parties. The
Board considers that the above provisions are not relevant
to the Company, being an externally managed investment
company. The Company has therefore not reported further
in respect of these provisions.
The Board has reviewed the principles and
recommendations of the AIC Code and considers that it has
complied throughout the year, except that the Chair of the
Board was also the Chair of the Remuneration Committee
during the year. Following the year end, Daniella Carneiro
was appointed to the Board as a non-executive Director.
She took on the role of the Chair of the Remuneration
Committee with eect from 21 February 2023. Therefore,
the Company is now also compliant with this provision of
the AIC Code.
As the Board consists of only non-executive Directors who
work collaboratively in their decision-making process,
it does not consider it necessary to appoint a senior
independent director.
Leadership
The Board of Directors
Under the leadership of the Chair, the Board is collectively
responsible for the eective stewardship of the Company’s
aairs and the long-term success of the Company,
generating value for shareholders and contributing to
the wider society. It establishes the purpose, values and
strategic aims of the Company and satises itself that these
and its culture are aligned. The Board ensures that the
necessary resources are in place for the Company to meet
its objectives and full its obligations to shareholders within
a framework of high standards of corporate governance
and eective internal controls. The Directors are required
to act with integrity, lead by example and promote this
culture within the Company.
At the date of this report, the Board consisted of ve
non-executive Directors. The Board believes that its
composition is appropriate for an investment company
of the Company’s nature and size. All of the Directors are
independent of the Investment Adviser and the AIFM,
and are able to allocate sucient time to the Company to
discharge their responsibilities eectively.
The Directors possess a wide range of business and
nancial expertise relevant to the direction of the Company
and consider that they commit sucient time to the
aairs of the Company. All Directors act in a non-executive
capacity. Brief biographical details of the Directors,
including details of their signicant commitments, can be
found on page 75.
The Directors have appointment letters which do not
provide for any specic term. Other than their letters of
appointment as Directors, none of the Directors has a
contract of service with the Company nor has there been
85
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
any other contract or arrangement between the Company
and any Director at any time during the year.
The Board has agreed a procedure for the induction
and training of new Board appointees and training
requirements are dealt with as required.
Information regarding the annual evaluation of the Board,
its Committees, the individual Directors and the Chair;
diversity policy; composition of the Board; tenure of the
Directors; and the Directors’ election/re-election is set out
in the Report from the Nomination Committee on pages 95
to 97.
The Chair
The Chair leads the Board and is responsible for its overall
eectiveness in directing the Company. He demonstrates
objective judgement, promotes a culture of openness
and debate, and facilitates eective contributions by
all Directors. In liaison with the Company Secretary, he
ensures that the Directors receive accurate, timely and
clear information.
The Chair was independent of the Investment Adviser at
the time of his appointment and is deemed by his fellow
Board members to continue to be independent in character
and judgement and to have no conicting relationships. He
considers himself to have sucient time to commit to the
Company’s aairs. The role and responsibilities of the Chair
of the Board are clearly dened and set out in writing, a
copy of which is available on the Company’s website.
Matters reserved for the Board
The Company’s investment policy and strategy are
determined by the Board. The Board is responsible for
investment decisions, other than to the extent delegated
to the AIFM and/or the Investment Adviser, and the
appointment, supervision and monitoring of the Company’s
service providers, including amongst others, the AIFM
and the Investment Adviser. The Board establishes the
Company’s borrowing policy, dividend policy, approves
public documents such as the annual and interim reports
and nancial statements, and corporate governance
matters. A formal schedule of matters reserved for decision
by the Board has been adopted. This is available on the
Company’s website.
Board committees
During the year, the Company had four Committees in
operation, namely, the Audit Committee, the Management
Engagement Committee, the Nomination Committee and
the Remuneration Committee. The terms of reference
of the Committees are available on the Company’s
website. Daniella Carneiro was appointed to all the Board
committees with eect from 21 February 2023.
Audit Committee
The Company has established an Audit Committee which
is chaired by Margaret Stephens and consists of Richard
Horlick, Louise Kingham and Daniella Carneiro. The Board
considers that the members of the Audit Committee
have the recent and relevant nancial experience and
the Committee as a whole has competence relevant to
the sector in which the Company operates. The Audit
Committee includes individuals with substantial experience
of the nancial matters of listed companies and the energy
infrastructure sector. This blend of skills and experience
enables the Committee to full its responsibilities
eectively.
The report of the Audit Committee is set out on page 88
to90.
Management Engagement Committee
The Company has established a Management Engagement
Committee which is chaired by Richard Horlick and consists
of Bernard Bulkin, Louise Kingham and Daniella Carneiro.
With eect from 14March 2023, Margaret Stephens
was appointed as a member of the Committee and, as
a result, the Management Engagement Committee now
comprises all Directors. The Committee meets at least
once a year to review the performance of the AIFM and the
Investment Adviser under the AIFM Agreement and the
Investment Advisory Agreement, respectively. In addition,
the Management Engagement Committee reviews the
performance, terms of appointment and fees payable to
the other key service providers of the Company, and makes
recommendations to the Board regarding the continuing
appointment of the Investment Adviser, the AIFM and the
other service providers.
The report of the Management Engagement Committee is
set out on page 98.
Nomination Committee
The Company has established a Nomination Committee
which is chaired by Bernard Bulkin and comprises
all Directors. The Committee reviews the Company’s
succession plan, and identies and nominates candidates
for the oce of director of the Company. It also reviews
the results of the annual evaluation process of the Board,
its Committees, the Directors and the Chair, and makes
recommendations to the Board in respect of the election/
re-election of the Directors.
The report of the Nomination Committee is included on
pages 95 to 97.
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corporate governance statement continued
Remuneration Committee
The Company has established a Remuneration Committee
which consists of all of Directors. During the year under
review, the Remuneration Committee was chaired by
Bernard Bulkin. With eect from 21 February 2023,
the Committee is chaired by Daniella Carneiro.The
Remuneration Committee’s principal duties are to consider
the levels of Directors’ fees and to make recommendations
in respect of the Directors’ remuneration policy and
implementation thereof.
The Directors’ Remuneration Report is included on pages
91 to 94.
Meetings held during the year
The Company has six scheduled Board meetings a year,
with additional meetings arranged as necessary.
At each Board meeting, the Directors follow a formal
agenda which is circulated in advance by the Company
Secretary. The Investment Adviser, the Administrator
and the Company Secretary regularly provide the Board
with nancial information, including an annual expenses
budget, together with brieng notes and papers in relation
to changes in the Company’s economic and nancial
environment, statutory and regulatory changes and
corporate governance best practice.
The number of scheduled Board and Committee meetings held during the year ended 31 December 2022 and the
attendance of the individual Directors is shown below:
Board
Audit
Committee
Management
Engagement Committee
Nomination
Committee
Remuneration
Committee
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Number
entitled to
attend
Number
attended
Bernard Bulkin
1
9 9 – – 1 1 2 2 1 1
Richard Horlick 9 9 3 3 1 1 2 2 1 1
Louise Kingham 9 9 3 3 1 1 2 2 1 1
Margaret Stephens
2
9 8 3 3 – – 2 2 1 1
In addition to the above, four ad hoc meetings of the
Board or its committees were held to deal with approval of
documentation and administrative matters in respect of the
quarterly interim dividends, annual and interim reports.
1
not a member of the Audit Committee
2
not a member of the Management Engagement Committee as at
31December 2022
Independent professional advice, insurance
and indemnity
The Board has formalised arrangements under which
the Directors, in the furtherance of their duties, may seek
independent professional advice at the expense of the
Company. The Company also maintains directors’ and
ocers’ liability insurance, which includes cover of defence
expenses. The Company’s Articles of Association provide
the Directors of the Company, subject to the provisions
of UK legislation, with an indemnity in respect of liabilities
which they may sustain or incur in connection with their
appointment. Apart from this, there are no qualifying third
party indemnity provisions in force.
Conicts of interest
It is the responsibility of each individual Director to avoid
an unauthorised conict arising. Directors must request
authorisation from the Board as soon as they become
aware of the possibility of an interest that conicts, or
might possibly conict, with the interests of the Company
(a“situational conict”). TheCompany’s Articles of
Association authorise the Board to approve such situations,
where deemed appropriate.
The Board is responsible for considering Directors’ requests
for authorisation of conicts and for deciding whether
or not the situational conict should be authorised.
The factors to be considered will include: whether the
situational conict could prevent the Director from properly
performing their duties; whether it has, or could have,
any impact on the Company; and whether it could be
regarded as likely to aect the judgementand/or actions
of the Director in question. When the Board is deciding
whether to authorise a situational conict, only Directors
who have no interest in the matter being considered
are able to take the relevant decision, and in taking the
decision, the Directors must act in a way they consider, in
good faith, will be most likely to promote the Company’s
success. The Board are able to impose limits or conditions
when giving authorisation if they think this is appropriate
in the circumstances. The Directors must also comply
with the statutory rules requiring the Directors to declare
any interest in an actual or proposed transaction or
arrangement with the Company.
The Company Secretary maintains the Register of Directors’
Conicts of Interests which is reviewed at each Board
87
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
meeting, to ensure that authorised conicts remain
appropriate. The Directors advise the Company Secretary
and Board as soon as they become aware of any conicts of
interest. Directors who have conicts of interest do not take
part in discussions which relate to any of their conicts.
Risk management and internal control
review
Overview
The Directors acknowledge that they have overall
responsibility for the Company’s risk management
and internal control systems and for reviewing their
eectiveness.
An ongoing process, in accordance with the FRC Guidance
on Risk Management, Internal Control and Related
Financial and Business Reporting, has been implemented
for identifying, evaluating and managing the principal and
emerging risks faced by the Company. This process has
been in place throughout the year ended 31December
2022 and up to the date the nancial statements were
approved and is regularly reviewed by the Board, through
the Audit Committee. Key procedures established with a
view to providing eective nancial control have also been
in place for the year under review and up to the date the
nancial statements were approved.
The risk management process and systems of internal
control are designed to manage rather than eliminate
the risk of failure to achieve the Company’s investment
objective. It should be recognised that such systems can
only provide reasonable, not absolute, assurance against
material misstatement or loss.
Financial and other aspects of internal control
The Company has contractually delegated the management
of the investment portfolio, the registration services,
administration services and other services to third party
service providers and reliance is therefore placed on the
internal controls of those service providers. The internal
nancial control systems aim to ensure the maintenance
of proper accounting records, the reliability of the nancial
information upon which business decisions are taken,
reports are published and the assets of the Company
are safeguarded. The key procedures include review of
management accounts, monitoring of performance at
quarterly Board meetings, segregation of the administrative
function from investment management, maintenance
of appropriate insurance and adherence to physical and
computer security procedures. The internal controls at the
service providers are reviewed by the Audit Committee.
The Board has undertaken a review of the eectiveness
of the Company’s risk management and internal control
systems as they have operated over the year and up to
the date of the approval of the Annual Report. There were
no matters arising from this review that required further
investigation and no signicant failings or weaknesses were
identied.
Internal control assessment process
Robust risk assessments and reviews of internal controls
are undertaken regularly in the context of the Company’s
overall investment objective. TheBoard, through the
Audit Committee, has categorised risk management
controls under the following key headings: risks relating
to the Company (including reliance on third party service
providers); portfolio investment strategy; risks relating to
making investments; risks relating to the Company’s shares;
risks relating to regulation; accounting, operational and
nancial reporting; governance; and climate-related risks. In
arriving at its judgement of what risks the Company faces,
the Board has considered the Company’s operations in the
light of the following factors:
• the nature and extent of risks which it regards as
acceptable for the Company to bear within its overall
business objective;
• the threat of such risks becoming reality;
• the Company’s ability to reduce the incidence and
impact of risk on its performance; and
• the cost to the Company and benets related
to thereview of risk and associated controls of
theCompany.
A risk matrix is in place against which the risks identied
and the controls to mitigate those risks can be monitored.
The risks are assessed on the basis of the likelihood of
them happening, the impact on the business if they were
to occur and the eectiveness of the controls in place to
mitigate them. This risk register is reviewed at least every
six months by the Audit Committee and at other times as
necessary.
The majority of the day-to-day management functions
of the Company are sub-contracted, and the Directors
therefore obtain regular assurances and information from
key third party suppliers regarding the internal systems
and controls operating in their organisations. In addition,
each of the third parties is requested to provide a copy of
its report on internal controls each year, where available,
which is reviewed by the Audit Committee.
Relations with shareholders
Details regarding the Company’s engagement with its
shareholders are set out within the Strategic Report on
page 40.
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report of the audit committee
I am pleased to present the report of the Audit Committee
(the “Committee”) for the year ended 31 December 2022.
Composition
The composition of the Committee is set out on page 85 in
the Corporate Governance Statement and details of how its
performance evaluation has been conducted are included
on page 96.
Meetings
The Committee met three times during the year under
review. The Directors’ attendance is set out on page 86 in
the Corporate Governance Statement.
Role of the Audit Committee
The primary responsibilities of the Committee are:
• monitoring the integrity of the nancial statements of
the Company, any formal announcements relating to
the Company’s nancial performance, and reviewing
signicant nancial reporting judgements contained
therein;
• advising the Board on whether the annual report
and nancial statements, taken as a whole, are fair,
balanced and understandable, and provide the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy;
• reviewing the Company’s internal nancial controls and
internal control and risk management systems, and
monitoring their ongoing eectiveness;
• considering reports from any independent valuer
appointed by the Company to value its investments;
• reviewing and monitoring the external auditor’s
independence and objectivity;
• reviewing the eectiveness of the external audit
process, taking into consideration relevant UK
professional and regulatory requirements;
• conducting the tender process and making
recommendations to the Board about the appointment,
re-appointment and removal of the external auditor,
and approving the remuneration and terms of
engagement of the external auditor; and
• developing and implementing policy on the
engagement of the external auditor to supply
non-audit services, ensuring there is prior approval of
non-audit services, considering the impact this may
have on independence, taking into account the relevant
regulations and ethical guidance in this regard, and
reporting to the Board on any improvement or action
required.
Activities of the Audit Committee
During the year under review, the Audit Committee:
• conducted a review of the internal controls and risk
management systems of the Company and its third
party service providers;
• conducted regular reviews of the Company’s risk
register;
• reviewed the interim and annual valuation reports of
the Company’s portfolio prepared by the Investment
Adviser. In doing so, the Audit Committee monitored
the eectiveness of the Company’s valuation policies
and methods;
• reviewed the disclosures made in the annual and
interim reports in relation to internal controls and
risk management, viability, going concern and related
parties;
• reviewed the Company’s annual and interim nancial
statements and recommended these to the Board. In
particular, the Committee advised the Board that taken
as a whole, the Annual Report is fair and balanced and
provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy;
• agreed the plan with the Auditor in respect of the
review of the Interim Report for the period ended
30June 2022 and the statutory audit of the Annual
Report for the year ended 31 December 2022, including
the principal areas of focus;
• reviewed and agreed the audit fees for the statutory
audit of the Company and for the interim review for
2022;
• received and discussed with the Auditor its report
on the results of the review of the interim nancial
statements and the year-end audit;
• discussed and considered the Auditor’s performance,
objectivity and independence and the eectiveness of
the external audit; and
• reviewed whether an internal audit function would
be of value and concluded that this would provide
minimal added comfort at considerable extra cost to
the Company. The existing system of monitoring and
reporting by third-party service providers remains
appropriate. The Committee keeps the need for an
internal audit function under periodic review.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Financial statements and signicant
accounting matters
The Audit Committee has taken into account the most
signicant risks and issues, both operational and nancial,
which are likely to impact the Company’s nancial
statements. It considered the following key issues in
relation to the Company’s nancial statements during the
year and post year end:
Valuation of investments
The Audit Committee monitored the integrity of the
nancial information published in the Interim and Annual
Reports and considered whether suitable and appropriate
estimates had been made in respect of areas which could
have a material impact on the nancial statements. It
actively engaged with the Investment Adviser and the
Administrator to assess these signicant estimates and the
systems and processes in place to form these estimates.
The Committee considered the valuation of investments
to be a risk which could materially impact the nancial
statements for the year ended 31 December 2022.
Assumptions applied to derive the valuation of investments
are selected and recommended by the Investment Adviser.
These include discounts rates, power prices, energy yield,
ination rates, asset life, operating expenses, taxation
rates and capital expenditure. Valuation methodology
and assumptions are discussed in detail within note 7 to
the nancial statements. The Committee considered the
subjectivity and appropriateness of the assumptions used
to determine the valuation of investments, held through
VH GSEO UK Holdings Limited, which could aect the NAV
of the Company. These were discussed with the Investment
Adviser and the Auditor. The Committee reviewed the
valuation reports from the Investment Adviser, including
the underlying assumptions, and concluded that the
valuation of the Company’s portfolio at the year end was
appropriate.
Going concern and viability statement
The Committee considered the Company’s nancial
requirements for the next 12 months and concluded
that it had sucient resources to meet its commitments.
Consequently, the nancial statements have been
prepared on a going concern basis. The Committee also
considered the longer-term viability statement within
the Annual Report, covering a ve-year period, and the
underlying factors and assumptions which contributed to
the Committee deciding that ve years was an appropriate
length of time to consider the Company’s long-term
viability. The Company’s Going Concern and Viability
Statements can be found on page 50.
Internal controls
The Audit Committee carefully considered the internal
control systems by monitoring the services and controls
of its third party service providers. It reviewed and, where
appropriate, updated the risk matrix in respect of the
signicant risks facing the Company and the controls in
place to mitigate those risks. The Company receives reports
on internal controls from key service providers during the
year, where available, and no signicant matters of concern
have been identied.
ESG Assurance Review
In respect of the Annual report and nancial statements for
the year ended 31 December 2022, the Audit Committee
received the ESG assurance report from BDO LLP, as a form
of non-audit services, which is elaborated below.
Audit fees and non-audit services
The Audit Committee reviewed the audit plan and fees
presented by the Auditor and considered its report on the
nancial statements. Total audit fees for the Company in
respect of the year under review amounted to £170,000
(period ended 31 December 2021: £110,000).
The Audit Committee has put a policy in place on the
supply of any non-audit services provided by the Auditor.
Such services are considered on a case-by-case basis and
may only be provided to the Company if approved by the
Audit Committee, the provision of such services is at a
reasonable and competitive cost, and does not constitute
a conict of interest or potential conict of interest which
would prevent the Auditor from remaining objective and
independent. BDO LLP was paid fees in respect of the
following non-audit services in the year:
Non-audit service provided
Year ended
31 December
2022
Period ended
31 December
2021
Audit of Initial Accounts N/A £60,000
Review of Interim Report £50,000 £5,000
ESG Assurance Review £47,500 N/A
Where non-audit services are provided by the Auditor, full
consideration of the nancial and other implications on
the independence of the Auditor arising from any such
engagement are considered before proceeding. During
the year, the Committee approved the provision of ESG
Assurance Review services to be provided by BDO LLP.
While this is a non-audit service, the Audit Committee
considered that given BDO LLP’s comprehensive knowledge
about the Company being its statutory Auditor, they were
best placed to provide this assurance to the Company in
respect of its reporting on ESG matters.
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report of the audit committee continued
The Audit Committee has considered the non-audit work
of the Auditor during the period and does not consider
that this compromises its independence. The Committee
periodically monitors the ratio of non-audit to audit services
to ensure that any fees for permissible non-audit services
do not exceed 70% of the average audit fees paid in the last
three years. Details of the Auditor’s remuneration are set
out in note 5 to the nancial statements.
Eectiveness of external audit
The Audit Committee reviews the eectiveness of the
external audit process on an annual basis. During the
year, the Committee met key members of the senior audit
team at BDO LLP as part of the annual reporting process. It
received a presentation of the audit plan from the Auditor
in respect of the year under review and a presentation of
the results of the audit following completion of the main
audit testing.
