Enabling
the energy
transition
VH GLOBAL SUSTAINABLE
ENERGY OPPORTUNITIES PLC
Annual Report and Accounts
For the year ended 31 December 2023
Annual Report and Accounts 2023
2
4 Overview
4 About GSEO
6 Introducing the Investment Manager
7 Highlights
8 Portfolio at a Glance
10 Timeline of Key Milestones
12 Strategic Report
12 Chair’s Statement
16 Investment Manager’s Report
26 GSEO Business Model & Strategy
32 GSEO Structure & Investment Policy
36 GSEO Investments
44 Key Performance Indicators
46 Stakeholder Engagement
49 Principal Risks & Uncertainties
57 Going Concern and Viability Statement
58 Sustainability
58 Approach to Sustainability
67 2023 Sustainability Highlights
68
2023 Sustainability Impact & Performance
76
Community Engagement Case Study
78
Climate Related Financial Disclosures
94 Governance
94 Introduction
95 Meet the Board
96 Directors' Report
102 Corporate Governance Statement
108 Report of the Audit Committee
112 Directors' Remuneration Report
117 Report of the Nomination Committee
120 Management Engagement Committee Report
121 Statement of Directors' Responsibilities
122 Financial Statements
123 Independent Auditor’s Report
130 Statement of Comprehensive Income
131 Statement of Financial Position
132 Statement of Change in Shareholders’ Equity
133 Statement of Cash Flows
134 Notes to the Financial Statements
156 Alternative Performance Measures
158 Additional Information
159 SFDR – Annex V
168 Glossary
170 Shareholder Information
172 Notice of Annual General Meeting
178 Company Information
3
Investment
company with a
specialist mandate
to support the
global energy
transition
VH Global Sustainable Energy Opportunities plc (“GSEO” or the
“Company”) is an investment company that provides exposure to
a globally and technologically diversied portfolio of sustainable
energy infrastructure assets that support the UN Sustainable
Development Goals (“SDGs”) and are essential for the global
transition towards net zero.
ABOUT GSEO
Annual Report and Accounts 2023
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Overview
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The Company aims to achieve diversication principally
by making a range of sustainable energy infrastructure
investments across (1) a number of distinct geographies
and (2) a mix of proven technologies, that align with the
UN 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
may 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 in the development phase.
No investment is made in projects involving the
extraction of fossil fuels or minerals.
GSEO is a closed-ended investment company and an
approved UK investment trust, launched in February
2021 by way of listing on the premium segment of the
London Stock Exchange’s Main Market. GSEO is classied
as an SFDR Article 9 Fund.
The Company is overseen by an independent Board of
non-executive Directors and managed by Victory Hill
Capital Partners LLP (“Victory Hill”).
5
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
INTRODUCING THE INVESTMENT MANAGER
Image from left to right: Eduardo Monteiro (Chief Investment Ocer), Michael Egan (Chief Financial Ocer & Head of Risk Management),
Lawrence Bucknell (General Counsel & Chief Compliance Ocer), Navin Chauhan (Chief Commercial Ocer), Richard Lum (Chief Investment Ocer).
Experienced and
focused leadership
Victory Hill’s experienced team brings decades of knowledge
and practice dedicated to energy nance and investment.
The Investment Manager is 100% owned by its ve
co-founders, who have focused on shaping the business in
pursuit of long term value for their clients. With a multitude
of nationalities and languages spoken within the wider team,
Victory Hill has a highly skilled and diverse team focused
on taking the necessary approach to sustainable energy
investing, with localised insight and understanding.
Annual Report and Accounts 2023
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Overview
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HIGHLIGHTS
Financial (for the full year ended 31 December 2023)
NAV per share as at
31 December 2023*
116.46p
31 Dec 22: 108.20p
Total annualised NAV
return since IPO (Feb 2021)*
10.0%
31 Dec 22: 7.8%
Dividend per share
declared for FY 2023
5.56p
31 Dec 22: 5.13p
Total annualised NAV
return for FY 2023*
14.5%
31 Dec 22: 7.6%
% of revenues contracted
and ination-linked
>90%
31 Dec 22: >90%
Total leverage of GSEO
as a % of NAV as at
31December 2023
1.9%
31 Dec 22: 3.0%
Dividend target
for FY 2024
5.68p
31 Dec 22: 5.52p
Net Asset Value as at
31 December 2023
£483.8m
31 Dec 22: £457.2m
844,434 MWh
Clean energy generated
and injected into the grid
31 Dec 22: 35,117 MWh
19,332t
Tonnes of sulfur
oxides displaced
31 Dec 22: 20,613
t
312,750
Approximate equivalent UK
homes powered annually by
clean energy
31 Dec 22: 9,000
122,530t
Tonnes of carbon dioxide
equivalent avoided
31 Dec 22: 14,349
t
Dividend coverage as at
31 December 2023*
1.1x
31 Dec 22: 1.4x
*Alternative performance measures are dened on pages 156 and 157.
Sustainability
7
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
26 assets, 5 technologies,
4 jurisdictions
PORTFOLIO AT A GLANCE
Australian solar
PV and battery
storage assets
Brazilian solar
PV assets
Brazilian
hydro facility
UK flexible power
with carbon capture
and reuse assets
CASE STUDY P.40
CASE STUDY P.40
CASE STUDY P.42
CASE STUDY P.38
US terminal
storage assets
CASE STUDY P.36
Annual Report and Accounts 2023
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Overview
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Deployed
Cash
AU
10.6%
Cash
5.7%
USA
24.9%
UK
21.9%
Brazil
36.9%
Delayed
Committed, not deployed
24.9%
32.9%
1.9%
2.0%
7.7%
2.9%
15.7%
5.7%
6.2%
Portfolio by geography and deployment
US terminal storage assets
UK flexible power with CCR assets
Cash
5.7%
USA
24.9%
UK
21.9%
Brazil
36.9%
Solar PV & battery storage
Brazilian solar PV assets
Brazilian hydro facility Cash
24.9%
12.2%
24.7%
10.6%
21.9%
5.7%
AU
10.6%
Portfolio by geography and technology
USD
GBP
Construction
15.8%
Cash
5.7%
Operational
58.0%
Committed,
not deployed
20.5%
BRL
AUD
24.9%
29.9%
6.2%
5.1%
3.2%
2.9%
1.9%
15.7%
4.5%
5.7%
Portfolio status by deployment and currency
Australian solar
PV and battery
storage assets
Brazilian solar
PV assets
Brazilian
hydro facility
UK flexible power
with carbon capture
and reuse assets
CASE STUDY P.40
CASE STUDY P.40
CASE STUDY P.42
CASE STUDY P.38
US terminal
storage assets
CASE STUDY P.36
as at 31 December 2023
9
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
2022
2023
2021
April 2021
Commitment to operational
US terminal storage programme
March 2023
Completion of construction of
one Brazilian solar PV asset
February 2021
IPO (£243m)
February 2023
Declaration of interim dividend of 1.38p per
ordinary share with respect to the period
from 1 October 2022 to 31 December 2022,
an increase of over 10% vs. the prior quarter
May 2021
Commitment to
Brazilian solar PV programme
October 2022
15-year CO
2
offtake agreement
signed for UK flexible power plant
Agreement to acquire
& build three solar PV sites
in New South Wales, Australia
December 2022
Acquisition of a 198MW operational
Brazilian hydro facility
£
TIMELINE OF KEY MILESTONES
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Overview
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September 2023
Share buyback programme
announcement (up to £10m)
August 2021
Commitment
to Australian solar PV
with BESS programme
September 2021
Commitment to UK flexible
power with CCR programme
July 2023
Completion of construction
of the first hybrid solar and
storage project in Australia,
within the Australian solar PV
with battery storage
programme
December 2021
Share placing (£70m)
Commitment to expansion
of US terminal storage
programme (site 2)
June 2022
Share placing
(£122m)
September 2022
Completion of construction
of three assets within the
Brazilian solar PV programme
May 2022
Completion of construction
of six Brazilian solar PV assets
Commitment to a second UK flexible
power with CCR asset
£
%
%
October 2023
Mechanical completion of
the solar farm component
of the 3 New South Wales
sites in Australia
11
STRATEGIC REPORT SUSTAINABILITY GOVERNANCEOVERVIEW FINANCIAL STATEMENTS
On behalf of the Board, I am pleased to present
the Company’s Annual Report for the year ended
31 December 2023.
The year under review has been dened by macroeconomic, regulatory, and
political uncertainties. Rising interest rates, persistent ination, and conict in the
Middle East and Ukraine shaped the turbulent market backdrop in 2023.
However, this challenging market backdrop has reinforced the diversication
attributes of GSEO. The Company's portfolio oers investors access to a diversity
of technologies and geographies, which provide an inbuilt hedge against
overreliance on single energy market declining trends or technology supply chain
issues. Furthermore, over 90% of the assets in the portfolio are underpinned
by ination
-linked, private revenue contracts providing the portfolio with high
visibility of returns supporting the progressive dividend for shareholders.
In the midst of all these challenges that 2023 has brought, the Company’s unique
strengths and market-enduring features enabled its cash ow generation to
remain robust, leading to dividends being fully covered.
CHAIR’S STATEMENT
“In the midst of all these
challenges that 2023 has
brought, the Company's
unique strengths and
market‑enduring features
enabled its cash ow
generation to remain robust”
Bernard Bulkin
Bernard Bulkin
Chair
Annual Report and Accounts 2023
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Strategic Report
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Financial performance
The Company has achieved robust nancial
performance throughout the period under review.
This has been a year of building value in the
portfolio. The portfolio is now 58% operational and
by early 2025, this current portfolio is expected
to be fully operational. As additional assets under
construction become operational, GSEO should
benet from further capital growth and cash ow
generation from investments.
The Company’s net asset value (NAV) per share was
116.46p as at 31 December 2023, an increase of
7.6% from the previous year. As at 31 December
2023, the Company has achieved a 10% annualised
NAV total return since IPO including dividends,
which is in line with the Company’s target total
return.
Cash received from the portfolio assets by way of
distributions, which includes interest and dividends
paid to VH GSEO UK Holdings Limited (“GSEO
Holdings”), the Company’s holding company,
was £29.3m during the year (2022: £28.8m). The
Company’s prot before tax for the year was £55.3m
(2022: £28.2m), resulting in earnings per share
of 13.14p (2022: 7.67p per share). The Company
generated during the period returns of 14.5% of
opening NAV when taking into account dividends
and capital growth.
As at 31December 2023, the Company remains one
of the lowest geared investment trusts in its sector
with total leverage at 1.9% of NAV.
The Board rmly believes the discount to NAV at
which GSEO’s shares trade materially undervalues
the Company. As part of an active capital allocation
policy, buybacks represent an attractive investment
opportunity and the Board announced a £10m
buyback on 15 September 2023. The Board
consistently considers the Company’s capital
allocation policy in relation to the discount that
GSEO shares trade on, noting that buybacks are
NAV per share accretive at wide discounts. The
discount persisted post-period which we believe
is largely due to investor sentiment towards the
sector as a whole following the reversal of low
interest rates. As such, post period end, the Board
extended the programme by a further £10m to a
total of £20m as it believes this to be in the best
interest of shareholders whilst also balancing the
need to maintain a strong balance sheet. As the
interest rate environment becomes clearer and
rates start to fall, we expect investor interest to
return to the sector, and, specically to GSEO, due
to the strong fundamentals and compelling long-
term investment strategy GSEO oers.
Dividend
The Company has a progressive dividend policy,
and is proud to have increased its dividend again,
while remaining fully covered. The Company
announced a dividend of 1.42pper share with
respect to the period from 1October 2023 to
31December 2023, an increase of 2.9% vs. the prior
quarter. This brings the total dividend declared
for the nancial year ending 31December 2023 to
5.56p per share, exceeding the dividend target of
5.52pper share.
The Company is targeting a dividend of 5.68p in
total for 2024, 2.9% higher than the dividend target
for FY2023.
Investment activity and portfolio
performance
The Company continues to focus on taking
advantage of the energy transition by 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.
During the year under review, the Company’s
investment activities and updates included:
Australian solar and battery storage
programme:
•
The completion of the construction of the rst
solar and storage hybrid system in Australia,
through the addition of a two hour 4.95MW
battery energy storage system (“BESS”).
•
The commissioning of the solar farm component
of the three New South Wales sites. Installation
works for the co-located BESS have commenced
and the sites are expected to be hybridised
within the year.
Brazilian solar PV assets:
•
The completion of the tenth solar site, which
brought the total operational capacity of the
Brazilian sites to 27.3MW.
•
The construction of three of the remaining six
sites is progressing well, with commissioning
expected within H12024. Construction of the
remaining three sites will commence upon
completion of the three sites currently under
construction.
Brazilian hydro facility:
•
The Brazilian facility outperformed expectations
in the period.
13
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
•
Furthermore, SUDENE (Superintendency for
Development of the Northeastern Region) tax
incentives were secured for a further eight years
to 2032.
United Kingdom exible power and carbon
capture and reuse programme:
•
The project successfully won the UK’s Capacity
Market Auction T-4 at a price of £63/kW/year
indexed to ination.
•
Following the issues faced by the project’s
incumbent EPC contractor in Q2 2023, the
Company hired a new EPC contractor to
complete construction, and the need to complete
the civil works at the project site resulted in
a payment of additional premia, leading to
an overall increase in CAPEX of £16m for the
project. Despite this increase, the Investment
Manager still expects returns to be in line with
original expectations, due to rmer expectations
for additional revenue streams of the project.
•
My fellow Board member Margaret and I visited
the site in November 2023, and we were highly
pleased with the progress. All equipment was on
site and the works were advancing well towards
the expected commissioning of the integrated
plant with CCR slated for the summer.
United States terminal storage programme:
•
The assets continued their strong performance
since acquisition in April 2021, through execution
of the buy, expand and optimise strategy.
Shareholder engagement and
corporate governance
The Board and the Company constantly aim to
improve the dialogue with shareholders and
steps have been taken to enhance disclosure
and detail of communication, as well as support
marketability and liquidity of the shares, through
active engagement with existing and prospective
investors. The Board, the Investment Manager and
the Company’s broker remain available to engage
with shareholders as appropriate.
The Board and I were delighted to welcome Daniella
Carneiro to the Board of GSEO in January 2023 as
an independent non-executive Director, bringing
extensive experience advising governments and
companies on how to integrate ESG principles into
business practice.
The Board was pleased to announce the appointment
of Richard Horlick as the Senior Independent Director
with eect from 1 January 2024. Richard joined the
Board as a non-executive Director in October 2020,
and is the Chair of the Management Engagement
Committee and a member of the Audit, Nomination
and Remuneration Committees. Richard has had
a long and distinguished career in the investment
management industry holding executive roles in
a number of global nancial institutions as well as
being a seasoned board member in the closed-end
listed funds sector.
Sustainability and ESG
GSEO qualies as an Article 9 fund under SFDR.
As at 31 December 2023, 51.2% of the Company’s
investments were aligned with EU Taxonomy
economic activities. The disclosures related to TCFD,
SFDR and the EU taxonomy can be found on pages
78 and 159 of this report.
The fund is a leader in sustainable investing. It is
unique in selecting investments on sustainability
criteria which meet target returns, and
diversication both in geography and technology.
Threeyears following the IPO of GSEO, thanks
to our shareholders, we are already making a
real dierence to communities in Brazil, bringing
cleaner fuel for Mexico, and enhancing grid stability
in Australia.
As a stronger focus is put on supply chain
transparency and traceability, as well as
transparent reporting, the Investment Manager
has sophisticated data infrastructure tools allowing
ecient monitoring of the sustainable impact of
its investments and the ability to report accurately
on metrics such as carbon emissions avoided,
renewable energy generated and life cycleanalysis.
Outlook
We are witnessing early signs that nancial
markets are entering a new phase with ination
cooling and an easing interest rate outlook. These
macroeconomic green shoots, coupled with the
underlying strengths of the Company, lead the Board
to look forward to the year ahead with condence.
GSEO is well-positioned to capitalise on these
positive developments, with a strong pipeline of
investment opportunities already identied by the
Investment Manager.
The Investment Manager is actively pursuing
activities to maximise shareholder returns, and
the Board continues to monitor the share price
discount to NAV.
I and my fellow Directors would like to thank all
shareholders for their continued support.
Bernard Bulkin
Chair
4April 2024
CHAIR’S STATEMENT CONTINUED
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Strategic Report
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
15
FINANCIAL STATEMENTS
Eduardo Monteiro Richard Lum
Co-Chief Investment Ocers
INVESTMENT MANAGER’S REPORT
“e Victory Hill approach to investing
relies on the belief that the energy
transition to net zero is a global
phenomenon much akin to the industrial
revolution in its scale, depth and wide
ranging signicance.”
Richard Lum
Market backdrop and outlook
The outlook for sustainable energy investment remains very
robust with attractive opportunities widely available, despite
the challenging macro environment in 2023.
Over 2023, we have witnessed a recovery from the pandemic
slump in economic activity, and constraints to energy systems
caused by the global energy crisis precipitated by the invasion
of Ukraine by Russia. The recovery has provided a signicant
boost to the ongoing electrication of our energy systems
globally, and to investments in clean energy as a key subset
of this shift. According to the estimates of the IEA in their
World Energy Investment 2023 report, annual clean energy
investment is expected to have risen much faster than
investment in fossil fuels over the period since 2021.
Annual Report and Accounts 2023
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Strategic Report
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The IEA estimates that full year investments in
the energy sector will account for US$2.8 trillion
in 2023, of which more than US$1.7 trillion will
be invested in clean energy, including renewable
power, nuclear, grids, storage, low carbon fuels,
energy eciency schemes and electrication. Such
investments will be bolstered by a range of factors
including the introduction of the Ination Reduction
Act in the US and improved economics for clean
energy projects.
Despite benign conditions for sustainable energy,
globally the wider infrastructure sector did get
aected by a higher interest rate environment
in 2023 which impacted reported NAVs and
also added pressure on cash ows available for
distribution in investment companies with high
leverage in their portfolios. This has seen knock
on eects on the investability of some large-scale
projects in the clean energy space, particularly
those backed by long term government related
taris and subsidies.
Inationary pressures were indeed a major factor
in 2023, however it seems clear that we have
now witnessed a topping out of ination with UK
ination down to 4% in December 2023, falling
from its height of 11% in October 2022. Whilst not
completely out of the system, it is fair to say that
there may be greater optimism that the higher-for-
longer mantra may be overstating the medium-
term picture. We anticipate this will likely lead to
greater investor condence in the infrastructure
space during the course of 2024, with further
capital able to be raised for deserving clean energy
projects globally.
The approach
The Victory Hill approach to investing relies on
the belief that the energy transition to net zero is
a global phenomenon much akin to the industrial
revolution in its scale, depth and wide-ranging
signicance. Such a shift creates dislocations in
each energy market throughout the world. We
term this dislocation a structural demand gap in
that energy market, which we aim to ll through
our asset investments, consequently achieving a
dierentiated return and making an impact. During
the course of 2023, we witnessed several energy
markets in which GSEO is invested demonstrating
behaviours which point to structural demand gaps.
In Australia, the rst of our hybridised solar plus
battery storage assets came onstream in Q3 2023,
and set about capturing attractive pricing in peak
demand hours in the evening in South Australia.
At the heart of the Company's strategy is the
motivation to provide investors with access to long
term infrastructure cashows underpinned by an
array of diversied technologies and geographies.
This provides shareholders with embedded
downside risk protection, as well as the ability
to achieve dierentiated returns by targeting
structural demand gaps in some of the world's
most liberalised energy markets.
To enable this, the Company enters into joint-
venture agreements with local energy developers
or operating partners, each of whom have unique
insights into local energy markets as well as
proven technical and commercial experience of
developing, constructing and operating sustainable
energy projects. Furthermore, all operating
partners dedicate their professionals, comprising a
headcount of over 100 globally, to managing GSEO’s
projects.
GSEO’s portfolio was designed to ensure minimal
exposure to interest rates through involving no
structural debt at fund level, and minimal gearing at
the assets themselves. Currently, aggregate gearing
of 1.9% at fund level (via 7.5% gearing at our US
terminal storage asset) has ensured that the higher
interest rate environmental has had no discernible
impact on our portfolio performance. Furthermore,
as all of the revenue contracts of our assets are
ination-linked, the higher inationary environment
has owed into higher revenues for our assets,
ensuring that our portfolio as a whole has not been
negatively impacted.
As a result of this unique approach, the higher
ination environment was positive for the portfolio
as all the long-term contracted cashows in the
portfolio are linked to local ination, with no caps
or collars. Such long-term revenues and the strong
cashow generation underpin the GSEO portfolio.
GSEO’s transparent valuation methodology relies
on inputs extracted from independent and publicly
available sources, such as the risk-free rate,
ination assumptions and country risk premia,
which ultimately result in accurately reecting the
current market environment. The Company has
also not changed its asset life assumptions in its
valuation of assets since IPO.
17
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
INVESTMENT MANAGER’S REPORT CONTINUED
The treasury function was also eectively managed
with interest on deposits helping mitigate any cash
drag during the period.
Performance summary
Active asset management, robust operational
performance and the persistent supply-demand
imbalance in some of the key underlying
geographies were key themes throughout the year
which drove the upward NAV revision in 2023.
2023 has been a year of building value in the
portfolio. Construction challenges in Brazilian solar
PV assets and the UK exible power plant have
been overcome and despite some higher costs
suered, future returns are expected to be in line
with the original target. This is a result of careful
investment processes and built-in contingencies, for
example, performance bonds and a well-resourced
and experienced team with strong in
-house legal
and nancial capability. The portfolio is now 58%
operational and by early 2025, this current vintage
of investments will be fully operational.
In Brazil the Company’s operational hydro and
distributed solar sites captured a segment in the
market requiring further investment to ensure
that Brazil’s need for exible power and upgraded
remote generation is best served. In the UK, we are
making headway in the construction of our rst
exible gas-red power plant with carbon capture
and reuse, ensuring that the demands for exible
power in the UK system, as well as the structural
short supply for puried food grade CO
2
, can be
met.
Outlook
Moving forward into 2024, our outlook is shaped
by the consequential abatement of the higher
inationary conditions of the last 18 months and
greater policy support for clean energy investment,
combined with the continuing occurrence of
structural gaps we have already identied in
liberalised energy markets as they undertake the
transition. In the rst few months of 2024, we have
already witnessed greater openness in the cross-
border trade between the US and Mexico, driven by
the upcoming elections in both countries, which has
had a positive eect on volumes received by our US
terminal storage assets. We expect greater impetus
to be given to opportunities for our midstream
presence in the US with the Ination Reduction Act’s
support for low-carbon fuels such as biofuels and
sustainable aviation fuels, each of which requires
the buildout and repurposing of fuels storage and
transportation infrastructure.
In the UK, the 2023 winter has demonstrated the
continuing requirement for exible forms of power
generation, as often renewable power supply at
peak hours is hampered by lower wind and solar
yields, resulting in the continuing need for the
system operator to call on conventional sources of
power such as gas, and indeed coal. We foresee this
trend continuing well into other seasons in 2024,
and being present for our UK investment to harness
as it comes onstream later in the year.
We rmly believe the opportunity to create value
and impact through investments in sustainable
energy infrastructure globally has not diminished
over time. Indeed the Company’s pipeline of
new opportunities remains robust and is only
constrained by its ability to raise further capital to
deploy into new investment programmes.
Annual Report and Accounts 2023
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Strategic Report
18
INVESTMENT UPDATES
Brazilian solar PV assets:
•
During the period under review,
the construction of the tenth site
was completed bringing the total
operational capacity to 27.3MW.
These ten sites supply energy
to creditworthy commercial and
industrial energy users and large
multinational corporations with
operations in Brazil. The average
length of these contracts is 20 years
and linked to local ination.
•
One of the project’s EPC contractors
faced nancial diculties during
the period, which required the
Company to halt delivery of two of
the sites that were initially intended
to be relocated. As a result of this, a
provision had been recognised for
these assets for £4.5m.
•
Together with the operating partner,
Victory Hill acted decisively in nding
a replacement EPC contractor to
nalise the six remaining projects
in an orderly manner – three of
which are expected to be completed
in H1 2024, bringing the portfolio
total installed capacity to 40.5MW.
Construction for the last three sites
will commence upon completion
of the three sites that are currently
under construction.
•
The programme remains on track to
deliver returns above the Company’s
target total NAV return of 10% once
fully completed.
Brazilian hydro facility:
•
During the period, the operating
partner, Paraty, successfully
completed the full transition of
operations from the vendor, EDP, at
a lower cost than anticipated and in a
shorter than expected time frame.
•
The Company successfully
implemented value creation eorts
and was notably able to secure tax
incentives for a further eight years, as
well as optimise operating costs.
•
The Investment Manager continues to
assess the market to implement our
value-creating commercial strategy
for the uncontracted volumes from
2027 onwards. The volatility of the
PPA market in Brazil oers windows
of opportunity to secure attractive
terms in the long-run. Victory Hill
is seeing positive signs with recent
improvements in PPA prices that
have been low due to unusual high
levels of rain in the Southeast region
of the country.
•
On the sustainability front,
community engagement initiatives
were conducted in preparation to
obtain the International Hydropower
Association Sustainability Standard
certication in 2024. Events such as
sh monitoring and a transportation
study were conducted, awareness
workshops as well as environmental
education events were held for the
local community and employees.
The ISO 45001 health and safety
management system certication, as
well as the ISO 14001 environmental
management certication and ISO
9001 quality management system
certication, were successfully
renewed.
US terminal storage assets:
•
The Company continued to perform
operational optimisation initiatives
during the period such as reducing
overtime expenses and enhancing
operational software and equipment
to automate the terminals’
operations:
–
Temporary workers were
contracted as permanent sta,
resulting in lower overtime worked
and better labour conditions.
–
New oces were added to one of
the sites to enhance management,
training operations, and safety
oversight.
•
The programme’s operating partner,
Motus, has initiated the process to
obtain ISO 45001 health and safety
management system certication
as well as ISO 14001 environmental
management certication on its
operations, leading to safer and
improved operational practices.
Investment updates
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
19
FINANCIAL STATEMENTS
Australian solar PV with battery storage assets:
•
The Australian programme is comprised of ve
sites. In Q3 2023, the Company delivered on time
and on budget one of the rst hybrid solar and
battery energy storage systems (“BESS”) in South
Australia, by adding a two hour 4.95MW BESS.
•
Following the completion of this project, the
solar and storage hybrid system captured
attractive power prices in the intraday market.
In November 2023, the average captured price
for BESS was over A$200/MWh, which is 4 times
higher than the average captured prices for solar
during the same period.
•
The programme was further expanded with
three new assets in New South Wales (NSW).
The solar farm component of these three sites
completed commissioning post-period and
became operational.
•
Installation works for the co-located BESS, on
the three new assets in NSW, commenced
post-period and the sites are expected to be
hybridised within the next 12 months. It is
expected that the assets will be able to derive
further value from the structural supply-demand
gap Australia is facing as it transitions to a
cleaner energy system.
UK exible power with CCR asset:
•
During the period under review, construction
continued on this asset with all equipment
already on site. Key project partners include Rolls
Royce, Mitsubishi Turboden, Climeon, Asco, Axpo
and Buse Group.
•
As part of our commercialisation strategy
of securing long-term contracted cash ows
pre-completion, the project successfully won the
UK’s Capacity Market Auction T-4 at a price of
£63/kW/year indexed to ination.
•
As previously highlighted, the incumbent EPC
contractor faced nancial diculties last year
as a result of the challenging macroeconomic
conditions for the construction industry, notably
high ination, high interest rates and supply
chain disruptions. Following such issues, Victory
Hill alongside the operating partner acted quickly
to identify and hire a new EPC contractor to
complete construction. The situation with the
incumbent EPC contractor has also served as a
good test of Victory Hill’s joint-venture model,
with local operating partners on-the-ground
able to proactively identify potential issues and
mitigate further project delays.
•
The replacement contractor needed to complete
the civil works at the project site resulting in
a payment of additional premia and led to
an overall increase in CAPEX of £16m for the
project. However, the Investment Manager
still expects returns to be in line with original
expectations despite this increase, due to rmer
expectations for additional revenue streams of
the project.
INVESTMENT MANAGER’S REPORT CONTINUED
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20
The performance of the portfolio has largely been
dened by its operating assets in the period.
The acquisition of the Brazilian hydro facility was
completed in December 2022. The period ended
31 December 2023 has seen the rst full year
of operations under the Company’s ownership.
With the successful transition of the asset by the
operating partner, nancial performance in the
period has exceeded expectations.
The rst full year of operations of the Brazilian solar
PV assets is reected in an increased generation in
the period. Energy production has however come
in behind expectation as the assets ramp up to full
production.