The Chair of the Committee liaises with the lead audit
partner, to discuss any issues arising from the audit as well
as its cost eectiveness. The Committee also met with the
lead audit partner and the key individuals of the senior
audit team prior to the nalisation of the audit of the
Annual Report and nancial statements for the year ended
31 December 2022, without the Investment Adviser being
present, to discuss how the external audit was carried out,
the ndings from such audit and whether any issues had
arisen from the Auditor’s interaction with the Company’s
various service providers.
Following its review, the Audit Committee concluded that
the Auditor has demonstrated a good understanding of
the structure and operations of the Company and had
identied and focused on the areas of signicant nancial
reporting risk. The external audit process was considered to
have been eective.
Independence and objectivity of the
Auditor
BDO LLP was selected as the Company’s external
independent Auditor at the time of the Company’s launch
in 2021 following a formal tender process and review of the
Auditor’s credentials. The continuing appointment of the
Auditor is reviewed annually by the Audit Committee, which
gives consideration to the Auditor’s fees and independence,
along with the matters raised during each audit.
The Audit Committee has considered the independence
and objectivity of the Auditor and has conducted a review
of non-audit services which the Auditor has provided during
the year under review. The Committee receives an annual
assurance from the Auditor that its independence is not
compromised by the provision of such non-audit services.
The Committee is satised that the Auditor’s objectivity and
independence is not impaired by the performance of these
non-audit services and that the Auditor has fullled its
obligations to the Company and its shareholders.
In accordance with the statutory requirements relating to
the appointment of auditors, the audit will be put out to
tender within 10 years of the initial appointment of BDO
LLP.
Re-appointment of the Auditor
Following consideration of the performance of the Auditor,
the services provided during the year and a review of
its independence and objectivity, the Committee has
recommended to the Board the re-appointment of BDO LLP
as Auditor to the Company. The Auditor has indicated their
willingness to continue in oce. Accordingly, resolutions
to re-appoint BDO LLP as Auditor to the Company and
authorising the Audit Committee to determine their
remuneration will be proposed at the Annual General
Meeting.
Fair, balanced and understandable
The Audit Committee has concluded that the Annual
Report for the year ended 31 December 2022, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy. It reached this conclusion through a process of
review of the Annual Report and enquiries to the various
parties involved in the production of the Annual Report.
The Audit Committee reported its conclusions to the Board.
Margaret Stephens
Chair of the Audit Committee
27 March 2023
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
directors’ remuneration report
ANNUAL REPORT ON DIRECTORS’
REMUNERATION
The law requires the Company’s Auditor to audit certain
disclosures provided in the Annual Report on Directors’
remuneration. Where disclosures are audited, they are
indicated as such. The Auditor’s opinion is given in their
report on pages 103 to 110.
Statement from the Chair of the
Remuneration Committee
I am pleased to present the Directors’ remuneration report
for the year ended 31 December 2022.
The Remuneration Committee (the “Committee”) assists
the Board in developing a fair and transparent framework
for setting the levels of Directors’ remuneration while
having regard to the Company’s nancial position and
performance, remuneration in other companies of
comparable scale and complexity and market statistics
generally. It also reviews the ongoing appropriateness
and relevance of the Directors’ remuneration policy. No
Director is involved in determining their own remuneration.
The Committee met once during the year. As noted in
the Corporate Governance Statement, the Remuneration
Committee was chaired by Bernard Bulkin during the year
under review. I took over as the Chair of the Committee
with eect from 21 February 2023. Further details of the
composition of the Committee are set out on page 86.
For the year ended 31 December 2022, the annual fees
were set at the rate of £70,000 for the Chair of the Board
and £50,000 for the other Directors. The Directors’ fees are
xed with no variable element.
The Remuneration Committee reviews Directors’ fees on
an annual basis. While no remuneration consultant was
appointed by the Company during the year under review,
the Committee met to review Directors’ remuneration levels
in the context of the scale of the Company’s operations,
the level of involvement and time commitment required of
the Directors and the wider investment trust sector, and to
make recommendations to the Board.
In line with the disclosures made in the 2021 Annual
Report of the Company, it was agreed that, with eect
from 1 January 2023, the Directors’ annual fees be adjusted
by UK RPI from 1 January 2021 to 31 December 2022,
rounded to the nearest £500. Accordingly, the annual fees
for the year ending 31 December 2023 are as follows:
£81,500 for the Chair of the Board and £58,500 for the
other Directors. The Board believes that this updated fee
structure appropriately reects the increase in the size of
the Company during the year, the enhanced workload of
the Directors and the additional time commitment required
from them, particularly in view of the ever-evolving
regulatory and corporate governance landscape.
The fees payable to the Directors will be reviewed annually,
as detailed in the Directors’ Remuneration Policy on
page93.
The Company is required to obtain formal approval from
shareholders of the Directors’ Remuneration Policy once
every three years and in any year if there are any changes
proposed to the policy. Shareholders are requested to
approve the Directors’ Remuneration Report on an annual
basis. The Directors’ Remuneration Policy is subject to a
binding vote, while the vote on the Directors’ Remuneration
Report is an advisory vote.
The Directors’ Remuneration Policy was approved by
shareholders at the AGM held on 27 April 2022. No
signicant changes are proposed to the way in which this
current, approved Directors’ Remuneration Policy will be
implemented during the course of the next nancial year.
An ordinary resolution will be put to shareholders at the
forthcoming AGM of the Company to be held on 25 April
2023 to receive and approve the Directors’ Remuneration
Report.
Performance of the Company
Due to the positioning of the Company in the market as a
listed investment trust that invests in sustainable energy
infrastructure to produce stable and inating dividends
for investors while aiming to preserve capital value, the
Directors consider that the Company has characteristics of
both an equity index and a bond index. The graph below
compares the total shareholder return of the Company
relative to a return on a hypothetical holding over the same
period in the FTSE All-Share Index and the Bloomberg
Barclays Sterling Corporate Bond Index, starting from
the IPO on 2 February 2021 to 31 December 2022. Total
shareholder return is the measure of returns provided by a
company to shareholders reecting share price movements
and assuming reinvestment of dividends.
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directors’ remuneration report continued
GSEO FTSE - All Share Bloomberg GBP Corporate TR Bonds
70
80
90
10
0
11
0
12
0
130
Feb
ruary 21 May 21 August 21 November 21 February 22 May 22 August 22 November 22
Directors’ remuneration (audited)
Fees Expenses Total
Directors
For the year
ended
31 December
2022
£
For the period
ended
31 December
2021
1
£
For the year
ended
31 December
2022
£
For the period
ended
31 December
2021
£
For the year
ended
31 December
2022
£
For the period
ended
31 December
2021
1
£
Percentage
change in fees
2
%
Bernard Bulkin 70,000 64,000 – – 70,000 64,000 9.38
Richard Horlick 50,000 46,000 518 – 50,518 46,000 8.70
Louise Kingham 50,000 46,000 – – 50,000 46,000 8.70
Margaret Stephens 50,000 46,000 – – 50,000 46,000 8.70
220,000 202,000 518 – 220,518 202,000 8.91
1
Fees accrued with eect from the Company’s IPO on 2 February 2021.
2
As the prior period fees accrued with eect from the Company’s IPO on 2 February 2021, on a year-on-year basis, there has been no
change to the Directors’ fees levels.
There are no other taxable benets payable by the Company other than certain expenses which may be deemed to be
taxable. None of the above fees was paid to third parties.
Expenses are reimbursements for costs incurred which are not taxable.
93
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Relative importance of spend on pay
The following table sets out:
• the remuneration paid to the Directors;
• the distributions to shareholders by way of dividends; and
• the investment advisory fees and other expenses incurred by the Company.
Year ended
31 December
2022
£’000
Period ended
31 December
2021
£’000
Change
%
Directors’ fees 220 202 8.91
Investment Adviser’s fee 3,810 2,218 71.78
Other expenses 647 1,136 (43.05)
Dividends paid and proposed 14,457 3,033 376.66
Directors’ shareholdings (audited)
There is no requirement under the Company’s Articles of Association, or the terms of their appointment, for Directors to
hold shares in the Company. The Directors had the following shareholdings in the Company as at 31 December all of which
are benecially owned.
Directors
31 December
2022
31 December
2021
Bernard Bulkin 38,181 20,000
Richard Horlick 300,000 200,000
Louise Kingham 20,000 10,000
Margaret Stephens 28,181 10,000
There have been no changes to these interests between 31 December 2022 and the date of this report. None of the
Directors or any persons connected with them had a material interest in the Company’s transactions, arrangements or
agreements during the year.
Voting at AGM
The Directors’ Remuneration Report for the period ended 31 December 2021 and the Directors’ Remuneration Policy were
approved by shareholders at the AGM held on 27 April 2022. The votes cast by proxy were as follows:
Directors’ Remuneration Report Directors’ Remuneration Policy
Number
of votes
% of
votes cast
Number
of votes
% of
votes cast
For 185,096,834 99.97 185,096,834 99.97
Against 55,022 0.03 55,022 0.03
Total votes cast 185,151,856 100.0 185,151,856 100.0
Number of votes withheld 14,277 14,277
DIRECTORS’ REMUNERATION POLICY
Introduction
The Directors’ Remuneration Policy is put to a shareholders’ vote every three years and in any year if there is to be a change
in the policy. A resolution to approve this Remuneration Policy was proposed at the Company’s AGM held on 27 April 2022.
The resolution was passed, and the Remuneration Policy provisions set out below will apply until they are next put to
shareholders for renewal of that approval.
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directors’ remuneration report continued
Policy
Fees
The Directors’ fees are determined within the limits set out in the Company’s Articles of Association and they are not eligible
for bonuses, pension benets, share benets, share options, long-term incentive schemes or other benets.
The Directors’ fees are paid at annual rates and do not have any variable or performance-related elements. The Board may
determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such
Director or Directors are requested by the Board to perform extra or special services on behalf of the Company.
The Directors shall be entitled to fees at such rates as determined by the Board subject to the maximum aggregate fee limit
of £500,000 set out in the Company’s Articles of Association.
The Directors shall also be entitled to be reimbursed for all expenses incurred in performance of their duties. These
expenses are unlikely to be of a signicant amount. Fees are payable from the date of appointment as a Director of the
Company and cease on date of termination of appointment.
The Board will not pay any incentive fees to any person to encourage them to become a Director of the Company. The
Board may, however, pay fees to external agencies to assist the Board in the search and selection of Directors.
Current and future policy
Component Director Purpose of reward Operation
Annual fee Chairman of Board Fees for services as chairman of a plc Determined by the Board
Annual fee Other Directors Fees for services as non-executive directors of a
plc
Determined by the Board
Expenses All Directors Reimbursement of expenses incurred in the
performance of duties
Submission of appropriate
supporting documentation
Statement of consideration of conditions elsewhere
in the Company
The Company has no employees. Therefore, the process
of consulting with employees on the setting of the
remuneration policy is not applicable.
Review
The Directors’ remuneration will be reviewed on an annual
basis by the Board and any changes are subject to approval
by the Board.
The remuneration payable to the Directors will take into
account a number of factors, inter alia, the experience
of the Directors, the complexity of the Company and
prevailing market rates.
Directors’ service contracts
The Directors do not have service contracts with the
Company. The Directors are not entitled to compensation
on loss of oce. The Directors have appointment letters
which do not provide for any specic term. However, in
accordance with the AIC Code, they are subject to annual
re-election.
Statement of consideration of shareholders’ views
The Company is committed to ongoing shareholder
dialogue and takes an active interest in voting outcomes. If
there are substantial votes against resolutions in relation to
Directors’ remuneration, the Company will seek the reasons
for any such vote and will detail any resulting actions in the
next Directors’ remuneration report.
Approval
The Directors’ Remuneration Report was approved by the
Remuneration Committee and signed on its behalf by:
Daniella Carneiro
Chair of the Remuneration Committee
27 March 2023
95
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
report of the nomination committee
I am pleased to present the report of the Nomination
Committee (the “Committee”) for the year ended
31December 2022.
Composition
The composition of the Committee is set out in the
Corporate Governance Statement on page 85. Details of
how its performance evaluation has been conducted are
included on page 96.
Meetings
There have been two meetings of the Committee during
the year. The Directors’ attendance at these meetings
is included in the Corporate Governance Statement on
page86.
Role of the Nomination Committee
The main responsibilities of the Committee include:
• reviewing the structure, size and composition of the
Board and its Committees;
• ensuring plans are in place for orderly succession to the
Board and ensuring that such plans promote diversity
of gender, social and ethnic backgrounds, cognitive and
personal strengths;
• leading the process for appointments to the Board
and considering the use of open advertising and/or an
external search consultancy for each appointment;
• considering job specications and whether the
candidates have the necessary skills and time available
to devote to the Company;
• arranging for any new Directors to be provided with
training and induction;
• making recommendations to the Board regarding the
Company’s policy on the tenure of the Chair of the
Company;
• reviewing the length of service of each Director and
assessing if this impacts their independence;
• making recommendations to the Board regarding the
Company’s policy on diversity and inclusion; and
• performing a formal and rigorous evaluation of the
Board, its committees, the Chair of the Board and
the individual Directors on at least an annual basis,
including, if appropriate, considering engagement of an
external evaluator to facilitate the evaluation.
Activities
During the year, the Nomination Committee:
• reviewed its terms of reference and considered
whether these remained appropriate;
• considered the results of the evaluation of the Board,
its Committees, the individual Directors and the Chair;
• as part of the evaluation process, considered the
Board’s composition with reference to the mix of skills,
diversity, knowledge and experience, and how these
aligned with the Company’s strategic objectives and the
opportunities and challenges faced by it;
• agreed the policy regarding the tenure of the Chair and
the other Board members;
• reviewed the signicant commitments of the Directors
and the time dedicated by them to the aairs of the
Company;
• made recommendations to the Board regarding the
Directors’ annual re-election by shareholders at the
AGM; and
• discussed the succession plans for the Board to
ensure its progressive refreshing, which led to the
appointment of Ms Carneiro as a Director following the
year end.
Appointment of new Director
The Nomination Committee regularly reviews the
composition and eectiveness of the Board and its
Committees with the objective of ensuring that these have
the appropriate balance of skills and experience required to
meet the current and future opportunities and challenges
facing the Company.
When considering the appointment of new Directors,
the Committee actively considers a range of factors
including the expertise and experience required in a
prospective candidate and the diversity, including gender
and ethnicity diversity, of the Board and is mindful of the
recommendations of the Hampton Alexander Review
and the Parker Review in this regard. These factors were
taken into consideration by the Committee as part of the
appointment process undertaken during the year which
culminated in the appointment of Ms Carneiro as a Director
of the Company on 18 January 2023.
In order to conduct a formal, rigorous and transparent
search process, the Company engaged Trust Associates, an
independent search consultancy with no connection to the
Company or its Directors, to assist with this appointment.
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report of the nomination committee continued
The Directors considered the desired background and
expertise of the new Director in order to complement
the skills already on the Board and a shortlist of diverse
candidates was then provided by Trust Associates. The
Directors met with a number of these candidates, following
which Ms Carneiro was appointed to the Board.
Induction of new Directors
The Company has an established process in place for the
induction of new Directors. An induction pack is provided
to new Directors by the Company Secretary, containing
relevant information about the Company, its constitutional
documents and its processes and procedures. New
appointees meet with relevant persons at the Investment
Adviser and the Company’s Broker. Directors’ training is
also provided to each new Director by the Company’s legal
adviser. Following the year end, this induction process was
implemented in respect of the appointment of Ms Carneiro
as a Director of the Company.
Performance evaluation
A formal performance evaluation process is undertaken
annually for the Board, its Committees, the individual
Directors and the Chair. The Directors are aware that
they continually need to monitor and improve Board
performance and recognise that this can be achieved
through regular Board evaluation, which provides a
valuable feedback mechanism for improving Board
eectiveness.
The Directors have undertaken an internal performance
evaluation by way of completing written questionnaires, led
by the Chair, specically designed to assess the strengths
and independence of the Board and the performance of
its Committees, the Chair and the individual Directors. The
questionnaires are also intended to analyse the focus of
Board meetings and assess whether they are appropriate,
or if any additional information may be required to facilitate
Board discussions. Any training needs identied as part of
the evaluation process are also considered by the Board.
The evaluation of the Chair was carried out by the other
Directors of the Company, led by Mr Horlick. The results of
the Board evaluation process were reviewed and discussed
by the Nomination Committee. The recommendations
made as part of the evaluation process were discussed
by the Directors to ensure that all points were addressed
appropriately and to enable continuous improvement of
the Board.
The Committee’s deliberations concluded that:
• as a whole, the Board functions eectively and the
current Committee structure remains appropriate;
• the Chair leads the Board eectively and promotes
a culture of openness and debate, and facilitates
constructive Board relations and eective contribution
of all Directors. In liaison with the Company Secretary,
he ensures that the Directors receive accurate, timely
and clear information;
• each Director provides constructive challenge, strategic
guidance, oers specialist advice and holds third party
service providers to account;
• all Directors are considered to be independent of the
Investment Adviser in both character and judgement.
None of the Directors sit on the boards of any other
companies managed by the Investment Adviser; and
• all of the current Directors make an eective
contribution to the Company’s operations which is
important to its long-term sustainable success. They
have the requisite skills and experience to continue to
provide able leadership and direction for the Company.
Election and re-election of Directors
In accordance with the AIC Code, the Committee annually
considers the re-election of the Directors with reference
to their performance over the course of the nancial year
and ability to commit adequate amount of time to the
Company’s aairs. Directors are subject to election by
shareholders at the rst annual general meeting after their
appointment and to annual re-election at the Company’s
annual general meetings thereafter.
Following formal performance evaluation as detailed
above, the Board strongly recommends the election of
Ms Carneiro and the re-election of all the other Directors
on the basis of their knowledge and understanding of the
Company’s business model, their experience and expertise
in investment matters, their independence and continuing
eectiveness and commitment to the Company. The
Directors’ biographical details are set out on page 75.
Diversity and inclusion
The Board’s diversity policy is based on its belief that the
Board should have a diverse range of experience, skills
and backgrounds. When making recommendations for
new appointments to the Board and planning for Board
succession, the Nomination Committee will take into
consideration the recommendations of the AIC Code and
other guidance on boardroom diversity and inclusion.
The Board welcomes the recommendations from the
FTSE Women Leader Review on gender diversity and the
Parker review about ethnic representation on company
boards. Whilst the Board does not consider it appropriate
to use specic diversity targets given its small size, it
97
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
acknowledges that diversity is important to ensure that the
Company can draw on a broad range of perspectives, skills,
experience, knowledge and backgrounds to eectively lead
the Company.
The FCA’s Listing Rules now require companies to report
on whether they have met the following targets on board
diversity:
• at least 40% of the individuals on the Board are women;
and
• at least one of the senior positions on the Board is held
by a woman.
As at 31 December 2022, the Company had met these
targets. Two out of four Directors (50%) were women
and one of them had a senior position, being the Audit
Committee Chair.
The following tables set out the gender and ethnic diversity
of the Board as at 31 December 2022:
Gender diversity
Number
of Board
members
Percentage of
the Board
Number of
senior positions
on the Board
1
Men 2 50 1
Women 2 50 1
Ethnic diversity
Number
of Board
members
Percentage of
the Board
Number of
senior positions
on the Board
1
White British
or other White
(including
minority-white
groups)
4
2
100
2
2
1 Senior positions include Chair of the Board and Chair of the Audit
Committee. As explained in the Corporate Governance Statement,
the Company does not have a Senior Independent Director.
2 Since 31 December 2022, the Company has appointed Ms
Carneiro as a Director on 18 January 2023. Her appointment has
enhanced the gender diversity on the Board to 60% and, being a
Latin American, the ethnic diversity to 20%. Being a dual Brazilian-
British national, she strengthens another aspect of diversity on the
Board.
As an externally managed investment company with solely
independent, non-executive Directors, the Company does
not have a Chief Executive or a Chief Financial Ocer and
has no employees. Accordingly, there are no disclosures
about executive management positions to be provided.
The role of the Audit Committee Chair is considered to
be a senior position and has been included in the above
tables. The information in the above tables was provided
by individual Directors in response to a request from the
Company.
Tenure and succession planning
The Company has no employees, and the Investment
Adviser is external to the Company, therefore the Board’s
oversight of succession planning is restricted to the
Board level. The Board will, from time to time and where
appropriate, discuss the succession plans of the Investment
Adviser through its Management Engagement Committee.
The Board’s succession plan is guided by its policy
on tenure. The Board has agreed on a limit of nine
years on the tenure of the Directors, in line with the
recommendations of the AIC Code. It believes that the
tenure should balance the need to provide and maintain
continuity, knowledge, experience and independence,
against the need to periodically refresh the Board
composition, in order to maintain an appropriate mix of
the required skills, experience, knowledge and length of
service.
As the Company was launched in 2021, the Nomination
Committee considers that it will be appropriate to initiate
formal succession planning in the Company’s third year
of existence. At that time, the Committee will ensure
that the succession plan is based on merit and objective
criteria and promotes diversity of gender, social and ethnic
backgrounds, cognitive and personal strengths, whilst
taking into account the challenges and opportunities facing
the Company and the Board and the balance of skills and
expertise that are required in the future.
Bernard Bulkin
Chair of the Nomination Committee
27 March 2023
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report of the management engagement committee
I am pleased to present the report of the Management
Engagement Committee (the “Committee”) for the year
ended 31 December 2022.
Composition
The composition of the Committee is set out in the
Corporate Governance Statement on page 85. Details of
how its performance evaluation has been conducted are
included on page 96.
Meetings
The Committee met once during the year under review
and once post year end. The Directors’ attendance at the
Committee meeting held during the year is set out in the
Corporate Governance Statement on page 86.
Role of the Management Engagement
Committee
The key responsibilities of the Committee are:
• monitoring and evaluating the AIFM and the Investment
Adviser’s investment performance and, if necessary,
providing appropriate guidance;
• reviewing, at least annually, the performance of the
AIFM and the Investment Adviser and considering their
continued appointment on the terms set out in their
respective agreements with the Company;
• reviewing the level and method of remuneration, the
basis of performance fees (if any) and the notice period
of the AIFM and the Investment Adviser to ensure that
these remain in the best interests of the shareholders;
• ensuring that processes have been put in place to
review the Company’s risk management and internal
control systems designed to safeguard shareholders’
investment and the Company’s assets; and
• monitoring and evaluating the performance of the
other key service providers of the Company to ensure
their continued competitiveness and eectiveness.
Activities during the year
The Committee has conducted a comprehensive review of
the performance of the AIFM, the Investment Adviser and
the Company’s other key service providers. This included an
assessment of the services provided as well as the fees paid
for the provision of such services.
Following its review, the Committee is satised that the
Investment Adviser and the AIFM have the suitable skills
and experience to manage the Company’s investments.
It concluded that the Investment Adviser had diligently
invested the available funds during the year, in line with
the investment policy, which should provide stable returns
to the Company’s shareholders. The Directors are satised
that the collective skillset of the Investment Adviser’s team
contains all the necessary skills and experience to best
serve the interests of GSEO shareholders in performing
its delegated responsibilities. Details of the Investment
Adviser’s activities during the year and the Company’s
overall performance are included in the Strategic Report.
The key elements of the investment advisory fees are set
out on page 80.
As a whole, the Committee is satised that the Investment
Adviser and the AIFM have the suitable skills and
experience to advise upon and manage, respectively, the
Company’s investments, and believes that their continuing
appointment is in the best interests of shareholders.
The performance of the Company’s other service providers
is also closely monitored by the Board, through the
Committee. The Committee’s review of the key service
providers comprised open and closed-ended questions
and included a review of the quality of their services and
fees to ensure they remained eective and competitive.
This process also included reviewing each service provider’s
policies and procedures to ensure that they had adequate
controls and procedures in place.
Following a comprehensive review, the Committee
concluded that the performance of all the Company’s key
service providers had been satisfactory and recommended
their continuing appointment on the current terms.
Richard Horlick
Chair of the Management Engagement Committee
27 March 2023
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
statement of directors’ responsibilities
The Directors are responsible for preparing the annual
report and the nancial statements in accordance with UK
adopted international accounting standards and applicable
law and regulations.
Company law requires the Directors to prepare nancial
statements for each nancial year. Under that law, they
are required to prepare the Company nancial statements
in accordance with UK adopted international accounting
standards. Under company law, the Directors must not
approve the nancial statements unless they are satised
that they give a true and fair view of the state of aairs of
the Group and Company and of the prot or loss for the
Company for that period.
In preparing these nancial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with UK adopted international accounting standards,
subject to any material departures disclosed and
explained in the nancial statements;
• prepare the nancial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and
• prepare a Directors’ report, a Strategic report and
Directors’ remuneration report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sucient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the nancial position of the Company
and enable them to ensure that the nancial statements
comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the annual
report and accounts, taken as a whole, are fair, balanced,
and understandable and provides the information
necessary for shareholders to assess the Group’s
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the annual
report and the nancial statements are made available
on a website. Financial statements are published on
the Company’s website in accordance with legislation
in the United Kingdom governing the preparation and
dissemination of nancial statements, which may vary from
legislation in other jurisdictions. The maintenance and
integrity of the Company’s website is the responsibility of
the Directors and has been delegated to the Investment
Adviser. The Directors’ responsibility also extends to the
ongoing integrity of the nancial statements contained
therein.
Directors’ responsibilities pursuant to DTR4
The Directors, to the best of their knowledge, conrm that:
• The nancial statements have been prepared in
accordance with the applicable set of accounting
standards, give a true and fair view of the assets,
liabilities, nancial position and prot of the Company;
and
• the annual report includes a fair review of the
development and performance of the business and
the nancial position of the Company, together with a
description of the principal risks and uncertainties that
it faces.
The Directors consider that the annual report and nancial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Company’s position and
performance, business model and strategy.
Approval
This Directors’ responsibilities statement was approved by
the Board of Directors and signed on its behalf by:
Bernard Bulkin
Chair
27 March 2023
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101
FINANCIAL STATEMENTS
Financial
tatements
5
$
%
s
Financial
tatements
5
$
%
s
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FINANCIAL STATEMENTS
Independent auditor’s report
103
Statement of comprehensive income
111
Statement of nancial position
112
Statement of changes in shareholders’ equity 113
Statement of cash ows 114
Notes to the nancial statements 115
Alternative performance measures 138
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
103
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VH GLOBAL
SUSTAINABLE ENERGY OPPORTUNITIES PLC
Opinion on the nancial statements
In our opinion the nancial statements:
• give a true and fair view of the state of the Company’s aairs as at 31 December 2022 and of its prot for the year then
ended;
• have been properly prepared in accordance with UK adopted international accounting standards;
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the nancial statements of VH Global Sustainable Energy Opportunities plc (the “Company”) for the year
ended 31 December 2022 which comprise the Statement of Comprehensive Income, the Statement of Financial Position,
the Statement of Changes in Shareholders’ Equity, the Statement of cash ows and notes to the nancial statements,
including a summary of signicant accounting policies. The nancial reporting framework that has been applied in their
preparation is applicable law and UK adopted international accounting standards.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the nancial
statements section of our report. We believe that the audit evidence we have obtained is sucient and appropriate to
provide a basis for our opinion. Our audit opinion is consistent with the additional report to the Audit Committee.
Independence
Following the recommendation of the Audit Committee, we were appointed by the Board on 4 November 2021 to audit
the nancial statements for the period ended 31 December 2021 and subsequent nancial periods. The period of total
uninterrupted engagement including retenders and reappointments is 2 years, covering the period ended 31 December
2021 and year ended 31 December 2022. We remain independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the nancial statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fullled our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard were not provided to the Company.
Conclusions relating to going concern
In auditing the nancial statements, we have concluded that the Directors’ use of the going concern basis of accounting in
the preparation of the nancial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s
ability to continue to adopt the going concern basis of accounting included:
• Assessing and challenging the inputs in the cashow forecast prepared by the Directors against existing contractual
commitments, including performing stress testing considering downside scenarios and assessing the impact on the
Company’s liquidity position;
• Assessing assumptions used within the valuation models to supporting documentation per the Key audit matter
noted below and considering how these impact on the ability of the portfolio companies to make distributions to the
Company and therefore on the Company’s ability to meet its commitments as they fall due;
• Reviewing the future commitments of the Company and checking they have been appropriately incorporated into the
forecast; and
• Reviewing the amount of headroom in the forecasts of both the base case and downside scenarios.
Based on the work we have performed, we have not identied any material uncertainties relating to events or conditions
that, individually or collectively, may cast signicant doubt on the Company’s ability to continue as a going concern for a
period of at least twelve months from when the nancial statements are authorised for issue.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VH GLOBAL
SUSTAINABLE ENERGY OPPORTUNITIES PLC CONTINUED
In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the Directors’ statement in the nancial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Overview
Key audit matters
Valuation of investments
2022 2021
Materiality
Company nancial statements as a whole
£6.860m (2021:£4.858m) based on 1.5%
(2021: 1.5%) of Net assets
Yes Yes
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system
of internal control, and assessing the risks of material misstatement in the nancial statements. We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
105
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most signicance in our audit of the
nancial statements of the current period and include the most signicant assessed risks of material misstatement
(whether or not due to fraud) that we identied, including those which had the greatest eect on: the overall audit strategy,
the allocation of resources in the audit, and directing the eorts of the engagement team. These matters were addressed in
the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of investments
See note 7 and accounting
policy on page 115.
100% of the underlying investment
portfolio is represented by unquoted
equity and loan investments.
The valuation of investments is
calculated using discounted dividend
models. This is a highly subjective
accounting estimate where there is an
inherent risk of bias arising from the
investment valuations being prepared
by the Investment Adviser (with the
assistance of externally appointed
experts), who is remunerated based
on the net asset value of the company.
These estimates include judgements
including discount rates, useful
economic lives of assets, tax and
ination.
Assets in construction were valued
using the cost approach.
Investments at fair value through
prot or loss is the most signicant
balance in the nancial statements
and is the key driver of performance
therefore we determined this to be a
key audit matter.
In respect of the investments valued using
discounted dividend models, we performed the
following specic procedures:
• Utilised spreadsheet analysis tools to assess the
integrity of the model.
• Assessed the reasonableness of forecasted
cashows against supporting documentation
such as revenue contracts.
• Challenged the appropriateness of the key
assumptions including discount factors, ination
and asset life applied by benchmarking to
available industry data and with the assistance
of our valuations experts where appropriate,
considering each assumption within a
reasonable range.
• Reviewed the corporation tax workings within
the valuation model and considered whether
these had been modelled accurately in the
context of current corporation tax legislation
and rates.
• Vouched cash to bank statements and other
net assets to investment entity management
accounts.
• Considered the accuracy of forecasting by
comparing forecasts to actual results.
• Vouched loans to loan agreements, veried the
terms of the loans and recalculated interest
income and compared to that recorded.
For each of the key assumptions in the valuation
models, we considered the appropriateness of the
assumption and whether alternative reasonable
assumptions could have been applied. We
considered each assumption in isolation as well
as in conjunction with other assumptions and the
valuation as a whole, in order to derive a reasonable
range of valuations and assess whether the
company’s valuation was within that range.
For those investments held at cost, we agreed the
cost of the investments to supporting documentation
and obtained progress reports from the developers
in order to assess whether the investments were
demonstrating indicators of impairment.
Key observations
Based on our procedures performed we found the
valuation of the investment portfolio and judgements
applied therein to be acceptable.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VH GLOBAL
SUSTAINABLE ENERGY OPPORTUNITIES PLC CONTINUED
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the eect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could inuence
the economic decisions of reasonable users that are taken on the basis of the nancial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identied
misstatements, and the particular circumstances of their occurrence, when evaluating their eect on the nancial
statements as a whole.
Based on our professional judgement, we determined materiality for the nancial statements as a whole and performance
materiality as follows:
Company nancial statements
2022 2021
Materiality £6.860m £4.858m
Basis for determining materiality 1.5% of Net assets
Rationale for the benchmark applied
Net Asset Value is a key indicator of performance and as such the
most relevant benchmark on which to base materiality for the
users of the nancial statements.
Performance materiality £4.802m £3.400m
Basis for determining performance materiality 70% of Materiality
Rationale for the percentage applied for performance
materiality
The level of performance materiality applied was set after having
considered a number of factors including our assessment of
the Company’s overall control environment and the expected
total value of known and likely misstatements and the level of
transactions in the year.
Specic materiality
We also determined that for those items impacting realised return, a misstatement of less than materiality for the
nancial statements as a whole, specic materiality, could inuence the economic decisions of users as it is a measure of
the Company’s performance. As a result, we determined materiality for these items to be £1.206k (2021: a lower testing
threshold of £335k was applied), based on 5% of revenue return before tax (2021: 10% of gross expenditure). We further
applied a performance materiality level of 70% (2021:70%) of specic materiality to ensure that the risk of errors exceeding
specic materiality was appropriately mitigated.
We used a specic materiality in the current year rather than a lower testing threshold given the presence of a dividend
target and therefore an enhanced incentive to overstate revenue returns.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit dierences in excess of £137k
(2021:£95k) and for those items impacting realised return £24k (2021: n/a). We also agreed to report dierences below
these thresholds that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the annual report and accounts other than the nancial statements and our auditor’s report thereon. Our opinion on
the nancial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
107
and, in doing so, consider whether the other information is materially inconsistent with the nancial statements or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the nancial statements themselves. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specied for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the nancial statements or our knowledge obtained during the audit.
Going concern and longer-term
viability
• The Directors' statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identied; and
• The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate.
Other Code provisions
• Directors' statement on fair, balanced and understandable;
• Board’s conrmation that it has carried out a robust assessment of the emerging
and principal risks;
• The section of the annual report that describes the review of eectiveness of risk
management and internal control systems; and
• The section describing the work of the Audit Committee.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VH GLOBAL
SUSTAINABLE ENERGY OPPORTUNITIES PLC CONTINUED
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the
nancial year for which the nancial statements are prepared is consistent with the
nancial statements; and
• the strategic report and the Directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identied material misstatements in
the strategic report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been
properly prepared in accordance with the Companies Act 2006.
Matters on which we are
required to report by exception
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit
have not been received from branches not visited by us; or
• the nancial statements and the part of the Directors’ remuneration report to be
audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specied by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities, the Directors are responsible for the preparation
of the nancial statements and for being satised that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of nancial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the nancial statements, the Directors are responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the nancial statements
Our objectives are to obtain reasonable assurance about whether the nancial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to inuence the economic
decisions of users taken on the basis of these nancial statements.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
109
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud is detailed below:
We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it
operates, and considered the risk of acts by the company which were contrary to applicable laws and regulations, including
fraud. We considered the signicant laws and regulations to be compliance with Companies Act 2006, the FCA listing and
DTR rules, the principles of the UK Corporate Governance Code, requirements of s.1158 of the Corporation Tax Act, and
applicable accounting standards.
Our procedures in response to the above included:
• Agreement of the nancial statement disclosures to underlying supporting documentation;
• Enquiries of management, the board and relevant Service Organisations regarding known or suspected instances
of non-compliance with laws and regulation and fraud. We corroborated our enquiries through our review of board
meeting minutes for the year and other evidence gathered during the course of the audit; and
• Obtaining an understanding of the control environment in monitoring compliance with laws and regulations
We assessed the susceptibility of the nancial statements to material misstatement, including fraud and considered the
fraud risk areas to be the valuation of investments, revenue recognition and management override of controls.
Our procedures in response to the above included:
• The procedures set out in the Key Audit Matters section above;
• Obtaining independent evidence to support the ownership of investments;
• Recalculating the investment management fees in total;
• Recalculating interest income in total and agreeing receipts to bank;
• Agreeing all dividend receipts to bank and to board resolutions of underlying companies; and
• Testing a risk based sample of journal entries to supporting documentation and evaluating whether there was evidence
of bias by the Directors that represented a risk of material misstatement due to fraud.
We also communicated relevant identied laws and regulations and potential fraud risks to all engagement team members
and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the nancial statements, recognising
that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and
regulations is from the events and transactions reected in the nancial statements, the less likely we are to become aware
of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF VH GLOBAL
SUSTAINABLE ENERGY OPPORTUNITIES PLC CONTINUED
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Peter Smith
(Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
27 March 2023
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
111
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2022
For the year ended
31 December 2022
For the period from incorporation
on 30 October 2020 to 31 December 2021
Note
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Income
Gains on investments
7 – 4,131 4,131 – 22,046 22,046
Investment income 4 28,823 – 28,823 1,674 – 1,674
Total income and gains 28,823 4,131 32,954 1,674 22,046 23,720
Investment advisory fees 16 (3,810) – (3,810) (2,218) – (2,218)
Other expenses 5 (940) – (940) (1,136) – (1,136)
Prot/(loss)fortheyear/
periodbeforetaxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Taxation 6 – – – – – –
Prot/(loss)fortheyear/
periodaftertaxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Protandtotal
comprehensive income
attributable to:
Equityholdersofthe
Company 24,073 4,131 28,204 (1,680) 22,046 20,366
Earnings/(loss) per share –
basic and diluted (pence) 18 6.55 1.12 7.67 (0.87) 11.39 10.52
The total column of the Statement of Comprehensive Income is the prot and loss account of the Company. The
supplementary revenue return and capital columns have been prepared in accordance with the Association of Investment
Companies Statement of Recommended Practice (AIC SORP) .
All revenue and capital items in the above statement derive from continuing operations.
The above Statement of Comprehensive Income includes all recognised gains and losses.
The notes on pages 115 to 137 form part of these nancial statements.
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STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
Note
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Non-current assets
Investments at fair value through prot or loss 7 315,133 159,618
Total non-current assets 315,133 159,618
Current assets
Cash and cash equivalents 10 141,791 163,810
Other receivables 9 740 811
Total current assets 142,531 164,621
Total assets
457,664 324,239
Current liabilities
Accounts payable and accrued expenses 11 (491) (341)
Total current liabilities (491) (341)
Total liabilities
(491) (341)
Net assets
19 457,173 323,898
Capital and reserves
Share capital 13 4,225 3,116
Share premium 13 186,368 67,949
Special distributable reserve 14,15 232,467 232,467
Capital reserve 26,177 22,046
Revenue reserve 7,936 (1,680)
TotalcapitalandreservesattributabletoequityholdersoftheCompany 457,173 323,898
Net asset value per ordinary share 19 108.21 103.95
The nancial statements were approved and authorised for issue by the Board of Directors on 27 March 2023 and signed
on its behalf by:
Bernard Bulkin
Chair
Company Registration Number 12986255
The notes on pages 115 to 137 form part of these nancial statements.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
113
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31December 2022
For the year ended 31 December
2022 Note
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Opening balance 3,116 67,949 232,467 22,046 (1,680) 323,898
Issue of share capital 13,14 1,109 120,891 – – – 122,000
Cost of issue of shares 14 – (2,472) – – – (2,472)
Transfer to special
distributable reserve – – – – – –
Total comprehensive
incomefortheyear – – – 4,131 24,073 28,204
Interim dividends paid
during the year – – – – (14,457) (14,457)
Balance at 31 December
2022 4,225 186,368 232,467 26,177 7,936 457,173
From the period from incorporation
on 30 October 2020 to
31 December 2021 Note
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Opening balance
Issue of share capital 13,14 3,116 309,508 – – – 312,624
Cost of issue of shares 14 – (6,059) – – – (6,059)
Transfer to special
distributable reserve – (235,500) 235,500 – – –
Total comprehensive
income/(loss)fortheperiod – – – 22,046 (1,680) 20,366
Interim dividends paid
during the period – – (3,033) – – (3,033)
Balance at 31 December
2021 3,116 67,949 232,467 22,046 (1,680) 323,898
A total of 422,498,890 ordinary shares were issued since its incorporation to 31 December 2022.