The operational performance of the two operational
Australian sites has been impacted due to the
implementation of the BESS on the Mobilong site
and substation works on the Dunblane site which
resulted in a network outage for 1month.
The US terminal storage expansion was completed
in December 2022. The period ending 31December
2023 saw the rst full year of operation at
the expanded site. These assets benet from
ination
-linked availability contracts and are
situated in a key aggregation hub in South Texas for
Mexico-US cross-border product movements.
Portfolio operational and nancial performance
Portfolio outlook
Based on the underlying free cash ow generation
of the portfolio programmes, dividend coverage is
expected to be 1.1 to 1.2 times in 2024 rising and
strengthening further in subsequent years.
At the heart of the Company's strategy is the
motivation to provide investors with access to long
term infrastructure cashows underpinned by an
array of diversied technologies and geographies.
This provides shareholders with embedded
downside risk protection, as well as the ability
to achieve dierentiated returns by targeting
structural demand gaps in some of the world's
most liberalised energy markets.
Revenue contracts in the portfolio have been
entered into with long tenors, often over 15 years,
with creditworthy otakers. As demonstrated in
the graph below, contracted revenues account for
over 90% of the total revenues in the portfolio,
with uncontracted revenues relating mostly to the
Australian solar and battery storage programme,
where we seek to benet from market dynamics
related to a disorderly market transition to net zero.
Summary of operational & nancial performance
31December 2023
Programme:
Brazilian
hydro facility
Brazilian solar PV
assets
Australian solar
PV with battery
storage assets
US terminal
storage assets
UK exible
power with
CCR assets
Number of
operational assets
1 10 2 2 0
Number of assets
under construction
0 6 3 0 1
Production/throughput 789,654 MWh 41,602 MWh 19,227 MWh 12,831,553 bbls N/A
Revenues
(GBPm)
28.59 2.07 1.46 18.64 N/A
Average revenue
per production unit
(expressed in GBP)
36.20 49.65 75.79 1.45 N/A
Note: The production, revenues, and average revenue per production unit reect assets under operation as at 31 December 2023 only.
The FX rate used for revenues is as at 31 December 2023. The energy production gure for the Brazilian solar PV assets represents the total
generation that was invoiced to the clients; it is directly related to the revenue generated by the assets. The energy production gure for the
Brazilian hydro facility represents the total gross generation.
21
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
INVESTMENT MANAGER’S REPORT CONTINUED
Expected revenue analysis
120
100
80
60
40
20
-
100%
80%
60%
40%
20%
0%
Contracted (LHS)
Uncontracted (LHS) Percentage Contracted
Revenues (millions GBP)
Percentage Contracted
2024 2026 2028 2030 2032 2034 2036 2038
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22
Highly contracted portfolio with credit-worthy counterparties
Programme Key Otaker(s) PPA Term Asset Life
Brazilian
solar PV assets
20 years 25 years
Brazilian
hydro facility
More than 30 PPAs with
blue-chip utilities counterparties
– e.g.
EDP
up to 15 years 25 years
US terminal
storage assets
3 years rolling 30 years
UK exible power
with CCR assets
15 years 25 years
Australian solar
PV with battery
storage assets
Local Australian utilities –
e.g.
Diamond Energy
Targeting contracted revenues
of up to 50% – the remainder is
intentionally left as merchant
to capture the peak margin
opportunity in Australia
25 years
Note: Asset Lives: since acquisition/commercial operational date (“COD”)
PMI is a 100% subsidiary of PEMEX
23
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Net Asset Value
NAV Bridge for the year ended 31 December 2023 (£’m)
-
50
100
150
200
250
300
350
400
450
500
-6.5
-0.5
-1.9
64.2 483.8
457.2
-23.3
-5.4
Increase Decrease Total
Opening NAV at
31/12/2022
Dividends paid
Share buyback
Fund expenses
Movements in
working capital
Fair value movement
& distributions from
investments
FX on investments
Closing NAV
at 31/12/2023
£26.4m*
*£26.4m represents distributions from investments
NAV (£'m)
The NAV of the Company increased from £457.2m
at 31 December 2022 to £483.8m at 31 December
2023. The total NAV return including reinvestment
of dividends in the nancial year is 14.5%. Since IPO,
the total NAV return at 31 December 2023 is 10.0%.
The key NAV drivers for the period under review
were:
•
A net increase in the fair value of investments
and distributions from investments of £64.3m.
•
Discount rates dropping during the period under
review, driven by lower risk-free rates, ination
outlook, and lower Brazil country risk premium.
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 eect
on any other assumption, and that the number
of investments in the portfolio remains static
throughout the modelled life.
Discount rate
A range of discount rates are applied in calculating
the fair value of the investments, considering risk
free rates, country-specic and asset-specic risk
premia and betas. Discount rates for operational
assets at 31 December 2023 are 6.9% in the US,
7.7% in Australia, 9.5% for the Brazilian hydro
facility and 9.7% for the Brazilian solar PV assets. A
1.5% increase (decrease) in discount rates across
the portfolio decreases (increases) NAV by 10.42p
(8.34p).
INVESTMENT MANAGER’S REPORT CONTINUED
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24
NAV per share sensitivity
Discount rate
(+1.5%/-1.5%)
Inflation
(-1.0%/+1.0%)
Operating expenses
(+5.0%/-5.0%)
FX
(+10.0%/-10.0%)
Asset life
(-1 yr/+1 yr)
(8.34)p
−7.17%
10.42p
8.95%
(6.25)p
−5.37%
7.31p
6.28%
(1.95)p
−1.67%
1.94p
1.67%
(1.23)p
−1.06%
1.18p
1.01%
(7.15)p
−6.14%
8.74p
7.50%
Ination
The sensitivity assumes a 1% increase or decrease
in long-term ination relative to the base case of
1.6% for the US assets, 2.4% for the Australian
assets and 3.0% for the Brazilian assets for each
year of asset life. A 1.0% increase (decrease)
in ination rates across the portfolio increases
(decreases) NAV by 7.31p (6.25p).
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 1.95p
(1.94p).
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 ination-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 7.15p (8.74p).
Asset life
The sensitivity assumes a 1 year increase or
decrease in asset life relative to the base cases of 30
years for the US terminal storage assets, 25 years
for the Australian solar PV with battery storage
assets, Brazilian solar PV assets and Brazilian hydro
facility. A 1 year increase (decrease) in asset lives
across the portfolio increases (decreases) NAV by
1.18p (1.23p).
Resource sensitivity
The portfolio has little resource risk sensitivity given
the availability based nature of the US terminal
storage assets, the base load generation prole 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.
25
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Business model at
a glance
GSEO BUSINESS MODEL & STRATEGY
A unique investment model…
— We don’t aim to tie investments
to sustainability; rather we start
with sustainability and look for
investments
— Our investments always meet
a structural demand gap in the
local energy markets
— We create value for shareholders
and a clear impact for the
environment and society by
targeting assets that can be
optimised and/or expanded
…that supports the energy
transition from all angles…
— Geography: The energy transition
is a global phenomenon that
needs to be tackled globally.
GSEO invests across jurisdictions
around the world, creating a highly
diversied portfolio
— Technology: GSEO’s investments
go beyond just core renewables
and target a diverse range of
proven sustainable energy
technologies in order to play
a part in the global transition
towards net zero
— Investment Stage: To accelerate
the transition, the Company
focuses on both the construction
of new assets as well as the
acquisition of operational assets
1 2
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26
4
…creating a clear
environmental and
social impact…
— The UN SDGs are the blueprint
for driving GSEO’s sustainability-
focused investment strategy, and
creating a positive environmental
and social impact as one of the
core investment decision criteria
— Auditable monitoring framework
to assess such impact
— GSEO is classied as an Article 9
fund under the EU Sustainable
Finance Disclosure Regulation
(“SFDR”)
…while generating
sustainable and attractive
nancial returns
— NAV target return of 10%
unlevered and net of the
Company’s costs and expenses
— Consistent annual dividend
growth since IPO, supported
by a progressive dividend policy
which aims at increasing dividends
each year
— Portfolio revenues oer
predictability, with more than
90% of revenues contracted
— Assets in the portfolio have
a signicantly high degree of
ination linkage, protecting
real returns
3
27
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
GSEO BUSINESS MODEL & STRATEGY CONTINUED
GSEO investment model
Investment pathways
Opportunity-specic UN SDGs
Investment decision gates
ree core criteria
Climate
change
Energy
access
Energy eciency 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
1
Meet a structural
demand gap
2
Ability to optimise and/
or expand the asset
3
Positive environmental
and social impact
1
2
3
£
Annual Report and Accounts 2023
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Strategic Report
Meet a structural
demand gap
Positive environmental
and social impact
Ability to optimise
and/or expand the asset
THREE CORE PRINCIPLES
FOR INVESTMENT
DECISIONS
•
Deep expertise of energy
market dynamics
•
Ability to relativise markets
globally and regionally
•
Developers with specic
insight into demand gaps
•
Long term asset
commercialisation strategy
•
Value creation adapting to
changing market environment
•
Programmatic approach
with developers
•
In-house sustainability expertise
•
Independent sustainability
due diligence
•
Auditable monitoring framework
to assess impact
29
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
GSEO BUSINESS MODEL & STRATEGY CONTINUED
Investors
Benet from both income
and capital growth
Communities
Immediate social benets
within the communities where
assets are located – such
as job creation
Operating partners
Opportunity to bring
additional projects to an
existing programme
Environment
Immediate positive
environmental impact,
helping to accelerate the
energy transition
10% p.a.
Target total NAV return
p.a. unlevered and net of costs
and expenses, for GSEO
shareholders
VH’s strategy and business activities result in:
844,434 MWh
Clean energy generated and
injected into the grid equivalent
to c.312,750 UK homes powered
annually approximately
5.56p per share
2023 dividend,
progressive for
GSEO shareholders
122,530 tonnes
CO
2
e avoided equivalent to
removing c.63,000 average sized
UK cars from the road per year
$
+
Benets
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30
GSEO
joint-venture model
Joint-venture model which levers multiple local operating partners
with unique insights in local energy markets
Key advantages
•
Long-term alignment of incentives with the
Operating Partner
•
Partnership with highly skilled developers with
specic insights into an energy market and institutional
execution abilities
•
Access to pipeline of projects developed by those partners
•
Ecient deployment over a tangible pipeline
reducing cash drag
•
No upfront development premium but conversion
of development costs in a stake in the JV
•
Reduced operational risk with dedicated
on-the-ground attention to the assets enabling
a thorough value creation process
Operating partners
5 established operating partners
Local presence
>100 people dedicated to
operating GSEO’s assets
Addressed global energy markets
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE
31
FINANCIAL STATEMENTS
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 that support the pursuit and
attainment of the United Nations Sustainable
Development Goals (the “SDGs”) 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
Eciency, 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 renement 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 and/or
shareholder loan instruments. In certain 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
Manager, and with the aim of trying to ensure that
the investment is managed in a manner that is
consistent with the Investment Policy.
Diversication
The Company aims to achieve diversication
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.
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;
GSEO STRUCTURE & INVESTMENT POLICY
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32
•
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 Ocial
List.
No investments are made in extraction projects for
fossil fuel or minerals.
Non-compliance resulting from changes in the price
or value of 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
RNS 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 dened in the ‘Guidelines
on a Common Denition 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 certicates 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
dened 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 specic
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.
Use of derivatives
The Company may enter into hedging transactions
for the purposes of ecient 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 sucient asset-level
returns to compensate for longer term uctuations
in exchange rates. Furthermore, asset level returns
where possible will be linked to local ination rates.
33
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 Investment
Manager 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 ecient 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
notied to HMRC. If a change to the investment
policy is material for the purposes of the AIFM
Rules, the Investment Manager 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 aairs
in compliance with sections 1158/1159 during
the year ended 31 December 2023 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 eectiveness of
these policies. These requirements, which may
apply to the Company's investments, do not apply
to the Company as it has no employees, all the
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 satised 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
sustainability are set out on pages 58 to 66.
Diversity
As at 31 December 2023, the Board comprised
three 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 conformed with the gender
and ethnic diversity targets during the year under
review. See pages 118 and 119 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.
GSEO STRUCTURE & INVESTMENT POLICY CONTINUED
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35
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
e case for sustainable
liquid storage assets in
the US
GSEO INVESTMENTS
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36
Q: Why did you decide to invest in these assets and how do they
contribute to support the energy transition?
Fundamentally, this investment seeks to make a positive sustainability
impact on the Mexican fuels value chain. We decided to invest in the
US terminals as their location provides a fuel aggregation point that
facilitates 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 more abundant and technologically
advanced rening capacity in the United States, which can turn the
“dirty” fuels from Mexican reneries into cleaner products.
It is important to remember that Mexico still burns high sulfur content
fuels in its transportation sector and for its energy generation industry,
resulting in the creation of signicant Particulate Matter (PM) 2.5 air
pollution and causing respiratory and health problems, particularly
in conurbation areas such as Mexico City. 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, SO2, and NO2 emissions.
Q: Since acquisition, what have you done to create additional
value?
We have expanded the storage capacity by 370,000 bbls, increased
the volume throughput by adding capabilities to oer 24/7 operations,
extended existing tenants’ contracts at higher rates, optimised ancillary
services revenues, reduced costs by modernising the operations’
hardware and software, improved internal controls and procedures,
and added asset-based leverage, among other initiatives.
Q: What are the expected returns for this programme and what is
this number conditional upon achieving?
Based on the current contractual arrangements, we expect the
returns from this project to remain in excess of GSEO’s target total
NAV return. We expect to see additional uplift by culminating the
terminals expansion and further optimising the commercial terms and
operations of the terminals.
Q: What is the future of this asset?
First we would like to use the available land within the terminals to add
more storage capacity. We would also like to improve the operation
capabilities to speed up the loading and unloading operations and
increase the volume throughput.
In the longer term, the tanks we hold can be retrotted to store
greener fuels such as renewable diesel, and sustainable aviation fuel
(SAF).
Q: Are investors exposed to hydrocarbons by having this asset in
the portfolio?
No, there is no commodity exposure. The terminal benets from
availability-based otake agreements.
In conversation with Richard Lum,
Victory Hill Managing Partner and co-CIO
Programme overview
In April 2021, GSEO completed the acquisition
of two operating liquid storage terminals with
a total combined capacity of 525,000 barrels in
the Port of Brownsville on the Texas gulf coast,
for a total purchase price of US$63m. The sites
have a useful life of at least 30 years, and the
operating partner is Motus Energy LLC, which
combines the team that built and operated
the assets for the previous owner and an
established cross-border fuel exporter. Since
acquisition, the capacity of the terminal has
been expanded to 895,000 barrels.
Operating partner overview
Motus Energy LLC is a US midstream specialist
company formed by a team which combines
the team that built and operated the VH liquid
storage assets for the previous owner that
have 25 years’ average experience in investing,
constructing and operating midstream
infrastructure assets globally. Motus support
the energy transition by participating in the
decarbonising process of high sulfur fuels by
facilitating its storage to be then processed into
lighter and cleaner fuels by modern reneries
in the US and by developing new midstream
infrastructure with the intention to store and
distribute transition fuels such as renewable
diesel and sustainable aviation fuel.
37
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
e case for exible power
with carbon capture and
reuse (CCR) in the UK
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Programme overview
In the UK, we have chosen to contribute to the
energy transition by supplying reliable baseload
power without adding to carbon emissions.
In 2021, GSEO completed its acquisition of a
10MW exible power project under construction
in Nottinghamshire, uniquely combined with
carbon capture and reuse (“CCR”) technology.
Commissioning of the integrated plant with
CCR is expected over the summer. Since
acquisition, a 15-year power otake 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 otake agreement for
food-grade CO
2
was also signed on attractive
terms with an industrial gas specialist group.
Additional revenues can be sourced from grid
ancillary services such as balancing mechanism
and capacity market; and additional margin can
be captured via private wire to local industrial
users. This programme is being funded without
public subsidy or government support.
Operating partner overview
Landmark Power Holdings (LMPH) was
established in 2019 by UK power industry
veterans with the purpose to help to
build a circular economy, by applying new
methodologies to proven technologies in energy
production. LMPH supports the transition
to net zero by supplying dispatchable, low
carbon energy that enables more renewable
energy production while contributing to a
circular economy, by eliminating ineciencies
in production, ensuring that every input is
used to its maximum potential and treating
all production waste as a protable resource.
LMPH develops, builds and operates
decarbonised exible power plants, that helps
bridge the gap between conventional and
greener energy solutions by providing essential
support for increasing levels of renewable
power.
Q: Could you explain how this program contributes to the energy
transition in the UK and why such technologies instead of wind or
solar?
This exible power and carbon capture and re-use programme
allows us to supply reliable exible power into the grid, solving for
intermittency issues that come with renewable power generation (such
as solar and wind) in a net zero manner.
Q: What is so unique about this project?
The project is uniquely positioned to solve for two issues facing the
decarbonisation of industry in the UK. Firstly, the gas red generators
are able to provide exible power into the grid to help rm the grid
in a net zero way, as its CO
2
emissions are captured and repurposed.
The provision of exible power services is important in the UK given
the success of renewable power penetration in the energy mix from
the rollout of wind and solar projects. This has resulted in the fact that
intermittency and grid frequency stabilisation are becoming much
more of an issue for the system operator. When the wind doesn’t blow
or the sun doesn’t shine, the system’s supply and demand dynamics
fall out of kilter, which may result in price spikes and the potential for
curtailed supply and indeed trips on the system.
Secondly, the captured CO
2
is scrubbed into puried food grade CO
2
,
which can then be commercialised via sales to the industrial gases
market, where CO
2
is seen as a precious industrial commodity, used
in the food and beverage manufacturing chain. Currently, there is a
structural shortage of food grade CO
2
produced locally in the UK, as we
have seen the closure of major producers of ammonia in the country.
The project therefore provides a replacement supply, and one that is
produced with a much smaller emissions footprint than the traditional
manner of production.
Q: How could this asset be repurposed in the future if needed?
The project utilises gas red power generation units, which can
transition to utilising net zero biomethane fuel sources and potentially
hydrogen fuel sources in the future.
In conversation with Richard Lum,
Victory Hill Managing Partner and co-CIO
39
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
e case for the Brazilian
renewable energy market –
hydropower and distributed
generation (DG) solar plants
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40
Q: What are the attractions of investing in the Brazilian renewable
energy market?
Brazil is a growing economy that needs energy to enable the country to
full its potential. Previous Brazilian administrations have successfully
implemented a robust regulatory framework that attracts private
investors who continue to fund the expansion of Brazil’s power, which
is crucial in enabling the country’s economic growth. With a unique
characteristic of having a very wide and diverse hydropower network,
Brazil stands out as a market with great potential for renewable energy.
Hydropower has natural storage properties enabling intermittent
sources such as renewable energy to be eciently added to the grid.
Q: What are the risks in Brazil and how do you mitigate them?
As an emerging market, Brazil is more exposed to volatile economic
cycles, with potential for high ination and political instability. As
foreign investors, we need to also consider the volatility of the
Brazilian currency versus the GBP. We believe that these risks are
largely mitigated by: i) our focus on energy investments, as energy
consumption tends to be robust regardless of cycles, ii) ination
linkage on all otake contracts providing protection against high
ination and also against depreciation of the Brazilian currency, and
iii) Brazil’s long track record as a recognised democracy with strong
independent institutions.
Q: How do you expect the share of Brazil in your total portfolio to
evolve?
We are satised with the current share and we will seek to maintain or
reduce our exposure to Brazil as we continue to pursue opportunities
in other markets.
Q: What makes the Brazilian hydro market so unique?
Brazil has one of the world’s largest hydrological resources and
hydropower generation continues to have systemic importance
in the country’s energy mix. Hydropower plants provide a reliable
and continuous source of clean energy for a power system with a
continuously growing demand and rapid penetration of intermittent
renewables. 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 consortium benet 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.
Q: Can you tell us more about the programme of remote
distributed power generation in Brazil?
Brazil has the largest power market in Latin America, with total
installed capacity of 225 GW in 2023. The country’s size, plentiful
resources and conducive policies have made Brazil the region’s
main renewable energy market and one of the top ten in the world.
Brazil’s renewable energy potential is still in its infancy. With regards
to distributed generation, the Brazilian government implemented a
regulatory framework favouring smaller scale power generation assets
by allowing them to directly contract with end users that are captive to
the local utilities and pay the much higher retail taris. This is done via
a contractual arrangement between private parties. Distributed power
plants can be located remotely within an entire distribution network,
and they can provide full credits to end users in their energy bills.
In conversation with Eduardo Monteiro,
Victory Hill Managing Partner and co-CIO
Programme overview
I –A Brazilian hydro facility
In 2022, GSEO acquired a 198MW run-of-river
hydropower plant from EDP Group. The facility
is located in the state of Espírito Santo, has been
operational since 1974 and went through a
major repowering in 2011. The plant ownership
was awarded under a concession framework
with four years remaining from previous cycle
and renewal for another 20 years thereafter.
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 to assess their quality of operation
and has recently ranked this facility as a top
10 hydro plant in Brazil. This facility benets
from a portfolio of over 30 long-term ination-
linked PPAs with creditworthy counterparts in
the regulated utilities market. It also has the
potential to commercialise power with large
energy consumers in the self-consumption
segment of the energy market.
II – 16 Brazilian solar PV assets
In 2021, GSEO committed $63m to fund the
construction of remote distributed solar
generation projects across 10 Brazilian states.
The investments stem from long-term PPAs
with investment grade corporates such as
a large multinational telecommunication
company. On average, these contracts have
a maturity over 20 years, are ination-linked,
and are not dependent on any government
subsidies. Three further sites are expected to
become operational by H1 2024, bringing the
total number of operational sites to 13. The
construction of the remaining three sites are
expected to be completed by the end of 2024.
Operating partners' overview
Paraty Energia, the operating partner for the
Brazilian hydro facility, is an energy developer
specialised in the Brazilian power market,
combining years of project nance experience
with strong capabilities in operations, energy
trading and regulatory advisory services. They
have a team of engineers, and traders that
oversee the operation of GSEO’s hydro facility.
Energea, the operating partner of the Brazilian
solar PV assets, is a global developer of
distributed solar PV assets. Its founders have
accumulated years of experience in the solar
segment, rst by developing distributed
generation sites in the US for large retail
players. They have entered the Brazilian
market, attracted by the unique regulatory
framework enabling the construction of
distributed generation solar PV assets that can
commercialise the power at retail taris, with any
otaker connected to the local utilities’ networks.
Energea has a team of experienced project
managers on the ground that oversee GSEO’s
solar PV assets and provide O&M services.
41
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
e case for distributed
solar PV and battery
energy storage systems
(BESS) in Australia
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42
Programme overview
In 2021, GSEO committed £50m in Australia
to implement distributed solar PV and battery
energy storage system (BESS) hybrid projects
with the Company's operating partner,
Birdwood Energy, a team of energy specialists
with an experienced track record of delivering
renewable power generation and battery
projects globally. GSEO acquired two operating
distributed solar PV generation assets in South
Australia and Queensland, totalling 17MW,
and subsequently added in Q3 2023 a 2-hour
BESS to hybridise one of the assets in order to
enhance its commercial potential. The Company
also acquired three ready to build sites in New
South Wales of 4.95MW each and reached
mechanical completion of the sites’ solar farm
component in Q3 2023. A 2-hour BESS addition
to each of the three sites is expected to be
completed by Q4 2024.
Operating partner overview
Birdwood Energy is an Australian specialist
developer and manager in the renewable sector
which works to scale projects for investment,
accelerate deployment and integrate batteries,
as well as investing into businesses supporting
the sector. Birdwood has developed a
A$2billion portfolio. Birdwood was founded
by energy storage and renewables experts
who over the last 25 years have built and led
investments and energy businesses across
Australia, Europe, US, Asia and Africa. Its team
comprises decades of investment, technical,
development, construction and operating
experience in the local market. Distributed
energy is dicult for investors to access, with
lots of small developers and companies. This
sector however requires signicant investment
at scale in order to achieve our net zero targets.
Distributed energy should be able to full ~60%
of the world's future energy supply. It will be the
lowest cost, most secure and cleanest energy
system.
Q: What is so unique about the Australian energy market and how
does this represent an opportunity for GSEO and its shareholders?
There is a structural supply/demand gap in Australia that needs to be
addressed to solve the grid’s issues of balancing supply and demand
for dependable and clean power throughout the day.
The rst wave of renewable power generation in Australia was
focused on the need to achieve scale and reducing the cost of energy
production. The extent to which these have been successfully achieved
in a relatively short space of time has conversely created additional
issues for the transmission network, including the fact that the grid is
struggling to accommodate a large volume of intermittent generation
entering the system, and consequently this has slowed the follow-on
growth of renewable energy deployment at the point when the country
needs it to increase in order to further displace coal.
As the country is going through a disruptive transition, there is an
opportunity for GSEO to capture value by providing clean energy
though distributed solar PV and BESS hybrid assets.
Q: Why invest in c.5 MW projects and not larger scale projects?
The portfolio is aggregating distribution network-connected assets
which represent the best value for investment, avoiding curtailment
risk from the congestion on the already stressed high voltage network
and providing further relief in a system already stressed. The operating
partner also implements a portfolio enhancement/commercialisation
strategy to take advantage of the price volatility.
With a 2-hour BESS, the assets can take advantage of the market
volatility from time shifting of the solar PV output as well as capturing
upside through energy arbitrage and other grid service revenues.
Q: How is the operating partner for this asset incentivised?
For all our programmes, construction, operation and maintenance is
overseen by a specialist local operating partner and the value creation
incentives are aligned with them through a prot share which is paid
out in the event the project meets a certain hurdle rate.
In conversation with Richard Lum,
Victory Hill Managing Partner and co-CIO
43
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
KEY PERFORMANCE INDICATORS
Financial KPIs
NAV per share growth
+7.6%
Denition
NAV divided by number of shares outstanding as at
31 December 2023.
Commentary
The NAV has increased to 116.46p since 31 December 2022
(31 December 2022: 108.2p). Alternative performance
pershare measures are dened on pages 156 to 157.
Annualised total NAV return since IPO
(February 2021)
10.0%
Denition
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
on an annualised basis.
Commentary
Total return reects continued underlying delivery to
shareholders (31 December 2022: 7.8%). Alternative
performance measures are dened on pages 156 to 157.
Dividend per share
5.56p
Denition
Aggregate dividends declared per share in respect of the
nancial year.
Commentary
The Company’s target was to pay a dividend of 5.52p
per share in respect of the year to 31 December 2023 (31
December 2022: 5.13p). With the declaration of the interim
dividend of 1.42p per share on 22 February 2023, the total
dividend for 2023 is 5.56p per ordinary share.
Ongoing Charges Ratio
1.4%
Denition
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's ongoing charge ratio was in line with the
previous year (31 December 2022: 1.30%). Alternative
performance measures are dened on pages 156 to 157.
Total NAV return for the year
14.5%
Denition
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 reects continued underlying delivery to
shareholders (31 December 2022: 7.60%). Alternative
performance measures are dened on
pages 156 to 157.
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44
Operational KPIs Climate-related KPIs
Largest three investment programmes
as a proportion of NAV
59.8%
Denition
Value of the three largest investment programmes divided by
the NAV at period end.
Commentary
The three largest investment programmes are the US terminal
storage assets, Brazilian solar PV and the Brazilian hydro facility
(31 December 2022: 54.50%).
Largest investment programme
as a proportion of NAV
24.9%
Denition
Value of largest investment programme divided by NAV
at period end.
Commentary
The largest investment programme within the
Company’s portfolio is the US terminal storage assets
(31 December 2022: 23.20%).
Total avoided carbon emissions
(tonnes CO
2
e)
122,530
Denition
A measure of our success in investing in projects that have a
positive environmental impact and reduce energy usage.
Commentary
The portfolio’s total avoided emissions in tCO
2
e from displacing
fossil fuel derived electricity (31 December 2022: 14,349),
equivalent to removing about 63,000 (31 December 2022: 7,000)
average sized cars from UK roads.
Weighted average carbon intensity
per $1m invested (tonnes CO
2
e / $m)
42
Denition
Portfolio’s exposure to carbon-intensive companies, expressed
in tonnes CO
2
e/$m revenue.
Commentary
The calculation covers operational scope 1 and 2 emissions
(31December 2022: 65). Emissions from assets under
construction are not factored into the calculations.
Total renewable energy generated and
injected into the grid (MWh)
844,434
Denition
Underlying portfolio energy generated from renewable assets
in MWh.
Commentary
The portfolio’s generation for 2023 in MWh (31 December
2022: 35,117), equivalent of the annual electricity use of
approximately 312,750 (31 December 2022: 9,000) UK homes.