The capital reserve represents the unrealised gains or losses on the revaluation of investments. The unrealised element
of the capital reserve is not distributable. The special distributable reserve was created on court cancellation of the
share premium account. Distributable reserves comprise, revenue, special distributable and capital reserves, which are
distributable by way of dividend.The total distributable reserves as at 31 December 2022 was £240,402,990 (31 December
2021: £230,787,289).
The notes on pages 115 to 137 form part of these nancial statements.
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STATEMENT OF CASH FLOWS
For the year ended 31 December 2022
Note
For the year
ended
31 December
2022
£’000
For the period
from
incorporation
on 30 October
2020
to 31 December
2021
£’000
Cashowsfromoperatingactivities
Prot before tax 28,204 20,366
Adjustmentsfor:
Movement in fair value of investments 7 (4,148) (23,595)
Interest on cash deposits 4 (2,310) –
Operatingresultbeforeworkingcapitalchanges 21,746 (3,229)
Decrease/(increase) in other receivables 9 71 (811)
Increase in accounts payable and accrued expenses 11 151 341
Netcashow generated by/(used in) operating activities 21,968 (3,699)
Cashowsfrominvestingactivities
Purchase of investments 7 (151,367) (136,023)
Interest on cash deposits 4 2,310 –
Net cash used in investing activities
(149,057) (136,023)
Cashowsfromnancingactivities
Proceeds from issue of shares 122,000 312,624
Payment of share issue costs (2,472) (6,059)
Dividends paid in the year 15 (14,457) (3,033)
Netcashgeneratedfromnancingactivities 105,071 303,532
Net (decrease) /increase in cash and cash equivalents (22,019) 163,810
Cash and cash equivalents at beginning of the year/period 163,810 –
Cashandcashequivalentsatendoftheyear/period 10 141,791 163,810
The notes on pages 115 to 137 form part of these nancial statements.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
115
Notes to the fiNaNcial statemeNts
1. General information
VH Global Sustainable Energy Opportunities plc (the “Company”) is a closed-ended investment company, incorporated in
England and Wales on 30 October 2020 as a public limited company under the Companies Act 2006 with registered number
12986255. The Company commenced operations on 2 February 2021 when its shares commenced trading on the London
Stock Exchange.
The Company and the AIFM have appointed Victory Hill Capital Partners LLP as the Investment Adviser pursuant to the
Investment Advisory Agreement dated 5 January 2021.
The Company has registered, and intends to carry on business, as an investment trust with an investment objective to
generate stable returns, principally in the form of income distributions, by investing in a diversied portfolio of global
sustainable energy infrastructure assets, predominantly in countries that are members of the EU, OECD, OECD Key Partner
and OECD Accession Countries.
The nancial statements comprise only the results of the Company, as its investment in VH GSEO UK Holdings Limited
(“GSEO Holdings”) is measured at fair value through prot or loss in line with IFRS 10 as explained in note 2.
2. Signicantaccountingpolicies
2.1 Basisofpreparation
The nancial statements have been prepared in accordance with UK-adopted international accounting standards and with
the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union as adopted at that date was brought into UK law and
became UK-adopted International Accounting Standards. The Company transitioned to UK adopted international
accounting standards in its nancial statements on 1 January 2021. There was no impact or changes on recognition,
measurement or disclosure in the period reported resulting from the transition.
The nancial statements are prepared on the historical cost basis, except for revaluation of certain nancial investments
at fair value through prot or loss. The principal accounting policies adopted are set out below and consistently applied,
subject to changes in accordance with any amendments in IFRS.
The nancial statements have also been prepared, as far as is consistent with adopted IFRS and relevant and applicable
to the Company in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust
Companies and Venture Capital Trusts (SORP) issued in April 2021 by the Association of Investment Companies (AIC).
The nancial statements incorporate the nancial statements of the Company only. The primary objective of the Company
is to generate returns in Sterling. The Company’s performance is measured in Sterling terms and its ordinary shares are
issued in Sterling. Therefore, the Company has adopted Sterling as the presentation and functional currency for its nancial
statements. These nancial statements are presented in pounds sterling and are rounded to the nearest thousand, unless
otherwise stated.
The preparation of nancial statements in compliance with adopted IFRS requires the use of certain critical accounting
estimates it also requires the Company’s management to exercise judgment in applying the Company’s accounting policies.
The areas where signicant judgments and estimates have been made in preparing the nancial statements and their eect
are disclosed in note 3.
2.2 Investmententityandbasisofnon-consolidationofsubsidiaries
The sole objective of the Company, through its subsidiary GSEO Holdings, is to make investments, via individual corporate
entities. The Company typically will subscribe for equity in or issue loans to GSEO Holdings in order for it to nance its
investments.
The Directors have concluded that the Company has all the elements of control as prescribed by IFRS 10 “Consolidated
Financial Statements” in relation to all its subsidiaries and that the Company satises the three essential criteria to be
regarded as an investment entity as dened in IFRS 10.
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Notes to the fiNaNcial statemeNts coNtiNued
There are three key conditions to be met by the Company for it to meet the denition of an investment entity. The three
essential criteria are that the entity must:
1. Obtain funds from one or more investors for the purpose of providing these investors with professional investment
management services;
2. Commit to its investors that its business purpose is to invest its funds solely for returns from capital appreciation,
investment income or both; and
3. Measure and evaluate the performance of substantially all of its investments on a fair value basis.
In satisfying the second criteria, the notion of an investment time frame is critical. An investment entity should not hold its
investments indenitely but should have an exit strategy for their realisation.
In this regard, GSEO Holdings is itself an investment entity. Consequently, the Company need not have an exit strategy for
its investment in GSEO Holdings.
As for investments in subsidiaries, the Company intends to hold each investment until the end of its life, at which point
the assets are expected to have no residual value. The Directors consider that this demonstrates a clear exit strategy from
these investments. The Company may choose to sell its interest in an investment before the end of its project life if an
attractive oer is received from a potential purchaser and the Directors consider that this demonstrates a clear exit strategy
from these investments.
Subsidiaries are therefore measured at fair value through prot or loss, in accordance with IFRS 13 “Fair Value
Measurement”, IFRS 10 “Consolidated Financial Statements” and IFRS 9 “Financial Instruments”.
Further detail on the signicant judgements in the basis of non-consolidation of the subsidiaries of the Company is
disclosed in note 3.
2.3 Goingconcern
The Directors have reviewed the nancial position of the Company and its future cash ow requirements, taking into
consideration current and potential funding sources, investment into existing and near-term projects and the Company’s
working capital requirements.
The Company faces a number of risks and uncertainties, as set out in the Strategic Report on pages 42 to 49. The nancial
risk management objectives and policies of the Company, including exposure to price risk, interest rate risk, credit risk and
liquidity risk are discussed in note 12 to the nancial statements.
The Company continues to meet day-to-day liquidity needs through its cash resources. As at 31 December 2022, the
Company had net current assets of £142m (2021: £164.3m) and cash balances of £141.8m (2021: £163.8m), which are
sucient to meet current obligations as they fall due. There is no external debt at the Company as at year end.
The major cash outows of the Company are the payment of dividends and costs relating to the acquisition of new assets,
both of which are discretionary, the Company’s ongoing operating costs and the fulllment of remaining commitments
made as laid out in note 17.
The Directors have reviewed Company forecasts and pipeline projections which cover a period of at least 12 months from
the date of approval of this report, considering foreseeable changes in investment and the wider pipeline, which show
that the Company has sucient nancial resources to continue in operation for at least the next 12 months from the date
of approval of this report. Furthermore, the Directors have considered a worst case scenario in which the Company is
assumed to meet all of its remaining investment commitments within the next 12 months, in addition to dividend payments
and ongoing operating expenses. Even in this unlikely scenario, the Company has sucient headroom to meet all expected
cash outows with its existing cash balances.
The Directors have considered factors relating to the wider global macroeconomic environment in 2022, in particular
changes in ination and interest rates. As the Company’s income is primarily ination-linked, a rise in ination would have
a positive impact on cashows from operating assets and an uplift in valuation of the investment portfolio. An increase
in interest rates may result in an increase in risk-free rates, therefore negatively impacting valuation of investments.
Furthermore, the Company has no physical assets in Ukraine, Russia or Eastern Europe and therefore, regional geopolitical
factors have an immaterial impact on the Company.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
117
Based on its assessment above, the Directors have a reasonable expectation that the Company has sucient resources to
continue in operational existence for at least 12 months from the date of the approval of these nancial statements. The
Directors are not aware of any material uncertainties that may cast signicant doubt upon the Company’s ability to continue
as a going concern. Accordingly, they continue to adopt the going concern basis in preparing the nancial statements.
2.4 FinancialInstruments
Financial assets and nancial liabilities are recognised in the Company’s statement of nancial position when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets
The classication of nancial assets at initial recognition depends on the purpose for which the nancial asset was acquired
and its characteristics.
All nancial assets are initially recognised at fair value plus transaction cost except for those designated as fair value
through prot or loss, which are recognised at fair value only. All purchases of nancial assets are recorded at the date on
which the Company became party to the contractual requirements of the nancial asset.
The Company’s nancial assets principally comprise of investments held at fair value through prot or loss and at amortised
cost.
Investments held at fair value through prot or loss
The Company accounts for its investment in its wholly owned direct subsidiary GSEO Holdings at fair value through prot
and loss in accordance with IFRS 9. At initial recognition, investments in sustainable energy infrastructure projects in GSEO
Holdings are measured at fair value through prot or loss. Subsequently, gains or losses resulting from the movement in
fair value are recognised in the Statement of Comprehensive Income at each valuation point. As both the Company and
GSEO Holdings are investment entities under IFRS, the Company includes its investment in GSEO Holdings at fair value
through prot or loss.
As shareholder loan investments form part of a managed portfolio of assets whose performance is evaluated on a fair value
basis, loan investments are designated at fair value in line with equity investments. The Company measures its investment
as a single class of nancial asset at fair value in accordance with IFRS 13 Fair Value Measurement.
Gains or losses resulting from the movement in fair value are recognised in the statement of comprehensive income at
each valuation point and are allocated to the capital column of the statement of comprehensive income.
Refer to note 7 for details regarding the valuation methodology of investments.
Financial assets are recognised/derecognised at the date of the purchase/disposal. Investments are initially recognised at
cost, being the fair value of consideration given.
Transaction costs are recognised as incurred and allocated to the capital column of the statement of comprehensive
income.
Fair value is dened as the amount for which an asset could be exchanged between knowledgeable willing parties in
an arm’s length transaction. The Board will consider any observable market transactions and will measure fair value
using assumptions that market participants would use when pricing the asset, including any assumptions regarding risk
surrounding the transaction.
A nancial asset (in whole or in part) is derecognised either:
• when the Company has transferred substantially all the risks and rewards of ownership; or
• when it has neither transferred or retained substantially all the risks and rewards and when it no longer has control
over the assets or a portion of the asset; or
• when the contractual right to receive cashow has expired.
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Notes to the fiNaNcial statemeNts coNtiNued
Financial assets at amortised cost
Loans and other receivables that are non-derivative nancial assets and that have xed or determinable payments that
are not quoted in an active market are classied as nancial assets at amortised cost. Financial assets are measured
at amortised cost using the eective interest rate method, less any impairment. Impairment provisions for loans and
receivables are recognised based on a forward-looking expected credit loss model. All nancial assets assessed under this
model are immaterial to the nancial statements.
The Company’s nancial assets held at amortised cost comprise of cash and cash equivalents and other receivables in the
Statement of Financial Position.
Financial liabilities
Financial liabilities are classied according to the substance of the contractual agreements entered into and are recorded
on the date on which the Company becomes party to the contractual requirements of the nancial liability.
The Company’s other nancial liabilities measured at amortised cost include accounts payable and accrued expenses which
are initially recognised at fair value and subsequently measured at amortised cost using the eective interest rate method.
A nancial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it
expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.
2.5 Cashandcashequivalents
Cash and cash equivalents comprise cash balances, deposits held on call with banks and other short-term highly liquid
deposits with original maturities of 3 months or less, that are readily convertible to a known amount of cash and are subject
to an insignicant risk of changes in value.
2.6 Foreigncurrencies
Transactions entered into by the Company in a currency other than its functional currency are recorded at the rates ruling
when the transactions occur.
Foreign currency monetary assets and liabilities are translated to the functional currency at the exchange rate ruling at the
balance sheet date. Foreign exchange dierences arising on translation to the functional currency are recognised in the
Statement of Comprehensive Income, within other expenses or other income. Foreign exchange dierences relating to
investments held at fair value through prot or loss are shown within the line Gains/(losses) on investments.
2.7 Dividends
Dividends payable to the Company’s shareholders are recognised as distributions in the nancial statements when the
Company’s obligation to make payment has been established.
2.8 Incomerecognition
Investment income comprises interest income on shareholder loan investments and dividend income from GSEO Holdings,
which are recognised when the Company’s entitlement to receive payment is established. Interest income from cash
deposits is recognised in the statement of comprehensive income using the eective interest method. Investment income
and interest income are allocated to the revenue column of the Company’s statement of comprehensive income unless
such income is of a capital nature.
Gains and losses on fair value of investments in the income statement represent gains or losses that arise from the
movement in the fair value of the Company’s investment in GSEO Holdings. Movements in relation to the fair value of
investments are allocated to the capital column of the Company’s statement of comprehensive income at each valuation
point.
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119
2.9 Expenses
Expenses are accounted for on an accruals basis. These include AIFM, investment advisory fees and other expenses are
allocated to the revenue column of the Statement of Comprehensive Income. 100% of the investment advisory fees are
charged as an expense item within the Statement of Comprehensive Income. Fees relating to the AIFM and Investment
Adviser are detailed in note 16.
Share issue expenses of the Company directly attributable to the issue and listing of shares are charged to the share
premium account.
2.10Sharecapitalandsharepremium
Financial instruments issued by the Company are treated as equity if the holder has only a residual interest in the assets of
the Company after the deduction of all liabilities. The Company’s ordinary shares are classied as equity instruments.
Costs associated or directly attributable to the issue of new equity shares are recognised as a deduction in equity and are
charged from the share premium account. Incremental costs include those incurred in connection with the placing and
admission which include fees payable under a placing agreement, legal costs, and any other applicable expenses.
The costs incurred in relation to the Company’s IPO and for the additional raise in July 2022 were charged to the share
premium account.
2.11 Taxation
Under the current system of taxation in the UK, the Company is liable to taxation on its operations in the UK.
Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or
substantively enacted at the date of the statement of nancial position.
Deferred tax is the tax expected to be payable or recoverable on temporary dierences between the carrying amounts of
assets and liabilities in the nancial statements and the corresponding tax bases used in the computation of taxable prot.
Deferred tax liabilities are generally recognised for all taxable temporary dierences and deferred tax assets are recognised
to the extent that it is probable that taxable prots will be available against which deductible temporary dierences can be
utilised.
Deferred tax assets and liabilities are not recognised if the temporary dierences arise from goodwill or from the initial
recognition of other assets and liabilities in a transaction that aects neither the tax prot or the accounting prot. Deferred
tax liabilities are recognised for taxable temporary dierences arising on investments, except where the Company is able
to control the timing of the reversal of the dierence and it is probable that the temporary dierence will not reverse in the
foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or credited to the statement of comprehensive income except when
it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are oset when there is a legally enforceable right to set o tax assets against tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its
current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are not discounted.
2.12Segmentalreporting
The Board of Directors, being the Chief Operating Decision Maker (the “CODM”), is of the opinion that the Company is
engaged in a single segment of business, being investment in Global Sustainable Energy Opportunities.
The Company has no single major customer. The internal nancial information to be used by the CODM on a quarterly
basis to allocate resources, assess performance and manage the Company will present the business as a single segment
comprising the portfolio of investments in energy eciency assets.
The nancial information used by the Board to manage the Company presents the business as a single segment.
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Notes to the fiNaNcial statemeNts coNtiNued
2.13Changestoaccountingstandardsandinterpretations
At the date of authorisation of the nancial statements, the following amendments had become newly eective for
accounting periods beginning on or after 1 January 2022:
• A number of narrow-scope amendments to IFRS 3 “Business Combinations”, IAS 16 “Property, plant and equipment”, IAS
37 “Provisions, contingent liabilities and contingent assets” and annual improvements on IFRS 1 “First-time Adoption of
IFRS”, IFRS 9 “Financial instruments”, IAS 41 “Agriculture” and illustrative examples accompanying IFRS 16 “Leases”.
The Company has reviewed and concluded that these amendments do not have an impact on the year-end nancial
statements of the Company.
The table below shows a number of standards and interpretations which had been published but not yet eective.
Description Eective Date
IFRS 17 Insurance Contracts Periods beginning on or after 1 January 2023
Amendments to the following standards:
• IAS 1 Presentation of Financial Statements and IFRS Practice Statement
2 (Disclosure of Accounting Policies)
• IAS 8 Accounting policies, Changes in Accounting Estimates and Errors
(Denition of Accounting Estimates)
• IAS 12 Income Taxes (Deferred Tax related to Assets and Liabilities
arising from a Single Transaction)
Periods beginning on or after 1 January 2023
Amendments to the following standards:
• IFRS 16 Leases (Liability in a Sale and Leaseback)
• IAS 1 Presentation of Financial Statements (Classication of Liabilities as
Current or Non-Current)
• IAS 1 Presentation of Financial Statements (Non-current Liabilities with
Covenants)
Periods beginning on or after 1 January 2024
Similarly, the Company has assessed the impact of the future amendments and has determined that the application of
these amendments and interpretations in current and future periods will not have a signicant impact on its nancial
statements.
3. Criticalaccountingestimates,judgements,andassumptions
The preparation of nancial statements requires the Directors of the Company to make judgements, estimates and
assumptions that aect the reported amounts recognised in the nancial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset
or liability in the future.
The estimates and underlying assumptions underpinning our investments are reviewed on an ongoing basis by both the
Directors and the Investment Adviser. Revisions to accounting estimates are recognised in the period in which the estimates
are revised and in any future periods aected.
Signicant estimates, judgements and assumptions for the year are set out as follows:
Key judgement: Investment entity and basis of non-consolidation
As detailed in note 2.2, the Directors have concluded that the Company and its wholly owned direct subsidiary, GSEO
Holdings, meet the denition of an investment entity by satisfying the three key conditions as set out in IFRS 10. This
assessment involves an element of judgement as to whether the company continues to meet the criteria outlined in the
accounting standards.
Being investment entities, the Company and GSEO Holdings are measured at fair value as opposed to being consolidated
on a line-by-line basis, meaning their balance sheet is included in the fair value of investments rather than in the Company’s
balance sheet.
The Directors believe the treatment outlined above provides the most relevant information to investors.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
121
Key estimation and uncertainty: Fair value estimation for investments at fair value
Fair value for each investment held through GSEO Holdings is calculated by the Investment Adviser as investments are not
traded in active markets. Fair value for operational sustainable energy infrastructure investments will typically be derived
from a discounted cash ow (DCF) methodology and the results will be benchmarked against appropriate multiples and key
performance indicators, where available for the relevant sector/industry. For sustainable energy infrastructure investments
that are not yet operational at the time of valuation, the price of recent investment may be used as an appropriate estimate
of fair value initially, but it is likely that a DCF will provide a better estimate of fair value as the asset moves closer to
operation.
In a DCF analysis the fair value is derived from the present value of the investment’s expected future cash ows to the
Company’s intermediate holdings i.e. GSEO Holdings, from investments in both equity (dividends) and shareholder
loans (interest and repayments). The DCF models use observable data, to the extent practicable, and apply reasonable
assumptions and forecasts for revenues, operating costs, macro-level factors, project specic factors and an appropriate
discount rate. Changes in assumptions about these factors could aect the reported fair value of investments, which is
detailed in note 7, considering the sensitivity of key modelling assumptions on the Company’s net asset value.
The AIFM and the Investment Adviser exercise their judgement in assessing the discount rate for each investment. This
is based on knowledge of the market, taking into account market intelligence gained from publicly available information,
bidding activities, discussions with nancial advisers, consultants, accountants and lawyers. The discount rates are reviewed
quarterly and updated, where appropriate, to reect changes in the market and in the project risk characteristics.
The risk of climate change has been considered in the valuation of investments, where applicable. Future power prices are
estimated using forecast data from third-party specialist consultancy reports, which reect various factors including gas
prices, carbon prices and renewables deployment.
Short to medium term ination assumptions used in the valuations are based on third party forecasts. In the longer term,
an assumption is made that ination will increase at a long-term rate.
The estimates and assumptions that are used in the calculation of the fair value of investments is disclosed in note 7.
Key judgement: Equity and debt investment in GSEO Holdings
The Company classies its investments based on its business model for managing those nancial assets and the contractual
cash ow characteristics of the nancial assets. The portfolio of investments is managed, and performance is evaluated on
a fair value basis.
The contractual cash ows of the Company’s shareholder loans (debt investments) are solely principal and interest,
however, these are not held for the purpose of collecting contractual cash ows. The collection of contractual cash ows is
only incidental to achieving the Company’s business model’s objective.
Consequently, in applying their judgement, the Directors have satised themselves that the equity and debt investments
into its direct wholly owned subsidiary, GSEO Holdings, share the same investment characteristics and, as such, constitute a
single asset class for IFRS 7 disclosure purposes.
4. Investmentincome
For the year ended
31 December 2022
For the period from incorporation on
30 October 2020 to 31 December 2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Interest on cash deposits 2,310 – 2,310 132 – 132
Interest income from investments 4,906 – 4,906 1,542 – 1,542
Dividend income 21,607 – 21,607 – – –
Investment income 28,823 – 28,823 1,674 – 1,674
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5. Operatingexpenses
For the year
ended
31 December
2022
£’000
For the
period from
incorporation
on
30 October
2020
to 31 December
2021
£’000
Fees to the Company’s Auditor
Statutory audit of the year-end nancial statements 170 110
Assurance related services for the year/period ended 50 60
Other non-audit services 48 5
Tax Advisory fees 10 84
AIFM fees 74 66
Directors’ fee 220 202
Other expenses 368 609
Total other expenses 940 1,136
Fees with respect to the Investment Adviser and the AIFM are set out in note 16.
The Company had no employees during the period. Full detail on Directors’ fees is provided in the Directors’ Remuneration
Report. There were no other emoluments during the year.
6. Taxation
a. Analysisofchargeintheyear/period
For the year ended 31 December 2022
For the period from incorporation on
30 October 2020 to 31 December 2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Corporation tax – – – – – –
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
123
b. Factorsaectingtotaltaxchargefortheyear/period
The eective UK corporation tax rate applicable to the Company for the period is 19%. The tax charge diers from the
charge resulting from applying the standard rate of UK corporation tax for an investment trust company.
The dierences are explained below:
For the year ended 31 December 2022
For the period from incorporation on
30 October 2020 to 31 December 2021
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Prot/(loss) for the year/period before
taxation 24,073 4,131 28,204 (1,680) 22,046 20,366
Corporation tax at 19% 4,574 785 5,359 (319) 4,189 3,870
Eect of:
Capital (gains) / losses not taxable – (785) (785) – (4,189) (4,189)
Expenditure not deductible (96) – (96) 13 – 13
Non-taxable UK dividends (4,105) – (4,105) – – –
Management expenses not utilised/
recognised (180) – (180) 306 – 306
Interest distributions (193) – (193) – – –
Totaltaxchargefortheyear/period – – – – – –
Investment companies which have been approved by HM Revenue & Customs under section 1158 of the Corporation Tax
Act 2010 are exempt from tax on capital gains. The Directors are of the opinion that the Company has complied with the
requirements for maintaining investment trust status for the purposes of section 1158 of the Corporation Tax Act 2010.
Additionally, the Company may utilise the interest streaming election which allows the Company to designate dividends
wholly or partly as interest distributions for UK tax purposes. Interest distributions are treated as tax deductions against
taxable income of the Company so that investors do not suer double taxation on their returns.
The nancial statements do not directly include the tax charges for the Company’s intermediate holding company, as GSEO
Holdings is held at fair value. GSEO Holdings is subject to taxation in the United Kingdom.
c. Deferredtaxation
The Company has no unutilised excess management expenses therefore no deferred tax asset has been recognised.
The Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments.
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7. Investmentsatfairvaluethroughprotorloss
As set out in note 2.2, the Company designates its interest in its wholly owned direct subsidiary GSEO Holdings as an
investment at fair value through prot or loss at each balance sheet date in accordance with IFRS 13, which recognises a
variety of fair value inputs depending upon the nature of the investment. Specically:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is signicant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest level input that is signicant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the nancial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting
period.
The Company classies all assets measured at fair value as below:
Fairvaluehierarchy
As at 31 December 2022
Total
£’000
Quoted prices
in active
markets
(level 1)
£’000
Signicant
Observable
inputs
(level 2)
£’000
Signicant
unobservable
inputs
(level 3)
£’000
Assetsmeasuredatfairvalue:
Non-current assets
Investments held at fair value through prot or loss 315,133 – – 315,133
As at 31 December 2021
Total
£’000
Quoted prices
in active
markets
(level 1)
£’000
Signicant
observable
inputs
(level 2)
£’000
Signicant
unobservable
inputs
(level 3)
£’000
Assetsmeasuredatfairvalue:
Non-current assets
Investments held at fair value through prot or loss 159,618 – – 159,618
All of the Company’s investments have been classied as Level 3 and there have been no transfers between levels during
the year ended 31 December 2022.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
125
The movement on the level 3 unquoted investment during the year is shown below:
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Opening balance at beginning of the year/period 159,618 –
Additions during the period at cost 151,367 136,023
310,985 136,023
Fair value movement on investments:
Change in fair value of equity investments
1
4,144 22,046
Interest on loan investments
2
4 1,549
Total fair value movement on investments 4,148 23,595
Closing balance 315,133 159,618
1 The £4,131k in the Statement of Comprehensive Income within other expenses/income and Statement of Changes in Equity is made up
of unrealised gains of £4,144k per this note and a realised foreign exchange loss of £13k during the year.
2 This is the amount related to the unpaid shareholder loan interest income as at the year/period end.
Further information on the basis of valuation is detailed in note 3 to the nancial statements.
Valuationmethodology
As set out in note 2.2, the Company meets the denition of an investment entity as described by IFRS 10, as such the
Company’s investment in the GSEO Holdings is valued at fair value.
The Company acquired underlying investments in special purpose entities (SPEs) through its equity and debt investment in
GSEO Holdings, as detailed in note 8. The Investment Adviser has carried out fair market valuations of the SPE investments,
where applicable, as at 31 December 2022, reviewed by the AIFM.
In line with IFRS 13, level of fair value hierarchy within the nancial assets or nancial liabilities ranges from level 1 to level 3
and is determined on the basis of the lowest level input that is signicant to the fair value measurement.
The Company records the net asset value of GSEO Holdings by calculating and aggregating the fair value of each of the
individual investments in which the Company holds an indirect investment. Due to their nature, such investments are
expected to be classied as level 3 as they are not traded and contain unobservable inputs. The Directors have satised
themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation.
The fair value of investments that are operational as at year end are measured at fair value through prot or loss using the
DCF methodology in line with the IFRS 13 framework for fair value measurement. As at 31 December 2022, the US terminal
storage assets, one of the ve Australian solar PV with battery storage assets and nine of the eighteen Brazilian solar PV
assets are being measured at fair value, using DCF valuation. Separately, investment in the Brazilian hydro facility uses
its acquisition price, adjusted for distributions and cash generated by the asset post acquisition, as the most appropriate
measurement of its fair value at year end, due to the recency of the acquisition on 7 December 2022, and that the asset has
not materially changed since acquisition.
Fair value of investments that are in construction as at year end is measured on a cost basis, as the most appropriate proxy
of their fair value. At year end, the remaining Australian solar PV with battery storage assets, remaining Brazilian solar PV
assets, and the UK exible power with CCR assets are in construction. Therefore, until commencement of operations, the
cost basis is considered to be the most appropriate measure of valuation. There are no indications at 31 December 2022
that the cost basis should be impaired.
In line with IFRS 13, the fair value of one of the ve solar PV assets in Australia is calculated as the acquisition price of the
asset and the cash ows associated with the installation and operation of the BESS. This is the best estimate of valuation as
the highest and best use of the asset would be when the BESS has been fully integrated with the solar plants.
The total movement in the value of the investments in GSEO Holdings is recorded through prot and loss in the Statement
of Comprehensive Income Statement of the Company.
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Notes to the fiNaNcial statemeNts coNtiNued
Valuationassumptions
The following economic assumptions were used in the valuation of operating assets.
Discount rates The discount rate used in the valuations is derived according to internationally
recognised methods.
Typical components of the discount rate are risk free rates, country-specic and
asset-specic risk premia. The latter comprise the risks inherent to the respective
asset class as well as specic premia for other risks such as construction.
Powerprice Power prices are based on power price forecasts from leading market consultants
adjusted for expected deployment of energy transition assets.
Energy yield Estimated based on energy yield assessments from leading technical consultants as
well as operational performance data (where applicable).
Inationrates Long-term ination is based on International Monetary Fund (IMF) forecasts for the
respective jurisdiction.
Assetlife Refer to the table below for details. In individual cases a longer operating life may be
assumed where the contractual set-up supports such assumption.
Operating expenses The operating expenses are primarily based on the respective contracts and budgets.
Taxation rates The underlying country-specic tax rates are derived from leading tax consulting
rms.
Capital expenditure Based on the contractual arrangements (e.g. EPC agreement), where applicable.
Keyassumptions
31 December
2022
Discount rate Weighted Average US terminal storage assets 8.43%
Weighted Average Australian solar PV with battery storage assets 8.55%
Weighted Average Brazilian solar PV assets 13.09%
Weighted Average Brazilian hydro facility 10.48%
Long-term ination
1
United States US terminal storage assets 2.0%
Australia Australian solar PV with battery storage assets 2.5%
Brazil Brazilian solar PV assets & Brazilian hydro facility 3.0%
Remaining asset life Years US terminal storage assets 30 years
Years Australian solar PV with battery storage assets 25 years
Years Brazilian solar PV assets 25 years
Years Brazilian hydro facility 25 years
Exchange rates GBP:USD US terminal storage assets 1:1.210
GBP:BRL Brazilian solar PV assets & Brazilian hydro facility 1:6.386
GBP:AUD Australian solar PV with battery storage assets 1:1.775
1
Source: IMF. Ination rates have been taken from IMF published on 14 Oct 2022 (data is published biannually), which provides yearly forecasted
ination up to 2027. Long-term ination rate refers to the 2027 projected rate. Short-term ination volatility of up to 2027 has been accounted for
in the valuation of operating assets.
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127
Valuationsensitivity
The key sensitivities in the DCF valuation are considered to be the discount rate used in the DCF valuation and long-term
assumptions in relation to ination, operating expenses and asset life.
The discount rate applied in the valuation of the operating assets are as per the table above, which is considered to be an
appropriate base case for sensitivity analysis. A variance of +/-1% is considered to be a reasonable range of alternative
assumptions for discount rate.
The base case long term ination rate assumption depends on the geographical location for assets in operation. These
are disclosed in the table above. A variance of +/-1% is considered to be a reasonable range of alternative assumptions for
ination.
For assets in construction, the Company has only sensitised the impact of foreign exchange uctuations. A variance of
+/-10% is considered to be a reasonable range of alternative assumptions for foreign exchange.
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Notes to the fiNaNcial statemeNts coNtiNued
The analysis below shows the sensitivity of the investments value (and impact on NAV) to changes in key assumptions.
All sensitivity calculations have been performed on the basis that each of the other assumptions remains constant and
unchanged.
Change in input
Changes in fair value
of investments
(£'000)
Change in NAV
per share (pence)
Discount Rate– US terminal storage assets
-1.00% 11,669 2.76
1.00% (9,995) (2.37)
Discount Rate– Australian solar PV with battery storage assets
-1.00% 365 0.09
1.00% (325) (0.08)
Discount Rate– Brazilian solar PV assets
-1.00% 1,332 0.32
1.00% (1,183) (0.28)
Discount Rate– Brazilian hydro facility
-1.00% 9,300 2.20
1.00% (8,088) (1.91)
DiscountRate–All
-1.00% 22,665 5.36
1.00% (19,591) (4.64)
Change in input
Changes in fair value
of investments
(£'000)
Change in NAV
per share (pence)
Ination– US terminal storage assets
-1.00% (9,666) (2.29)
1.00% 11,188 2.65
Ination– Australian solar PV with battery storage assets
-1.00% (442) (0.10)
1.00% 63 0.01
Ination– Brazilian solar PV assets
-1.00% (1,071) (0.25)
1.00% 1,098 0.26
Ination– Brazilian hydro facility
-1.00% (7,447) (1.76)
1.00% 5,891 1.39
Long–termInation–All (seetablebelow)
-1.00% (18,627) (4.41)
1.00% 18,241 4.32
Change in input
Changes in fair value
of investments
(£'000)
Change in NAV
per share (pence)
Asset life– US terminal storage assets
-1 year (1,504) (0.36)
+1 year 1,358 0.32
Asset life– Australian solar PV with battery storage assets
-1 year (76) (0.0 2 )
+1 year 310 0.07
Asset life– Brazilian solar PV assets
-1 year (137) (0.03)
+1 year 137 0.03
Asset life– Brazilian hydro facility
-1 year (1,512) (0.36)
+1 year 1,440 0.34
Assetlife–All
-1 year (3,230) (0.76)
+1 year 3,245 0.77
Change in input
Changes in fair value
of investments
(£'000)
Change in NAV
per share (pence)
Operating expenses– US terminal storage assets
-5.00% 3,555 0.84
5.00% (3,555) (0.84)
Operating expenses– Australian solar PV with battery storage assets
-5.00% 15 0.00
5.00% (15) (0.00)
Operating expenses– Brazilian solar PV assets
-5.00% 429 0.10
5.00% (428) (0.10)
Operating expenses– Brazilian hydro facility
-5.00% 2,565 0.61
5.00% (2,743) (0.65)
Operatingexpenses– All
-5.00% 6,565 1.55
5.00% (6,742) (1.60)
Change in input
Changes in fair value
of investments
(£'000)
Change in NAV
per share (pence)
FX (GBP:USD)
-10.00% 11,790 2.79
10.00% (9,646) (2.28)
FX (GBP:BRL)
-10.00% 15,905 3.76
10.00% (13,014) (3.08)
FX (GBP:AUD)
-10.00% 3,585 0.85
10.00% (2,933) (0.69)
FX – All
-10.00% 31,280 7.40
10.00% (25,593) (6.06)
The sensitivities above are assumed to be independent of each other. Combined sensitivities are not presented.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
129
8. Unconsolidatedsubsidiaries
The following table shows subsidiaries of the Company. As the Company is regarded as an investment entity, these
subsidiaries have not been consolidated in the preparation of the nancial statements.
Investments Place of Business
Ownership interests as at
31 December 2022
VH GSEO UK Holdings Limited United Kingdom 100%
Victory Hill Distributed Energy Investments Limited United Kingdom 100%
Victory Hill Flexible Power Limited United Kingdom 100%
Rhodesia Power Limited United Kingdom 100%
Victory Hill USA Holdings LLC United States 100%
Victory Hill Midstream Investments LLC United States 100%
Victory Hill Midstream Energy LLC
United States 100%
Motus T1 LLC United States 100%
Motus T2 LLC United States 100%
Victory Hill Australia Investments Pty Ltd Australia 100%
Victory Hill Distributed Power Pty Ltd Australia 100%
Mobilong Solar Farm Pty Ltd Australia 100%
Dunblane Solar Pty Ltd Australia 100%
Dubbo Solar Project Pty Ltd Australia 100%
Narrandera Solar Project Pty Ltd Australia 100%
Coleambally East Solar Farm Pty Ltd Australia 100%
Greentech Solar Project No 1 Unit Trust Australia 100%
Dubbo Solar Project Unit Trust Australia 100%
Narrandera Solar Project Unit Trust Australia 100%
VH Participacoes Hidreletricas do Brasil LTDA Brazil 98.25%
VH Hydro Brasil Holding S.A. Brazil 100%
Energest S.A. Brazil 100%
Victory Hill Holdings Brasil S.A. Brazil 99.99%
Energea Itaguai I Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Itaguai II Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Itaguai III Aluguel De Equipamentos E Manutencao LTDA* Brazil 100%
Energea Nova Friburgo LTDA* Brazil 100%
Gera Solar SE LTDA* Brazil 100%
Gera Solar RN LTDA* Brazil 100%
Gera Solar RN LTDA* Brazil 100%
Gera Solar PB Energia LTDA* Brazil 100%
Gera Solar MS LTDA* Brazil 100%
Energea Palmas Geracao S.A* Brazil 100%
Energea Geracao de Projetos Minas Gerais LTDA* Brazil 100%
Energea Geracao de Projetos RJ LTDA* Brazil 100%
Energea Geracao de Projetos RJ II LTDA* Brazil 100%
Energea Vassouras VH Geracao LTDA* Brazil 100%
CGS Sao Paulo Locacoes LTDA* Brazil 100%
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130
Notes to the fiNaNcial statemeNts coNtiNued
At 31 December 2022, the Company has one direct subsidiary and owns 100% of GSEO Holdings. The Company owns
investments in the other entities per the table above through its ownership of GSEO Holdings. GSEO Holdings owns 100% of
Victory Hill USA Holdings LLC, Victory Hill Australia Investments Pty Ltd, Victory Hill Distributed Energy Investments Limited
and Victory Hill Flexible Power Limited and 98.25% of VH Participacoes Hidreletricas do Brasil Ltda.
The Company’s investments in Victory Hill Midstream Investments LLC, Victory Hill Midstream Energy LLC, Motus T1 LLC and
Motus T2 LLC are held through Victory Hill USA Holdings LLC. These relate to the US terminal storage assets.
The Company’s investments in Brazilian solar PV assets are held through Victory Hill Distributed Energy Investments
Limited, which holds 99.99% of Victory Hill Holdings Brasil S.A. The holdings of Victory Hill Holdings Brasil S.A. are indicated
by an asterisk in the list of unconsolidated subsidiaries above.
The Company’s investments in VH Hydro Brasil Holding S.A. and Energest S.A. are held through VH Participacoes
Hidreletricas do Brasil LTDA. These relate to the Brazilian hydro facility.
The Company’s investments in Victory Hill Distributed Power Pty Ltd, Mobilong Solar Farm Pty Ltd, Dubbo Solar Project
Pty Ltd, Narrandera Solar Project Pty Ltd, Coleambally East Solar Farm Pty Ltd, Dunblane Solar Pty Ltd, Greentech Solar
Project No 1 Unit Trust, Dubbo Solar Project Unit Trust and Narrandera Solar Project Unit Trust are held through Victory Hill
Australia Investments Pty Ltd. These relate to the Australian solar PV with battery storage assets.
The Company’s investments in Rhodesia Power Limited is held through Victory Hill Flexible Power Limited. These relate to
the UK exible power with CCR assets.
9. Otherreceivables
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Other receivables 96 65
Interest receivable on cash and cash equivalents 270 9
Receivable from aliates 355 737
Prepayments 19 –
Total other receivables 740 811
The Directors have analysed the expected credit loss in respect of receivables and concluded there was no material
exposure for the year/period ended 31 December 2022 and 31 December 2021.