45
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 benet 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 benet 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 dierent in that as an investment
trust it has no employees and, in terms of suppliers, it receives
professional services from a number of dierent providers,
principal amongst them being the Investment Manager.
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 eective.
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
below.
Key decisions made during the year
Share buyback programme
The Board continually evaluates the optimum capital
allocation strategy for the Company balancing the need to
maintain a strong balance sheet in order to support existing
portfolio assets alongside further investment opportunities
and returning capital to shareholders via dividends or
share buybacks. In recognition of the discount at which the
Company’s share price was trading relative to its NAV per
share and its impact on shareholder returns, on 15September
2023 the Company announced a share buyback programme
(the “buyback programme”) for up to £10m. Post period
end, on 22 February 2024 the Company announced an
increase in the buyback programme by an additional £10m
bringing the total buyback programme to £20m. The buyback
programme is expected to be accretive to NAV per share, as
well as oer additional liquidity for the Company’s underlying
shares. Details of the shares repurchased under the buyback
programme are set out on page 97.
Board changes
Ms Carneiro was appointed as a non-executive Director of the
Company on 18 January 2023. Details of her appointment were
included in the Company’s 2022 Annual Report.
As announced by the Company on 11 December 2023, the
Board appointed Mr Horlick as the Senior Independent
Director of the Company with eect from 1 January 2024. In
line with the AIC Code of Corporate Governance, the Board
considers that this appointment would provide a sounding
board for the Chair, serve as an intermediary for the other
Directors and shareholders, and also act as an alternative
engagement channel to the shareholders and other key
stakeholders.
Change of Alternative Investment Fund Manager
During the year under review, the Board replaced G10 Capital
Limited, the AIFM of the Company since the IPO, with Victory
Hill Capital Partners LLP. Further disclosures regarding the new
AIFM Agreement with Victory Hill are included on page98.
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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
Manager 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 sucient information to understand
the risk/reward balance to which they are exposed by investing in the
Company. The methods of engaging with shareholders include:
Publications
The Annual and Interim 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 Interim Reports, the investor presentations made by the Investment
Manager 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, share buybacks 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 Manager are available to discuss issues aecting the Company
and answer any questions. 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 Manager, 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.
Shareholder concerns
Shareholders wishing to communicate directly with the Board or the
Investment Manager to raise any issues or concerns, should contact the
Company Secretary at the registered oce address. The Chair, Senior
Independent Director 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 prole 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 Manager. The results of these meetings are reported to the
Board as part of the formal reporting undertaken by both the Investment
Manager and the Broker. The details of substantial shareholdings in the
Company are included in the Directors’ Report on page 97.
47
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Stakeholder Importance How the Company engages
Investment
Manager
The Investment
Manager’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 Manager is crucial to promoting the
long-term success of the Company in an eective and responsible way.
Representatives of the Investment Manager 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
Manager, 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 Manager and
they recognise that the long-term health of the Investment Manager is in
the interests of shareholders as a whole.
The Board, through the Management Engagement Committee, keeps the
ongoing performance of the Investment Manager under continual review
and conducts an annual appraisal to consider its terms of engagement.
Details regarding the continuing appointment of the Investment Manager
are set out on pages 99 and 120.
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 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 equity
funded allowing for ecient asset acquisition. Once assets have been
acquired and are operational, the Investment Manager, through its
extensive international network of funding partners, may seek the most
ecient debt funding on a non-recourse basis.
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 sustainability
is set out in the Sustainability section of the report.
STAKEHOLDER ENGAGEMENT CONTINUED
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48
PRINCIPAL RISKS & 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 eectively managed as they develop and recorded in the risk matrix.
The Directors are focussed on the risk presented to the Company by the discount to NAV being high for reasons not under the
Company's control. Given the market conditions, the Company has been unable to raise additional funds for investments to
drive further growth and diversication in the portfolio. At the same time the Directors are focussed on the Investment Manager
managing the Company's liquidity. Some risks in relation to current investments have been considered by the Directors to be
relatively low and well managed: demand, usage and throughput, and meteorology. These have been removed from the list below
this year. A great deal of work has been completed on climate change scenarios and more detail is given on physical and transition
risks below.
Information about the Company’s internal control and risk management procedures are detailed in the Corporate Governance
Statement on pages 106 and 107.
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
Manager
The Company relies on the
Investment Manager for the
achievement of its investment
objective.
The Company relies on the
Investment Manager for the
achievement of its investment
objective.
The departure of some 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
manager 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 eect on
the performance of the
Company’s NAV, revenues
and returns to shareholders.
The Investment Manager consists of
ve managing partners supported
by ve investment professionals. The
total Investment Manager personnel
is 15, which includes the Investment,
Finance, Sustainability, Compliance Data
Analytics and Investor Relations teams. A
collegiate approach is taken to investment
management 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 Manager 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 Manager and makes
a recommendation on the continuing
appointment of the Investment Manager to
the Board.
The initial term of the investment
management agreement is 5 years (ending
in February 2026).
49
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 eect
on the Company’s NAV,
revenues and returns to
shareholders.
The Investment Manager and 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
eect on the Company’s
protability, the NAV and the
price of the shares.
Investments are held for the long-term.
The Company enters into hedging
arrangements for periods up to 12 months
to hedge against short-term currency
movements.
Currency risk is taken into consideration at
time of investment.
The movement in NAV attributable to
currency movements is disclosed to
investors each quarter with the NAV update.
Liquidity risks Risk that sucient cash funds
are not in place in order
to meet commitments for
investment, dividends, buy-
backs of shares and ongoing
fund costs.
Risk that unexpected calls are
made on investments.
The fund is investing in a mixture of
operating and construction assets.
Operating assets have the benet of
providing cash ows.
The Investment Manager provides an
annual budget to the Board for approval.
Performance vs budget is monitored on a
quarterly basis by the Investment Manager
and the Board.
The Investment Manager monitors liquidity
of the Company vs forecast investment,
dividend and share buy-back commitments.
Liquidity is represented in cash, money
market investments and xed term
deposits.
The Investment Manager is exploring
options for project level debt facilities and
fund level debt facilities. Until the Company
is fully deployed into a diversied pool of
assets, fund level debt facilities are limited.
At this early stage in the Company’s life
it has cash reserves originating from the
proceeds of equity issuances. Therefore,
given the investment pipeline, investment
limits and dividend considerations, liquidity
is not constrained.
In the case of share buy-backs to manage
share price discount vs. NAV, the ultimate
buy-back is subject to sucient funds
to pay dividends, market conditions and
Board discretion. Liquidity constraints will
be considered before share buy-backs are
undertaken.
PRINCIPAL RISKS & UNCERTAINTIES CONTINUED
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50
Risk Description of Risk Risk Impact Mitigation
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
dicult 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 Manager and the Board will
monitor the position on a regular basis.
Market conditions Market conditions may delay
or prevent the Company
from making appropriate
investments that generate
attractive returns.
The actual return to
shareholders may be
materially lower than the
target total return.
A pipeline of investments has been
identied and is constantly being
refreshed. The senior management team
at the Investment Manager have extensive
experience in executing strategies similar to
that of the Company.
The Company is invested across a number
of investment programmes and assets
that generate returns in line with the fund
projected returns.
Concentration risk Concentration risk in
relation to exposure to
individual sustainable energy
infrastructure investments,
technology and geography.
Targeted returns may
be materially negatively
impacted if those sustainable
energy infrastructure
investments, geographies
and/or technologies, do
not deliver the returns
anticipated by Victory Hill.
Limits are set out in the Investment Policy to
mitigate concentration risk.
The Company has a very broad mandate.
This risk should be mitigated as the
Company increases in size.
At the time of making investments,
concentration risk is taken into
consideration.
The Investment Manager will monitor
exposures and the position will be regularly
reviewed by the Board.
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 commitments.
Failure to complete
projects in accordance with
expectations could adversely
impact the Company’s
performance and shareholder
returns.
The Investment Manager 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 Manager seeks to utilise EPC
contractors that can provide single point,
lump sum turnkey arrangements wherever
possible.
The Investment Manager monitors
construction carefully and reports
frequently to the Board where issues with
contractors arise, the Investment Manager
has the experience and expertise to identify
and contract with alternative contractors.
51
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
protability or valuation of
the investment.
The senior management team at the
Investment Manager have extensive
experience in executing strategies similar to
that of the Company.
Where appropriate, due diligence
conducted by the Investment Manager is
supplemented, for example, by independent
legal, tax, accounting, commercial and
technical advisers.
Counterparty risks Counterparties defaulting on
their contractual obligations
or suering an insolvency
event.
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 eect
on the Company’s NAV,
revenues and returns to
shareholders.
Due diligence on counterparty risk is
performed before entering into projects and
counterparty risk is monitored on a regular
basis.
Uninsured loss
and damage
The risk that an investment
may be destroyed or suer
material damage, and the
existing insurances may not
be sucient to cover all the
losses and damages.
The actual return to
shareholders may be
materially lower than the
target total returns.
An independent insurance adviser is
appointed for each project to review project
risks in conjunction with the Investment
Manager 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, aected
investments may not receive
any compensation or only
limited compensation.
Extensive due diligence is performed on
each project before investment.
The Investment Manager constantly reviews
curtailment risks.
Commodity
price risks
The operation and cash ows
of certain investments may
depend 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 mitigates 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.
ESG risks Material ESG risks may arise
such as health and safety,
unfair advantage, bribery,
corruption and environmental
damage including climate
related risks.
If the Company fails to adhere
to its ESG commitments this
could result in shareholder
dissatisfaction and adversely
aect the reputation of the
Company.
ESG is embedded in the investment cycle
with a formal ESG matrix including a
minimum target ESG score required for
approval of any new investments.
Ongoing operational and construction ESG
risk management is reviewed periodically by
the Investment Manager, who work closely
with service providers on ESG and impact
standards reporting.
PRINCIPAL RISKS & UNCERTAINTIES CONTINUED
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52
Risk Description of Risk Risk Impact Mitigation
4. Risks relating to the Company’s shares
Discount to NAV The share price may not
reect the underlying NAV.
Discount management
provisions being unable
to be satised may result
in a signicant share price
discount to NAV.
Lack of liquidity in the
Company’s shares could
negatively impact on
shareholder returns.
The Board, Broker and Investment Manager
monitor the discount or premium to NAV at
which the shares trade.
The Board, Broker and Investment Manager
actively consider whether share buybacks
can assist with discount management. In
addition, corporate strategies are actively
considered as and when they arise.
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 diversied
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 Manager ensures that
contracts are not exposed to 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
‘netzero’ carbon emission targets.
The Investment Manager 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 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 Manager monitors the
performance vs. annual budget and KPIs on
a monthly and quarterly basis. On an annual
basis the Operating partners are subject
to an annual performance review across
operational, ESG and nancial KPIs.
The Investment Manager provides quarterly
reports to the Board on asset-level
performance.
53
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Risk Description of Risk Risk Impact Mitigation
Valuation risk Valuation of the portfolio of
assets is based on nancial
projections and estimations
of future results.
Actual results may vary
signicantly from the
projections, which may
reduce the protability 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 Manager. However, if
considered necessary and appropriate, the
Board may appoint an independent valuer.
The Investment Manager has signicant
experience in the valuation of energy assets.
The Investment Manager has a valuation
working group to perform and challenge
valuations. In addition, the Investment
Manager’s Portfolio Risk and Valuation
Committee (“PRV”) reviews and challenges
valuations. The PRV members are
functionally independent from the team
performing valuations.
The Board reviews the valuations provided
quarterly by the Investment Manager.
As part of the annual audit, the External
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 in impacting renewable
output and associated
earnings.
Increased occurrence of
extreme weather events such
as cyclones, storms, ooding,
droughts and heatwaves
causing damage to assets,
disruption to feedstocks,
value chain, outputs and
associated earnings.
These factors could result in
the reduction of output from
assets leading to reduced
income stream. This risk may
increase over the long term
in the absence of climate
mitigation.
The Company is investing in a diversied
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 buer 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.
PRINCIPAL RISKS & UNCERTAINTIES CONTINUED
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54
Risk Description of Risk Risk Impact Mitigation
Abrupt disruptive climate
impacts such as impacts from
ooding, wildre, drought,
extreme heat, or sudden
regulatory actions increasing
over time.
Increase operating
expenditure to recover asset
damage caused by natural
disasters and increase
insurance premium for assets
in high-risk locations.
Throughout the investment decision-making
process, the due diligence process accounts
for climate change risk and impacts.
The Investment Manager 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.
Uncertainty in market
signals take forms in lower-
than-expected power price
reected from imbalance
in abundant intermittent
power supply and market
demand as well as lower than
expected volume throughput
for conventional fuel storage
assets with increased
demand for alternative fuels.
Increase in market volatility
and abrupt and unexpected
shifts in power prices make
nancial forecasts less
reliable on intermittent
renewable energy solutions.
Reduced throughput for
conventional fuels longer-
term with expected shifts
to cleaner and alternative
fuels impacting existing fuel
storage asset revenue ows.
The Company manages this risk through
its diverse portfolio of energy transition
infrastructure assets such as the battery
energy storage systems and its enduring
hydro facility, as well as signing xed price
otaker agreements.
The Company is assessing its longer-
term strategy to adapt storage assets to
accommodate alternative fuels required
for hard to abate transportation including
sustainable aviation fuel, renewable diesel,
marine e-methanol and hydrogen as the
market shifts.
Transition risks Market shifts such as
changing customer behaviour
and substitution of existing
products and services with
lower emissions options
or new technologies may
dampen ability to engage
investors on a broader
portfolio of energy transition
projects than a traditional
renewable focus including
dierent geographies.
The Investment Manager
monitors changes in climate
change policy and assesses
the potential impact and
mitigation strategies.
Increase costs to adopt/
deploy new practices to
transition to lower emissions
technologies, reduction in the
availability of market capital
to invest in some local energy
transition projects.
There is strong public demand for support
of the renewables 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 Investment Manager monitor the
position on a regular basis.
The senior management team at the
Investment Manager has extensive
experience in executing a wide range of
strategies in the energy sector, the team
monitors market shifts and tailor investment
strategies accordingly.
55
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Risk Description of Risk Risk Impact Mitigation
Policy shift may introduce
regulation around climate
change, e.g., increased
disclosure, taxes etc.
Stakeholders' increasing
concerns on business
practice (e.g., supply chain
management, workforce
management and planning)
need to be addressed.
This could increase
cost of doing business
(e.g., higher compliance
costs, increased insurance
premiums, workforce
management and planning),
and
result in reduction in
the availability of capital to
invest in energy transition
projects.
The Company is supportive of the policy
aims of the Disclosure Regulation and will
comply and monitor changes.
The Investment Manager engages with
partners and stakeholders on behalf of the
Company 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’s investment strategy
targeting the energy transition is aligned
with global policy movements on climate
change which would
limit impact.
PRINCIPAL RISKS & UNCERTAINTIES CONTINUED
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Strategic Report
56
GOING CONCERN AND VIABILITY STATEMENT
Going concern
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 Manager, 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 sucient headroom to meet all expected
cash outows 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
2028, 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 Manager 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 conrm 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 pages 49 to
56 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 Manager, 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
4April 2024
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
APPROACH TO SUSTAINABILITY
In 2023 the Company
continued to drive its energy
transition investment strategy
achieving a signicant increase
in renewable energy generation,
displacing more pollutive
energy sources and supplying
clean energy to the grid for
communities and companies
globally. is strategic impact
was coupled with operational
improvements to create
local environmental and
social value.
Eleanor Smith
Head of
Sustainability
(Victory Hill)
Sustainability approach
The Company’s sustainable energy infrastructure investments aim to
support and accelerate the energy transition towards a net zero carbon
world. The investment process uses the UN SDGs as the framework to
achieve these objectives (see page 28).
The SDGs recognise that social and environmental sustainability are
interconnected and mutually reinforcing. They guide the Company’s
asset management actions as much as its investment decision making.
The Company has also committed to implement the UN Global Compact
principles in investment management further aligning actions with the SDGs.
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Sustainability
58
Sustainability is embedded in the Company’s
investment life cycle which brings together a strong
governance framework, rigorous due diligence
processes, third party objectivity, continuous
operational improvement expectations and a
commitment to transparency and accountability.
An external assurance rm is used to verify that
investments are aligned with the six core SDGs and
energy transition objectives. The external assurance
rm also assesses whether the investment “does
no signicant harm” to the other eleven SDGs. They
use a proprietary SDG analysis tool to assess the
investment against underlying SDG indicators. The
external assurance rm also evaluates eligibility,
and completes the technical screening, under the
EU Taxonomy of sustainable economic activities to
achieve alignment.
The Company invests in diverse geographies and
technologies to deliver energy transition strategies
in dierent contexts and with a range of operational
priorities. The Company’s principle-based approach
guides in identifying and managing the positive and
negative changes that result from the Company’s
investments and from its business relationships.
Sustainability governance
The Company’s governance structure and
composition is described in the governance section
of this report (page 103). The highest governance
bodies have responsibility for overseeing
sustainability risks and opportunities and assessing
eectiveness of related actions. The Independent
Company Board of Directors has ultimate oversight
for ESG aspects and sustainability objectives of
investments and has a dedicated board member
with responsibility for ESG and sustainability
issues. They have responsibility for ensuring the
reasonable expectations of shareholders are met
and ensuring where responsibilities are delegated
that objectives are achieved.
The Investment Manager has been appointed by
the Independent Board to advise on investments
and perform asset management activities.
Delegated responsibilities include development
and implementation of sustainability policies and
processes and ensuring necessary resourcing.
Oversight is achieved through several Investment
Manager administered subcommittees which
include the Investment Manager’s Head of
Sustainability as a member.
Portfolio investments committed to
positively contributing to the UN SDGs:
59
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
•
Investment Committee evaluates investment
opportunities and ensures alignment with the
SDG investment policy and inclusion of ESG due
diligence and risk analysis in the investment
process. The committee also provides oversight
for investment stewardship activities, monitors
investment ESG performance, and ensures
actions and priorities are executed.
•
Risk, Operations and Compliance Committee
ensures ESG risks, including climate related
physical and transition risks, are identied
and corresponding controls are considered
and implemented. The management of
environmental and social related risks and
opportunities is integrated into the Company’s
risk management framework.
•
Sustainability Committee advises on ESG
strategy, emerging ESG issues and provides
recommendations on ESG integration into
investment and asset management processes.
This includes target setting, monitoring and
reporting.
The Investment Manager leadership team are
permanent members of the three subcommittees.
Decisions and programme updates are reported to
the Board and Board committees.
Sustainability policy commitments
The Investment Manager’s sustainability policy
and investment policy underlie the Company’s
commitment to sustainable energy investments.
The investment criteria within the sustainability
policy require investments to align operations
with universal principles on human rights, labour
standards, environment and anti-corruption to
advance action on global sustainability goals as
described in the SDGs and UN Global Compact.
Additionally, specic actions on material
environmental and social aspects are identied
through a risk-based approach. Sustainable energy
infrastructure operating partners are required
to report progress monthly on key performance
indicators on material environmental and social
aspects.
The Company has committed to independent
third-party assurance on key ESG metrics that
demonstrate the strategic impact of investments
as well as operational performance. The assurance
scope is described on page 68.
The Investment Manager has responsibility for
ensuring appropriate resourcing. The Head of
Sustainability supports the investment and asset
management teams in embedding sustainability
factors in investment decision making processes.
All Investment Manager employees have
responsibility to ensure the sustainability policy
and the investment decision making process are
implemented and this is reected in individual
performance reviews and remuneration decisions.
Sustainability investment
management
The Investment Manager aims to create additional
environmental and social value through active
management of the investments. Operating
partners are required to have SPE level ESG policies,
associated processes and action plans to manage
and mitigate material operational and value
chain related environmental and social issues.
Actions are identied in an investment specic
sustainable action plan (SAP) which may include
expectations for ESG resourcing, management
system implementation and certication,
stakeholder and community engagement, supply
chain management, target setting and reporting
requirements. Progress against these plans is
reviewed regularly and the plans are updated
annually. Performance against the plan is formally
assessed annually.
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.
APPROACH TO SUSTAINABILITY CONTINUED
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60
Company stakeholders and
business relationships
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
operating partners and suppliers to
ensure quality, reliable and sustainable
assets that deliver on the energy
transition to net zero.
Communities and customers
•
The Company’s energy infrastructure
investments support aordable
energy access.
•
The Company measures and manages
project economic, environmental and
social impacts.
•
The Company is committed to acting
with cultural and local awareness
and integrity.
Employees
•
The commitment, quality and integrity
of Investment Manager sta drives the
Company’s success.
•
The Investment Manager'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 its geographic
footprint 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.
The operating partners have responsibility for
implementing a stakeholder engagement plan
commensurate with operations. The Investment
Manager has developed guidance and tools to
assist operations in stakeholder mapping and
engagement strategies. This approach recognises
the interconnected systems and impacts in dierent
energy value chains.
Investment impacts on the Company’s stakeholders
can be broader than operations. Taking a value
chain view is therefore an important element of the
Investment Manager's ESG risk analysis process and
its eorts to mitigate risks in business relationships.
ESG opportunities, risks and impacts on both
the Company and from the Company’s 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 investment SAP. The SAP is
informed by the external SDG assessment, due
diligence and materiality analysis.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Sustainability and ESG risk analysis
APPROACH TO SUSTAINABILITY CONTINUED
Monitoring, evaluation & reporting
Data collection and analysis of KPIs and targets
to track SAP progress
(Stage: Asset Management)
Annual and periodic sustainability reports
– KPIs and metrics assured externally
(Stage: Asset Management)
Sustainability action plan (SAP)
Sustainability materiality analysis and ESG risk
and opportunity assessment informed by sector
and geographic risks, project specic impacts and
stakeholder mapping
(Stage: Onboarding)
The asset sustainability action plan addressing priority
sustainability risks and opportunities with the aim to create
additional sustainable value through environmental and
community engagement
(Stage: Onboarding)
Origination sustainability analysis
Fund mandate, SDG and
EU Taxonomy eligibility analysis
internal evaluation
(Stage: Preliminary Deal Analysis)
Due diligence questionnaire
covering ESG red ags, do no harm
criteria & ESG risk management and
practices
(Stage: Screening)
External SDG and EU
Taxonomy eligibility evaluation
Investment SDG alignment, life cycle
and value chain analysis
(Stage: Screening)
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62
Materiality analysis
*
Material and systemic issues are assessed to
prioritise ESG risks and impacts related to the
sector of operation, the region and country of
operation as well as specic project attributes.
All assets under management are assessed through
this process.
Material issues relevant for the energy sector and
infrastructure are informed by the International
Finance Corporation performance standards, the
Global ESG Benchmark for Real Assets and the
Sustainability Accounting Standards Board and
Global Reporting Initiative standards.
The regional and geographic risks considered
include those identied by Transparency
International Corruption Perception Index, Freedom
House Freedom in The World Index, Fund for Peace
Fragile States Index, Global Slavery Index, Social
Progress Index and ILO Labour Rights as well as
individual country climate pledges.
Investment specic attributes considered include
the operational proximity to local communities,
indigenous peoples, cultural heritage, ecological
and biodiversity habitats, and operational activities
such as noise, light, water use, discharge and waste.
The stakeholders interacting with the operations
including employees, communities, contractors,
suppliers and customers are considered along with
the operating partner company's resourcing and
ESG management policies and procedures.
Risk and signicance of material issues are
assessed on this basis, accounting for the
probability of impacts and the quality of controls
that the operating partner has in place. The diverse
nature of the portfolio is reected in varied range of
operational priorities.
Systemic issues for the sector include climate
risk and opportunities, energy generation and
operational emissions produced and displaced.
The Company’s approach to these is addressed
in the TCFD report on page 78. The Company
recognises that sustainability topics are naturally
interconnected.
Material topics by asset class
The following table lists the topics and metrics
identied as material by these standards for the
Company’s diverse operations. These have been
adapted following the Company’s analysis of
individual project’s ESG footprint.
This year, the Company also considered the new
IFRS International Sustainability Standards Board
standards in completing this report and included
relevant indicators.
* SASB sustainability topics applicable for midstream, electricity power generators, solar project developers and BESS were
considered for the materiality analysis and not those relevant for manufacturing, grid or non-renewable metrics.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Topic Metric Unit Materiality standard by asset class Page
GHG emissions
and targets
Scope 1
Scope 2
Scope 3
tCO
2
e ISSB/SASB
GRI 305
SFDR indicators
68 & 69
Emissions associated
with power delivery
(avoided)
tCO
2
e SASB – power generators 68
Performance against
targets
Qualitative
analysis
SASB
GRI 305
68
Climate risks and
resilience
Implications, risks and
opportunities due to
climate change
Qualitative
analysis
GRI 201
TCFD
ISSB
78
Air quality GSEO investments to
not emit pollutants
NA SASB – midstream 71
Reported avoided for
terminal storage
Tonnes GRI 305 71
Energy management Total energy purchased MWh SASB 68
Total energy consumed MWh
%
GRI 304
SFDR indicators
ISSB
Total electricity
delivered
MWh SASB – power generators 71
Waste management Volume of
waste generated
Tonnes GRI 306
SFDR indicators
72
Volume diverted
from landll
NA
Water management Total water withdrawn
and consumed
Litres SASB – power generators
GRI 303
72
% sited in water stress
areas
% SASB – power generators
ISSB
72
Water quality g/litres GSEO analysis – hydro
SASB – power generators
SFDR indicators
72
Noncompliance with
water regulations
#
Water management
practices
Qualitative SASB – power generators 72
Workforce health
and safety
Total case injury rate
(TCIR)
Rate SASB
GRI 403
73
Fatality rate
Operational safety Reportable incidents
including accidental
releases
# SASB – midstream
GSEO analysis – hydro
GRI 306
73
APPROACH TO SUSTAINABILITY CONTINUED
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64
Topic Metric Unit Materiality standard by asset class Page
Emergency
preparedness and
response
Management systems
discussion
Qualitative SASB- midstream
GSEO analysis – hydro
73
Ecological impacts of
project development
Number and duration
of project delays due to
ecological impacts
# and days SASB- solar project developers 71
Environmental
management plans and
practices
Qualitative SASB
SFDR indicators
71 & 72
% land operated within
protected conservation
areas
% by HA SASB
GRI 304
71
Land protected or
restored
HA SASB
GRI 304
71
Number and volume
of chemical or
hydrocarbon spills
Barrels SASB- midstream 72
Community
relationships
Description of eorts
to address community
and ecological impacts
Qualitative SASB – all
GRI 414
74
Management of
energy infrastructure
integration
Description of risks
associated with
integration of solar
energy into existing
energy infrastructure
and discussion on risk
management
Qualitative SASB- solar project developers 52
Description of risks and
opportunities of energy
policy and eect on
energy infrastructure
integration
Qualitative SASB – power generators 53
End of life
management
Not applicable yet for
the portfolio. All solar
PV + BESS sites are
under construction
or in rst 5 years of
operation
SASB – power generators NA
Material sourcing Description of the
management of risks
associated with the use
of critical materials
Qualitative SASB – power generators 74
Description of
management of
environmental and
social risks associate
with the polysilicon
supply chain
Qualitative SASB – power generators
GRI 414
74
65
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Workforce management Employee turnover % GRI 401 73
Training hours (not reported) Avg hrs GRI 404
Employment practices Qualitative GRI 401/402/403/407 73
Gender diversity and equal opportunity % GRI 405
SFDR indicators
73
Anti corruption Risks, communication and actions Qualitative GRI 205 60
The Company does not have employees; however, the operating partners do have operations and
maintenance employees that work directly on investment assets. Employee data included in this report
covers those operating partner employees. The Brazilian hydro facility and U.S. terminal storage assets
have permanent operational employees on site. The solar sites are generally unmanned, and maintenance
sta visit periodically. The following additional metrics and topics have therefore been identied as material
for operating partners and data is collected. The Company does not make payments to governments or
contributions to political parties.
Membership and associations
Collaboration with other organisations, industry peers and stakeholders is crucial to address sustainability
topics. The Investment Manager therefore is signatory, supporter and member of organisations that seek to
drive change through disclosure and partnership.
UNPRI
joined Autumn 2020
2020 2022 2023
Signatory to the
UN Global Compact
since November 2020
Task Force on Climate-related
Financial Disclosures
supporter since
September 2020
Global Impact Investor
Network (GIIN)
member since 2022
Net Zero target
published in
May 2023
EU Sustainable Finance
Disclosure Reporting
(SFDR) Reporting Article 9
Disclosures
since June 2022
Signatory to the UK
Stewardship Code
since September 2022
Signatory to the Net
Zero Asset Managers
Initiative
since April 2022
APPROACH TO SUSTAINABILITY CONTINUED
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66
2023 SUSTAINABILITY HIGHLIGHTS
The equivalent of powering over
312,750
average size homes
in the UK
Hydro
781,482MWh
Solar
62,952 MWh
The electricity generated in
Brazil is the equivalent of
providing the average person’s
annual power needs for over
‡
47,000
Brazilians
1
19,332
tonnes of sulfur oxides
displaced from the
Mexican fuel value chain
1
References for equivalency calculations:
UK energy use – Average gas and electricity usage: Ofgem https://www.ofgem.gov.uk/information-
consumers/energy-advice-households/average-gas-and-electricity-use-explained
Brazilian per capita energy use: https://ourworldindata.org/energy/country/brazil
Brazil: Energy Country Prole – Our World in Data
UK average mileage: https://maps.dft.gov.uk/transport-statistics-nder/index.html
Transport Statistics Finder: interactive dashboard (dft.gov.uk)
* The generation represents the total generation of the assets exported to the grid recorded
through onside meter readings. For the Brazilian Solar PV assets total generation is generation
invoiced to the clients. Where invoices were not available meter readings were used.
The equivalent
of removing over
63,000
average sized cars
from UK roads
122,530
tonnes CO
2
e emissions
avoided by displacing
grid emissions
844,434MWh
clean energy generated and
injected into the grid*
Zero health and safety
incidents on sites
Portfolio net zero
target published on the
net zero asset managers
initiative website
67
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Company is committed to transparency and
accountability and drives continuous performance
improvement aligned with the highest standards for
sustainability. To build condence in data reported,
the Company engaged BDO to independently
assure selected environmental and social metrics
reported through a limited assurance engagement
in accordance with the International Standard on
Assurance Engagements (ISAE) 3000 “Assurance
Engagements Other than Audits or Reviews of
Historical Financial Information,” and ISAE 3410,
“Assurance Engagements on Greenhouse Gas
Statements.” These standards provide a framework
for assessing the completeness, accuracy, and
reliability of the selected social and environmental
disclosures. Social and environmental metrics
annotated with ‡ have been covered in the
assurance process.
The assurance engagement data collection
processes and methodologies were examined
through the assurance process, and an opinion was
provided on the disclosed information.
Portfolio energy use and GHG emissions
2
Energy use (MWh) GHG emissions (tonnes CO
2
e)
Year 2022 2023 Energy %
change
2022 2023 GHG %
change
Scope 1 21,729 17,905 -18% 3,950 3,271
‡
-17%
Scope 2 (location) 1,436 1,783 24% 470
3‡
518
‡
10%
Scope 2 (market) –
onsite generation
- 8,172 - 0 -
Total Scope 1 & 2 23,165 27,860 20% 4,420 3,789
‡
-14%
Scope 3 (all
logistics)
6,967 29,013
‡
316%
Scope 3 (2022
logistics)
6,967
‡
7,618 9%
Avoided emissions
(without hydro)
14,349 17,663 23%
Avoided emissions 14,349 122,530
‡
754%
2
GHG emissions scope denitions and methodology
The Company collects GHG emission data monthly from its operational assets and reports totals annually.
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 denes its emissions boundary as those under majority ownership
(+50%). 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 freight in and
outbound to the storage terminal, waste, water use and fuel and energy related activities not included in scope 1 and 2.
Regional and country specic 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.
3
Restated from 2022 as error discovered in terminal storage electricity reporting leading to overstatement of electricity consumed.
2023 SUSTAINABILITY IMPACT & PERFORMANCE
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68
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.
The table above covers the Company’s scope 1,
2 and 3 emissions from the operational assets
including the Australian solar PV with battery
storage assets, Brazilian solar PV assets operational
in 2023, Brazilian hydro facility, and US 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 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 diculties
sourcing data from the asset value chains, for
example destinations of inbound and outbound
freight for the US terminal storage assets. In this
case an estimate was used based on industry
knowledge. For the solar PV assets, the scope 3
emissions from transmission and distribution (T&D)
are accounted for.
With the acquisition of the Brazilian hydro facility
and additional solar PV operational assets the
baseline has been reset as 2023. However, a
comparison of performance against 2022 is
provided. Despite the addition of the hydro facility
the trajectory of operational GHG emissions
is decreasing. This can be attributed both to a
reduction in operational activity at the USterminal
storage assets as well as operational eciencies.
Scope 3 data collection has broadened in 2023
covering more categories and notably the
accounting for upstream and downstream transport
and distribution at the USterminal storage assets.
This has led to the increase in scope 3 emissions
attributed to calculating barge and truck logistics
at the US terminal storage asset in addition to rail.
Scope 3 data collection is a challenge and estimates
have been used where actual data is not available.
Carbon footprint
2022 2023
GHG emission Emissions % Total Emissions % Total
Scope 1
Subtotal 3,950 35% 3,271
±
10%
Mobile Combustion – Owned Fleet 28 0.2% 50 0.2%
Stationary Combustion (natural gas, diesel, propane) 3,922 34% 3,220 10%
Fugitive Emissions - - 0.52 0.002%
Scope 2
Subtotal 470
‡4
4% 518
±
1.7%
Purchased and Used Electricity 470 4% 518 1.7%
Scope 3
Subtotal 6,967
‡
61% 29,013
±
88%
Category 1: Purchased goods and services 7 0.1% 4 0.0%
Category 3: Fuel- and Energy-Related Activities 838
4
7% 739 2%
Category 4: Upstream Transport and Distribution 6,121 54% 6,853 22%
Category 5: Waste 0.03 0% 3 0.01%
Category 7: Employee Commuting - - 19 0.06%
Category 9: Downstream Transport and Distribution - - 21,395 65%
Total Emissions 11,387 32,802
±
4
2022 scope 2 and scope 3 emissions have been restated following correction of electricity use reporting at the US terminal storage asset.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
2023 SUSTAINABILITY IMPACT & PERFORMANCE CONTINUED
Life cycle analysis (LCA) of embodied carbon by programme
Units Australia Brazil (hydro) Brazil (solar) UK Portfolio
Life time embodied
emissions
kg CO
2
e 132,871,331 175,381,510 114,276,353 1,321,045 423,850,239
Life time operational
emissions
kg CO
2
e 6,560,974 1,865,990 12,867,804 93,210,017 114,504,785
Total life cycle emissions kg CO
2
e 141,307,607 177,247,500 127,144,157 94,531,062 540,230,326
Life time emissions
avoided
kg CO
2
e 637,651,331 9,157,834,560 197,048,974 246,557,717 10,239,092,582
Life time net emissions
avoided
kg CO
2
e 496,343,724 8,980,587,060 69,904,817 152,026,655 9,698,862,256
Average emissions
avoided per annum
kg CO
2
e 25,506,053 91,578,346 7,881,959 9,862,309 134,828,667
Emissions payback years 5.5 1.9 16.1 9.6 4.0
Avoided emissions since
GSEO acquisition
kg CO
2
e 25,035,373 104,866,963 6,976,839 In
construction
136,879,175
Remaining emissions kg CO
2
e 116,272,234 Complete* 120,167,318 409,777,295
Remaining payback Years 4.6 Complete* 15.2 -
3
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 the commissioning of the BESS system
in the Australian solar PV sites. This analysis was
completed by a third-party sustainability expert
with the methodology described below. This is
also a requirement for some assets under the
EU SFDR regulation.
The data was calculated on an average 25-year
life cycle (longer for hydro) 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 tCO
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 within the
LCA take into 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 tCO
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 benets of distributed power generation.
A reduction in electricity losses along transmission
and distribution lines means the remote distributed
solar PV assets in Brazil will provide a more ecient
and cleaner source of energy locally, supporting
future growth and energy access.
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70
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 assets. The
clean electricity generated is starting to payback
that emitted and estimated in their lifetime. The
Brazilian hydro facility was commissioned in 1974
and has a short 'payback' period for its embodied
emissions which means the facility is notionally
providing zero emission electricity into the grid.
Environmental
The Company contributes to two categories
of environmental impact. The rst is strategic,
achieved through its investment intention. The
energy transition focus on creating opportunity to
support the decarbonisation of electricity grids in
countries of operation and facilitate cleaner energy
value chains through provision of strategic energy
infrastructure. This impact is measured by the
displacement of more carbon intensive electricity in
grids or pollutive fuels in value chains.
The addition of the 198MW hydro facility had a
notable impact on the portfolio in 2023 both in
terms of avoided emissions and renewable energy
generated. Energy generated is tracked against
targeted budgets for each asset. There was a 79%
increase in solar generation in the portfolio with
the completion of several construction assets in
the Brazil solar PV programme. Australian Solar PV
with battery storage assets and the Brazilian hydro
facility report electricity generated through on site
meters. Brazilian Solar PV assets report electricity
generated through utility invoices. Where these are
not available on site meter readings are used in
lieu.
There was 6% decrease in avoided pollutants in the
portfolio in 2023 directly linked to the reduction in
fuel ows through the US terminal storage asset.
The second category of environmental impact
is operational and achieved through proactive
environmental management and emissions
reduction at the facilities and construction sites.
Investments will not be developed or operate in
ecologically sensitive, protected or conservation
areas and the Investment Manager’s sustainability
criteria require operating partners not to contribute
to environmental degradation and to take proactive
measures to improve the environment around
the operations. This includes choosing contractors
who meet due diligence criteria for environmental
management and reducing direct and indirect
operational emissions to achieve a net zero target
aligned with the Paris Agreement goal. Expected
measures could include implementing a robust
and appropriate environmental management
system for operations e.g., ISO 14001, assessing
and mitigating environmental and social impacts
for new construction, taking a life cycle and value
chain approach, ensuring responsible water use
particularly in areas of water stress, and ensuring
no negative land use change that impacts local
food security or soil carbon. All construction assets
included in the portfolio are ready-to-build with
all environmental permitting and statements
completed. No delays to projects were due to
environmental concerns.
The operational environmental metrics table below
provides absolute metrics with a comparison to
2022 metrics where available. This covers 100% of
operational assets under management that have
been operational for at least six months during the
nancial reporting year.
Environmental metrics (strategic impact) Unit 2022 2023 % Change
Renewable energy generated* MWh 35,117 844,434
‡
-
Renewable energy generated (solar only) MWh 35,117 62,952
79%
Nitrous Oxides (NOx) avoided Tonnes 2,048 1,921
‡
Sulfur Oxides (SOx) avoided Tonnes 20,613 19,332
‡
-6%
Particulate Matter (PM) 10 avoided Tonnes 1,049 984
‡
Particulate Matter (PM) 2.5 avoided Tonnes 770 722
‡
GHG emissions avoided (Solar only) Tonnes CO
2
e 14,349 17,663
21%
GHG emissions avoided Tonnes CO
2
e 14,349 122,530
‡
* The generation represents the total generation of the assets exported to the grid recorded through on-site meter readings.
For the Brazilian Solar PV assets total generation is generation invoiced to the clients. Where invoices were not available meter
readings were used.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The renewable energy consumed is in reference to
the Brazilian hydro facility which consumes some
of the electricity generated by its turbines in the
facilities operations. This electricity is zero carbon
and is reported in the emissions table on page68.
There was a reduction in water use in 2023; this was
predominantly due to eciencies at the USterminal
storage assets. The site does not consume water
but uses water in operations. The operating
partner renovated the steam generation system
enabling it to capture more condensate allowing
the same water to be used multiple times for steam
generation. Additionally, the lower rail car volumes
decreased steam requirements and consequently
the water use. This was an important initiative
for the terminals which is the only investment
in an area of high water stress. According to the
World Resources Institute online water risk tool,
the local aquifer system is under extremely high-
water stress, has high baseline water depletion
and medium to high interannual variability. This
is mitigated in the Brownsville area as a portion
of water supply is produced from desalination
and water is drawn from the Rio Grande River.
However, water reports from Brownsville Public
Utilities Board in June 2023 conrmed that in 2022
they initiated a drought plan with a request for
user water conservation. As weather extremes are
predicted to increase with climate change, water
management risk is a material issue for the asset.
Water is also a material issue at the Brazilian
hydro facility which monitors water quality every
six months at the site. The facility is located
downstream of numerous towns and industrial
activities and so there is a risk of cumulative
environmental impacts. Monitoring water quality
and biodiversity, and managing impacts is
therefore important for the local environment and
communities that rely on the resource. Thirty-one
water metrics are tested including pH, biochemical
oxygen demand (BOD), chemical oxygen demand
(COD), fecal coliforms, temperature, nitrogen
compounds, and heavy metals such as manganese,
chromium, mercury, and copper. Water with low
concentration of dissolved oxygen or high BOD are
considered polluted as aerobic organisms need
oxygen to break down organic material in the
water. The water is tested at four sites around the
dam and was found to have low BOD (< 2.0 mg/L),
indicating a low organic load in the monitored
stretch when tested during 2023. The limits are
dened by the National Water Agency Resolution
“CONAMA N° 357 – 2005” which provides guidelines
for each classication of bodies of water.
The standards used in Brazil were adapted from
the Water Quality Index (WQI) of the United States
National Sanitation Foundation. The hydro facility
testing results meant it was ranked good on the
WQI in 2023.
The tonnes of waste produced from the sites
increased in 2023 partly due to the addition of
the Brazilian hydro facility, which during planned
maintenance replaced several heavy batteries
on site, and partly the disposal of contaminated
materials at the USterminal storage assets following
an accidental spill of fuel oil.
This was the one environmental and safety incident
reported at the USterminal storage assets in
2023 with 8bbls (approximately 1tonne) of fuel
oil released from a faulty rail car. The operating
partner immediately initiated its emergency
response procedures and contained the spillage.
The authorities were informed but due to the small
volume and following remediation, no further
action was required. The operating partner has
revised training and operation manuals in the event
another faulty rail car is received in the future.
There were no injuries reported.
Social
The Company has no employees. The social
data reported and assured below is related to
operating partner employees who interact with
site operations and/or work directly on site. This
is reported as full time equivalent (FTE) for the
nancial year 2023. This does not include operating
partner management employees working at head
oce or elsewhere.
The number of workers on sites increased in
2023 due to the acquisition of the hydro facility
Environmental metrics (operational impact) Unit 2022 2023 % Change
Water use including consumed Litres 44,793,795 24,274,056
-46%
Water consumed Litres No data 15,700
Water quality (BOD) kg/litre 0.000002
‡
Waste produced Tonnes 31 75
141%
Renewable energy consumed MWh 0 8,172
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Employee metrics 2022 2023 % Change
Total number of employees FTE 22.5 58 158%
Gender diversity Male 93% 98%
‡
5%
Female 7% 2%
‡
-5%
Other 0% 0%
‡
-
Employee turnover % 27% 14%
‡
-13%
Operations: policy and procedures 2023
Operating partners with H&S safety policy 100%
ISO 45001 certied 50%
Environmental management policy and system 75%
ISO 14001 certied 50%
ILO aligned employee handbook 100%
Supplier code of conduct or equivalent 100%
Non compliance with environmental regulations 0
Health and safety
and increased operations and maintenance team
managing the Brazil solar PV sites. The operating
partners saw a decrease in the percentage of
female workers in 2023 due to the increase in
workforce being predominantly male. Operating
partners are required to have a diversity, equality
and inclusion policy and plan with an aim to
improve these metrics. The Company board had
60% female and 40% male gender split during 2023.
The Company saw increased stability in the
operating partner’s workforce with 8employees
leaving in 2023 and a turnover rate of 14% which
is above the 10% target, however an improvement
on2022.
Health and safety of asset workers continues to be
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 2023, 100% of assets had health and safety
policies in place. The Brazilian hydro facility
and USterminal storage assets both achieved
certication on ISO 45001 health and safety
management systems as well as ISO 14001
environmental management systems.
The total case injury rate (TCIR) for the operational
assets was zero. Health and safety data is reported
monthly, and material incidents are reported within
24hours of the event. The USterminal storage
assets and Brazilian hydro facility had the highest
number of workers on site and recorded no worker
accidents or injuries in 2023.
Incidents reported during the year in addition to
the spill described above, but not recorded as near
miss as no employees were involved, included small
res at one of the Australian Solar PV with battery
storage assets due to a faulty component and at a
Brazilian Solar PV asset with wind blowing sparks
from neighbouring land. The res were dealt with
quickly through emergency response procedures
and onsite reghting equipment with little damage
caused and no injuries. Strong winds in Brazil also
caused a temporary shut down and damaged
modules to one site. A root cause investigation was
completed and the construction contractor took
remedial action with additional resilience measures
implemented to mitigate this from happening in the
future.
There were no accidents in the construction
assets, these fall outside the scope of the limited
assurance.
Health and safety metrics 2022 2023
Total number of incidents 1 4
Total number of injuries 0 0
Total case injury rate 0 0
‡
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Supply chain
During 2023, the Company constructed three solar
PV sites in New South Wales, Australia and deployed
BESS at one of its Australian operational sites.
Suppliers in the cobalt and polysilicon supply chains
that includes silicon components of solar cells
have been implicated in forced labour practices
and human rights abuses. Companies implicated
have been blacklisted by various governments
including the United States and Australia. However,
other downstream suppliers, particularly in the
photovoltaic supply chain may be unwillingly
complicit by procuring silicon from these suppliers.
Enhanced due diligence is one way of mitigating this
risk. The Company’s operating partner in Australia,
through the construction contractor, engaged with
suppliers for the new sites to understand their
environmental and social operating practices as
well as supply chain engagement practices. Data
was also collected on supplier audits and processes
for understanding the provenance of dierent
components.
Due diligence found low risk in battery procurement
as the favoured battery chemistry requires
signicantly less cobalt, and the preferred suppliers
were found to have no record of exploitative
practices.
All suppliers are required to have a supply chain
code of conduct.
Community
The Company shared guidance and tools with
the operating partners in 2023 to support their
development of stakeholder engagement plans
and strategies. The objective was to support the
establishment of meaningful and constructive
relationships and dialogues and to improve
transparency and identication of opportunities,
challenges and risks to the businesses.
All sites have mechanisms for receiving reports
from the community, which are investigated and
mitigating actions implemented if required. During
2023, two sites received complaints from the local
community. One in Australia at one of the solar
PV construction sites from a neighbour who was
concerned about dust. The contractor implemented
enhanced dust suppression activities to alleviate
concerns. The second at the Brazilian hydro
facility from the local community representatives
concerned about a siren which was accidentally
sounded.
This latter event led to enhanced engagement
with the community to share dam safety
and emergency response procedures including
a safety drill in September which involved the
whole community and emergency response
agencies. The asset also oered psychological
services to local community members who
wanted additional support.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
COMMUNITY ENGAGEMENT CASE STUDY
In 2023, the Brazilian hydro facility
operating partner engaged a third-
party expert to complete a gap
analysis and baseline study using the
Hydropower Sustainability ESG Gap
Analysis Tool. This is in anticipation
of achieving the Hydropower
Sustainability Standard. This analysis
found robust programmes and
projects to manage environmental
issues with no signicant gaps in
avoiding, minimising and mitigating
environmental and social impacts.
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76
Hydro facility programmes
•
Environmental licensing identication program
•
Organic residue composting project
•
Log boom material collection and
disposal program
•
Water resources management program
•
Water quality monitoring program
•
Sedimentological management program
•
Sediment metric monitoring program
•
Ichthyofauna monitoring program
•
Reservoir surroundings zoning program
•
Environmental inspection program
•
Environmental education and social
communication program
Three ndings have led to enhanced
community engagement around the facility.
These have included:
•
Education days for school children at the plant
•
Community training and simulation for
dam safety and emergency action plan
coordinated with local agency including
police and re departments
•
Stakeholder mapping and engagement plan
The site will continue strengthening stakeholder
engagement and communication into 2024 aiming
to build trust and foster better collaboration with
the facilities' neighbours.
Environmental and
social assessment
and management
Labour and
working conditions
Water quality
and sediments
Climate change
mitigation and
resilience
Hydrological
resource
Communications
and consultation
Community
impacts and
infrastructure saftey
Governance
and procurement
Resettlement Cultural heritage
Biodiversity and
invasive species
Indigenous
peoples
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Company is voluntarily disclosing its current
practice in its annual nancial report in accordance
with the Task Force on Climate-Related Financial
Disclosures (TCFD) recommendations and
requirements. The Company is committed to
strengthening climate-related nancial disclosures
over time. Additional reporting in 2023 include net
zero targets published through the Net Zero Asset
Managers Initiative (NZAMI) covering 100% AUM,
as well as quantitative analysis of climate related
impacts to the portfolio.
Pillar 1: Governance
Disclose the organization’s governance around
climate related risks and opportunities
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, specically those that address
themes that include climate change, energy access,
energy eciency and market liberalisation. Climate
change issues are therefore intrinsically considered
by both the Board and the Investment Manager.
The management of climate related risks and
opportunities is integrated into the Company’s
risk management framework. This looks at the
likelihood of a risk and the severity of impact with
and without controls. It enables the Board and the
Investment Manager to prioritise material risks for
additional mitigation (see principal risk section on
page50).
a) Describe the board’s oversight of climate-
related risks and opportunities
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
which includes climate-related risks faced by the
Company.
The Board’s Audit Committee, which is comprised
of three independent Directors and chair, 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 risks.
Louise Kingham, CBE, is a Board member with
strong industry expertise and is responsible for ESG
and sustainability related matters for the Company.
The Board and Board committees monitor and
oversee climate-related issues when reviewing and
guiding GSEO strategies, important plans of action
and risk management policies. They also track
implementation and performance progress against
goals and targets for addressing climate-related
issues through its periodic committee meetings and
the oversight of the Investment Manager.
The experience and background of Board members
are disclosed on page95.
b) Describe management’s role in assessing
and managing climate-related risks and
opportunities
The Investment Manager has responsibility for
implementing the Company’s investment strategy,
managing the Company investments, and reporting
to the Board and Board committees. There are
three relevant subcommittees at the Investment
Manager level which address climate-related issues
and report to the Investment Manager leadership
team:
•
The Investment Committee evaluates
investment opportunities aligned with the
SDGs and with the purpose of accelerating
the energy transition towards a net zero
carbon world before making any investment
decisions. An external assurance consultant is
used to advise on project selection following
a robust SDG validation due diligence
process. The Investment Manager’s Head of
Sustainability is a member of the Investment
Committee informing about climate-related
issues.
•
The Sustainability Committee provides
recommendations on ESG integration into the
investment strategy and ongoing asset life
cycle management. This includes appropriate
ESG target setting, periodic monitoring, and
reporting.
•
Risk, Operations and Compliance
Committee ensures risks are identied and
control measures are put in place to mitigate
the risk, which includes climate-related issues.
CLIMATE RELATED FINANCIAL DISCLOSURES
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78
The Investment Manager leadership team are
deeply involved in these three subcommittees; they
then aggregate, consolidate, and report investment
decisions and program updates periodically to the
Board and Board committees.
The Investment Manager’s Head of Sustainability
is responsible for the climate-related program
management which includes monitoring climate
issues, adopting ESG and climate-related practices
into the Company, improving investment-level
resilience to climate-related risks and reaping
climate-related opportunities aligned with the
Company's strategy. The Head of Sustainability
reports to the Investment Manager’s Head of
Risk Management on climate-related risk issues
and metrics to respective committees and
leadership team.
The Investment Manager also works closely with
operating partners through regular meetings
and monthly reports to review and monitor
climate-related issues.
Operational carbon footprints are calculated
including life cycle analysis of energy generation
projects to understand their contribution to the
Company’s net zero target (see page 92). Actions
are put in place to reduce operation emissions
and other environmental impacts, including
understanding supply chain and value chain
impacts. Operating partners periodically arm their
compliance with relevant policies.
For construction assets, operating partners are
engaged to ensure ESG management practices are
aligned with the Investment Manager’s sustainable
development culture.
The Company’s governance structure is presented
on page 103 where associated subcommittees
are included.
Pillar 2: Strategy
Disclose the actual and potential impacts of
climate-related risks and opportunities on
the organization’s businesses, strategy, and
nancial planning where such information is
material.
a) Describe the climate-related risks and
opportunities the organization has identied
over the short, medium, and long term
The average asset life in the Company portfolio
exceeds 25 years, therefore the Company generally
takes a long-term time horizon approach. This
is also aligned with the portfolio net zero target
timeframe. The Investment Manager is a signatory
to the Net Zero Asset Managers Initiative (NZAMI)
which supports the goal of net zero GHG emissions
by 2050. With rapid changes in market movements,
regulatory trends, and weather patterns, the
Company also assesses material climate-related risk
in shorter time horizons.
The Company considers climate related risks and
opportunities within the following time horizons:
•
Short term: 0-5 years
•
Medium term: 5-10 years
•
Long term: 10+ years
The Company’s process of assessing climate-related
risks and opportunities is integrated into its ESG
materiality and ESG risks analysis process which
is described on page 63. It covers the investment
process ranging from investment decision-making
to ongoing deployment monitoring. Potential
risks can also be raised by operating partners
and investment team members to the Head of
Sustainability. The material climate-related risks
and opportunities of the Company are identied
and listed in tables below. This is based on the
Company’s business strategy, geographical
exposure and type of energy technology. It
considers the Company’s nancial materiality
threshold, which is above 3% of NAV for residual
climate related risks after considering risk
mitigations. This is consistent with nancial market
norms.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Climate-related Risk Risk Assessment and Mitigation
Risk category:
Physical risk – Chronic
Longer term gradual changes in
climate patterns, e.g., reduction
or increase in wind levels,
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.
Time horizon: medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact: reduction in output from assets leading to reduced income stream. This
risk may increase over the long term in the absence of climate mitigation.
Risk mitigation: The Company invests in a portfolio of energy transition infrastructure
assets, diversied by geography, technology, and capability. These investments follow the
thesis of energy transition to achieve net zero goals. Such diversication provides a buer
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, meteorology due diligence is undertaken before investment, weather
conditions are monitored and some of the assets have battery storage capabilities to
optimise energy input to the grid.
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 local teams and operations.
Risk category:
Physical risk – Acute
Abrupt disruptive climate impacts
such as impacts from ooding,
wildre, drought, extreme heat,
or sudden regulatory actions
increasing over time.
Time horizon: short-term, medium-term, long-term
Impact area: business, nancial planning
Potential impact: Increase operating expenditure to recover asset damage caused by
natural disasters and increase insurance premium for assets in high-risk locations.
Risk mitigation: Throughout the investment decision-making process, the due diligence
process accounts for climate change risk and impacts.
The Investment Manager 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.
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80
Climate-related Risk Risk Assessment and Mitigation
Risk category:
Transition risks – Market
Uncertainty in market signals
manifests as lower-than-expected
power prices, driven by an
imbalance between an abundant
intermittent power supply and
market demand. Lower than
expected volume throughput for
conventional fuel storage asset
driven by increased demand for
alternative fuels.
Time horizon: medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact: Increase in market volatility and abrupt and unexpected shifts in power
prices make nancial forecasts less reliable on intermittent renewable energy solutions.
Reduced throughput for conventional fuels longer-term with expected shift to clearer and
alternative fuels impacting existing fuel storage asset revenue ows.
Risk mitigation: The Company manages this risk through its diverse portfolio of energy
transition infrastructure assets such as the battery energy storage systems and enduring
hydro facility, as well as signing xed price otaker agreements.
The Company is assessing its longer-term strategy to invest in storage assets to
accommodate alternative fuels required for hard to abate transportation including
sustainable aviation fuel, renewable diesel, marine e-methanol and hydrogen as the
market shifts.
Risk category:
Transition risks –
Technology, Market
Market shifts such as changing
customer behaviour and
substitution of existing products
and services with lower emissions
options or new technologies
may dampen ability to engage
European investors on a
traditional European focused
renewable portfolio and often
shift strategy towards a broader
portfolio of energy transition
projects that cover various regions
and include new technologies
such as biofuel, carbon capture
and reuse, and etc.
Time horizon: medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact: Increase costs to adopt/deploy new practices to transition to lower
emissions technologies, reduction in the availability of capital to invest in some local and/
or mature technology energy transition projects.
Risk mitigation: There is strong public demand for support of the renewable energy
market towards net zero carbon emission targets.
The senior management team of the Investment Manager has extensive experience in
executing a wide variety of strategies in the energy sector, the team monitors market shifts
and tailor investment strategies accordingly.
The Company is expected to hold most of its investments on a long-term basis and the
Board and the Investment Manager monitor the position on a regular basis.
Risk category:
Transition risks –
policy and legal, reputation
Policy shift may introduce
regulation around climate
change e.g., increased disclosure,
taxes etc.
Stakeholders' increasing concerns
on business practice (e.g. supply
chain management, workforce
management and planning) need
to be addressed.
Time horizon: short-term, medium-term, long-term
Impact area: business, and nancial planning
Potential impact: Increase cost of doing business (e.g., higher compliance costs,
increased insurance premiums, workforce management and planning). Reduction in the
availability of capital to invest in energy transition projects.