10.Cashandcashequivalents
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Cash at bank 48,075 92,094
Cash on deposit 93,716 71,716
Total cash at bank 141,791 163,810
Cash on deposit consists of funds held in a 32 day notice deposit account with Barclays Bank plc.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
131
11.Accountspayableandaccruedexpenses
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Accrued expenses 491 197
Accounts payable – 144
Accounts payable and accrued expenses 491 341
The Directors consider that the carrying amount of other payables and accrued expenses matches their fair value.
12.Financialriskmanagement
The Company’s activities expose it to a variety of nancial risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk.
The AIFM and the Investment Adviser have risk management procedures and processes in place which enable them to
monitor the risks of the Company. The objective in managing risk is the creation and protection of shareholder income and
value. Risk is inherent in the Company’s activities, but it is managed through a process of ongoing identication, impact
assessment, and monitoring and subject to risk limits and other controls.
The principal nancial risks facing the Company in the management of its portfolio are as follows:
Currencyrisk
The Company make investments which are based in countries whose local currency may not be Sterling and the Company
and its investments may make and/or receive payments that are denominated in currencies other than Sterling. Therefore,
when foreign currencies are translated into Sterling there could be a material adverse eect on the Company’s protability
and its net asset value.
The Company’s investments are held for the long-term and the Company may enter into hedging arrangements for
periods less than 12 months to hedge against short-term currency movements. Currency risk is taken into consideration
at time of investment and included in the Investment Adviser’s assessment of minimum hurdle rate from investments.
Hedging policies of the Company will be reviewed on a regular basis to ensure that the risks associated with the Company’s
investments are being appropriately managed.
The Company invests in a portfolio of assets through GSEO Holdings, which pays dividends in sterling to the Company.
Shareholder loan investments and interest are held and paid in local currencies at the Company, including US$63,665,000
and A$35,400,000, representing a total of 15.9% of the Company’s NAV at year end.
Note 7 details sensitivity analysis on the impact of changes to the inputs on the fair value of the Company’s investments.
Interestraterisk
The Company’s interest rate risk on its nancial assets is limited to interest earned on cash or cash equivalents and any
shareholder loan investments, which yield interest at xed rates. The Board considers that, shareholder loan investments
bear interest at a xed rate, they do not carry any interest rate risk.
The Company may use borrowings for multiple purposes, including for investment purposes. At the year end the Company
held no borrowings. Interest rate risk will be taken into consideration when taking out any such borrowings.
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132
Notes to the fiNaNcial statemeNts coNtiNued
The Company’s interest and non-interest bearing assets and liabilities as at 31 December 2022 and 31 December 2021 are
summarised as below:
For the year ended
31 December 2022
For the period ended
31 December 2021
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Cash and cash equivalents 141,791 – 141,791 163,810 – 163,810
Prepayments and other receivables – 470 470 – 802 802
Interest receivable 270 – 270 9 – 9
Investments at fair value through prot or
loss 89,047 226,086 315,133 56,717 102,901 159,618
Total assets 231,108 226,556 457,664 220,536 103,703 324,239
Liabilities
Accounts payable and accrued expenses – (491) (491) – (341) (341)
Total liabilities – (491) (491) – (341) (341)
Pricerisk
The operation and cash ows of certain investments will depend, in substantial part, upon prevailing market prices for
electricity and fuel, and particularly natural gas. The Company intends to mitigate these risks by entering into (i) hedging
arrangements; (ii) extendable short, medium and long-term contracts; and (iii) xed price or availability based asset-level
commercial contracts, and ensuring that market risk is combined with non-market risk exposures.
Price risk is limited to the fair value of investments. Note 7 details sensitivity analysis on the impact of changes to the inputs
on the fair value of the Company’s investments and prots.
Creditrisk
Credit risk is the risk that a counterparty will cause nancial loss to the Company by failing to meet a commitment it has
entered into with the Company. The Company’s credit risk exposure is minimised with its policy to enter into banking
arrangements with reputable nancial institutions with a credit rating of at least ‘A/Positive’ from Standard and Poor’s and
making loan investments which are equity in nature. The Investment Adviser monitors the credit ratings of banks used by
the Company on a regular basis.
The table below shows the Company’s maximum exposure to credit risk:
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Cash and cash equivalents 141,791 163,840
Investments at fair value through prot or loss 89,047 56,717
Other receivables (note 9) 740 811
231,578 221,368
The Company had no derivatives during the period.
Liquidityrisk
The Company manages its liquidity and funding risks by considering cash ow forecasts and ensuring sucient cash
balances are held within the Company to meet future needs. Prudent liquidity risk management implies maintaining
sucient cash and marketable securities, the availability of nancing through appropriate and adequate credit lines, and
the ability of counterparties to settle obligations. The Company ensures, through forecasting of capital requirements, that
adequate cash is available.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
133
The following table details the Company’s liquidity analysis in respect of its nancial liabilities on contractual undiscounted
payments:
As at 31 December 2022
<3
Months
£’000
3-12
Months
£’000
1-5
Years
£’000
>5
Years
£’000
Total
£’000
Accounts payable and accrued expenses 491 – – – 491
491 – – – 491
As at 31 December 2021
<3
Months
£’000
3-12
Months
£’000
1-5
Years
£’000
>5
Years
£’000
Total
£’000
Accounts payable and accrued expenses 311 30 – – 341
311 30 – – 341
The Board of Directors monitors key risks faced by the Company and has agreed policies for managing the above risks with
the AIFM and/or the Investment Adviser.
Capitalmanagement
The Company considers its capital to comprise ordinary share capital, distributable reserves and retained earnings.
The Company’s primary capital management objectives are to ensure the sustainability of its capital to support continuing
operations, meet its nancial obligations and allow for growth opportunities. Generally, acquisitions are anticipated to be
funded with a combination of cash, debt and equity.
13.Sharecapital
Date Issued and fully paid
Number of
shares
Share Capital
(A)
£’000
Share
premium
(B)
£’000
Special
Distributable
Reserve
(C)
£’000
Total
(A+B+C)
£’000
30 October 2020 Ordinary shares 1 – – – –
2 February 2021 Ordinary shares 242,624,280 2,426 240,198 – 242,624
2 February 2021 Share issue costs – – (4,698) – (4,698)
13 April 2021 Transfer to special distributable reserve – – (235,500) 235,500 –
11 November 2021 Dividends paid – – – (3,033) (3,033)
3 December 2021 Ordinary shares 68,965,518 690 69,310 – 70,000
3 December 2021 Share issue costs – – (1,361) – (1,361)
At 31 December
2021 311,589,799 3,116 67,949 232,467 303,532
1 July 2022 Ordinary shares 110,909,091 1,109 120,891 – 122,000
1 July 2022 Share issue costs – – (2,472) – (2,472)
At 31 December
2022 422,498,890 4,225 186,368 232,467 423,060
The Company was incorporated on 30 October 2020 when the issued share capital of the Company was £0.01 represented
by one ordinary share and £50,000 represented by 50,000 management shares of nominal value of £1.00 each, which
were subscribed for by Victory Hill Capital Partners LLP. On 2 February 2021, the Company issued a further 242,624,280
ordinary shares and on that date 242,624,281 ordinary shares were admitted to trading on the London Stock exchange. The
management shares were redeemed at par on 2 February 2021.
On 1 December 2021, the Company raised additional gross proceeds of £70 million through the issue of 68,965,518
ordinary shares at an issue price of 101.5 pence per ordinary share.
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134
Notes to the fiNaNcial statemeNts coNtiNued
On 1 July 2022, the Company raised additional gross proceeds of £122 million through the issue of 110,909,091 ordinary
shares at an issue price of 110 pence per ordinary share.
Shareholders are entitled to all dividends paid by the Company and on a winding up, provided that the Company has
satised all its liabilities, the shareholders are entitled to all of the residual assets of the Company.
14.Specialdistributablereserve
As at
31 December
2022
£’000
As at
31 December
2021
£’000
Balance at beginning of year/period 232,467 –
Transfer from share premium account – 235,500
Dividends paid in the year/period – (3,033)
Balance at end of year/period 232,467 232,467
In order to increase distributable reserves available for the payment of future dividends, the Company resolved on 5
January 2021 that, the amount standing to the credit of the share premium account of the Company immediately following
completion of the issue be cancelled and transferred to a special distributable reserve.
As stated by the Institute of Chartered Accountants in England and Wales (ICAEW) and the Institute of Chartered
Accountants in Scotland (ICAS) in the technical release TECH 02/17BL, The Companies (Reduction of Share Capital) Order
2008 SI 2008/1915 (“the Order”) species the cases in which a reserve arising from a reduction in a company’s capital (i.e.,
share capital, share premium account, capital redemption reserve or redenomination reserve) is to be treated as a realised
prot as a matter of law.
The Order also applies the general prohibition in section 654 on the distribution of a reserve arising from a reduction
of capital. The Order provides that if a limited company having a share capital reduces its capital and the reduction is
conrmed by order of court, the reserve arising from the reduction is treated as a realised prot unless the court orders
otherwise.
15.Dividends
The Board of Directors of the Company announced an interim dividend of 1.25p per ordinary share of £3.9m with respect
to the period 1 January 2022 to 31 March 2022, which was paid on 10 June 2022.
On 4 August 2022, the Board of Directors announced an interim dividend of £5.3 million equivalent to 1.25 pence per share
with respect to the period 1 April 2022 to 30 June 2022 which was paid on 16 September 2022.
On 4 November 2022, the Board of Directors announced an interim dividend of £5.3 million equivalent to 1.25 pence per
share with respect to the period 1 July 2022 to 30 September 2022 which was paid on 16 December 2022.
Total dividend paid in the year was £14.5 million.
On 22 February 2023, the Board of Directors announced an interim dividend of £5.8 million equivalent to 1.38 pence per
ordinary share with respect to the period 1 October 2022 to 31 December 2022, which will be paid on 31 March 2023.
16.TransactionswithAIFM,InvestmentAdviserandrelatedparties
AIFM
The Company has entered into the AIFM Agreement with G10 Capital Limited (the ‘AIFM’) under which the AIFM has been
appointed to act as the Company’s alternative investment fund manager with overall responsibility for the risk management
and portfolio management of the Company, providing alternative investment fund manager services and ensuring
compliance with the requirements of the AIFM Rules, subject to the overall supervision of the Directors in accordance with
the policies laid down by the Directors from time to time and the investment restrictions referred to in the AIFM Agreement.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
135
The AIFM Agreement provides that the Company will pay to the AIFM a xed monthly fee of £5,000, exclusive of VAT. The
Company will also reimburse the AIFM for reasonable expenses properly incurred by the AIFM in the performance of its
obligations under the AIFM Agreement.
The AIFM Agreement may be terminated by the Company or the AIFM giving not less than four months’ written notice. The
AIFM Agreement may be terminated with immediate eect on the occurrence of certain events, including insolvency or in
the event of a material and continuing breach.
The AIFM fees for the year ended 31 December 2022 amounted to £74,400 (2021: £66,000) (including VAT) and no amount
was outstanding at the year end.
InvestmentAdviser
The Company and the AIFM have entered into an Investment Advisory Agreement with Victory Hill Capital Partners LLP.
Under the Investment Advisory Agreement, the AIFM and the Company have appointed Victory Hill as the Investment
Adviser to the Company and the AIFM.
Under the terms of the Investment Advisory Agreement, the Investment Adviser will (i) seek out and evaluate investment
opportunities: (ii) recommend the manner in which investments should be made, retained and realised; (iii) advise the
Company and the AIFM in relation to acquisitions and disposals of assets; (iv) provide asset valuations to assist the
Administrator in the calculation of; the quarterly Net Asset Value; and (v) provide operational, monitoring and asset
management services.
The Investment Adviser is entitled to receive from the Company an annual fee to be calculated as percentages of the
Company’s net assets, 1% on the rst £250m of NAV, 0.9% on NAV in excess of £250m and up to and including £500m and
0.8% on NAV in excess of £500m exclusive of VAT.
Furthermore, if in any fee period, the annual fee paid to the Investment Adviser exceeds:
a) £3.5 million, the Investment Adviser shall apply 8% of the annual fee, subject to a maximum amount of £400,000, to
subscribe for or acquire ordinary shares of £0.01 each in the capital of the Company.
b) £2.5 million, the Investment Adviser shall apply 2% of the annual fee to be paid as a charitable donation to O&C Limited,
or other suitable registered charity aimed at promoting sustainable energy, as selected by the Investment Adviser,
provided that if, following the Investment Adviser’s reasonable endeavours, a suitable charity cannot be found, this 2%
portion of the annual fee (net of any applicable taxes) will be applied to the subscription for or acquisition of ordinary
shares.
No performance fee is payable to the Investment Adviser.
The Investment Advisory Agreement may be terminated on 12 months’ written notice, provided that such notice may not
be served before 2 February 2025. The Investment Advisory Agreement may be terminated with immediate eect on the
occurrence of certain events, including insolvency or in the event of a material and continuing breach.
The investment advisory fees for the year ended 31 December 2022 amounted to £3,809,615 (2021: £2,217,992) (including
VAT) of which £167,623 was outstanding and included in accounts payable and accrued expenses at the end of the year.
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136
Notes to the fiNaNcial statemeNts coNtiNued
Directors
The Directors have been entitled to aggregate annual remuneration (excluding expenses) payable and benets in kind
granted as follows:
For the year
ended
31 December
2022
£’000
Bernard Bulkin OBE 70
Margaret Stephens 50
Richard Horlick 50
Louise Kingham CBE 50
220
The Directors are not eligible for bonuses, pension benets, share options, long-term incentive schemes or other benets.
There is no amount set aside or accrued by the Company in respect of contingent or deferred compensation payments or
any benets in kind payable to the Directors. During the year ended 31 December 2022, Directors fees of £220,000 were
paid of which none was payable at the year end.
The Directors held the following benecial interests in the ordinary shares of the Company as at 31 December 2022.
As at 31 December 2022
Numberof
ordinary
shares held
%ofordinary
shares in issue
Bernard Bulkin OBE 38,181 0.009
Margaret Stephens 28,181 0.007
Richard Horlick 300,000 0.071
Louise Kingham CBE 20,000 0.005
Otherbalanceswithrelatedparties
The Company entered into intercompany loan agreements with GSEO Holdings, which entered into further intercompany
loan agreements with the following subsidiary companies these balances form part of the investments balance in the
Statement of Financial position.
• Victory Hill USA Holdings LLC (US$63,665,000)
• Victory Hill Australia Investments Pty Ltd (A$35,400,000)
• Victory Hill Flexible Power Ltd (£14,924,400)
Note that £4,000 of accrued interest accumulated during the year.
During the year ended 31 December 2022, the Company entered into intercompany loan agreements with Victory Hill USA
Holdings LLC of US$2,100,000, Victory Hill Australia Investments Pty Ltd of A$17,400,000 and Victory Hill Flexible Power Ltd
of £14,924,400. Dividends of £21,607,272 were paid to the Company during the year ended 31 December 2022.
As at the year-end, the Company held receivables from aliates of £355,000. This comprises of £346,000 from VH GSEO
UK Holdings Limited, £2,000 from VH Hydro Brasil Holdings S.A., £2,000 from Victory Hill Flexible Power Limited and £5,000
from Victory Hill Distributed Power Pty Ltd.
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
137
17.Contingentliabilitiesandcommitments
At 31 December 2022 the Company had no contingent liabilities.
In Brazil, the Company has a remaining commitment of £14m (31 December 2021: £10m) in the construction of remote
distributed solar generation projects across Brazil.
In Australia, the Company has a remaining commitment of £17m (31 December 2021: £34m) to acquire a portfolio of
distributed solar generation assets with plans to build battery storage capacity in Australia in two tranches.
In the UK the Company has a remaining commitment £80m (31 December 2021: £72m) to fund two Flexible Power plants
which bring together high eciency gas-red turbine technology with carbon capture systems to provide a clean and
exible electricity solution for the United Kingdom, with a combined capacity of 45MW.
There are no remaining commitments to fulll as at year end relating to the US storage assets and the Brazilian hydro
facility.
18.Earningspershare
Earnings per share (EPS) is calculated by dividing prot for the period attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares in issue on 1 January 2021 to 31 December 2022. Amounts
shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current
year/period.
For the year ended 31 December 2022
For the period from incorporation on 30 October
2020 to 31 December 2021
Revenue Capital Total Revenue Capital Total
Earnings (£’000) 24,073 4,131 28,204 (1,680) 22,046 20,366
Weighted average number of ordinary
shares 367,500,135 367,500,135 367,500,135 193,505,110 193,505,110 193,505,110
EPS (p) 6.55 1.12 7.67 (0.87) 11.39 10.52
19.Netassetvaluepershare
Net asset value per share is calculated by dividing the net assets attributable to ordinary equity holders of the Company
by the number of ordinary shares outstanding at the reporting date. Amounts shown below are both basic and diluted
measures as there were no dilutive instruments in issue throughout the current year/period.
Year ended
31 December
2022
Period ended
31 December
2021
NAV (£’000) 457,173 323,898
Number of ordinary shares 422,498,890 311,589,799
NAV per share (p) 108.21 103.95
20.Postbalancesheetevents
On 22 February 2023, the Board of Directors announced an interim dividend of £5.8 million equivalent to 1.38 pence per
ordinary with respect to the period 1 October 2022 to 31 December 2022 which will be paid on 31 March 2023.
21.Controllingparties
There is no ultimate controlling party of the Company.
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138
alteRNatiVe PeRfoRmaNce measuRes
Alternative Performance Measures (APMs) are often used to describe the performance of investment companies although
they are not specically dened under IFRS. Calculations for APMs used by the Company are shown below.
In reporting nancial information, the Company presents alternative performance measures, “APMs”, which are not dened
or specied under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a
substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of
the Company.
The APMs presented in this report are shown below:
NAVpershare
NAV per share is calculated by dividing the Company’s NAV by the total number of outstanding shares at year end.
Page
NAV as at 31 December 2022 457,173,179
Total number of outstanding shares as at 31 December 2022 422,498,890
NAV per share 3 1.08
Ongoing charges
A measure expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment
company, calculated in accordance with the AIC methodology.
Page
Average undiluted NAV (in £'m) 405.03
Recurring costs in year 5.26
Ongoing charges 3 1.30%
Premium/(discount)toNAV
The amount, expressed as a percentage, by which the share price is more than the NAV per ordinary share.
As at 31 December 2022 Page
NAV per ordinary share (pence / share) 1.082
Ordinary share price (pence / share) 1.010
Premium / (Discount) to NAV as at 31 December 2022 (%) n/a (7.13%)
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
139
Totalreturn
A measure of performance that includes both income and capital returns. This takes into account capital gains and
reinvestment of any dividends paid out by the Company, with reinvestment on ex-dividend date.
Year ended 31 December 2022 Page NAV Share price
Opening as at 1 January 2022 a 103.95p 107.00p
Closing as at 31 December 2022 b 108.21p 101.0p
Dividends paid during the year 3.75p 3.75p
Dividend adjustment factor c 1.0335 1.0335
Adjusted closing d = b x c 111.84p 104.38p
Totalreturnfortheyear(%) d / a - 1 3 7.6% -2.4%
From IPO to 31 December 2022 Page NAV Share price
Opening as at 2 February 2021 a 98.00p 100.00p
Closing as at 31 December 2022 b 108.21p 101.00p
Dividends paid to date since IPO 5.00p 5.00p
Dividend adjustment factor c 1.0458 1.0458
Adjusted closing d = b x c 113.17p 105.62p
Total return since IPO (%) d / a - 1 3 15.5% 5.6%
Dividendcover
The dividend cover ratio is calculated by using the Company’s distributable prots for the year, divided by the amount of
dividends paid during the year ending 31 December 2022.