Risk mitigation: The Company is supportive of the policy aims of the Disclosure
Regulation and will comply with it and monitor changes.
The Company, via the Investment Manager, 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 such
as 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.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Climate-related Opportunities Opportunity Assessment and Response
Opportunity category:
Energy Source, Resilience
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.
Time horizon: medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact:
•
Creates more deal origination opportunities in support of energy transition which aligns
with Company’s investment strategy.
•
Increases capital availability as more investors favour lower-emissions programs.
Opportunity category:
Resource Eciency, Energy
Source, and Products and Services
Volatile power price movements
support an increase in energy
eciency grid infrastructure
investing which leads to increased
source of revenue.
Time horizon: short-term, medium-term, long-term
Impact area: business, strategy
Potential impact:
•
Provides additional revenue sources in marketplaces with abundant intermittent power
supply through harvesting merchant pricing.
•
Supports in energy eciency and energy security reinforces intangible benets such
as reputation, brand and goodwill, together with employee, partner and stakeholder
engagement.
Opportunity category:
Energy Source, Markets, and
Resilience
Market liberalisation in developed
and developing economies
is creating opportunity for
market share in renewable and
alternative energy opportunities
in new geographies.
Time horizon: short-term, medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact:
•
Access to new markets leads to an enhanced competitive position through addressing
shifting consumer preferences, resulting in increased revenues.
•
Increases availability and diversication of nancial assets such as green bonds.
•
Improves resource eciency and reduces operating costs.
•
The Investment Manager has engaged and will continue to reach out globally with
various companies and investors to support expansion of the Company and sustainable
energy infrastructure investments.
Opportunity category:
Resource Eciency, Markets,
and Resilience
Decentralisation of energy
generation creating new
opportunities for investment in
renewable and other sustainable
energy infrastructure.
Time horizon: short-term, medium-term, long-term
Impact area: business, strategy, and nancial planning
Potential impact:
•
Enhances competitiveness and increases revenues through new solutions, access to
new markets, diversication, resilience planning and relationships.
•
Increases reliability of supply chain and ability to operate under various conditions.
•
A pipeline of investments is constantly being identied, with the Investment Manager
regularly reporting to the Board on this pipeline.
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82
b) Describe the impact of climate related
risks and opportunities on the organization’s
businesses, strategy, and nancial planning.
Impact on existing businesses
The Company invests in a diverse range of
sustainable energy infrastructure investments such
as renewable energy generation, transmission,
distribution, and storage that drive the global
transition towards cleaner and more sustainable
sources of power. The Company’s investment
strategy therefore sees opportunity in the current
and growing transition to a low-carbon economy.
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 ecient carbon
capture and reuse technologies.
The Company’s investments are exposed to
physical climate risk such as potential damage to
asset infrastructure as well as osite transmission
and distribution systems. This risk arises from
extreme weather conditions that are becoming
more common and frequent in the locations of
operation. The Investment Manager reduces impact
by diversifying technology, nding synergies such
as co-locating generation and storage, and building
a global portfolio with investments in multiple
continents experiencing dierent weather patterns
and conditions. It also conducts climate risk and
vulnerability assessments (CRVA) for each asset to
identify opportunities to build resilient assets.
Increased power price volatility because of more
intermittent renewable power generation in the
market has become increasingly prominent. The
nancial impact of this market trend will become
relevant and benecial as the Investment Manager
builds out its co-location of solar PV and battery
energy storage solution in volatile markets such as
Australia.
Impact on strategy
The Investment Manager continues to observe
globally favourable government policies to support
decarbonising goals and low carbon renewable
energy investment. This aligns with the Company’s
investment objective to generate stable returns
by investing in a diversied portfolio of global
sustainable energy infrastructure investments
to facilitate the transition to a low carbon energy
world.
The Company also supports the goal and has set a
target of reaching net zero carbon emissions in its
portfolio by 2050.
Energy security is a principal concern for country
leaders and is driving a focus on reducing reliance
on energy imports and building out domestic
renewable and low carbon energy capacity. This
represents an opportunity for the Company to
further expand into new markets supported by the
existing cross-continental exposure and the energy
sector expertise of the Investment Manager.
As the public consensus and attention on
sustainability grows, and countries and
organisations strive to achieve the goal of a net
zero carbon world, investment ow towards the
energy transition is continuing to grow. This is
both an opportunity and a risk. As capital ows
align with the Company’s investment objective,
this can enable increased access to investment
funds; however, as more investors pursue the
same sustainable energy infrastructure investment
theme, the market may become increasingly
competitive and therefore sourcing investments
on attractive terms will become more dicult. The
Investment Manager’s industry expertise and ability
to source exclusive transactions is invaluable in
mitigating this risk.
Impact on nancial planning
Climate-related issues are both opportunities and
risks for the Company’s nancial planning.
The Company benets from its strong ESG
credentials which reect both in positive impact
on climate change and stable long-term income
distributions to meet investor requirements on
sustainability and return. It provides the Company
with the opportunity to leverage sustainability-
linked credit facilities at a lower cost of borrowing
if required. The Company’s TCFD voluntary
disclosures and transparency to the market are
praised by existing shareholders and attractive to
sustainability-driven prospective investors.
The Company’s investment valuation and nancial
projections rely on various assumptions. Increased
power price volatility is one such factor identied
and discussed in the climate related risks and
opportunities on page 80 that brings uncertainty
to the Company's investment revenue streams.
The Company reduces this risk exposure through
entering into xed power price agreements
with otakers in the short to medium term. The
Company continues to invest in battery storage
development, as there is an opportunity to capture
value given the market price volatility.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Company uses external expert advisors to produce and validate its nancial assumptions to increase
accuracy, yet the Company’s nancial forecasts and budgets are still subject to climate-related issues related
to projection accuracy.
A materiality analysis of the climate-related risks and opportunities identied on page 80 was completed
following the asset specic CRVA and review of the nancial models, market trends and Network for
Greening the Financial System (NGFS) climate transition scenarios. The table below lists the material risks,
assessment of probability and time horizon. These material risks were evaluated at the individual asset level
and considered in the quantitative scenario analysis to calculate potential nancial impact as described on
page 85.
Risk Risk category Description and potential Impact Likelihood and likely
time horizon
Physical – Acute Flood In several asset locations, the
Inter-governmental Panel on Climate
Change (IPCC) Sixth Assessment
Report (AR6) models predict an
increase in frequency of extreme
rainfall which can result in river and
surface water ooding damage to
infrastructure and shut down of
operations.
Likely –
Medium to Long
Physical – Acute Wildre In several asset locations, the IPCC
AR6 models suggest an increase in
the re season with increased severity
and frequency of wildres which can
lead to infrastructure damage and
shutdowns.
Likely –
Medium to Long
Physical – Acute Extreme Heat An increase in mean air temperature
consistent with global trends across
the portfolio with predictions of an
increase in air temperature extremes
can lead to increased drought, wildre
and heat stress which further result
in infrastructure damage and/or
curtailment of electricity generation
and labour shortages.
Likely –
Medium to Long
Transition – Markets Power price
volatility
NGFS scenarios predict volatility and
reduction in the power price as more
renewables and low carbon power
generators export to the grid.
Likely –
Medium to Long
Transition – Markets Fuel market
transitions
NGFS scenarios predict a reduction
in demand for conventional fuels in
the Mexican fuel supply chain as the
economy transitions to cleaner and
alternative fuels indicated by a trend
of increase investment in biofuel,
hydrogen, and other alternative fuels.
Highly likely –
Medium to Long
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84
c) Describe the resilience of the organization’s
strategy, taking into consideration dierent
climate-related scenarios, including a 2°C or
lower scenario
The analysis of the Company’s business strategy
under dierent 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.
Commitments made internationally at the UN
climate change conferences and nationally
demonstrate policy and market momentum,
towards energy transition and in support of the
Company’s investment policy.
The Company considers a bottom-up approach
to perform scenario analysis, given the portfolio’s
diversied geographic locations and technologies.
When assessing the impact of climate risks and
opportunities on the portfolio, the Company
distinguishes between transition risk and
physical risk.
The Company’s diverse energy infrastructure
investments are considered under the following
scenarios including:
•
NGFS climate scenarios
•
IPCC Representative Concentration Pathways (RCP)
The NGFS transition risk models use integrated
assessment models that derive the impacts of
dierent policy ambitions on the energy transition
relevant sectors with granular information on
implications for 184 countries. The physical risk
models include acute and chronic risk based on
global temperature paths. The NGFS models were
assessed by the IPCC working group III as part of
AR6 and although they cover a smaller range of
model assumptions, they have a higher sectoral
and regional granularity. The NGFS scenarios are
also well aligned with the IEA scenarios on several
dimensions.
5
Given the portfolio's geographical
and technological diversication, and given the
Company's bottom-up approach in performing
scenario analysis, the Company selected NGFS
scenarios for transition risk as relevant scenarios.
5
The nancial impact and resilience of the
Company’s investment business strategy to
dierent climate scenarios is inherent in the
Investment Manager’s nancial modelling
processes. The energy transition is the focus of the
Company’s investment strategy. 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 Company’s scenario analysis for TCFD has
produced a range of possible nancial impacts
under three dierent scenarios for each asset
unique to each geography and predicted changes.
There is uncertainty in terms of how climate change
will impact individual operations as well as the
impact of global eorts to achieve an orderly energy
transition and so this data should be regarded as
indicative rather than absolute predictions.
Generally, the Company’s nancial materiality
threshold for climate related risks and
opportunities is 3% of NAV after considering risk
mitigation. Due to the unpredictability of climate
related weather events, the Company takes a more
cautious approach to manage and secure insurance
policies in order to mitigate this uncertainty in the
longer term.
Scenario analysis is split into physical and transition
risks. The Company performed the scenario
analysis on operational assets only and quanties
the resilience of the portfolio to climate-related
scenarios by assessing the impact on NAV per
share.
Transition Risk
Transition risk is comprehensively considered
and embedded in the investment nancial
models, including sensitivity analysis, to allow the
Investment Manager to proactively make decisions
to mitigate, transfer, accept, or control those risks
where appropriate.
The Company’s investment process selects projects
that align to the energy transition to net zero.
Various standard parameters are considered in
the Investment Manager’s nancial and valuation
models including policy and regulatory changes
and stringency, technology and energy mix,
energy demand and future mix, capacity changes,
key commodity changes and associated costs or
prots to the business. The nancial and valuation
models are geographically tailored, and take into
consideration the national mandated targets for
renewable and other energy source penetration
in the energy mix. Carbon reduction policies of
the investment country and region are also critical
considerations in understanding investment impact
and suitability.
5
https://www.ngfs.net/sites/default/les/medias/documents/ngfs_climate_scenarios
for_central_banks_and_supervisors_phase_iv.pdf Scenario Design and Analysis
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
For this scenario analysis exercise, the Company
focused on the Global Change Analysis Model
(GCAM) modelling suite, part of the NGFS, given the
model's data availability and geographic granularity
in line with the Fund assets.
6
The Company includes
the following scenarios under each category:
•
Current Policies/BAU: Current Policies,
Nationally Determined Contributions (NDCs)
•
Paris Aligned Well-Below 2C: Below 2C,
Delayed Transition
•
Paris Ambitious 1.5C: Net Zero 2050,
Low Demand
The Company identied one key variable as
the main driver for each programme to assess
the impact of transition risk on the value of the
portfolio. The Company selected power price as
the main driver for the Brazilian hydro facility, the
Australian solar PV with battery storage assets, and
the Brazilian solar PV assets. For the US terminal
storage assets, the Company selected volume
throughput, taking into account the change in
demand for oil and the transition to alternative fuel
sources such as hydrogen and biofuels.
The Company used country and market specic
scenario data when available. Particularly when
considering Latin American markets, scenario
results varied signicantly between countries in
the region, so local predictions were used for Brazil
and Mexico. Similarly, the Company focused on
the Australia/New Zealand region for the scenario
analysis of the Australian solar PV with battery
storage assets.
By considering a bottom-up approach to conduct
scenario analysis, the Company shocked the
aforementioned factors in the asset valuation
models and assessed the impact on the life-time
dividends by discounting them to present value.
The Company assessed the impact on valuation at
both programme level and portfolio level.
The portfolio level results are highlighted below
in a NAV per share impact range. The Company
benets from both technology and geography
diversication, demonstrating the inherent focus
on the energy transition in the Company's
investment strategy.
+1.5p/share to
+1.9p/
share
Current Policies/BAU
+1.6p/share to
+1.9p/
share
Paris Aligned Well-Below 2C
116.46p
Q4 NAV per share
-1.6p/share to
-1.1p/
share
Paris Ambitious 1.5C
Estimated NAV per share impact under transition risk scenarios
6
https://gcims.pnnl.gov/modeling/gcam-global-change-analysis-model
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86
Paris ambitious 1.5c – valuation impact
Portfolio
-5.00% 0.00% 5.00%
US terminal storage
Australian solar PV and battery storage
Brazilian solar PV
Brazilian hydro facility
Q4 valuation
Among the operational programmes,
the US terminal storage programme
show the highest impact to transition
risk. This is driven by the change
in oil demand and the transition
to other fuels such as biofuels and
hydrogen observed in Mexico. The
Brazilian hydro facility and the
Brazilian solarPV assets benet
from higher power prices in the
Paris Ambitious 1.5C and Paris
Aligned Well-Below 2C scenarios.
The Australian solar PV with battery
storage assets experiences minimal
impact which does not register on
the impact graphs given power
price assumptions in the Australian/
New Zealand region as well as the
portfolio composition of which the
Australian programme contributes
3%.
The Company is committed in
developing and employing the
best available data, scenarios
and methodology. The Company
selected the most relevant variable
when performing the scenario
analysis. However, the Company
recognises there are high levels
of uncertainty and limitations in
the climate models, scenarios
and methodology. Therefore, the
gures reported should be seen as
indicative of potential impact and not
performance forecasts.
Portfolio and programme valuation
impact under transition risk scenarios
Paris aligned well-below 2c – valuation impact
Portfolio
-5.00% 0.00% 5.00%
US terminal storage
Australian solar PV and battery storage
Brazilian solar PV
Brazilian hydro facility
Q4 valuation
Current policies/BAU – valuation impact
Note: the blue line represents the portfolio valuation as at 31st December 2023. The orange boxes
represent the % range of impact on the portfolio and programme valuation under the dierent scenarios.
Portfolio
-5.00% 0.00% 5.00%
US terminal storage
Australian solar PV and battery storage
Brazilian solar PV
Brazilian hydro facility
Q4 valuation
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Physical Risk
The Company identies physical risks in the
asset specic CRVAs and proactively takes steps
to mitigate climate-related risks and build asset
resilience. Acute physical risks including but
not limited to hurricanes, wildres, oods and
heatwaves are mitigated through insurance
policies, while chronic physical risks such as higher
average temperatures and changes in precipitation
patterns are mitigated through the asset design and
operational management.
The IPCC AR6 report quanties the insured
damages projected impact under the RCP 2.6
scenario and RCP 8.5 scenario for Australasia.
7
The
Company uses the percentage increase in insurance
premiums as a proxy for the insured damages
projected impact. The Company applies this shock
to assess the impact on the programme level and
portfolio level valuations as follows: 7% under RCP
2.6 scenario, 7.5% under RCP 4.5 scenario, 8%
under RCP 8.5 scenario. The shocks are applied
across the three operational programmes: US
terminal storage assets, Brazilian solar PV assets,
and Australian solar PV with battery storage
assets. In the case of the Brazilian hydro facility,
performing a hydrological risk assessment that
estimates the capital expenditures required to
build additional measures to cater for an increased
maximum river ow was considered more relevant
and appropriate.
Under the RCP 2.6 scenario, the NAV per share
impact is -0.30p/share, while under the RCP 8.5
scenario the NAV/share impact is -0.42p/share. The
subdued impact highlights the inherent risk analysis
and considerations that the Company uses in its
investment strategy.
The Company focused on one key variable or factor
when performing the physical risk scenario analysis,
while keeping all other model inputs constant. Due
to the complexity of variable interactions and model
impacts, the Company is aware that limitations to
the scenario analysis remain and is fully committed
to develop the methodology further. Therefore, the
gures reported should be seen as indicative of
potential impact and not performance forecasts.
Given that the energy transition is the focus of
the Company's investment strategy, the Company
inherently considers both transition and physical
risks and opportunities in its investment decision
process and asset life cycle management. Thus, the
results and scenario analysis are in line with the
Company's strategy.
7
https://www.ipcc.ch/report/ar6/wg2/downloads/report/IPCC_AR6_WGII_Chapter11.pdf
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88
RCP 2.6
-0.36p/share
RCP 4.5
-0.30p/share116.46p
Q4 NAV per share
-0.42p/share
RCP 8.5
Estimated NAV per share impact under physical risk scenarios
Pillar 3 – Risk Management
a) Describe the organization’s processes for
identifying and assessing climate-related risks
The Sustainability and ESG risk analysis process is
described on page62 of this report. Climate related
risks and opportunities are identied through
this process. Climate-related risks are considered
at the asset level within the screening and due
diligence processes of energy infrastructure
investments prior to any investment decisions. The
risk management process considers the type of
infrastructure and geographic risks. Local partners
are engaged to assess environmental management
practices and processes, and to broaden
understanding of stakeholder perspectives. This
investment management process is described on
page63.
As described on page70, the Company takes a life
cycle approach in calculating the embodied carbon
in the energy generating assets and conducting a
CRVA for each asset. This identies the material
climate physical risks and opportunities for the
asset and recommendations to mitigate the risk
and build asset resilience. This is described in more
detail below.
The operating partners may also do asset specic
analysis to support insurance or environmental
management practices. For example, the Brazilian
hydro facility completed a hydrological study and
ood risk analysis in 2023 to understand the dual
impact of ood and drought on the asset and local
communities.
These identied risks are reported to the
Investment Manager’s Investment Committee
and rolled up to the Company risk register which
is reviewed by the Board Audit Committee as
described in the governance section on page50 and
principle risks section on page50.
b) Describe the organization’s processes for
managing climate-related risks
The material climate-related risks have been
identied and corresponding risk management
strategies have been considered and described on
pages 80 and 81.
As discussed in the Sustainability section above,
an expert third party sustainability consultant
continued to deliver physical CRVA reports for
each of the Company’s new assets in 2023. The
CRVA identied material investment-specic
physical risks and corresponding risk mitigation
recommendations.
RCP 2.6
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Investment Manager’s Head of Sustainability
analyses the assessment report and discusses
appropriate specic risk mitigation business
practices with the operating partners and
investment management team. Where there is an
acute physical risk such as severe natural disaster,
for construction projects the asset design considers
infrastructure toleration maximums, and the
Investment Manager seeks insurance coverage to
transfer the risk.
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. Specically, the CRVA
was conducted to accord with the requirements of
Appendix A of the above regulation, the Generic
Criteria for Do No Signicant Harm to Climate
Change Adaptation.
The CRVA was carried out using climate projections
across dierent RCPs used by the IPCC fth
assessment report (AR5) and AR6.
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 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.
Implementation of adaptation solutions identied
within the CRVA are reviewed with the operating
partners and the gap is lled if necessary. These
adaptations show how the resilience of the asset
is improved to withstand vulnerabilities. The
most common hazard identied was the potential
for wildre 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 reghting equipment installed
and operators, crisis and emergency response
procedures.
c) Describe how processes for identifying,
assessing, and managing climate-related risks
are integrated into the organization’s overall
risk management
The Company’s process of identifying, assessing,
and managing climate-related risks is fully
integrated into its investment process ranging from
investment decision-making to post-investment
ongoing monitoring. Material climate-related
risks identied are included in the Company’s risk
register and the ongoing risk management process.
After assessing the likelihood and the severity
of impact of climate-related risks, the material
risks are disclosed in the principal risk section
on page 49.
More detail on the sustainability and ESG risk
analysis process is on page 62.
Section 4 – Metrics and Targets
a) Disclose the metrics used by the organization
to assess climate related risks and opportunities
in line with its strategy and risk management
process
Metrics used to assess and monitor transition risks
and opportunities:
•
£m Capital invested and committed to
sustainable energy infrastructure assets
•
Growth in investment portfolio
•
MWh of energy produced by the portfolio a year
•
Volume throughput at the terminal storage
assets
•
% Investments aligned to the EU Taxonomy
Metrics used to assess and monitor physical risks
and opportunities:
•
At a fund level, current portfolio diversication
•
At an asset level, annual performance
against budget
•
CapEx / repairs and maintenance costs
Other related metrics such as GHG emissions and
investment weighted average carbon intensity
are also reported on page 91. Environmental
metrics used such as water, energy, and waste
management are reported in the Sustainability
section on page 72, which includes comparison
with previous operational years and are used to
calculate the portfolio’s total carbon footprint.
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90
Operating partners, as part of their environmental
management practices, look to reduce impact from
these metrics. These activities are reported in the
ESG section of this report on page58.
Physical risks are considered throughout the
investment acquisition process and ongoing
monitoring. Through CRVA reports, investment-
specic physical risks are contemplated and
addressed early in the acquisition process. If
the climate risk highlighted has no immediate
mitigation solution, insurance policies and further
discussion at the Investment Manager Investment
Committee is required.
Metrics used to assess and monitor physical risks
and opportunities:
•
At a fund level, current portfolio diversication
•
At an asset level, annual performance against
budget
•
CapEx / repairs and maintenance costs
b) Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (GHG) emissions, and
the related risks
Portfolio GHG emissions for 2023, comparison
with the previous year 2022 and discussion on
trends and risks are included in the sustainability
section on page68.
The Company reports on energy generation,
consumption and associated carbon emissions.
The carbon intensity of the Company’s portfolio is
low. The Company predicts most emissions that will
require reduction by 2050 will be Scope 3.
Under the TCFD recommendation, asset managers
are required to provide the weighted average
carbon intensity for the investment strategy. This
metric with other carbon footprinting metrics using
formulas 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.
TCFD carbon footprinting and exposure metrics
8, 9
Unit 2022
10
2023
Portfolio's exposure to carbon-intensive companies,
expressed in tonnes CO
2
e/$M revenue
t CO
2
e/$M 65 42
‡
The absolute greenhouse gas emissions associated with
a portfolio, expressed in tonnes CO
2
e
t CO
2
e 3,636 3,199‡
Total carbon emissions for a portfolio normalized by
the market value of the portfolio, expressed in tonnes
CO
2
e/$M invested
t CO
2
e/$M 6 5
‡
Volume of carbon emissions by million dollar
of revenues
t CO
2
e/$M 273 192
‡
8
Underlying revenue metrics are unaudited. Figures may change once metrics are audited in 2024.
9
Market capitalisation calculated using prot rather than equity share to more accurately reect value of investments.
10
2022 gures restated per updated methodology and restated scope 2 emissions.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
c) Describe the targets used by the organization
to manage climate-related risks and
opportunities and performance against targets
The Company aims to meet the Paris Agreement
target and achieve net zero carbon emissions in
its portfolio by 2050 under the Net Zero Asset
Managers Initiative (NZAMI). The Company uses
various metrics at asset level and portfolio level,
disclosed on page 68, which feed into the portfolio
goal to meet the decarbonisation target.
In 2022, the Investment Manager became signatory
to the NZAMI and commissioned an external
adviser to develop a road map towards 2050 net
zero goal with a target for the Company portfolio
which was published in 2023 through the Net Zero
Asset Managers Initiative and in the Company
interim report.
The target covers 100% of the portfolio including
assets under construction. The target will be
recalculated replacing estimated emission data with
actual once the construction assets are operational.
The underlying science-based net zero pathway
from which the targets are derived is the Sectoral
Decarbonisation approach methodology and largely
based on ‘Power’ sector for most of the assets. This
requires a 65% reduction within a maximum 10-
year time frame of Scope 1 and 2 emissions as the
near-term target which includes Scope 3 emissions.
The long-term target will see emissions reduced by
95% with residual emissions oset.
Methodology Year Target
Science Based Target
initiative for Financial
Institutions: Sectoral
Decarbonisation approach
Baseline 2023 0.0710229 tonnes CO
2
e / MWh
Near term 2030 0.0260654 tonnes CO
2
e / MWh
Long term 2050 0.0035511 tonnes CO
2
e / MWh
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INTRODUCTION
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 Chair’s statement, the
Investment Manager’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 eectively 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 Manager.
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’
conicts 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.
Annual Report and Accounts 2023
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Governance
94
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 chair.
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 Oce of
Renewable Energy of UK Government.
Louise Kingham, CBE
Non-executive Director
Over 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.
Daniella Carneiro
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.
Margaret Stephens
Chair of the Audit Committee
Qualied Chartered Accountant and a
28-year career with KPMG. 16 years as a
partner focused on global infrastructure
and international M&A. Currently, a
non-executive director and Chair of
the Remuneration Committee of AVI
Japan Opportunity Trust plc and a non-
executive director of Sequoia Economic
Infrastructure Income Fund Limited.
Formerly, a Trustee Director and Chair of
Audit Committee of the Nuclear Liabilities
Fund Limited, and a non-executive board
member and Chair of the Audit and Risk
Committee at the Department for Exiting
the European Union.
Richard Horlick
Senior Independent Director
and 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.
MEET THE BOARD
95
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
DIRECTORS' REPORT
The Directors are pleased to present their report for
the year ended 31 December 2023. 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, Nomination 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 oce at the date of this report
are as shown on page 95. 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 102
to 107 forms part of this Directors’ report.
Dividends
On 25 May 2023, the Company declared an interim
dividend of 1.38p per ordinary share in respect of
the period from 1 January 2023 to 31 March 2023,
which was paid on 30 June 2023 to shareholders on
the register as at 2 June 2023.
On 2 August 2023, the Company declared an
interim dividend of 1.38p per ordinary share in
respect of the period from 1 April 2023 to 30 June
2023, which was paid on 14 September 2023 to
shareholders on the register as at 11 August 2023.
On 1 November 2023, the Company declared
an interim dividend of 1.38p per ordinary share
in respect of the period from 1 July 2023 to 30
September 2023, which was paid on 8 December
2023 to shareholders on the register as at 10
November 2023. Of this amount, 1.03p per share
was designated as an interest distribution.
Post year end, on 22 February 2024, the Company
declared an interim dividend of 1.42p per ordinary
share in respect of the period from 1 October 2023
to 31 December 2023, which will be paid on 28
March 2024 to shareholders on the register as at
29 February 2024.
Therefore, the total dividends paid by the Company
in respect of the year ended 31 December 2023
were 5.56p per ordinary share, exceeding the
dividend target of 5.52p 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 1.42p or 5.68p in total
per ordinary share for the nancial year ending
31December 2023, in line 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 IT Regulations. 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 oer 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 benet 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 classication 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.
Annual Report and Accounts 2023
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Governance
96
Share capital structure
Issue of shares
No shares were issued during the year under
review or since the year end.
Purchase of shares
At the AGM held on 25 April 2023, the Company
was granted authority to purchase up to 14.99%
of its ordinary share capital in issue, amounting to
63,332,583 ordinary shares. During the year ended
31 December 2023, the Company purchased in
the stock market 7,027,321 ordinary shares (with a
nominal value of £70,273.21) to be held in treasury,
at a total cost of £5,399,770. This represented 1.66%
of the issued share capital at 31 December 2022.
No shares were purchased for cancellation during
the year. The share purchases were made with a
view to reducing discount volatility.
Shares held in treasury
Holding shares in treasury enables a company to
cost-eectively issue shares that might otherwise
have been cancelled. The total number of
shares held in treasury as at 31 December 2023
was 7,027,321 shares (with a nominal value of
£70,273.21). This represents 1.66% of the issued
share capital as at the year end.
Current share capital
As at 31 December 2023, the Company’s issued
share capital comprised 422,498,890 ordinary
shares, each of £0.01 nominal value, of which
7,027,321 shares were held in treasury.
At general meetings of the Company, ordinary
shareholders are entitled to one vote on a show of
hands and, on a poll, to one vote for every ordinary
share held. Shares held in treasury do not carry
voting rights.
At 4 April 2024, the total voting rights in the
Company were 409,728,422.
Signicant shareholders
As at 31 December 2023, the Company had been
notied of the following disclosable interests in the
share capital of the Company:
Shareholder Number of shares % of total voting rights
Witan Investment Trust plc 54,575,752 13.14
Quilter Plc 48,198,710 11.60
Newton Investment Management Limited 24,262,428 5.84
Courtiers Asset Management Limited 20,045,000 4.82
Waverton Investment Management Limited 13,167,009 3.17
Stichting Juridisch Eigendom Privium Sustainable Impact Fund 12,842,602 3.09
Since the year end, the Company has been notied
by Witan Investment Trust plc that its holding has
decreased to 53,000,000 shares, representing
12.94% of voting rights as at the date of this report.
The Company has not been informed of any
other changes to the notiable interests between
31December 2023 and 4 April 2024, 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 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 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 aect its control
following a successful takeover bid.
97
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Requirements of the listing rules
Listing Rule 9.8.4 requires the Company to include
specied information in a single identiable section
of the Annual Report or a cross reference table
indicating where the information is set out. The
Directors conrm that no disclosures are required
in relation to Listing Rule 9.8.4.
Independent professional advice,
insurance and indemnity
Details regarding independent professional
advice, insurance and indemnity are set out in the
Corporate Governance Statement on page 106.
Energy and carbon reporting,
including greenhouse gas emissions
The Company’s environmental statements are set
out in the Sustainability section of the report.
Management arrangements
Victory Hill Capital Partners LLP is the Company’s
AIFM, replacing G10 Capital Limited on 3 May
2023. Prior to that Victory Hill was the Company’s
investment adviser.
Victory Hill is, for the purposes of the Alternative
Investment Fund Manager Directive (AIFMD) and
the rules of the FCA, authorised and regulated by
the FCA as a ‘full scope’ UK alternative investment
fund manager with a permission pursuant to Part
4A of the Financial Services and Markets Act 2000
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, risk management,
consultancy, advisory and general management
services, and comply with the obligations and
performing the duties and functions of an
alternative investment fund manager contained in
the UK AIFMD Rules.
Under the terms of the AIFM Agreement, the AIFM
will be paid:
a. a xed fee of £70,000 per annum, payable
monthly in advance;
b. an annual fee to be calculated as percentages
of the Company’s net assets and payable
monthly in arrears as follows:
i. 1% on the rst £250m of net asset value;
ii. 0.9% on net asset value in excess of £250m
and up to and including £500m; and
iii. 0.8% on net asset value in excess of
£500m.
c. a fee of £18,000 per annum for preparing and
maintaining the Company’s key information
document.
If, in any fee period, the annual fee paid to the AIFM
exceeds:
a. £3.5m, the AIFM shall apply 8% of the annual
fee (net of any applicable taxes), subject to a
maximum amount of £400,000, to subscribe for
or acquire ordinary shares of £0.01 each in the
capital of the Company.
b. £2.5m, the AIFM shall apply 2% of the annual
fee (net of any applicable taxes) to be paid as
a charitable donation to a registered charity
aimed at promoting sustainable energy/ the
SDGs, as selected by the AIFM, provided that if,
following the AIFM'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 AIFM.
The AIFM Agreement may be terminated on 12
months’ written notice, provided that such notice
may not be served before 2 February 2025. This
Agreement may be terminated with immediate
eect on the occurrence of certain events, including
insolvency or in the event of a material or persistent
breach.
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, which is available on the Company’s
website.
DIRECTORS' REPORT CONTINUED
Annual Report and Accounts 2023
|
Governance
98
Continuing appointment
of Victory Hill
The Board keeps the performance of Victory Hill,
as the Company’s Investment Manager under
continual review. The Management Engagement
Committee conducts an annual review of the Victory
Hill’s performance and makes a recommendation
to the Board about its continuing appointment.
It is considered that Victory Hill has executed the
Company’s investment strategy according to the
Board’s expectations. Accordingly, the Directors
believe that the continuing appointment of Victory
Hill as the Investment Manager of the Company,
on the terms agreed, is in the best interests of
the Company and its shareholders as a whole.
Further details are set out in the Report from the
Management Engagement Committee on page120.
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57.
Auditor
The Directors conrm 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 oce 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19 to the nancial statements.
Annual General Meeting
The Notice of the AGM to be held on 22 May
2024 (the “Notice”) is set out on pages 172 to
177. 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 2023;
•
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 re-election of Directors;
•
the re-appointment of BDO LLP as the
Company’s 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 £409,728.42,
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
99
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
•
further ordinary shares generally and
unconditionally in accordance with section
551 of the Act up to an additional aggregate
nominal value of £409,728.42, 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 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 Manager,
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 2025 AGM
of the Company, or 15 months from the passing of
these resolutions, whichever is earlier.
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 £409,728.42, 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 £409,728.42, 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 2025 AGM of the Company,
or 15 months from the passing of these resolutions,
whichever is earlier.
There were 7,027,321 shares held in treasury at the
year end. As at 4 April 2024, 12,770,468 shares were
held in treasury.
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
eectively thereby improving liquidity and providing
the Company with additional exibility in the
management of its capital base.
At the Annual General Meeting held on 25 April
2023, the Company was granted authority to
purchase up to 14.99% of the Company’s shares in
issue amounting to 63,332,583 shares. During the
year under review, 7,027,321 shares were bought
back pursuant to this authority.
DIRECTORS' REPORT CONTINUED
Annual Report and Accounts 2023
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Governance
100
Resolution 15, a special resolution, as set out in the
Notice, if passed, will renew the Directors’ authority
to purchase up to 61,418,290 shares (being
14.99% of the issued share capital as at 4 April
2024), 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 signicant 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 or, if
earlier, on the expiry of 15 months from the date of
the passing of this resolution.
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 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
benecial 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) oers 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 eective until the
date of the AGM to be held in 2025 resolution or, if
earlier, on the expiry of 15 months from the date of
the passing of this resolution.
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.
By order of the Board
Apex Fund and Corporate Services (UK) Limited
Company Secretary
4 April 2024
101
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 eective stewardship
over the Company’s activities in the interests
of shareholders. The Board is accountable to
shareholders for the governance of the Company’s
aairs 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 specic 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 the FCA. A copy of the AIC Code can be
found at www.theaic.co.uk. A copy of the UK Code
can be obtained at www.frc.org.uk.
Statement of compliance
Pursuant to the Listing Rules of the FCA, the
Company is required to provide shareholders
with a 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 the Company 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 Board considers that the rst two provisions
are not relevant as the Company is an externally
managed investment company with all its day-to-
day management and administrative functions
outsourced to third parties. As a result, the
Company has no executive directors, employees
or internal operations. The Company has therefore
not reported further in respect of these provisions.
The Company does not have an internal audit
function. The need for this is reviewed annually
by the Audit Committee, as explained in the Audit
Committee report on page109.
The Board has reviewed the principles and
recommendations of the AIC Code and considers
that it has complied throughout the year. A
senior independent director was not appointed
during the year. Following the year end, on 1
January 2024, Richard Horlick was appointed as
the Senior Independent Director of the Company
to provide a sounding board for the Chair, serve
as an intermediary for the other Directors and
shareholders, and also act as an alternative
engagement channel to the shareholders and other
key stakeholders.
Annual Report and Accounts 2023
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Governance
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Leadership
The Board of Directors
Under the leadership of the Chair, the Board
is collectively responsible for the eective
stewardship of the Company’s aairs 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 satises 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 fulll its obligations to
shareholders within a framework of high standards
of corporate governance and eective 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 Manager and are able to allocate
sucient time to the Company to discharge their
responsibilities eectively.
The Directors possess a wide range of business and
nancial expertise relevant to the direction of the
Company and consider that they commit sucient
time to the aairs of the Company. All Directors
act in a non-executive capacity. Brief biographical
details of the Directors, including details of their
signicant commitments, can be found on page95.
Governance structure
The VH Global Sustainable Energy Opportunities plc Board
Ultimately responsible for the eectiveness of the Company’s governance and the system of internal controls
Investment
Committee
Review and decide
on investment
opportunities,
relevant policies, as
well as investment
reasonableness
and investment risk
monitoring
Risk, Operations
and Compliance
Committee
Provide oversight
to the Victory Hill
risk management
framework including
its eectiveness
to investment,
operational,
regulatory and
legal risk
Portfolio Risk
and Valuations
Committee
Review valuations of
investments against
the Company’s
valuation procedure
and methodology
and determine
reasonability of
valuation processes
and procedures
Sustainability
Committee
Responsible
for developing
sustainability strategy
considering climate
related risks and
opportunities; review
and challenge Victory
Hill’s existing practice
Sales and Marketing
Committee
Review and evaluate
sales and marketing
performance,
propose and approve
marketing budgets
and resource
allocation
Victory Hill Capital Partners LLP, (Victory Hill), Investment Manager
Ensures the Company operates in an eective and ethical manner through creating, developing and implementing
its strategy; Victory Hill driving operational and nancial performance, and assessing and monitoring
internal control practices
Audit Committee
Review of annual and
half year reports, audit
results, internal controls,
and risk assessment
Management
Engagement Committee
Regular review of major
service provider agreements
and performances
Nomination Committee
Advise the Board
on succession planning,
Board mix balance
Remuneration Committee
Review remuneration
policy, annual remuneration
and ad hoc payment
to Directors
103
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Directors have appointment letters which
do not provide for any specic 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 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; composition of the Board; tenure of the
Directors; and the Directors’ re-election is set out
in the Report from the Nomination Committee on
pages 117to119.
The Chair
Bernard Bulkin, as the Chair, leads the Board in
determining its governance framework, culture
and values and is responsible for its overall
eectiveness in directing the Company. He
demonstrates objective judgement, promotes a
culture of openness and debate, and facilitates
eective contributions by all Directors. The Chair
leads the Board’s relationship and engagement with
shareholders and other stakeholders, and manages
the relationship with the Investment Manager. In
liaison with the Company Secretary, he ensures
that the Directors receive accurate, timely and clear
information.
The Chair was independent of the Investment
Manager 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 conicting relationships. He considers
himself to have sucient time to commit to the
Company’s aairs. The role and responsibilities of
the Chair of the Board are clearly dened and set
out in writing, a copy of which is available on the
Company’s website.
Senior Independent Director
Richard Horlick is the Senior Independent Director
of the Company. He acts as a sounding board
for the Chair, meets with major shareholders as
appropriate, provides a channel for any shareholder
concerns regarding the Chair and takes the lead
in the annual evaluation of the Chair by the other
Directors. In the event the Company experiences a
period of stress, the Senior Independent Director
would work with the Chair, the other Directors
and/or shareholders to resolve any issues. The role
description of the Senior Independent Director 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 Investment Manager, and the
appointment, supervision and monitoring of the
Company’s service providers, including amongst
others, the Investment Manager. 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.
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 full its
responsibilities eectively.
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The report of the Audit Committee is set out on
pages108to111.
Management Engagement Committee
The Management Engagement Committee is
chaired by Richard Horlick and consists of Bernard
Bulkin, Margaret Stephens, Louise Kingham
and Daniella Carneiro. Margaret Stephens was
appointed as a member of the Committee with
eect from 14 March 2023. The Committee meets
at least once a year to review the performance
of the Investment Manager, the terms of their
engagement and to consider the appropriateness
of their fees. 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 Manager
and the other service providers.
The report of the Management Engagement
Committee is set out on page120.
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 identies and
nominates candidates for the oce 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 re-election of the Directors.
The report of the Nomination Committee is
included on pages117to119.
Remuneration Committee
The Remuneration Committee is chaired by Daniella
Carneiro and consists of all Directors. Its 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 set out on
pages112to116.
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 Manager, the
Administrator and the Company Secretary regularly
provide the Board with nancial information,
including an annual expenses budget, together
with brieng 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
2023 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
6 6 – – 2 2 2 2 1 1
Daniella Carneiro
2
6 6 3 3 2 2 2 2 1 1
Richard Horlick 6 6 3 3 2 2 2 2 1 1
Louise Kingham 6 5 3 3 2 2 2 1 1 1
Margaret Stephens
3
6 6 3 3 1 1 2 2 1 1
In addition to the above, eight ad hoc meetings of the Board or its committees, and one ad hoc meeting
of the Audit Committee and the Remuneration Committee each were held to deal with approval of
documentation and administrative matters in respect of the quarterly interim dividends, annual and interim
reports, and Directors' remuneration.
1
not a member of the Audit Committee
2
appointed as the Chair of the Remuneration Committee and as a member of the Audit, Management Engagement and
Nomination Committees with eect from 21 February 2023
3
appointed as a member of the Management Engagement Committee with eect from 14 March 2023
105
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 ocers’ 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.
Conicts of interest
It is the responsibility of each individual Director
to avoid an unauthorised conict arising. Directors
must request authorisation from the Board as
soon as they become aware of the possibility of an
interest that conicts, or might possibly conict,
with the interests of the Company (a “situational
conict”). The Company’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 conicts and for
deciding whether or not the situational conict
should be authorised. The factors to be considered
include: whether the situational conict 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 aect the judgement and/or actions of the
Director in question. When the Board is deciding
whether to authorise a situational conict, 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
is able to impose limits or conditions when giving
authorisation if it thinks 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’ Conicts of Interests which is reviewed
at each Board meeting, to ensure that authorised
conicts remain appropriate. The Directors advise
the Company Secretary and the Board as soon as
they become aware of any conicts of interest.
Directors who have conicts of interest do not
take part in discussions which relate to any of their
conicts.
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
eectiveness.
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 31 December 2023
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 eective
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
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Governance
106
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
eectiveness 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 signicant failings or weaknesses were
identied.
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.
The Board, 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 benets related to
the review of risk and associated controls of the
Company.
A risk matrix is in place against which the risks
identied 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 eectiveness 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 on page47.
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
I am pleased to present the report of the Audit
Committee (the “Committee”) for the year ended 31
December 2023.
Composition
The composition of the Committee is set out
above in the Corporate Governance Statement
and details of how its performance evaluation has
been conducted are included in the report of the
Nomination Committee on pages117and118.
Meetings
The Committee held three scheduled meetings
during the year under review. The Directors’
attendance is set out on page105 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 signicant
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 eectiveness;
•
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 eectiveness 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 Manager. In doing so, the Audit
Committee monitored the eectiveness 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, balanced and understandable,
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 30 June 2023 and the statutory audit
of the Annual Report for the year ended 31
December 2023, 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 2023;
•
received and discussed with the Auditor its
report on the results of the review of the interim
nancial statements and the year-end audit;
REPORT OF THE AUDIT COMMITTEE
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Governance
108
•
reviewed and approved the proposal from
the Auditor in respect of providing non-audit
services relating to ESG Assurance Review for the
year ended 31 December 2023. The Committee
considers that the provision of this service by
BDO LLP does not compromise its independence
and objectivity in carrying out the statutory audit;
•
discussed and considered the Auditor’s
performance, objectivity and independence and
the eectiveness 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.
Financial statements and
signicant accounting matters
The Audit Committee has taken into account the
most signicant 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 Manager and the Administrator to
assess these signicant 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 2023.
Assumptions applied to derive the valuation of
investments are selected and recommended by
the Investment Manager. These include discount
rates, power prices, energy yield, ination 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, furthermore, the Board
engaged a Big 4 advisory rm to perform a review
of the Investment Manager's valuation methodology
which conrmed the appropriateness of the
application of the methodology. The Committee
considered the subjectivity and appropriateness of
the assumptions used to determine the valuation
of investments, held through GSEO Holdings, which
could aect the NAV of the Company. These were
discussed with the Investment Manager and the
Auditor. The Committee reviewed the valuation
reports from the Investment Manager, 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 sucient 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57.
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 signicant risks facing
the Company and the controls in place to mitigate
those risks. The Company received reports on
internal controls from key service providers during
the year, when available, and no signicant matters
of concern have been identied.
ESG assurance review
In respect of the Annual Report and nancial
statements for the year ended 31 December 2023,
the Audit Committee received the ESG assurance
report from BDO LLP, as a form of non-audit
service, which is detailed on page110. The
Committee also reviewed the Investment Manager’s
ESG and Sustainability Impact Report which
provided an overview of Victory Hill’s ESG activities.
109
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 £223,000 (period ended 31
December 2022: £170,000).
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 conict
of interest or potential conict 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
2023
Year
ended 31
December
2022
Review of Interim Report £70,000 £50,000
ESG Assurance Review £83,700 £47,500
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.
This was in line with the approach adopted on the
matter in the previous year.
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. The Committee notes that this ratio has not
been breached given this is the third year of audit
and the threshold would apply to subsequent
audits. Details of the Auditor’s remuneration are set
out in note 5 to the nancial statements.
Eectiveness of external audit
The Audit Committee reviews the eectiveness
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 eectiveness. 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 2023, without the Investment Manager
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.
The process for assessing the eectiveness of the
external audit also involved receiving feedback from
the Company’s other service providers involved in
the audit, primarily the Investment Manager, on the
performance of the Auditor.
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 identied and focused on
the areas of signicant nancial reporting risk. The
external audit process was considered to have been
eective.
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110
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 satised
that the Auditor’s objectivity and independence is
not impaired by the performance of these non-
audit services and that the Auditor has fullled 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 the Auditor
to the Company. The Auditor has indicated their
willingness to continue in oce. 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
2023, 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
4 April 2024
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OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 123 to 129.
Statement from the Chair of the
Remuneration Committee
I am pleased to present the Directors’ remuneration
report for the year ended 31 December 2023.
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 held one scheduled meeting during
the year. The Directors’ attendance at this meeting
and the composition of the Committee are set
out in the Corporate Governance Statement and
details of how its performance evaluation has
been conducted are included in the report of the
Nomination Committee on pages117and118.
For the year ended 31 December 2023, the annual
fees were set at the rate of £81,500 for the Chair of
the Board and £58,500 for the other Directors. The
Directors’ fees are xed with no variable element.
The Remuneration Committee reviews Directors’
fees on an annual basis. During the year, the
Committee engaged Trust Associates, a board
advisory rm with no connection to the Company or
the Directors, to provide a benchmark review of the
Directors’ remuneration. The Committee received
the report from Trust Associates following the
completion of their review, following which it 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. As a
result of the benchmarking exercise performed by
Trust Associates, the Committee agreed that, with
eect from 1 January 2024, the Directors’ annual
fees be adjusted by UK RPI as at 31 December
2023, rounded to the nearest £500. Accordingly, the
annual fees for the year ending 31 December 2024
are as follows: £84,500 for the Chair of the Board;
£61,500 for the other Directors; an additional fee of
£10,000 to the Chair of the Audit Committee; and an
additional fee of £3,000 to the Senior Independent
Director. The premium applied to the remuneration
of the Chair of Audit Committee and the Senior
Independent Director has been introduced from
the current nancial year. The Board believes that
this updated fee structure appropriately reects the
increase in the size and operations 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
Company’s distinctive position in the infrastructure
sector with its portfolio assets located in a wide
range of geographical areas and using a number
of dierent technologies, and 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 page116.
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
signicant 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 22 May 2024 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 inating 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 on the following
page 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, from IPO on 2 February 2021
to 31 December 2023. Total shareholder return is
the measure of returns provided by a company to
shareholders reecting share price movements and
assuming reinvestment of dividends.
DIRECTORS' REMUNERATION REPORT
Annual Report and Accounts 2023
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Governance
112
Directors’ remuneration (audited)
The Directors who served during the year received the following emoluments:
Fees Expenses Total
Directors
For the year
ended
31 December
2023
£
For the period
ended
31 December
2022
£
For the year
ended
31 December
2023
£
For the period
ended
31 December
2022
£
For the year
ended
31 December
2023
£
For the period
ended
31 December
2022
£
Bernard Bulkin 81,500 70,000 – – 81,500 70,000
Richard Horlick 58,500 50,000 2,765 518 61,265 50,518
Louise Kingham 58,500 50,000 – – 58,500 50,000
Margaret Stephens 58,500 50,000 – – 58,500 50,000
Daniella Carneiro
*
55,869 – – – 55,869 –
Total 312,869 220,000 2,765 518 315,634 220,518
* Appointed on 18 January 2023
There are no other taxable benets 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.
GSEO FTSE – Share Bloomberg GBP Corporate TR Bonds
Feb 21 Apr 21 Jun 21 Aug 21 Oct 21 Feb 23 Apr 23 Jun 23 Aug 23 Oct 23Dec 21 Feb 22 Apr 22 Oct 22Jun 22 Aug 22 Dec 22
Dec 23
60
70
80
90
100
110
120
140
130
113
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Annual change in Directors’ remuneration
1
Directors' fees for the year ended 31 December 2023 were increased in line with UK RPI from 1 January 2021 to 31 December
2022.
2
The fees for the period ended 31 December 2021 accrued from the Company’s IPO on 2 February 2021. On a year-on-year basis,
there was no change to the Directors’ fees between this period and the year ended 31 December 2022.
3
Appointed on 18 January 2023
Director
Year to 31 December
2023 %
1
Year to 31 December
2022 %
2
Period to
31December 2021 %
2
Bernard Bulkin 16.4 9.4 0.0
Richard Horlick 17.0 8.7 0.0
Louise Kingham 17.0 8.7 0.0
Margaret Stephens 17.0 8.7 0.0
Daniella Carneiro
3
– – –
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;
•
the distributions to shareholders by way of share buybacks; and
•
the investment management fees and other expenses incurred by the Company.
1
25% of the increase relates to the appointment of an additional Director during 2023.
2
Share buyback programme commenced on 15 September 2023
Year ended 31 December 2023
£’000
Year ended 31 December 2022
£’000
Change
%
Directors’ remuneration
1
313 220 42.2
Investment Manager’s fee 4,372 3,810 14.8
Other expenses 1,819 647 181.1
Distributions to shareholders
by way of:
•
Dividends paid and proposed
•
Share buybacks
2
23,269
5,470
14,457
–
61.0
100.0
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, and as at the date of this report, all of which are benecially owned.
Director 4 April 2024 31 December 2023 31 December 2022
Bernard Bulkin 68,101 46,362 46,362
1
Richard Horlick 300,000 300,000 300,000
Louise Kingham 26,753 20,000 20,000
Margaret Stephens 56,960 28,181 28,181
Daniella Carneiro – – –
DIRECTORS' REMUNERATION REPORT CONTINUED
1
The gure reported in the 2022 Annual Report has been restated to take into account the announcement released by the
Company on 27 February 2024.
Annual Report and Accounts 2023
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Governance
114
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 year ended 31 December 2022 was approved by shareholders at
the AGM held on 25 April 2023. The Directors’ Remuneration Policy was last approved by shareholders at the
AGM held on 27 April 2022. The votes cast by proxy were as follows:
Directors’ Remuneration Report
(AGM 2023)
Directors’ Remuneration Policy
(AGM 2022)
Number of votes % of votes cast Number of votes % of votes cast
For 280,032,586 93.3 185,096,834 99.97
Against 20,124,775 6.7 55,022 0.03
Total votes cast 300,157,361 100.0 185,151,856 100.0
Number of votes withheld 871,329 – 14,277 –
DIRECTORS’ REMUNERATION POLICY
Overview
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.
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 benets, share benets, share options, long-term incentive schemes or
other benets.
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 signicant 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.
115
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Current and future policy
Component Director Purpose of reward Operation
Annual fee Chair of Board Fees for services as
chair 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 oce. The Directors have appointment letters which do not provide for any specic
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
4 April 2024
DIRECTORS' REMUNERATION REPORT CONTINUED
Annual Report and Accounts 2023
|
Governance
116
I am pleased to present the report of the
Nomination Committee (the “Committee”) for the
year ended 31 December 2023.
Composition
The composition of the Committee is set out in the
Corporate Governance Statement above. Details
of how its performance evaluation has been
conducted are included below and on page118.
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 page105.
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 specications 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:
•
led the recruitment process for the appointment
of Ms Carneiro on 18 January 2023. As noted
in the Company’s 2022 Annual Report, in order
to conduct a formal, rigorous and transparent
search process, the Committee had engaged Trust
Associates, an independent search consultancy
with no connection to the Company or its
Directors, to assist with the recruitment process.
•
recommended to the Board the appointment of
Ms Carneiro as the Chair of the Remuneration
Committee and her appointment to various
committees of the Board;
•
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;
•
updated the Company’s policies regarding
the tenure of the Chair and the other Board
members, and diversity and inclusion, to make
these more robust and better aligned with the
recommendations of the AIC Code and other
relevant regulatory framework;
•
reviewed its terms of reference and considered
whether these remained appropriate;
•
reviewed the signicant commitments of the
Directors and the time dedicated by them to the
aairs of the Company; and
•
made recommendations to the Board regarding
the Directors’ annual re-election by shareholders
at the AGM.
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 eectiveness.
The Directors have undertaken an internal
performance evaluation by way of completing
written questionnaires, led by the Chair,
specically designed to assess the strengths and
independence of the Board and the performance
REPORT OF THE NOMINATION COMMITTEE
117
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 identied 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 eectively
and the current Committee structure remains
appropriate;
•
the Chair leads the Board eectively and
promotes a culture of openness and debate,
and facilitates constructive Board relations and
eective 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, oers specialist advice and
holds third party service providers to account;
•
all Directors are considered to be independent
of the Investment Manager in both character
and judgement. None of the Directors sit on the
boards of any other companies managed by the
Investment Manager; and
•
all of the current Directors make an eective
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.
The Nomination Committee of the Company aims
to follow best governance practices, where possible,
and accordingly, regularly considers the merits of
having an external performance evaluation in line
with the recommendation of the AIC Code for FTSE
350 companies.
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 aairs. 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, the Board
strongly recommends the re-election of all 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 eectiveness and
commitment to the Company. The Directors’
biographical details are set out on page95.
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
Manager and the Company’s Broker. Directors’
training is also provided to each new Director by
the Company’s legal adviser. During the year, the
induction process was carried out in respect of Ms
Carneiro's appointment to the Board.
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 supports the recommendations of the
FTSE Women Leaders Review on gender diversity
and its voluntary target for FTSE 350 boards to
have a minimum of 40% of women on boards.
The Company also supports the Parker review’s
recommendations to increase ethnic and cultural
diversity on company boards. Whilst the Board does
not consider it appropriate to use specic diversity
targets given its small size, it acknowledges that
diversity is important to ensure that the Company
can draw on a broad range of perspectives, skills,
experience, knowledge and backgrounds to
eectively lead the Company.
As at 31 December 2023, three out of ve Directors
(60%) were women. The Board is also meeting the
recommendation that at least one Director is from
an ethnic minority background. The following tables
set out the gender and ethnic diversity of the Board
as at 31 December 2023:
REPORT OF THE NOMINATION COMMITTEE CONTINUED
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Governance
118
Gender diversity
Number of
Board members
Percentage
of the Board
Number of senior
positions on the Board
1
Men 2 40 1
Women 3 60 1
Other – – –
Not specied/prefer not to say – – –
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 80 2
Mixed/Multiple Ethnic Groups – – –
Asia/Asian British – – –
Black/African/Caribbean/
Black British
– – –
Other ethnic groups,
including Arab
1
2
20 –
Not specied/prefer not to say – – –
1
Senior positions include Chair of the Board and Chair of the Audit Committee. The Company did not have a Senior Independent
Director as at 31 December 2023
2
Latin American
As an externally managed investment company with
solely independent, non-executive Directors, the
Company does not have a Chief Executive or a Chief
Financial Ocer and has no employees or internal
operations. Accordingly, there are no disclosures
about executive management positions to be
included. 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 Manager 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
Manager 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. Accordingly, the
formal succession planning will be initiated by the
Nomination Committee in 2024.
Bernard Bulkin
Chair of the Nomination Committee
4 April 2024
119
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
I am pleased to present the report of
the Management Engagement Committee
(the “Committee”) for the year ended
31 December 2023.
Composition
The composition of the Committee is set out in the
Corporate Governance Statement on page105.
Details of how its performance evaluation has been
conducted are included on pages117 and118 in
the report of the Nomination Committee.
Meetings
The Committee met twice during the year under
review. The Directors’ attendance at the Committee
meetings held during the year is set out in the
Corporate Governance Statement on page105.
Role of the Management
Engagement Committee
The key responsibilities of the Committee include:
•
monitoring and evaluating the AIFM and the
Investment Manager’s investment performance
and, if necessary, providing appropriate
guidance;
•
reviewing, at least annually, the performance
of the AIFM and the Investment Manager 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
Manager 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
eectiveness.
Activities during the year
The Committee has conducted a comprehensive
review of the performance of the AIFM, the
Investment Manager 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.
On 3 May 2023, Victory Hill Capital Partners LLP was
appointed as the Company's new AIFM, replacing
G10 Capital Limited.
Following its review, the Committee is satised
that Victory Hill, as the Investment Manager and
the AIFM, has 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
satised that the collective skillset of the Investment
Manager’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 Manager’s
activities during the year and the Company’s overall
performance are included in the Strategic Report.
The key elements of the fees paid to Victory Hill are
set out on page98.