Prot for the year at VH Global Sustainable Energy Opportunities plc £24,073,045
Net distributions withheld at VH GSEO UK Holdings Limited £6,068,537
Totalnewdistributionsreceivedfromunderlyinginvestments £30,141,582
Dividend declared for nancial year 2022
(5.13p per ordinary share x Number of shares outstanding as at
31 December 2022 of 422,498,890) £21,674,193
Dividend cover 1.4x
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AdditionAl informAtion
SFDR – Annex V 141
Glossary 149
Shareholder Information 151
Company Information 153
141
Sfdr AnnEX V (unAuditEd)
Template periodic disclosure for the financial products referred to in Article 9, paragraphs 1 to 4a, of
Regulation (EU) 2019/2088 and Article 5, first paragraph, of Regulation (EU) 2020/852
Sustainable
investment means
an investment in an
economic activity
that contributes to
an environmental
or social objective,
provided that the
investment does
not signicantly
harm any
environmental or
social objective and
that the investee
companies follow
good governance
practices.
The EU Taxonomy
is a classication
system laid down
in Regulation
(EU) 2020/852
establishing a list of
environmentally
sustainable
economic
activities. That
Regulation does not
lay down a list of
socially sustainable
economic activities.
Sustainable
investments with
an environmental
objective might be
aligned with the
Taxonomy or not.
Product name: VH Global Sustainable Energy Opportunities plc (the “Company ”)
Legal entity identifier: 213800RFHAOF372UU580
Sustainable investment objective
To what extent was the sustainable investment objective of this financial
product met?
The Company’s Sustainable Energy Infrastructure Investments are aligned with the
SDGs with the specific objective of facilitating the energy transition from the current
fossil fuel system to a low carbon system. The Company’s energy transition pathways
address climate change, energy access, energy efficiency and market liberalisation,
therefore a selection of the Company’s investments is aligned with the objective
climate change mitigation under the EU Taxonomy. The Company infrastructure
investments also seek to have significant impact on the local communities they serve.
More information on the investment policy and strategy see page 15.
1
Undeployed cash is held in short-term deposits, 100% of investments are made in sustainable investments.
Did this financial product have a sustainable investment objective?
X
Yes
No
X
It made sustainable investments
with an environmental objective:
100%
1
It promoted Environmental/Social
(E/S) characteristics and while it did
not have as its objective a sustainable
investment, it had a proportion of
__________% of sustainable investments
X
in economic activities that qualify as
environmentally sustainable under
the EU Taxonomy
with an environmental objective in
economic activities that qualify as
environmentally sustainable under
the EU Taxonomy
X
in economic activities that do not
qualify as environmentally sustainable
under the EU Taxonomy
with an environmental objective in
economic activities that do not qualify
as environmentally sustainable under
the EU Taxonomy
with a social objective
It made sustainable investments
with an social objective: _________%
It promoted E/S characteristics, but
did not make any sustainable
investments
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Sfdr AnnEX V (unAuditEd) continuEd
Sustainability
indicators measure
how the sustainable
objectives of this
nancial product are
attained.
The Company has assessed each investment against sustainability eligibility criteria to
verify alignment against the following SDGs: SDG 3, Good health and wellbeing; SDG 7,
Energy access; SDG 13, Climate action; SDG 9, Industry, innovation and infrastructure; SDG
8, Decent work and economic growth and SDG 17 partnerships for the goal. The Company
has also assessed eligibility and alignment of each of the assets with the EU Taxonomy of
environmentally sustainable activities “Do No Significant Harm” and technical screening
criteria, described further below.
The Company investments contributed to reducing carbon emissions by generating
renewable energy, avoiding greenhouse gas emission and displacing harmful air emissions.
The Investment Adviser is a signatory to the Net Zero Asset Managers Initiative (NZAMI),
committing to support the goal of net zero greenhouse gas emissions by 2050, in line with
global efforts to limit warming to 1.5°C and applied this commitment to the Company’s
investments.
How did the sustainability indicators perform?
The Company has committed to reporting against the following indicators to measure the
sustainable investment objective:
Figure Explanation 2022
performance
Capital investment
into energy transition
focused Portfolio
Companies (USD)
Victory Hill intends that all the Company’s
investments are aligned with the energy
transition.
381M
MWh of renewable
energy produced
This figure represents the renewable and net
zero electricity generation which displaces
carbon intensive generation, demonstrating
contribution to SDG 13.
35,117
±
Carbon dioxide
equivalent avoided
(tCO
2
e)
This figure accounts for renewable energy
generation and renewable fuels use displacing
fossil fuel generation net of any Scope 1, 2 and
available 3 operational emissions.
14,349
±
Tonnes of particulate
matter (PM10) avoided
Tonnes of sulfur
oxides (SOx) avoided
These figures demonstrate the impact of
renewable and cleaner fuels produced by an
asset with a pollution reduction environmental
objective, by reporting the tonnes of pollutive
compounds removed through use of cleaner
fuels. This demonstrates contribution to on
SDG 3.
1,049
±
20,613
±
Equivalent number
of homes, businesses
and/or vehicles served
by renewable energy
or fuel
This figure demonstrates the equivalent
number of homes, businesses and/or vehicles
served by renewable energy or fuel. This
demonstrates contribution to SDG7.
9000 average UK
homes powered
143
Principal adverse
impacts are the
most signicant
negative impacts of
investment decisions
on sustainability
factors relating to
environmental,
social and employee
matters, respect
for human rights,
anti-corruption and
anti-bribery matters.
…and compared to previous periods?
This is the baseline year for reporting so no comparable periods available yet.
How did the sustainable investments not cause significant harm to any sustainable
investment objective?
How have the indicators for adverse impacts on sustainability factors been taken into
account?
The Company takes into account PAI through the due diligence and risk-based analysis
approach described in the “How did this financial product consider principal adverse
impacts on sustainability factors” section below. The Company preliminarily reported on
the 14 principle adverse indicators and selected additional indicators on the Investment
Adviser’s website in 2022 https://victory-hill.com. This will be updated to reflect 2022
actions as part of investor periodic reporting.
The greenhouse gas emissions sustainability indicators are used to measure the
Company’s progress against its net zero target. These are also key indicators in
demonstrating progress towards the Company’s energy transition investment objective.
Other social and environmental indicators are used to monitor asset and operating
partner activities and progress on responsible business practices. More information on
this approach is provided below in the “How did this financial product consider principal
adverse impacts on sustainability factors” section.
Were sustainable investments aligned with the OECD Guidelines for Multinational Enterprises
and the UN Guiding Principles on Business and Human Rights? Details:
All operational assets had an agreed SAP in 2022 which included ensuring appropriate
policies for diversity and inclusion, employee rights including health and safety,
stakeholder engagement and grievance management were in place.
The Company’s strategic focus on the SDGs supports the OECD Guidelines. A core aim is
to contribute to economic, social and environmental progress priorities as identified in
the SDGs.
The Company’s investments have created 23 direct jobs at the assets and employed 163
contractors in 2022, excluding any expansion of the management teams of operating
partners.
Operating partners are also required to identify risks in their value chain and the SAP
includes actions to implement a supplier code of conduct and due diligence process
to identify and mitigate risks. This has included environmental impact, labour rights or
material sourcing.
The Investment Adviser is a signatory to the UN Global Compact and supports the 10
principles including human rights, labour, the environment and anti-corruption and
enacted those principles in when acting for the Company.
No reports of noncompliance with the OECD guidelines and UNGPs were made in 2022.
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Sfdr AnnEX V (unAuditEd) continuEd
How did this financial product consider principal adverse impacts on sustainability
factors?
The Company considers the indicators on principal adverse impacts (PAI) on
sustainability factors through internal and external due diligence of its investments
taking a risk-based approach.
Ex ante the Company obtains external assurance opinions on an investment’s alignment
with the SDGs described above. This assessment also covers whether the investment
may do “significant harm” to the other SDGs. It also considers the impact on the SDGs
through the asset’s operations, such as reducing inequalities, including gender equality
(SDG 5 and10) and sustainable production and consumption (SDG 12).
The International Finance Corporation performance standards, the Global ESG
Benchmark for Real Assets and the Sustainability Accounting Standards Board, have
identified material energy sector and infrastructure risks and impacts. The Company
assessed each investment against these specific risks and impacts, as well as regional
and geographic risks to identify the environmental, social and governance (ESG) issues
most relevant for the investment. This analysis also considers the SFDR PAI. This risk and
opportunity-based approach to ESG management as described on page 56 is used to
identify material impacts.
The Company’s scope of ESG risk and impact assessment for Assets is as follows:
• Assessment of ESG risks and impacts related to the sector of operation.
• Assessment of ESG risks and impacts related to the region and country of operation.
• Assessment of ESG risks and impacts related to the operational proximity to local
communities, indigenous peoples, cultural heritage and ecological and biodiversity
habitats.
• Assessment of ESG risks and impacts related to operational activities such as noise,
light, water use, discharge and waste.
• Assessment of ESG risks and impacts related to number of people interacting with
the operation including employees, contractors and customers.
• Assessment of ESG risks and impacts related to internal operating partner resourcing
and policies for ESG management.
In 2022 all assets were risk assessed on this basis accounting for the probability of
impacts and the quality of controls that the operating partner and asset had in place.
The Investment Adviser worked with the operating partners to close gaps in
management practices and identified opportunities for improvement. This is described
in the ESG progress section on this annual report on page 68.
What were the top investments of this financial product?
Largest investments Sector % Assets Country
US terminal storage assets Energy
25.0% USA
Brazilian solar PV assets Energy
12.3% Brazil
Australian solar PV with battery storage assets Energy
11.7% Australia
UK flexible power with CCR assets
1
Energy
25.1% UK
Brazilian hydro facility
2
Energy
25.9% Brazil
1
included assets under construction in 2022
2
purchased December 7th 2022
The list includes
the investments
constituting
the greatest
proportion of
investments of
the financial
product during the
reference period
which is:
145
What was the proportion of sustainability-related investments?
What was the asset allocation?
All (100%) of the Company’s investments were sustainable investments with
anenvironmental objective. Those included 24% of the EU Taxonomy-aligned
investments and 76% of the investments with other environmental objective (not EU
Taxonomy aligned). Undeployed cash is held in short-term deposits.
#1 Sustainable
covers sustainable
investments with
environmental or
social objectives
Investments
#1 Sustainable
Environmental
Taxonomy-aligned
Other
In which economic sectors were the investments made?
All assets are energy infrastructure assets including renewable (solar PV and hydro),
flexible power with CCR, terminal storage and battery storage.
To what extent were the sustainable investments with an
environmental objective aligned with the EU Taxonomy?
During the reference period, 24% of the sustainable investments with an environmental
objective were aligned with the EU Taxonomy. The Australian and Brazilian solar PV
assets have been assessed under the EU Taxonomy technical screening criteria by a
third-party assurance firm. This assessment has included assessment of asset life cycle
emissions, physical climate risk and vulnerability and assessment against the relevant
DNSH criteria. The conclusion of this assessment is that those assets are compliant with
the EU Taxonomy criteria for their respective activity types.
Terminal storage is not an activity included in the EU Taxonomy and is therefore not EU
Taxonomy aligned. Flexible power with CCR is an activity type which is included in the
EU Taxonomy but until the introduction of carbon capture and storage (CCS) technology
with the ability to permanently store carbon in geological formations, it is not EU
Taxonomy aligned.
Did the financial product invest in fossil gas and/or nuclear energy related activities
complying with the EU Taxonomy
3
?
Yes:
In fossil gas In nuclear energy
X
No
Asset allocation
describes the share
of investments in
specific assets.
Taxonomy-aligned
activities are
expressed as a share
of:
– turnover
reflecting
the share of
revenue from
green activities
of investee
companies
– capital
expenditure
(CapEx) showing
the green
investments
made by investee
companies, e.g.
for a transition to
a green economy.
– operational
expenditure
(OpEx) reflecting
green operational
activitiesof
investee
companies.
3
Fossil gas and/or nuclear related activities will only comply with the EU Taxonomy where they contribute to limiting
climate change (“climate change mitigation”) and do no signicant harm to any EU Taxonomy objective – see
explanatory note in the left hand margin. The full criteria for fossil gas and nuclear energy economic activities that
comply with the EU Taxonomy are laid down in Commission Delegated Regulation (EU) 2022/1214.
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Sfdr AnnEX V (unAuditEd) continuEd
Enabling activities
directly enable
other activities to
make a substantial
contribution to
an environmenal
objective
Transitional
activities are
economic
activities for
which low-carbon
alternatives are
not yet available
and that have
greenhouse gas
emission levels
corresponding to the
best performance.
The graphs below show in green the percentage of investments that were aligned with the
EU Taxonomy. As there is no appropriate methodology to determine the taxonomy-alignment
of sovereign bonds*, the first graph shows the Taxonomy alignment in relation to all the
investments of the financial product including sovereign bonds, while the second graph shows
the Taxonomy alignment only in relation to the investments of the financial product other than
sovereign bonds.
22.5%
22.5%
3.1%
OpEx
CapEx
Turnover
0% 50% 100%
2. Taxonomy-alignment of investments
Taxonomy aligned (no gas and nuclear)
Non Taxonomy-aligned
22.5%
22.5%
3.1%
OpEx
CapEx
Turnover
0% 50% 100%
2. Taxonomy-alignment of investments
excluding sovereign bonds*
Taxonomy aligned (no gas and nuclear)
Non Taxonomy-aligned
This graph represents 100% of the total investments.
* For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures
What was the share of investments made in transitional and enabling activities?
Asset Sector Activity type
Brazilian solar PV assets Energy Enabling
Australian solar PV with battery storage assets Energy Enabling
How did the percentage of investments that were aligned with the EU Taxonomy
compare with previous reference periods?
This is the baseline year for reporting. No previous reference periods are available.
147
What was the share of sustainable investments with an environmental
objective not aligned with the EU Taxonomy?
Asset Sector
Investment
Share
US terminal storage assets Energy 25.0%
UK exible power with CCR assets Energy 25.1%
Brazilian hydro facility Energy 25.9%
The Mascarenhas run of river Brazilian hydro facility was purchased 7th December 2022.
Electricity generation from hydropower is an EU Taxonomy eligible activity. The Company is
completing technical screening of the purchase to establish alignment.
The UK flexible power with CCR asset is under construction and due to commission in 2023.
Under article 10, paragraph e, of regulation EU 2020/853 this project will increase the use
of environmentally safe carbon capture and utilisation to deliver a reduction in greenhouse
gas emissions and, under article 10 paragraph g, will establish energy infrastructure
required for enabling the decarbonisation of energy systems by providing baseload and
grid stabilisation for renewable penetration. The predicted operational carbon footprint
means the plant will be eligible under the EU Taxonomy if the carbon dioxide captured is
permanently sequestered.
The objective of the US terminal storage assets is to enable the displacement of high sulfur
fuel oil (HSFO) from the Mexican market. Reducing the impact of air pollution (SDG3.9) is
a priority of the energy industry and an important element of the energy transition. Air
pollution poses a major risk to health and economies globally. The displacement of high
sulfur fuel oil reduces PM2.5, PM10, SOx, NOx emissions. The reduction of PM is core part
of Mexico’s nationally determined contribution on climate action.
The US terminal storage assets provide an aggregation point and facilitate the transfer of
HSFO to more efficient refining capacity in the United States and the transfer of cleaner
fuels back into the Mexican Market.
What actions have been taken to attain the sustainable investment objective
during the reference period?
Actions taken by the Company are covered in this report in the ESG section on page 52.
The Company has an engagement policy and routinely engages with the asset operating
partners. This includes weekly video calls, monthly key performance indicator submission
for performance measurement, and monitoring of the SAP implementation.
As described above, the Company influences its operating partners through requiring the
implementation of an SAP which includes actions identified through the due diligence and
risk analysis process.
In 2022 under the SAP a priority for operating partners was providing baseline operating
data to develop targets to drive improvement and strengthening the governance
framework for operating the assets which included developing management systems and
stakeholder engagement.
are
sustainable
investments
with an
environmental
objective that do not
take into account
the criteria for
environmentally
sustainable
economic activities
under the EU
Taxonomy.
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Sfdr AnnEX V (unAuditEd) continuEd
Some specific Company actions:
• Completed physical climate vulnerability and risk assessments for all assets to support
climate change adaptation.
• Completed life cycle analysis of carbon emissions to calculate embodied carbon to
support climate mitigation.
• Collected full year of renewable energy generation and calculated associated avoided
emissions using grid emissions factors to support climate mitigation.
• Measured ows of HSFO from Mexico to the US terminal storage assets and calculated
associated avoided air emissions to support environmental and health impact through
pollution reduction.
• Calculated operational greenhouse gas footprint from operating assets to support
target setting for climate change mitigation, this included scope 3 emissions from water
use, waste production and some freight transport.
149
GloSSAry
AIC Association of Investment Companies
AIFM Alternative Investment Fund Manager, G10 Capital Limited
Annual General Meeting
or AGM
A meeting held once a year which shareholders can attend and where they can vote on
resolutions to be put forward at the meeting and ask directors questions about the company
in which they are invested
COD Commercial Operational Date
Company VH Global Sustainable Energy Opportunities plc
Decentralised energy Energy which is produced close to where it will be used, rather than at a large centralised
plant elsewhere, delivered through a centralised grid infrastructure
Discount The amount, expressed as a percentage, by which the share price is less than the net asset
value per share
Dividend Income receivable from an investment in shares
EPC Engineering, procurement and construction
ESG Environmental, social and governance
EU European Union
Ex-dividend date The date from which you are not entitled to receive a dividend which has been declared and
is due to be paid to shareholders
Financial Conduct
Authority or FCA
The independent body that regulates the nancial services industry in the UK
FiT Feed-in Tari
GAV Gross Asset Value
Gearing A way to magnify income and capital returns, but which can also magnify losses
GHG Green House Gases
Investment Adviser /
Victory Hill
Victory Hill Capital Partners LLP
Investment Company A company formed to invest in a diversied portfolio of assets
Investment Trust An investment company which is based in the UK and which meets certain tax conditions
which enables it to be exempt from UK corporation tax on its capital gains. The Company is
an investment trust
IPO Initial Public Oering
MW Megawatt
MWh Megawatt Hour
NAV per ordinary share NAV divided by the number of ordinary shares in issue (excluding any shares held in treasury)
Net asset value or NAV An investment company’s assets less its liabilities
OECD Organisation for Economic Co-operation and Development
Ongoing charge The ‘ongoing charges’ ratio is an indicator of the costs incurred in the day-to-day management
of the Company, expressed as a percentage of average net assets. This ratio calculation is
based on Association of Investment Companies (‘AIC’) recommended methodology
Ordinary shares The Company’s ordinary shares in issue of £0.01 each
O&M Operation and Maintenance
PPA Power Purchase Agreement
Premium The amount, expressed as a percentage, by which the share price is more than the net asset
value per share
PV Photovoltaic
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GloSSAry continuEd
ROC Renewable Obligation Certicates
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
Share price The price of a share as determined by a relevant stock market
SPE Special Purpose Entity
TCFD Task Force on Climate-Related Financial Disclosures
Total return Total return statistics enable the investor to make performance comparisons between
investment trusts with dierent dividend policies. The total return measures the combined
eect of any dividends paid, together with the rise or fall in the share price or NAV. This
is calculated by the movement in the share price or NAV plus the dividends paid by the
Company assuming these are reinvested in the Company at the prevailing NAV/share price
WACC Weighted Average Cost of Capital
151
ShArEholdEr informAtion
Share information
The Company’s ordinary shares of 1p each are quoted on the Ocial List of the FCA and traded on the premium segment of
the Main Market of the London Stock Exchange.
SEDOL number BNKVP75
ISIN GB00BNKVP754
Ticker/TIDM GSEO
LEI 213800RFHAOF372UU580
Frequency of NAV publication
The Company’s NAV is released via RNS to the London Stock Exchange on a quarterly basis and is published on the
Company’s website.
Sources of further information
Copies of the Company’s annual and interim reports, stock exchange announcements and further information on the
Company can be obtained from the Company’s website: www.vh-gseo.com.