As a whole, the Committee is satised that Victory
Hill has the suitable skills and experience to advise
upon and manage, respectively, the Company’s
investments, and believes that their continuing
appointment as the Investment Manager and the
AIFM of the Company 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 eective 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
4 April 2024
MANAGEMENT ENGAGEMENT COMMITTEE REPORT
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120
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 satised that they give
a true and fair view of the state of aairs of the
Group and Company and of the prot 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 sucient 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 Manager. 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,
conrm 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 prot 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
4 April 2024
STATEMENT OF DIRECTORS' RESPONSIBILITIES
121
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Annual Report and Accounts 2023
|
Financial Statements
122
FINANCIAL STATEMENTS
Independent Auditor’s report 123
Statement of comprehensive income 130
Statement of nancial position 131
Statement of changes in shareholders’ equity 132
Statement of cash ows 133
Notes to the nancial statements 134
Alternative performance measures 156
123
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
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 aairs as at 31 December 2023 and of its prot 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 2023 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
material 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 sucient 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 of Directors in the year of incorporation
to audit the nancial statements for the year ended 31 December 2021 and subsequent nancial periods. The period of total
uninterrupted engagement including retenders and reappointments is 3 years, covering the years ended 31 December 2021 to
31 December 2023. 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 fullled 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 cashow 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 identied any material uncertainties relating to events or conditions that,
individually or collectively, may cast signicant 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.
124
Annual Report and Accounts 2023
|
Financial Statements
INDEPENDENT AUDITOR’S REPORT 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.
An overview of the scope of our Audit
Key audit matters Valuation of Investments 2023 2022
Materiality
Financial statements as a whole
£7.258m (2022: £6.860m) based on 1.5% (2022: 1.5%) of
net assets.
Specic Materiality
Materiality for items impacting on the realised return
was £1.141m (2022: £1.206m) based on 5% (2022: 5%)
of prot before tax, excluding the unrealised valuation
movements.
Yes
Yes
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.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most signicance in our audit of the nancial
statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to
fraud) that we identied, including those which had the greatest eect on: the overall audit strategy; the allocation of resources
in the audit; and directing the eorts 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.
125
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of investments
(See note 7, and accounting
policy on pages 134)
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 Manager who is
remunerated based on the net asset
value of the company.
These estimates include judgements
including discount rates, useful
economic lives of assets, power
generation and pricing forecasts, tax
and ination.
Assets in construction were valued
using the cost approach.
Investments at fair value through
prot or loss is the most signicant
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 specic
procedures:
•
Utilised spreadsheet analysis tools to assess the
integrity of the model.
•
Assessed the reasonableness of forecasted cashows
against supporting documentation such as revenue
contracts.
•
Challenged the appropriateness of the key
assumptions including discount factors, ination
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 calculated accurately in the context of current
corporation tax legislation and rates in relevant
jurisdictions.
•
Vouched cash to bank statements and other net
assets to investee entity management accounts.
•
Considered the accuracy of forecasting by comparing
previous and future forecasts to actual results and
challenged the reasons for signicant variances and
whether these have been adequately factored into
future modelling.
•
Vouched loans to loan agreements, veried the terms
of the loans and recalculated interest income and
compared to that recorded.
For each of the key assumptions in the valuation models,
including in relation to the inputs used in the build up
of discount rates, we challenged 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 whose fair value is akin to cost,
we agreed the cost of the investments to supporting
documentation and obtained progress reports from the
developers in order to assess the appropriateness of the
valuation.
Key observations
Based on our procedures performed we did not identify
any matters to suggest the valuation of the investments
was not appropriate.
126
Annual Report and Accounts 2023
|
Financial Statements
INDEPENDENT AUDITOR’S REPORT CONTINUED
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the eect of misstatements. We
consider materiality to be the magnitude by which misstatements, including omissions, could inuence 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 identied misstatements, and the
particular circumstances of their occurrence, when evaluating their eect 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
2023 2022
Materiality £7.258m £6.860m
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 £5.080m £4.802m
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.
Specic materiality
We also determined that for those items impacting on realised returns, a misstatement of less than materiality for the nancial
statements as a whole, specic materiality, could inuence the economic decisions of users. As a result, we determined materiality
for these items to be £1.141m (2022: £1.206m) based on 5% (2022:5%) of prot before tax excluding unrealised valuation
movements. We further applied a performance materiality level of 70% (2022: 70%) of specic materiality of £0.799m (2022:
£0.844m) to ensure that the risk of errors exceeding specic materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit dierences in excess of £145k (2022:£137k)
and for those items impacting realised return £22.8k (2022: 24k). We also agreed to report dierences 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 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.
127
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 specied 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 identied set out on page57;
and
•
The Directors’ explanation as to their assessment of the Company’s prospects, the
period this assessment covers and why the period is appropriate set out on page 57.
Other Code provisions
•
Directors’ statement on fair, balanced and understandable set out on page 108;
•
Board’s conrmation that it has carried out a robust assessment of the emerging and
principal risks set out on page 49;
•
The section of the annual report that describes the review of eectiveness of risk
management and internal control systems set out on page 107; and
•
The section describing the work of the Audit Committee set out on page 108.
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 identied 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 specied 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 satised 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.
128
Annual Report and Accounts 2023
|
Financial Statements
INDEPENDENT AUDITOR’S REPORT CONTINUED
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 inuence the economic decisions of users taken on the basis of these nancial
statements.
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:
Non-compliance with laws and regulations
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.
These included but were not limited to compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK
Corporate Governance Code, the requirements of s.1158 of the Corporation Tax Act, and applicable accounting standards.
Our tests included, but were not limited to:
•
Obtaining an understanding of the control environment in monitoring compliance with laws and regulations;
•
Agreement of the nancial statement disclosures to underlying supporting documentation;
•
Enquiries of management and those charged with governance regarding any instances of non-compliance with laws and
regulations; and
•
Review of minutes of Board meetings throughout the period regarding any instances of non-compliance with laws and
regulations.
Fraud
We assessed the susceptibility of the nancial statements to material misstatement including fraud.
Our risk assessment procedures included:
•
Enquiry with management, Audit Committee and those charged with governance regarding any known or suspected instances
of fraud;
•
Obtaining an understanding of the Company’s policies and procedures relating to:
— Detecting and responding to the risks of fraud; and
— Internal controls established to mitigate risks related to fraud.
•
Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud;
•
Discussion amongst the engagement team as to how and where fraud might occur in the nancial statements; and
•
Considering remuneration incentive schemes and performance targets and the related nancial statement areas impacted by
these.
Based on our risk assessment, we considered the areas most susceptible to fraud to be the valuation of investments and
management override of controls.
129
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Our procedures in response to the above included:
•
The procedures set out in the Key Audit Matters section above;
•
Testing journals posted in the preparation of the nancial statements
•
Evaluating whether there was evidence of bias by the Investment Manager and Directors that represented a risk of material
misstatement due to fraud
•
Incorporating an element of unpredictability by testing a judgemental sample of smaller expense items that would not
otherwise be selected for testing.
We also communicated relevant identied 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 reected 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.
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.
Vanessa-Jayne Bradley (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, United Kingdom
4April 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Annual Report and Accounts 2023
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Financial Statements
130
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
For the year ended
31 December 2023
For the year ended
31 December 2022
Note
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Income
Gains on investments 7 – 32,517 32,517 – 4,131 4,131
Investment income 4 29,326 – 29,326 28,823 – 28,823
Total income and gains 29,326 32,517 61,843 28,823 4,131 32,954
Investment management
fees 15 (4,372) – (4,372)
(3,810) – (3,810)
Other expenses 5 (2,132) – (2,132) (940) – (940)
Prot/(loss) for the year
before taxation 22,822 32,517 55,339
24,073 4,131 28,204
Taxation 6 – – – – – –
Prot/(loss) for the year
after taxation 22,822 32,517 55,339
24,073 4,131 28,204
Prot and total
comprehensive income
attributable to:
Equity holders of the
Company
22,822 32,517 55,339 24,073 4,131 28,204
Earnings/(loss) per share –
basic and diluted (p) 17 5.42 7.72 13.14 6.55 1.12 7.67
The total column of the Statement of Comprehensive Income is the prot 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 134 to 155 form part of these nancial statements.
131
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
Note
As at
31 December
2023
£’000
As at
31 December
2022
£’000
Non-current assets
Investments at fair value through prot or loss 7 369,047 315,133
Total non-current assets 369,047 315,133
Current assets
Cash and cash equivalents 10 74,258 141,791
Cash receivable 9 40,367 –
Other receivables 9 441 740
Total current assets 115,066 142,531
Total assets 484,113 457,664
Current liabilities
Accounts payable and accrued expenses 11 (270) (491)
Total current liabilities (270) (491)
Total liabilities (270) (491)
Net assets 18 483,843 457,173
Capital and reserves
Share capital 13 4,225 4,225
Share premium 13 186,368 186,368
Special distributable reserve 13 227,067 232,467
Capital reserve 58,694 26,177
Revenue reserve 7,489 7,936
Total capital and reserves attributable to equity holders of the Company 483,843 457,173
Net asset value per ordinary share (p) 18 116.46 108.21
The nancial statements were approved and authorised for issue by the Board of Directors on 4April 2024 and signed on its behalf
by:
Bernard Bulkin
Chair
Company Registration Number 12986255
The notes on pages 134 to 155 form part of these nancial statements.
Annual Report and Accounts 2023
|
Financial Statements
132
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31December 2023
For the year ended 31 December 2023 Note
Share
capital
£’000
Share
premium
account
£’000
Special
distributable
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
Opening balance 4,225 186,368 232,467 26,177 7,936 457,173
Shares bought back 13 – – (5,400) – – (5,400)
Total comprehensive income forthe year – – – 32,517 22,822 55,339
Interim dividends paid during the year 14 – – – – (23,269) (23,269)
Balance at 31 December 2023 4,225 186,368 227,067 58,694 7,489 483,843
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 1,109 120,891 – – – 122,000
Cost of issue of shares 13 – (2,472) – – – (2,472)
Total comprehensive income for the year – – – 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
A total of 422,498,890 ordinary shares were issued since the Company’s date of incorporation to 31 December 2023.
During the year, the Company purchased for treasury a total of 7,027,321 ordinary shares.
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 and revenue reserves are distributable to shareholders of the Company.
The notes on pages 134 to 155 form part of these nancial statements.
133
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
Note
For the year
ended
31 December
2023
£’000
For the year
ended
31 December
2022
£’000
Cash ows from operating activities
Prot before tax 55,339 28,204
Adjustments for:
Movement in fair value of investments 7
(31,095) (4,148)
Interest on cash deposits 4 (5,865) (2,310)
Operating result before working capital changes 18,379 21,746
(Increase)/decrease in other receivables 9
(40,068) 71
Increase/(decrease) in accounts payable and accrued expenses 11 (221) 151
Net cash (used in)/generated from operating activities
(21,910) 21,968
Cash ows from investing activities
Purchase of investments 7 (22,819
) (151,367)
Interest on cash deposits 4 5,865 2,310
Net cash used in investing activities
(16,954) (149,057)
Cash ows from nancing activities
Proceeds from issue of shares – 122,000
Share buybacks 13
(5,400) –
Payment of share issue costs –
(2,472)
Dividends paid in the year 14 (23,269) (14,457)
Net cash (used in)/generated from nancing activities (28,669) 105,071
Net decrease in cash and cash equivalents (67,533) (22,019)
Cash and cash equivalents at beginning of the year 141,791 163,810
Cash and cash equivalents at end of the year 10 74,258 141,791
The notes on pages 134 to 155 form part of these nancial statements.
Annual Report and Accounts 2023
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Financial Statements
134
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 has appointed Victory Hill Capital PartnersLLP as the Investment Manager& AIFM pursuant to the Investment
Management Agreement dated 3May 2023.
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 diversied 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 is measured
at fair value through prot or loss in line with IFRS10 as explained in note2.
2. Material accounting policy information
2.1 Basis of preparation
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.
The nancial statements are prepared on the historical cost basis, except for revaluation of certain nancial investments at fair
value through prot 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
signicant judgments and estimates have been made in preparing the nancial statements and their eect are disclosed in note3.
2.2 Investment entity and basis of non-consolidation of subsidiaries
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 satises the three essential criteria to be regarded as an
investment entity as dened in IFRS10.
There are three key conditions to be met by the Company for it to meet the denition 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 indenitely but should have an exit strategy for their realisation.
135
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
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 oer 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 prot or loss, in accordance with IFRS13 “Fair Value Measurement”,
IFRS10 “Consolidated Financial Statements” and IFRS9 “Financial Instruments”.
Further detail on the signicant judgements in the basis of non-consolidation of the subsidiaries of the Company is disclosed in
note3.
2.3 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 Company faces a number of risks and uncertainties, as set out in the Strategic Report above. 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 2023, the Company
had net current assets of £114.8m (2022:£142m) and cash balances of £74.3m (2022:£141.8m) and cash receivables of £40.4m
(2022:£0), which are sucient to meet current obligations as they fall due. There is no external debt at the Company as at year
end.
The major cash outows of the Company are the payment of dividends and costs relating to the acquisition of new assets, both of
which are discretionary.
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 sucient 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 sucient headroom to meet all expected cash outows with its existing cash balances.
The Directors have considered factors relating to the wider global macroeconomic environment in 2023, in particular changes in
ination and interest rates. As the Company’s income is primarily ination-linked, a rise in ination would have a positive impact on
cashows 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, the Middle East or Eastern Europe and therefore, regional geopolitical factors have an immaterial impact
on the Company.
Based on its assessment above, the Directors have a reasonable expectation that the Company has sucient 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 signicant 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.
Annual Report and Accounts 2023
|
Financial Statements
136
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2.4 Financial Instruments
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 classication 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 prot
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 prot or loss and at amortised cost.
Investments held at fair value through prot or loss
The Company accounts for its investment in its wholly owned direct subsidiary GSEO Holdings at fair value through prot 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 prot 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 prot 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 dened 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 cashow has expired.
2.5 Cash and cash equivalents
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
insignicant risk of changes in value.
137
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
2.6 Foreign currencies
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 dierences arising on translation to the functional currency are recognised in the Statement of
Comprehensive Income, within other expenses or other income. Foreign exchange dierences relating to investments held at fair
value through prot or loss are shown within gains/losses on investments within the Statement of Financial Position.
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 Income recognition
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 eective 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.
2.9 Expenses
Expenses are accounted for on an accruals basis. Expenses include AIFM, investment management fees and other expenses which
are allocated to the revenue column of the Statement of Comprehensive Income. 100% of the investment management fees are
charged as an expense item within the Statement of Comprehensive Income. Fees relating to the AIFM and Investment Manager
are detailed in note15.
Share issue expenses of the Company directly attributable to the issue and listing of shares are charged to the share premium
account.
2.10Share capital and share premium
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 classied 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.
2.11 Taxation
Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital
gains. The Company has successfully applied and has been granted approval as an Investment Trust by HMRC.
The underlying intermediate holding companies and project companies in which the Company invests provide for and pay
taxation at the appropriate rates in the countries in which they operate. This is taken into account when assessing the value of the
subsidiaries.
Annual Report and Accounts 2023
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Financial Statements
138
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2.12 Segmental reporting
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 eciency assets.
The nancial information used by the Board to manage the Company presents the business as a single segment.
2.13 Changes to accounting standards and interpretations
In the current year, the Company has applied a number of amendments to IFRS Accounting Standards issued by the International
Accounting Standards Board (IASB) that are mandatorily eective for an accounting period that begins on or after 1January 2023.
The impact of these standards is not expected to be material to the reported results and nancial position of the Company.
• IFRS17 Insurance Contracts (including the June2020 and December2021 Amendments to IFRS17).
The Company does not have any contracts that meet the denition of an insurance contract under IFRS17.
• Amendments to IAS1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements–
Disclosure of Accounting Policies
• Amendments to IAS12 Income Taxes–Deferred Tax related to Assets and Liabilities arising from a Single Transaction
• Amendments to IAS12 Income Taxes– International Tax Reform–Pillar Two Model Rules
• Amendments to IAS8 Accounting Policies, Changes in Accounting Estimates and Errors–Denition of Accounting Estimates
The table below shows a number of standards and interpretations which had been published but not yet eective.
Description Eective Date
Amendments to the following standards: Periods beginning on or after 1January 2024
• IFRS10 and IAS28 Leases (Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture)
• IAS1 Presentation of Financial Statements (Classication of Liabilities as
Current or Non-Current)
• IAS1 Presentation of Financial Statements (Non-current Liabilities with
Covenants)
• IAS7 and IFRS7 (Supplier Finance Arrangements)
• IAS16 (Lease Liability in a Sale and Leaseback)
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the nancial statements
of the Company in future periods.
139
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
3. Critical accounting estimates, judgements, and assumptions
The preparation of nancial statements requires the Directors of the Company to make judgements, estimates and assumptions
that aect 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 Manager. Revisions to accounting estimates are recognised in the period in which the estimates are revised
and in any future periods aected.
Signicant 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 denition 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’s investment in GSEO Holdings is 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.
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 Manager 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. The fair value of investments that are in construction as at year end are
measured on a cost basis, as the most appropriate proxy of their fair value.
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 specic factors and an appropriate discount rate. Changes in assumptions
about these factors could aect the reported fair value of investments, which is detailed in note7 which considers the sensitivity of
key modelling assumptions on the Company’s net asset value.
The Investment Manager exercises their judgement in assessing the discount rate applied in the valuation of 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 reect changes in the market and in the project risk characteristics.
Annual Report and Accounts 2023
|
Financial Statements
140
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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 reect various factors including gas prices,
carbon prices and renewables deployment.
Short to medium term ination assumptions used in the valuations are based on third party forecasts. In the longer term, an
assumption is made that ination 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 classies 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 satised 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. Investment income
For the year ended
31December 2023
For the year ended
31December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Interest on cash deposits 5,865 – 5,865 2,310 – 2,310
Interest income from investments 6,260 – 6,260 4,906 – 4,906
Dividend income 17,200 – 17,200 21,607 – 21,607
Investment income 29,325 – 29,325 28,823 – 28,823
141
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
5. Operating expenses
For the year
ended
31December
2023
£’000
For the year
ended
31December
2022
£’000
Fees to the Company’s Auditor:
Statutory audit of the year-end nancial statements 223 170
Assurance related services for the interim report 70 50
Other non-audit services 84 48
Tax advisory fees 14 10
AIFM fees 66 74
Directors’ fees 345 220
Due diligence fees 349 2
Administration and depositary fees 227 188
Professional fees 70 104
Other expenses 684 74
Total operating expenses 2,132 940
Fees with respect to the Investment Management and AIFM services are set out in note15.
The Company had no employees during the year. Full detail on Directors’ fees is provided in the Directors’ Remuneration Report.
There were no other emoluments during the year.
6. Taxation
a. Analysis of charge in the year
For the year ended 31December 2023 For the year ended 31December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Corporation tax – – – – – –
Annual Report and Accounts 2023
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Financial Statements
142
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
b. Factors aecting total tax charge for the year
The eective UK corporation tax rate applicable to the Company for the year is 23.52% (2022:19%). The tax charge diers from the
charge resulting from applying the standard rate of UK corporation tax for an investment trust company.
For the year ended 31December 2023 For the year ended 31December 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Prot for the year before taxation 22,822 32,517 55,339 24,073 4,131 28,204
Corporation tax at 23.52% 5,368 7,648 13,016 4,574 785 5,359
Eect of:
Capital (gains) / losses not taxable – (7,648) (7,648) – (785) (785)
Expenditure not deductible 1 – 1 (96) – (96)
Non-taxable UK dividends (4,046) – (4,046) (4,105) – (4,105)
Management expenses not utilised/
recognised 161 – 161 (180) – (180)
Interest distributions (1,014) – (1,014)
Proposed Interest distributions (470) – (470) (193) – (193)
Total tax charge for the year – – – – – –
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 suer 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. Deferred taxation
The Company has excess management expenses of £945,780 (2021: £262,400) that are available for oset against future prots. A
deferred tax asset of £236,445 (2021: £65,600) has not been recognised in respect of these losses as they will be recoverable only
to the extent that the Company has sucient future taxable prots.
The Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments.
143
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
7. Investments at fair value through prot or loss
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 prot 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. Specically:
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 signicant to the fair value measurement is directly or
indirectly observable.
Level 3:Valuation techniques for which the lowest level input that is signicant 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 classies all assets measured at fair value as below:
Fair value hierarchy
As at 31December 2023
Total
£’000
Quoted prices
in active
markets
(level 1)
£’000
Signicant
Observable
inputs
(level 2)
£’000
Signicant
unobservable
inputs
(level 3)
£’000
Assets measured at fair value:
Non-current assets
Investments held at fair value through prot or loss 369,047 – – 369,047
As at 31December 2022
Total
£’000
Quoted prices
in active
markets
(level 1)
£’000
Signicant
observable
inputs
(level 2)
£’000
Signicant
unobservable
inputs
(level 3)
£’000
Assets measured at fair value:
Non-current assets
Investments held at fair value through prot or loss 315,133 – – 315,133
All of the Company’s investments have been classied as Level 3 and there have been no transfers between levels during the year
ended 31December 2023.
Annual Report and Accounts 2023
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Financial Statements
144
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The movement on the level 3 unquoted investment during the year is shown below:
As at
31December
2023
£’000
As at
31December
2022
£’000
Opening balance at beginning of the year 315,133 159,618
Additions during the year at cost 22,819 151,367
337,952 310,985
Fair value movement on investments:
Change in fair value of equity investments
1
32,649 4,144
Interest on loan investments
2
(1,554) 4
Total fair value movement on investments 31,095 4,148
Closing balance 369,047 315,133
1
The £32,517k in the Statement of Comprehensive Income within other expenses/income and Statement of Changes in Equity is made up of unrealised gains
of £32,649k per this noteand a realised foreign exchange loss of £132k during the year.
2
This is the amount related to the movement in accrued interest on shareholder loans.
Further information on the basis of valuation is detailed in note3 to the nancial statements.
Valuation methodology
As set out in note2.2, the Company meets the denition 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 holds underlying investments in special purpose entities (SPEs) through its equity and debt investments in GSEO
Holdings, as detailed in note8. The Investment Manager has carried out fair market valuations of the SPE investments as at
31December 2023.
IFRS13 requires the Company to classify its investments in a fair value hierarchy that reects the signicance of the inputs used
in making the measurements. IFRS13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to
measure fair value. The three levels of fair value hierarchy under IFRS13 are as follows:
Level 1: fair value measurements are
those derived from quoted prices
(unadjusted) in active markets for
identical assets or liabilities
Level 2: fair value measurements are
those derived from inputs other than
quoted prices included within Level 1
that ore observable for the asset or
liability, either directly (i.e., as prices) or
indirectly (i.e., derived from prices)
Level 3: fair value measurements are
those derived from valuation techniques
that include inputs to the asset or
liability that ore not based on observable
market data (unobservable inputs)
There were no Level 1 or Level 2 assets or liabilities during the year. There were no transfers between Level 1 and 2, Level 1 and 3
or Level 2 and 3 during the year.
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
classied as level 3 as they are not traded and contain unobservable inputs. The Directors have satised 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 prot or loss using the DCF
methodology in line with the IFRS13 framework for fair value measurement. As at 31December 2023, the US terminal storage
assets, two of the ve Australian solar PV with battery storage assets, the Brazilian hydro facility and 10 of the 16 Brazilian solar PV
assets are being measured at fair value, using the DCF valuation.
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. The cost basis of those assets under construction is regularly reviewed to
determine if the cost basis is the most appropriate basis of valuation as assets approach their operational phase.
145
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The total movement in the value of the investments in GSEO Holdings is recorded through prot and loss in the Statement of
Comprehensive Income Statement of the Company.
Valuation assumptions
The following economic assumptions were used in the valuation of operating assets.
Discount rates The discount rate used in the valuations is derived according to internationally recognised
methods.
Typical components of the discount rate are risk free rates, country-specic and asset-
specic risk premia. The latter comprise the risks inherent to the respective asset class as
well as specic premia for other risks such as construction.
Power price Power prices are based on power price forecasts from leading market consultants
adjusted for expected deployment of energy transition assets.
Energy yield Estimated based on energy yield assessments from leading technical consultants as well
as operational performance data (where applicable).
Ination rates Long-term ination is based on International Monetary Fund (IMF) forecasts for the
respective jurisdiction.
Asset life Refer to the table below for details. In individual cases a longer operating life may be
assumed where the contractual set-up supports such assumption.
Operating expenses The operating expenses are primarily based on the respective contracts and budgets.
Taxation rates The underlying country-specic tax rates are derived from leading tax consulting rms.
Capital expenditure Based on the contractual arrangements (e.g.EPC agreement), where applicable.
Key assumptions
31December
2023
31December
2022
Discount rate Weighted Average US terminal storage assets 6.91% 8.43%
Weighted Average Australian solar PV with battery storage assets 7.74% 8.55%
Weighted Average Brazilian solar PV assets 9.67% 13.09%
Weighted Average Brazilian hydro facility 9.54% 10.48%
Long-term ination
1
United States US terminal storage assets 1.62% 2.0%
Australia Australian solar PV with battery storage assets 2.42% 2.5%
Brazil Brazilian solar PV assets& Brazilian hydro facility 3.03% 3.0%
Total asset life Years US terminal storage assets 30years 30years
Years Australian solar PV with battery storage assets 25years 25years
Years Brazilian solar PV assets 25years 25years
Years Brazilian hydro facility 25years 25years
Exchange rate GBP:USD US terminal storage assets 1:1.2732 1:1.210
GBP:BRL Brazilian solar PV assets& Brazilian hydro facility 1:6.1771 1:6.386
GBP:AUD Australian solar PV with battery storage assets 1:1.8689 1:1.775
1
Source:IMF. Ination rates have been taken from IMF published on 14 Oct 2023 (data is published biannually), which provides yearly forecasted ination
up to 2028. Long-term ination rate refers to the 2028 projected rate. Short-term ination volatility of up to 2028 has been accounted for in the valuation of
operating assets.
Annual Report and Accounts 2023
|
Financial Statements
146
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Valuation sensitivity
The key sensitivities in the DCF valuation are considered to be the discount rate used in the DCF valuation and long-term
assumptions in relation to ination, 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 +/-1.5% is considered to be a reasonable range of alternative
assumptions for discount rate given the volatility of discount rates used during the year.
The base case long term ination 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 ination.
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.
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.
For the annual report
As at 31December 2023 Change in input
Changes in fair value
of investments
(£’000)
Change in NAV per
share (p)
Discount rate – US terminal storage assets
-1.50% 22,034 5.30
1.50% (17,339) -4.17
Discount rate – Australian solar PV with battery storage assets
-1.50% 1,973 0.47
1.50% (1,616) -0.39
Discount rate – Brazilian solar PV assets
-1.50% 3,327 0.80
1.50% (2,734) -0.66
Discount rate – Brazilian hydro facility
-1.50% 15,976 3.85
1.50% (12,981) -3.12
Discount rate – All
-1.50% 43,310 10.42
1.50% (34,670) -8.34
As at 31December 2023 Change in input
Changes in fair value
of investments
(£’000)
Change in NAV per
share (p)
Ination – US terminal storage assets
-1.00% (10,833) -2.61
1.00% 12,451 3.00
Ination – Australian solar PV with battery storage assets
-1.00% (1,144) -0.28
1.00% 1,458 0.35
Ination – Brazilian solar PV assets
-1.00% (2,011) -0.48
1.00% 2,295 0.55
Ination – Brazilian hydro facility
-1.00% (11,997) -2.89
1.00% 14,176 3.41
Long-term Ination – All
-1.00% (25,984) -6.25
1.00% 30,380 7.31
As at 31December 2023 Change in input
Changes in fair value
of investments
(£’000)
Change in NAV per
share (p)
Asset life – US terminal storage assets
-1year (1,888) -0.45
+1year 1,782 0.43
Asset life – Australian solar PV with battery storage assets
-1year (333) -0.08
+1year 306 0.07
Asset life – Brazilian solar PV assets
-1year (395) -0.10
+1year 370 0.09
Asset life – Brazilian hydro facility
-1year (2,496) -0.60
+1year 2,426 0.58
Asset life – All
-1year (5,112) -1.23
+1year 4,883 1.18
147
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
As at 31December 2023 Change in input
Changes in
fair value of
investments
(£’000)
Change in NAV per
share (p)
Operating expenses – US terminal storage assets
-5.00% 4,224 1.02
5.00% (4,224
) -1.02
Operating expenses – Australian solar PV with battery storage assets
-5.00% 275 0.07
5.00% (2
66) -0.06
Operating expenses – Brazilian solar PV assets
-5.00% 828 0.20
5.00% (8
16) -0.20
Operating expenses – Brazilian hydro facility
-5.00% 2,771 0.67
5.00%
(2,772) -0.67
Operating expenses – All
-5.00% 8,097 1.95
5.00% (8,0
79) -1.95
As at 31December 2023 Change in input
Changes in
fair value of
investments
(£’000)
Change in NAV per
share (p)
FX (GBP:USD)
-10.00% 13,366 3.22
10.00% (10,936) -2.63
FX (GBP:BRL)
-10.00% 18,787 4.73
10.00% (15,372) -3.70
FX (GBP:AUD)
-10.00% 4,140 1.00
10.00% (3,387) -0.82
FX – All
-10.00% 36,293 8.74
10.00% (29,694) -7.15
The sensitivities above are assumed to be independent of each other. Combined sensitivities are not presented.
Annual Report and Accounts 2023
|
Financial Statements
148
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8. Unconsolidated subsidiaries
The following table shows subsidiaries of the Company. As the Company is regarded as an investment entity, these subsidiaries
have not been consolidated in the preparation of the nancial statements.
Investments Place of Business
Ownership interests as
at 31December 2023
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%
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 Itaguaí I Ltda. * Brazil 100%
Energea Itaguaí IILtda. * Brazil 100%
Energea Itaguaí IIILtda. * Brazil 100%
Energea Nova FriburgoLtda. * Brazil 100%
Energea ItabaianaLtda. * Brazil 100%
Energea RedençãoLtda. * Brazil 100%
Energea ItaporangaLtda. * Brazil 100%
Energea BataguassuLtda. * Brazil 100%
Energea PalmasS.A. * Brazil 100%
Energea ItacarambiLtda. * Brazil 100%
Energea Vassouras ILtda. * Brazil 100%
Energea SeropédicaLtda. * Brazil 100%
Energea Paraíba do SulLtda. * Brazil 100%
Energea TaquaritingaLtda. * Brazil 100%
Energea Nova CruzLtda. * Brazil 100%
149
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
At 31December 2023, 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 and Dunblane Solar PtyLtd 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. Receivables
As at
31December
2023
£’000
As at
31December
2022
£’000
Other receivables 93 96
Interest receivable on cash and cash equivalents 317 270
Receivable from aliates – 355
Prepayments 31 19
Total other receivables 441 740
The Directors have analysed the expected credit loss in respect of receivables and concluded there was no material exposure for
the year ended 31December 2023 and 31December 2022.
Cash of £40,367k is held on behalf of the Company by VH GSEO UK Holdings Limited.
10. Cash and cash equivalents
As at
31December
2023
£’000
As at
31December
2022
£’000
Cash at bank 30,542 48,075
Cash on deposit 43,716 93,716
Total cash at bank
1
74,258 141,791
1
Cash at bank includes money market investments of £26.4m (31 December 2022: £93.7m)
Annual Report and Accounts 2023
|
Financial Statements
150
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11. Accounts payable and accrued expenses
As at
31December
2023
£’000
As at
31December
2022
£’000
Accrued expenses 270 491
Accounts payable – –
Accounts payable and accrued expenses 270 491
The Directors consider that the carrying amount of other payables and accrued expenses matches their fair value.
12. Financial risk management
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 Investment Manager has 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 identication, 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:
Currency risk
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 eect on the Company’s protability 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 Manager’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$64,686,291 and A$40,290,000,
representing a total of 15.0% 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.
Interest rate risk
The Company’s interest rate risk on its nancial assets is limited to interest earned on cash or cash equivalents. The Board
considers that, because 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.
151
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
The Company’s interest and non-interest bearing assets and liabilities as at 31December 2023 and 31December 2022 are
summarised as below:
For the year ended 31December 2023 For the year ended 31December 2022
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Interest
bearing
£’000
Non-interest
bearing
£’000
Total
£’000
Cash and cash equivalents 114,625 – 114,625 141,791 – 141,791
Prepayments and other receivables – 124 124 – 470 470
Interest receivable 317 – 317 270 – 270
Investments at fair value through prot or
loss
93,347 275,700 369,047 89,047 226,086 315,133
Total assets 208,289 275,824 484,113 231,108 226,556 457,664
Liabilities
Accounts payable and accrued expenses – (270) (270) – (491) (491)
Total liabilities – (270) (270) – (491) (491)
Price risk
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 prots.
Credit risk
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 Manager 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
2023
£’000
As at
31December
2022
£’000
Cash and cash equivalents 114,625 141,791
Investments at fair value through prot or loss 93,347 89,047
Other receivables (Note9) 441 740
208,413 231,578
Liquidity risk
The Company manages its liquidity and funding risks by considering cash ow forecasts and ensuring sucient cash balances
are held within the Company to meet future needs. Prudent liquidity risk management implies maintaining sucient 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.
Annual Report and Accounts 2023
|
Financial Statements
152
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The following table details the Company’s liquidity analysis in respect of its nancial liabilities on contractual undiscounted
payments:
As at 31December 2023
<3
Months
£’000
3-12
Months
£’000
1-5
Years
£’000
>5
Years
£’000
Total
£’000
Accounts payable and accrued expenses 270 – – – 270
270 – – – 270
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
The Board of Directors monitors key risks faced by the Company and has agreed policies for managing the above risks with the
Investment Manager.
Capital management
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. Share capital
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
Opening balance 311,589,799 3,116 67,949 232,467 303,532
Ordinary shares 110,909,091 1,109 120,891 – 122,000
Share issue costs – – (2,472) – (2,472)
At 31 December 2022 422,498,890 4,225 186,368 232,467 423,060
Opening balance 422,498,890 4,225 186,368 232,467 423,060
Buyback of ordinary shares – – – (5,400) (5,400)
At 31 December 2023 422,498,890 4,225 186,368 227,067 417,660
During the period under review, the Company purchased for treasury a total of 7,027,321 ordinary shares at an aggregate cost of
£5,399,769 (including stamp duty and other fees) at an average price per ordinary share of 76.3p.
153
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
14. Dividends
The Company paid the below dividends during the year.
Period
Pence per
ordinary
share
Total
dividend
Date paid
1October 2022 – 31December 2022 1.38p £5.8m 31March 2023
1January 2023 – 31March 2023 1.38p £5.8m 30June 2023
1April 2023 to 30June 2023 1.38p £5.8m 14September 2023
1July 2023 to 30September 2023 1.38p £5.8m 8December 2023
15. Transactions with AIFM, Investment Manager and related parties
AIFM
On 3May 2023 the Company entered into an Alternative Investment Fund Management Agreement (“AIFM Agreement”) with
Victory Hill Capital PartnersLLP (the “AIFM”) replacing G10 Capital Limited. Victory Hill Capital PartnersLLP is acting as the
Company’s AIFM with overall responsibility for the risk management and portfolio management of the Company, providing
alternative investment fund management services and ensuring compliance with the requirements of the AIFM Rules, subject to
the overall supervision of the Board of Directors in accordance with the policies set by the Directors from time to time and the
investment restrictions as set out in the AIFM Agreement.
The AIFM Agreement provides that the Company will pay to the AIFM a xed monthly fee of £5,833, 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 twelve months’ written notice. The AIFM
Agreement may be terminated with immediate eect on the occurrence of certain events, including insolvency or in the event of a
material and continuing breach.
Investment Manager
The Investment Manager is entitled to receive from the Company an annual fee to be calculated as percentages of the Company’s
net assets, 1% on the 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 Manager exceeds:
a) £3.5m, the Investment Manager shall apply 8% of the annual fee, subject to a maximum amount of £400,000, to subscribe for
or acquire ordinary shares of £0.01 each in the capital of the Company.
b) £2.5m, the Investment Manager shall apply 2% of the annual fee to be paid as a charitable donation to O&C Limited, or other
suitable registered charity aimed at promoting sustainable energy, as selected by the Investment Manager, provided that if,
following the Investment Manager’s reasonable endeavours, a suitable charity cannot be found, this 2% portion of the annual
fee (net of any applicable taxes) will be applied to the subscription for or acquisition of ordinary shares.
The Investment Management Agreement may be terminated on 12months’ written notice, provided that such notice may not
be served before 2February 2025. The Investment Management Agreement may be terminated with immediate eect on the
occurrence of certain events, including insolvency or in the event of a material and continuing breach.
The investment management fees for the year ended 31December 2023 amounted to £4,371,947 (2022:£3,809,615) (including
VAT) of which £0 (2022:£167,623) was outstanding and included in accounts payable and accrued expenses at the end of the year.
No performance fee is payable to the Investment Manager.
Annual Report and Accounts 2023
|
Financial Statements
154
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Directors
The Directors have been entitled to aggregate annual remuneration (excluding expenses payable) as follows:
For the year
ended
31December
2023
£’000
For the year
ended
31December
2022
£’000
Bernard Bulkin OBE 81.5 70
Margaret Stephens 58.5 50
Richard Horlick 58.5 50
Louise Kingham CBE 58.5 50
Daniella Carneiro
1
55.9 –
312.9 220
1
Daniella Carneiro joined the Board of Directors on 18 January 2023.
The Directors are not eligible for bonuses, pension benets, share options, long-term incentive schemes or other benets. There is
no amount set aside or accrued by the Company in respect of contingent or deferred compensation payments or any benets in
kind payable to the Directors. During the year ended 31December 2023, Directors’ fees of £313,000 (2022:£220,000) were paid of
which none was payable at the year end.
The Directors held the following benecial interests in the ordinary shares of the Company as at 31December 2023.
As at 31December 2023
Number of
ordinary
shares held
% of ordinary
shares in
issue
Bernard Bulkin OBE 46,362 0.009
Margaret Stephens 28,181 0.007
Richard Horlick 300,000 0.071
Louise Kingham CBE 20,000 0.005
Daniella Carneiro – –
Other balances with related parties
The Company entered into intercompany loan agreements with GSEO Holdings, which entered into further intercompany loan
agreements with the following subsidiary companies:
• Victory Hill Flexible PowerLtd (£6,060,000) (31December 2022:£14,924,400)
• Victory Hill Australia Investments PtyLtd A$4,890,000 (31December 2022:A$35,400,000)
• Victory Hill USA HoldingsLLC US$1,021,290.60 (31December 2022:63,665,000)
As at the year-end, the Company held a receivable from VH GSEO UK Holdings Limited of £40,366,849.32 (31 December 2022: Nil).
16. Contingent liabilities and commitments
As at 31 December 2023, the Company had no contingencies or commitments.
155
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
17. Earnings per share
Earnings per share (EPS) is calculated by dividing prot 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 2023. Amounts shown below are both
basic and diluted measures as there were no dilutive instruments in issue throughout the current year.
For the year ended 31December 2023 For the year ended 31December 2022
Revenue Capital Total Revenue Capital Total
Earnings (£’000) 22,822 32,517 55,339 24,073 4,131 28,204
Weighted average number of ordinary
shares
421,086,053 421,086,053 421,086,053 367,500,135 367,500,135 367,500,135
EPS (p) 5.42 7.72 13.14 6.55 1.12 7.67
18. Net asset value per share
Net asset value per share is calculated by dividing the net assets attributable to ordinary equity holders of the Company by the
number of ordinary shares outstanding at the reporting date. Amounts shown below are both basic and diluted measures as there
were no dilutive instruments in issue throughout the current year.
Year ended
31December
2023
Year ended
31December
2022
NAV (£’000) 483,843 457,173
Number of ordinary shares 415,471,569* 422,498,890
NAV per share (p) 116.46 108.21
* excluding the shares held in treasury.
19. Post balance sheet events
On 22February 2024, the Board of Directors announced an interim dividend of £5.8m equivalent to 1.42p per ordinary share with
respect to the period 1October 2023 to 31December 2023 which will be paid on 28March 2024.
Post year end, the Company had announced cumulative buybacks of 5,743,147 shares between 1 January 2024 and 4 April 2024.
20. Controlling parties
There is no ultimate controlling party of the Company.
Annual Report and Accounts 2023
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Financial Statements
156
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures (APMs) are often used to describe the performance of investment companies although they are
not specically dened 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 dened or
specied under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for
or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the Company.
The APMs presented in this report are shown below:
NAV per share
NAV per share is calculated by dividing the Company’s NAV by the total number of outstanding shares at year end.
NAV as at 31December 2023 483,843,373
Total number of outstanding shares as at 31December 2023 415,471,569
NAV per share 116.46p
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.
Average undiluted NAV (in £’m) 467,373,829
Recurring costs in the year to date 6,496,623
Ongoing charges 1.39%
Premium / (discount) to NAV
The amount, expressed as a percentage, by which the share price is more than the NAV per ordinary share.
NAV per ordinary share (pence per share) 116.46
Ordinary share price (pence per share) 77.20
Premium / (discount) to NAV as at 31 December 2023 -33.71%
157
OVERVIEW STRATEGIC REPORT SUSTAINABILITY GOVERNANCE FINANCIAL STATEMENTS
Total return
A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of
any dividends paid out by the Company, with reinvestment on ex-dividend date.
Year ended 31December 2023 NAV
Opening as at 1January 2023 a 108.21p
Closing as at 31December 2023 b 116.46p
Dividends paid during the period 5.52 p
Dividend adjustment factor c 1.06389
Adjusted closing d = b x c 123.90p
Total return for the year (%) d / a – 1 14.50%
From IPO to 31December 2023 NAV
Opening as at 2February 2021 98.00p
Closing as at 31December 2023 b 116.46p
Dividends paid to date since IPO 10.52p
Dividend adjustment factor c 1.11
Adjusted closing d = b x c 129.23p
Total return since IPO (%) e = d/a – 1 31.9%
Number of years since IPO f 2.91
Total annualised NAV return since IPO (%) (1 + e)^(1/f)-1 9.97%
Dividend cover
The dividend cover ratio is calculated by using the Company’s distributable prots for the year, divided by the amount of dividends
paid during the year ending 31December 2023.
Prot for the period at VH Global Sustainable Energy Opportunitiesplc £22,821,360
Net distributions withheld at VH GSEO UK Holdings Limited £2,958,471
Total new distributions received from underlying investments £25,779,831
Dividend declared for nancial year 2023
(5.52p per ordinary share x number of shares outstanding as at 31December 2023 of 415,471,569)
£23,333,733
Dividend cover 1.1x
Annual Report and Accounts 2023
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Financial Statements
158
ADDITIONAL INFORMATION
SFDR – Annex V 159
Glossary 168
Shareholder Information 170
Notice of Annual General Meeting 172
Company Information 178
159
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
signicantly harm
any environmental
or social objective
and that the investee
companies follow
good governance
practices.
The EU Taxonomy
is a classication
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. For more information on the investment policy and strategy see
page28.
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
Sustainability
indicators measure
how the sustainable
objectives of this
nancial product are
attained.
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Financial Statements
160
SFDR ANNEX V (UNAUDITED) CONTINUED
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
Manager 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 has 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
2023
performance
Capital investment into
energy transition focused
infrasturcture (USD$M)
Victory Hill intends that all the
Company’s investments are aligned
with the energy transition.
381 392
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.
35,117 844,434
‡
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.
14,349 122,530
‡
Tonnes of particulate
matter (PM10) avoided
Tonnes of sulfur oxides
(SOx) avoided
These figures demonstrate the impact
of renewable and cleaner fuels
produced by a Portfolio Company with
a pollution reduction environmental
objective, by reporting the tonnes of
pollutive compounds removed through
use of cleaner fuels. This demonstrates
contribution to SDG 3.
1,049
20,613
984
‡
19,332±
Equivalent number of
homes, businesses and/
or vehicles served by
renewable energy or fuel
(UK assumptions used)
This figure demonstrates the
equivalent number of homes,
businesses and/or vehicles served
by renewable energy or fuel. This
demonstrates contribution to SDG7.
9,000 average
UK homes
powered
312,750
average
UK homes
powered
161
The Annex 1 methodology carbon intensity metrics have been included here for additional disclosure.
These have been calculated for 2022 and 2023 for comparison noting the acquisition of the Brazilian
hydro facility, the completion of several PV solar sites in Brazil and the improvement in scope 3 data
collection with regards to fuel transport at the US terminal storage assets increasing scope 3 quantities.
(1) ‘GHG emissions’
i
∑
(
current value of investment
i
x investee company’s Scope(x) GHG emissions
i
)
investee company’s enterprise value
i
n
Year Scope 1 Scope 2 Scope 3
2022 (tonnes/€M) 3,247.6 388.1 5,728.5
2023 (tonnes/€M) 2,758.3
‡
440.5
‡
24,462.1
‡
(2) ‘carbon footprint’
∑
i
(
current value of investment
i
x investee company’s Scope 1,2 and 3 GHG emissions
i
)
n
investee company’s enterprise value
i
current value of all investments (€M)
Year Carbon footprint
2022 (tonnes/€M) 17.8
2023 (tonnes/€M) 49.6
‡
(3) ‘GHG intensity of investee companies’
i
∑
(
current value of investment
i
x
investee company’s Scope
1,2 and 3 GHG emissions
i
)
current value of all investments (€M)
investee company’s €M revenue
i
n
Year GHG Intensity
2022 (tonnes/€M) 150.1
2023 (tonnes/€M) 382.5
‡
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Financial Statements
162
SFDR ANNEX V (UNAUDITED) CONTINUED
Principal adverse
impacts are the
most signicant
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?
Comparative data is provided in the table above.
With the additional acquisition of the Brazilian hydro facility end of 2022 and completion
of Brazilian solar PV assets under construction through 2022/23 the quantity of renewable
power generated increased significantly in 2023. Therefore the associated emission
displacement from the clean power injected into local grids and the number of homes
served by energy produced by the portfolio also increased. With below expected throughput
of fuel through the US terminal storage assets the quantity of fuel removed from the
Mexican value chain was lower resulting in a lower quantity of displaced emissions
compared to 2022.
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 principle adverse indicators (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 reported on the 14PAIs
and selected additional indicators on its website in 2023 https://victory-hill.com. This is updated
annually.
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:
Continuing from 2022, in 2023 all newly acquired and operational assets were assessed for
appropriate policies for diversity and inclusion, employee rights including health and safety,
stakeholder engagement and grievance management, if there were gaps identified action to fill
these were captured in the asset specific Sustainability Action Plan (SAP) for 2023 agreed with the
operating partner.
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.
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 Manager 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 when acting for the Company.
No reports of non-compliance with the OECD guidelines and UN Guiding Principles on Business
and Human Rights were made in 2023.
163
How did this financial product consider principal adverse impacts on sustainability factors?
The Company considers the PAIs on principal adverse impacts 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 and 10) 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63 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 2023 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.
Key performance indicators on material aspects are collected from the operating partners monthly
to track performance and progress. Certified environmental and health and safety systems are
required of operations with high risks in these aspects.
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Financial Statements
164
SFDR ANNEX V (UNAUDITED) CONTINUED
What were the top investments of this financial product?
The top GSEO investments based on value are as follows.
Largest investments Sector % Assets Country
Brazilian hydro facility Energy 27.4% Brazil
US terminal storage Energy 25.9% USA
UK flexible power with CCR
1
Energy 22.8% UK
Brazilian solar PV Energy 12.8% Brazil
Australian solar PV with battery storage Energy 11.1% Australia
1
included assets under construction in 2023
What was the proportion of sustainability-related investments?
What was the asset allocation?
All (100%) of the Company’s investments were sustainable investments with an environmental
objective, of which 51% were EU Taxonomy-aligned investments and 49% 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 plus carbon capture and reuse, storage (terminal storage) and battery energy storage
systems.
The list includes
the investments
constituting the
greatest proportion
of investments
of the financial
product during the
reference period
which is 2023:
Asset allocation
describes the share
of investments in
specific assets.
165
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
activitiesof
investee
companies.
To what extent were the sustainable investments with an environmental
objective aligned with the EU Taxonomy?
During the reference period, 51% of the sustainable investments with an environmental objective
were aligned with the EU Taxonomy, an increase from 24% in 2022. Further information is
provided in “How did the percentage of investments aligned with the EU Taxonomy compare
with previous reference periods?” section below. The Australian solar PV with battery storage
assets, Brazilian solar PV assets, and the Brazilian hydro facility 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 do no significant harm (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 carbon capture 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
2
?
 Yes:
 In fossil gas       In nuclear energy
X
  No
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.
47%
28% 72%
53%
65% 35%
OpEx
CapEx
Turnover
0% 50% 100%
1. Taxonomy-alignment of investments
including sovereign bonds*
Taxonomy aligned (no gas and nuclear)
Non Taxonomy-aligned
OpEx
CapEx
Turnover
0% 50% 100%
2. Taxonomy-alignment of investments
excluding sovereign bonds*
Taxonomy aligned (no gas and nuclear)
Non Taxonomy-aligned
47%
28% 72%
53%
65% 35%
* For the purpose of these graphs, ‘sovereign bonds’ consist of all sovereign exposures
2
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 signicant 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.
Annual Report and Accounts 2023
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Financial Statements
166
SFDR ANNEX V (UNAUDITED) CONTINUED
What was the share of investments made in transitional and enabling activities?
Out of the sustainable investments with an environmental objective that were aligned with the EU
Taxonomy, 100% of the investments were made in transitional or enabling activities.
Asset Sector Activity type
Brazilian solar PV assets Energy Enabling
Australian solar PV with battery storage Energy Enabling
Brazilian Hydro facility Energy Enabling
How did the percentage of investments that were aligned with the EU Taxonomy compare with
previous reference periods?
The EU Taxonomy alignment by value increased from 24% in 2022 to 51% in 2023. The increase
is due to completion of the technical screening and alignment validation for the Brazilian hydro
facility. This asset was acquired in December 2022 and was an eligible economic activity under the
EU Taxonomy with technical screening for alignment completed in 2023. The Australian solar PV
with battery storage programme was expanded in 2023 with the construction of three new solar
PV sites and BESS expansion at an existing site. This also contributed to the increase in investment
alignment.
What was the share of sustainable investments with an environmental objective not
aligned with the EU Taxonomy?
During the reference period 49% of the sustainable investments with an environmental objective were
not aligned with the EU Taxonomy.
Asset Sector
Investment
Share
US terminal storage assets Energy 26%
UK exible power with CCR assets Energy 23%
The UK flexible power with CCR asset is under construction and due to commission in 2024. 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 carbon dioxide will be reused in the food and beverage sector.
The objective of the US terminal storage asset 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 HSFO reduces PM2.5, PM10, SOx, NOx emissions
in Mexico. The reduction of PM is a 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.
are
sustainable
investments
with an
environmental
objective that do not
take into account
the criteria for
environmentally
sustainable economic
activities under the
EU Taxonomy.
Enabling activities
directly enable
other activities to
make a substantial
contribution to
an environmental
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.
167
What investments were included under “not sustainable”, what was their purpose
and were there any minimum environmental or social safeguards?
No investments were included under “not sustainable”, all investments (excluding cash) were made
under the sustainable investment objective.
What actions have been taken to attain the sustainable investment objective during
the reference period?
The sustainable investment objective of facilitating the energy transition through investing in
sustainable energy infrastructure investments aligned with the sustainable development goals is
achieved through the investment decision making process. To further this objective the investments
are actively managed and operating partners engaged in sustainable management practices. Actions
taken by the Company are covered in this report in the Sustainability section on page 68.
The Company has an engagement policy and routinely engages with the asset operating partners. This
includes fortnightly or monthly video calls, monthly ESG 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 2023 under the SAP a priority for operating partners was to continue to provide operating
environmental and social key performance data to develop targets to drive improvement, start
implementing the asset contribution to the portfolio net zero road map and strengthening the
governance framework for operating the assets which included developing management systems,
obtaining certification, action gap analysis and stakeholder engagement.
Some specific Company actions:
• Completed nancial climate risk and opportunity analysis for all investments to understand
potential risks to value under dierent transition scenarios.
• Completed technical screening including physical climate risk analysis and life cycle analysis for all
newly acquired and constructed assets including the run of river hydro facility.
• Collected renewable energy generation monthly and calculated associated avoided emissions
using grid emissions factors to support climate mitigation.
• Measured ows of HSFO from Mexico to the storage terminal 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 several scope 3 categories including emissions from
water use, waste disposal and freight transport.
• Pre-emptively engaged construction programme operating partners to ensure operational
procedures to support best practice environmental and social management will be implemented.
• Engaged larger operational programmes on obtaining management system certication on health,
safety and the environment, and where applicable more broadly sustainability standards.
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168
GLOSSARY
AIC Association of Investment Companies
AIFM Alternative Investment Fund Manager
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 Greenhouse Gases
Investment / Victory Hill Victory Hill Capital Partners LLP
Investment Company A company formed to invest in a diversied 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 Oering
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
ROC Renewable Obligation Certicates
SDG UN Sustainable Development Goals
SFDR Sustainable Finance Disclosure Regulation
169
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 dierent dividend policies. The total return measures the combined eect 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
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Financial Statements
170
SHAREHOLDER INFORMATION
Shareholder information
The Company’s ordinary shares of 1p each are quoted on the Ocial 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/May 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 oers an automated self-
service functionality (available 24 hours a day, 7 days a week) which allows you to:
• hear the latest share price;
• conrm your current shareholding balance;
• conrm your payment history; and
• order Change of Address, Dividend Bank Mandate and Stock Transfer forms.
By quoting the reference number on your share certicate, you can check your holding on the Registrar’s website at
www.investorcentre.co.uk. They also oer 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;
171
• 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.
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 certicate).
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 benets 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 certicate 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 Registrar’s secure 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, [email protected] or visit the website: www.theaic.co.uk.
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Financial Statements
172
NOTICE OF ANNUAL GENERAL MEETING
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 qualied independent
adviser authorised under the Financial Services and Markets Act 2000 immediately if you are in the United Kingdom, or
from another appropriately qualied 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 eected 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 oces
of Victory Hill Capital Partners LLP, 4 Albermarle Street, London W1S 4GA on Wednesday, 22May 2024 at 2:00pm 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99 to 101.
Ordinary resolutions
1. To receive and adopt the Company’s Annual Report and Financial Statements for the year ended 31 December 2023, 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 2023.
3. To approve the Company’s dividend policy as set out in the Annual Report for the year ended 31 December 2023 and authorise
the Directors to declare and pay all dividends of the Company as interim dividends.
4. To re-elect Bernard Bulkin as a Director of the Company.
5. To re-elect Daniella Carneiro 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 oce 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 £409,728.42, (being 10% of the issued share capital as
at 4April 2024 comprising 40,972,842ordinary shares of £0.01 each in the Company (excluding treasury shares)), or if changed,
the amount that represents 10% of the aggregate nominal value of the Company’s issued share capital (excluding treasury
shares) 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 oer 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 oer or agreement as if such authority conferred by this resolution had not expired.
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 £409,728.42, (being 10% of the issued share capital as at 4April 2024 comprising
40,972,842ordinary shares of £0.01 each in the Company(excluding treasury shares)), or if changed, the amount that
represents 10% of the aggregate nominal value of the Company’s issued share capital (excluding treasury shares) at the date
173
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 oer 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 oer
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 dened 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 £409,728.42 (being 10% of
the issued share capital of the Company as at 4April 2024 comprising 40,972,842ordinary shares of £0.01 each in the
Company (excluding treasury shares)) or, if changed, the amount that represents 10% of the aggregate nominal value of
the Company’s issued share capital (excluding treasury shares) 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 oer 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 oer 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 dened 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 £409,728.42 (being 10% of
the issued share capital of the Company as at 4April 2024 comprising 40,972,842ordinary shares of £0.01 each in the
Company (excluding treasury shares)) or if changed, the amount that represents 10% of the aggregate nominal value of
the Company’s issued share capital (excluding treasury shares) 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 oer 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 oer or an agreement as if such power had not expired.
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 61,418,290ordinary shares or, if changed,
the number representing 14.99% of the Company’s issued share capital (excluding treasury shares) 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
Ocial 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;
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174
NOTICE OF ANNUAL GENERAL MEETING CONTINUED
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
4April 2024
Registered Oce:
6th Floor
125 London Wall
London
EC2Y 5AS
Company number:
12986255
175
NOTES FOR THE ANNUAL GENERAL MEETING
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 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 Registrar, 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 certied or oce 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 Uncerticated Securities Regulations 2001, the Company species 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 20May 2024.
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 specied 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 22May 2024 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”)
specications 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 specied 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.
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
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Financial Statements
176
NOTES FOR THE ANNUAL GENERAL MEETING CONTINUED
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
Uncerticated 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 2:00pm on 20May 2024 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 4April 2024, 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, of which, 12,770,468 ordinary shares were held in treasury.
Therefore, the total voting rights in the Company on that date was 409,728,422.
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 condential 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.
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 oce 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 [email protected].
177
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.
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Financial Statements
178
COMPANY INFORMATION
Non-executive Directors
Bernard Bulkin OBE (Chair)
Daniella Carneiro
Richard Horlick
Louise Kingham CBE
Margaret Stephens
Registered oce
6
th
Floor
125 London Wall
London
EC2Y 5AS
Investment Manager and AIFM
Victory Hill Capital Partners LLP
4 Albemarle Street
London
W1S 4GA
Corporate Broker
Deutsche 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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