Financial calendar
March
Annual results announced
Payment of rst interim dividend
April Annual General Meeting
June
Payment of second interim dividend
Company’s half-year end
September
Interim results announced
Payment of third interim dividend
December
Payment of fourth interim dividend
Company’s year end
Share register enquiries
Computershare Investor Services PLC maintains the share register on behalf of the Company. In the event of queries
regarding shares registered in your own name, please contact the Registrar on 0370 703 0333. This helpline also oers an
automated self-service functionality (available 24 hours a day, 7 days a week) which allows you to:
• hear the latest share price;
• conrm your current shareholding balance;
• conrm your payment history; and
• order Change of Address, Dividend Bank Mandate and Stock Transfer forms.
By quoting the reference number on your share certicate, you can check your holding on the Registrar’s website at
www.investorcentre.co.uk. They also oer a free, secure share management website service which allows you to:
• view your share portfolio and see the latest market price of your shares;
• calculate the total market value of each shareholding;
• view price histories and trading graphs;
• register to receive communications from the Company, including the Annual Report and Financial Statements, in
electronic format;
• update bank mandates and change address details;
• use online dealing services; and
• pay dividends directly into your overseas bank account in your chosen local currency.
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ShArEholdEr informAtion continuEd
To take advantage of this service, please log in at www.investorcentre.co.uk and enter your Shareholder Reference Number
and Company Code (this information can be found on the last dividend voucher or your share certicate).
Electronic Communications and Proxy Voting
If you hold stock in your own name, you can choose to receive communications from the Company, and vote, in electronic
format. This has environmental benets in the reduction of paper, printing, energy and water usage, as well as reducing
costs to the Company. The paragraphs below explain how you can use these services.
Electronic Communications
If you would like to take advantage of this service, please visit the Registrar’s website at www.investorcentre.co.uk and
register. You will need your Shareholder Reference Number (which is on your share certicate and tax voucher) to hand.
If you then agree to the terms and conditions, in future, on the day that documents are sent to shareholders by post,
you will receive an e-mail providing the website address link to the documents. After you register, paper documents will
be available on request.
Electronic Proxy Voting
You can also return proxies electronically at www.eproxyappointment.com. If you have registered for electronic
communications, you will be issued a PIN number to use when returning proxies to the secure Registrar website. You
do not need to register for electronic communications to use electronic proxy voting, paper proxy forms will contain a
PIN number to allow you to return proxies electronically. If you have any questions about this service, please contact
Computershare on 0370 703 0333.
Association of Investment Companies
The Company is a member of the AIC, which publishes statistical information in respect of member companies. The AIC can
be contacted on 020 7282 5555, enquiries@theaic.co.uk or visit the website: www.theaic.co.uk.
153
compAny informAtion
Non-executive Directors
Bernard Bulkin OBE (Chair)
Daniella Carneiro
Richard Horlick
Louise Kingham CBE
Margaret Stephens
Registeredoce
6
th
Floor
125 London Wall
London
EC2Y 5AS
AIFM
G10 Capital Limited
4
th
Floor
3 More London Riverside
London
SE1 2AQ
Investment Adviser
Victory Hill Capital Partners LLP
4 Albemarle Street
London
W1S 4GA
Corporate Broker
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
Legal Adviser
Eversheds Sutherland (International) LLP
One Wood Street
London
EC2V 7WS
Company number: 12986255
Country of incorporation: England and Wales
Administrator and Company Secretary
Apex Fund and Corporate Services (UK) Limited
6
th
Floor
125 London Wall
London
EC2Y 5AS
Depositary
Apex Depositary (UK) Limited
6
th
Floor
125 London Wall
London
EC2Y 5AS
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZY
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
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AnnuAl GEnErAl mEEtinG
Notice of Annual General Meeting 155
155
noticE of AnnuAl GEnErAl mEEtinG
THIS NOTICE OF ANNUAL GENERAL MEETING IS AN IMPORTANT DOCUMENT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to what action you should take or the contents of this document, you are
recommended to seek your own nancial advice from your stockbroker, bank, solicitor, accountant or other
appropriately qualied independent adviser authorised under the Financial Services and Markets Act 2000
immediately if you are in the United Kingdom, or from another appropriately qualied independent nancial
adviser if you are in a territory outside the United kingdom.
If you have sold or otherwise transferred all of your shares in VH Global Sustainable Energy Opportunities
plc (the “Company”), please forward this document as soon as possible to the purchaser or transferee or to
the stockbroker, bank or other agent through whom the sale or transfer was eected for transmission to the
purchaser or transferee.
Notice is hereby given that the Annual General Meeting of VH Global Sustainable Energy Opportunities plc will be held
at the oces of Victory Hill Capital Partners LLP, 4 Albermarle Street, London W1S 4GA on Tuesday, 25 April 2023 at
12:00noon to transact the business set out below:
To consider and, if thought t, pass the following resolutions. Resolutions 1 to 12 (inclusive) will be proposed as Ordinary
Resolutions which require more than 50% of the votes cast to be in favour in order for the resolutions to be passed.
Resolutions 13 to 16 (inclusive) will be proposed as Special Resolutions which require at least 75% of the votes cast to be in
favour in order for the resolutions to be passed. For further information on the resolutions, please refer to pages 81 to 83.
Ordinary resolutions
1. To receive and adopt the Company’s Annual Report and Financial Statements for the year ended 31 December 2022,
with the reports of the Directors and Auditor thereon.
2. To approve the Directors’ Remuneration Report included in the Annual Report for the year ended 31 December 2022.
3. To approve the Company’s dividend policy as set out in the Annual Report for the year ended 31 December 2022 and
authorise the Directors to declare and pay all dividends of the Company as interim dividends.
4. To elect Daniella Carneiro as a Director of the Company.
5. To re-elect Bernard Bulkin as a Director of the Company.
6. To re-elect Richard Horlick as a Director of the Company.
7. To re-elect Louise Kingham as a Director of the Company.
8. To re-elect Margaret Stephens as a Director of the Company.
9. To re-appoint BDO LLP as Auditor to the Company to hold oce from the conclusion of the Annual General Meeting
until the next meeting at which nancial statements are laid before the Company.
10. To authorise the Audit Committee to determine the remuneration of the Auditor of the Company.
11. That the Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of
the Companies Act 2006 (the “Act”), to exercise all the powers of the Company to allot relevant securities (within the
meaning of Section 551 of the Act) up to a maximum aggregate nominal amount of £422,498.89, (being 10% of the
issued share capital as at 27 March 2023 comprising 42,249,889 ordinary shares of £0.01 each in the Company), or if
changed, the amount that represents 10% of the aggregate nominal value of the Company’s issued share capital at the
date of the passing of this resolution, such authority to expire at the conclusion of the next annual general meeting
of the Company to be held after the date of the passing of this resolution or 15 months from the date of passing this
resolution, whichever is earlier, unless previously revoked, varied or renewed by the Company in a general meeting,
save that the Company may, at any time prior to the expiry of such authority, make an oer or enter into an agreement
which would or might require the relevant securities to be allotted after such expiry and the Directors may allot relevant
securities in pursuance of such an oer or agreement as if such authority conferred by this resolution had not expired.
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12. That, subject to the passing of Resolution 11 and in addition to the authority conferred by Resolution 11 above, the
Directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies
Act 2006 (the “Act”), to exercise all the powers of the Company to allot relevant securities (within the meaning of Section
551 of the Act) up to a maximum aggregate nominal amount of £422,498.89, (being 10% of the issued share capital as
at 27 March 2023 comprising 42,249,889 ordinary shares of £0.01 each in the Company), or if changed, the amount
that represents 10% of the aggregate nominal value of the Company’s issued share capital at the date of the passing
of this resolution, such authority to expire at the conclusion of the next annual general meeting of the Company to be
held after the date of the passing of this resolution or 15 months from the date of passing this resolution, whichever
is earlier, unless previously revoked, varied or renewed by the Company in a general meeting, save that the Company
may, at any time prior to the expiry of such authority, make an oer or enter into an agreement which would or
might require the relevant securities to be allotted after such expiry and the Directors may allot relevant securities in
pursuance of such an oer or agreement as if such authority conferred by this resolution had not expired.
Special Resolutions:
13. That, subject to the passing of Resolution 11, the Directors be and are hereby generally empowered (pursuant to
Sections 570 and 573 of the Companies Act 2006 (the “Act”)) to allot equity securities (within the meaning of Section 560
of the Act) for cash pursuant to the authority conferred on them in Resolution 11 above and/or to sell ordinary shares
held by the Company as treasury shares (as dened in Section 724 of the Act) for cash as if Section 561(1) of the Act did
not apply to any such allotment or sale, such power shall:
a) be limited to the allotment or sale of equity securities up to an aggregate nominal amount of £422,498.89 (being
10% of the issued share capital of the Company as at 27 March 2023 comprising 42,249,889 ordinary shares of
£0.01 each in the Company) or, if changed, the amount that represents 10% of the aggregate nominal value of the
Company’s issued share capital at the date of the passing of this resolution; and
b) expire at the conclusion of the next annual general meeting of the Company to be held after the date of the
passing of this resolution or 15 months from the date of passing this resolution, whichever is earlier, unless
previously revoked, varied or renewed by the Company in general meeting, save that the Company may, at any
time prior to the expiry of such power, make an oer or enter into an agreement which would or might require
equity securities to be allotted or sold from treasury after the expiry of such power, and the Directors may allot
or sell from treasury equity securities in pursuance of such an oer or an agreement as if such power had not
expired.
14. That, in addition to the authority conferred by Resolution 13 above, but subject to the passing of resolutions 11, 12
and 13, the Directors be and are hereby generally empowered (pursuant to Sections 570 and 573 of the Companies
Act 2006 (the “Act”)) to allot equity securities (within the meaning of Section 560 of the Act) for cash pursuant to the
authority conferred on them in Resolution 12 above and/or to sell ordinary shares held by the Company as treasury
shares (as dened in Section 724 of the Act) for cash as if Section 561(1) of the Act did not apply to any such allotment
or sale, such power shall:
a) be limited to the allotment or sale of equity securities up to an aggregate nominal amount of £422,498.89 (being
10% of the issued share capital of the Company as at 27 March 2023 comprising 42,249,889 ordinary shares of
£0.01 each in the Company) or if changed, the amount that represents 10% of the aggregate nominal value of the
Company’s issued share capital at the date of the passing of this resolution; and
b) expire at the conclusion of the next annual general meeting of the Company to be held after the date of the
passing of this resolution or 15 months from the date of passing this resolution, whichever is earlier, unless
previously revoked, varied or renewed by the Company in general meeting, save that the Company may, at any
time prior to the expiry of such power, make an oer or enter into an agreement which would or might require
equity securities to be allotted or sold from treasury after the expiry of such power, and the Directors may allot
or sell from treasury equity securities in pursuance of such an oer or an agreement as if such power had not
expired.
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15. That the Company be and is generally and unconditionally authorised in accordance with Section 701 of the Companies
Act 2006 (the “Act”) to make one or more market purchases (within the meaning of Section 693(4) of the Act) of its
ordinary shares on such terms and in such manner as the Directors of the Company may from time to time determine,
provided that:
a) the maximum aggregate number of ordinary shares that may be purchased is 63,332,583 ordinary shares or, if
changed, the number representing 14.99% of the Company’s issued share capital at the date of the meeting of the
Company at which this resolution is passed;
b) the minimum price (exclusive of any expenses) which may be paid for an ordinary share is £0.01;
c) the maximum price (exclusive of expenses) which may be paid for an ordinary share shall be the higher of: (i) 105%
of the average of the middle market quotations for an ordinary share (as derived from the London Stock Exchange
Daily Ocial List) for the ve business days prior to the date of the market purchase; and (ii) the higher of the price
of the last independent trade of an ordinary share and the highest current independent bid for the ordinary share
on the trading venue where the purchase is carried out;
d) this authority shall expire at the conclusion of the next annual general meeting of the Company to be held after the
date of the passing of this resolution or, if earlier, on the expiry of 15 months from the date of the passing of this
resolution, unless such authority is revoked, varied or renewed prior to that time; and
e) the Company may make a contract to purchase ordinary shares under the authority, which will or may be executed
wholly or partly after the expiration of such authority and may make a purchase of ordinary shares pursuant to any
such contract.
16. THAT, a general meeting of the Company (other than an annual general meeting) may be called on not less than 14
clear days’ notice, provided that this authority shall expire at the conclusion of the next annual general meeting of the
Company to be held after the date of the passing of this resolution or, if earlier, on the expiry of 15 months from the
date of the passing of this resolution.
By Order of the Board
Apex Fund and Corporate Services (UK) Limited
Company Secretary
27 March 2023
RegisteredOce:
6th Floor
125 London Wall
London EC2Y 5AS
(Company number: 12986255)
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Notes for the Annual General Meeting
1. A member entitled to attend and vote may appoint a proxy or proxies to attend, speak and vote instead of him or her.
A proxy need not be a member of the Company but must attend the meeting in person but must attend the meeting
in person for the member’s vote to be counted. The appointment of a proxy will not preclude a shareholder from
attending and voting in person at the Annual General Meeting or at any adjournment thereof.
A form of proxy is enclosed which, if used, must be lodged at the Company’s Registrars, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY not less than 48 hours (excluding non-working
days) before the Annual General Meeting. Alternatively, you can appoint a proxy electronically by visiting www.
eproxyappointment.com. You will be asked to enter the Control Number, the Shareholder Reference Number and PIN
which are printed on the form of proxy or contained within the email sent to you. To appoint more than one proxy,
you may photocopy this form. You may appoint a person other than the Chair as your proxy. Please indicate the
proxy holder’s name and the number of shares in relation to which they are authorised to act as your proxy (which, in
aggregate, should not exceed the number of shares held by you).
Please also indicate if the proxy instruction is one of multiple instructions being given. All forms must be signed and
should be returned together with any power of attorney or other authority under which it is signed, or a notarially
certied or oce copy of such power of attorney in the same envelope.
Members who wish to revoke or change their proxy instructions should submit a new proxy appointment using the
methods set out in these Notes. Any amended proxy appointment or revocation received after the relevant cut-o time
for receipt of proxy appointments may be disregarded. If a member submits more than one valid proxy appointment,
the appointment received last before the latest time for the receipt of proxies will take precedence.
2. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the
names of the joint holders appear in the Company’s Register of Members in respect of the joint holding (the rst named
being the most senior).
3. Pursuant to Regulation 41 of the Uncerticated Securities Regulations 2001, the Company species that to be entitled
to attend and vote at the Annual General Meeting (and for the purpose of the determination by the Company of the
number of votes they may cast), members must be entered on the Company’s Register of Members at close of business
on 21 April 2023. If the meeting is adjourned then, to be so entitled, members must be entered on the Company’s
Register of Members at the time which is 48 hours (excluding non-working days) prior to the adjourned meeting or,
if the Company gives notice of the adjourned meeting, at the time specied in that notice. Changes to entries on the
Company’s Register of Members after that time shall be disregarded in determining the rights of any person to attend
and vote at the Annual General Meeting.
4. A “vote withheld” option is provided on the proxy form to enable a shareholder to instruct their proxy not to vote on
any particular resolution. It should be noted that a vote withheld in this way is not a vote in law and will not be counted
in the calculation of the proportion of the votes “For” or “Against” a resolution.
5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so for the Annual General Meeting to be held on 25 April 2023 and any adjournment(s) thereof by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those
CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service
provider(s), who will be able to take the appropriate action on their behalf.
6. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST
message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK and Ireland
Limited (“CRESTCo’s”) specications and must contain the information required for such instructions, as described
in the CREST Manual. The message, in order to be valid and regardless of whether it constitutes the appointment of
a proxy or an amendment to the instruction given to a previously appointed proxy, must be transmitted so as to be
received by the Company’s agent ID (3RA50) by the latest time for receipt of proxy appointments specied above. For
this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message
by the CREST Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in
the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should
be communicated to the appointee through other means.
159
CREST members and, where applicable, their CREST sponsors or voting service providers should note that CRESTCo
does not make available special procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has
appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and
timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the
Uncerticated Securities Regulations 2001.
7. If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a
process which has been agreed by the Company and approved by the Registrar. For further information regarding
Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 12:00noon on 21 April 2023 in order to
be considered valid. Before you can appoint a proxy via this process, you will need to have agreed to Proxymity’s
associated terms and conditions. It is important that you read these carefully as you will be bound by them and they
will govern the electronic appointment of your proxy.
8. Any person to whom this Notice is sent who is a person nominated under Section 146 of the Companies Act 2006
(the “Act”) to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the
shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a
proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish
to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the
exercise of voting rights. The statements of the rights of shareholders in relation to the appointment of proxies in
the Notes above do not apply to a Nominated Person. The rights described in those Notes can only be exercised by
registered shareholders of the Company.
9. As at 27 March 2023, being the latest practicable date prior to the publication of this notice, the Company’s issued share
capital was 422,498,890 ordinary shares carrying one vote each. No ordinary shares were held in treasury. Therefore,
the total voting rights in the Company on that date was 422,498,890.
10. In accordance with section 319A of the Act, the Company must cause any question relating to the business being dealt
with at the meeting put by a shareholder attending the meeting to be answered. No such answer need be given if (i) to
do so would interfere unduly with the preparation for the meeting, or involve the disclosure of condential information;
(ii) the answer has already been given on a website in the form of an answer to a question; or (iii) it is undesirable in the
interests of the Company or the good order of the meeting that the question be answered.
11. A person authorised by a corporation is entitled to exercise (on behalf of the corporation) the same powers as the
corporation could exercise if it were an individual shareholder of the Company. On a vote on a resolution on a poll,
if more than one authorised person purports to exercise a power in respect of the same shares: (i) if they purport
to exercise the power in the same way as each other, the power is treated as exercised in that way; or (ii) if they do
not purport to exercise the power in the same way as each other, the power is treated as not exercised. To be able
to attend and vote at the meeting, corporate representatives will be required to produce prior to their entry to the
meeting evidence satisfactory to the Company of their appointment. Corporate shareholders can also appoint one or
more proxies in accordance with Note 1.
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12. Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under
section 527 of the Act, the Company may be required to publish on a website a statement setting out any matter
relating to: (i) the audit of the Company’s accounts (including the Auditor’s report and the conduct of the audit) that
are to be laid before the Annual General Meeting; or (ii) any circumstances connected with an Auditor of the Company
ceasing to hold oce since the previous meeting at which annual accounts and reports were laid in accordance with
section 437 of the Act. The Company may not require the shareholders requesting any such website publication to pay
its expenses in complying with sections 527 or 528 of the Act. Where the Company is required to place a statement on
a website under section 527 of the Act, it must forward the statement to the Company’s Auditor not later than the time
when it makes the statement available on the website. The business which may be dealt with at the Annual General
Meeting includes any statement that the Company has been required under section 527 of the Act to publish on a
website.
13. Any person holding 3% or more of the total voting rights of the Company who appoints a person other than the Chair
of the meeting as their proxy is to ensure that both they and their proxy comply with their respective disclosure
obligations under the UK Disclosure Guidance and Transparency Rules.
14. Copies of the letters of appointment of the Directors of the Company and existing Articles of Association will be
available for inspection from the Company Secretary during normal business hours (excluding weekends and public
holidays) until the date of the Annual General Meeting and, on the date of the Annual General Meeting, at the location
of the meeting from 11.45 am until the conclusion of the meeting. The Company Secretary can be contacted at
ukfundscosec@apexfs.com.
15. The Annual Report incorporating this Notice of Annual General Meeting, the information required by section 311A of
the Act and, if applicable, any members’ statements, members’ resolutions or members’ matters of business received
by the Company after the date of this notice, will be available on the Company’s website at www.vh-gseo.com/investors.
16. Members may not use any electronic address provided either in the Notice of Annual General Meeting or any related
documents to communicate with the Company for any purpose other than those expressly stated.
Designed and produced
b
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www.blackandcallow.com
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020 3794 1720
