TIDMROOF
RNS Number : 3785Z
Atrato Onsite Energy PLC
11 January 2024
LEI: 213800IE1PPREDIIZB62
ATRATO ONSITE ENERGY PLC
(the "Company")
ANNUAL RESULTS FOR THE YEARED 30 SEPTEMBER 2023
DELIVERING STRONG, GROWING AND SUSTAINABLE LONG-TERM INCOME
Atrato Onsite Energy plc (LSE: ROOF), the investment company
focusing on clean energy generation, reports its audited results
for the year ended 30 September 2023.
Key metrics As at 30 September As at 30 September Change in
2023 (audited) 2022 (audited) Year
--------------------- ------------------- ------------------- ----------
Gross Asset Value
("GAV") GBP138.1 m GBP139.1 m -0.7%
Net Asset Value
("NAV") GBP138.1m GBP139.1m -0.7%
NAV per share [1] 92.0 pence 92.8 pence -0.9%
Dividends per share 5.0 pence 3.01 pence n/a
NAV total return
(%) 4.6 % (4.2)% n/a
Annual generation
(GWh) 36.3 28.8 +25.9%
Tonnes of CO(2)
avoided 7,627 6,000 +27.1%
Ongoing charges
ratio 1 1.8% 1.4% n/a
--------------------- ------------------- ------------------- ----------
Grown to become the leading commercial and industrial solar
platform in the UK
-- GBP72 million investment in the Year, increasing to GBP149 million post balance sheet [2]
-- Increased capacity from 62MW to 147MW at year end and 182MW post balance sheet
-- Completing several milestone projects (5)
o 28MW installation for Britvic under innovative sleeved Power
Purchase Agreement ("PPA") [3]
o 20MW installation for Nissan - the UK's largest private wire
solar installation
o Energised our 19th Tesco store plus new framework agreement on
70 further sites
o Acquired 34MW operational private wire solar portfolio (the
"ASG portfolio")
-- Increased our dividend target for FY24 to 5.5 pence per ordinary share an increase of 10 %
o 12-month forward looking dividend cover in excess of 1.3x
[4]
High quality portfolio with highly contracted index-linked long
income [5]
-- 93% of revenue is contracted generating the lowest
sensitivity to merchant prices in the sector
-- 11-year average unexpired contract revenue term, longest in the sector
-- 92% is subject to annual inflation or fixed uplifts, of which:
o 47% benefits from annual uncapped RPI or CPI uplifts
-- Weighted average remaining asset life of 23 years
-- 79% of the portfolio fully operational and 21% under installation
o Energisation of remaining installation assets expected by
March 2024
o c. 173GWh expected annual green energy generation once fully
operational
Portfolio financial performance
-- GBP15m gain from Installation assets revaluation generated, equivalent to 10 pence per share
-- Portfolio valued at GBP99.3 million as at 30 September 2023,
reflecting an unlevered weighted average discount rate of 7.4%
(September 2022: 6.6%)
-- Overall 0.8 pence decrease in NAV per share to 92.0 pence (September 2022: 92.8 pence)
-- 7.7 pence decrease in NAV driven by a 80bps increase in portfolio discount rate
-- 5.0 pence dividend declared for the year
Strong balance sheet
-- Gearing of 29.1% as at 10 January 2024 (0% as at balance sheet date) [6]
-- GBP30.0 million Revolving Credit Facility ("RCF") signed at a
margin of 1.3% over SONIA, one of the lowest in the sector
-- Post balance sheet:
o First GBP17 million drawdown of the RCF, to fund new
acquisitions
o GBP47.1 million of term debt, acquired as part of the ASG
Portfolio
o Further GBP20 million of available liquidity via RCF accordion
[7]
-- As at 10 January 2024:
o 3.2% weighted average cost of debt
o 72.9% of drawn debt fixed
Committed to being a sustainability leader [8]
-- Forecast 173 GWh annual clean energy generation, equivalent to: [9]
o 37,000 tonnes of carbon avoided [10]
o 64,000 homes powered by clean energy [11]
-- Voluntarily published both
o Greenhouse gas ("GHG") emissions inventory figures covering
Scope 1, 2 and 3 emissions
o TCFD compliant Annual Report and Accounts
-- Supporting the responsible investment commitments made by our
Investment Adviser as a signatory of the Net Zero Asset Managers
Initiative (NZAM) and United Nations Principles for Responsible
Investment (UNPRI).
Juliet Davenport, Chair of Atrato Onsite Energy plc:
"This has been a transformational year for the Company. W e have
assembled a highly diversified solar portfolio, offering one of the
most secure income profiles in the UK listed renewables sector
.
We are now the partner of choice for some of the largest
blue-chip corporations in the UK to help them deliver on their net
zero targets. This has been a driving force behind our significant
pipeline.
We are delighted that our origination and installation strategy
has continued to bear fruit, delivering significant valuation
upside for shareholders."
Results presentation
There will be a presentation for sell side analysts at 8.30 a.m.
today. Please contact Kaso Legg Communications for details.
The presentation will be simulcast online with Q&A function
for anybody wishing to join. The webcast can be accessed here
https://brrmedia.news/ROOF_FYR23
The results presentation will be available in the Investor
Centre section of the Company's website.
Further information is available on the Company's website
www.atratorenewables.com
ENQUIRIES
Atrato Partners
Gurpreet Gujral
Christopher Fearon +44 (0)77 959 75560
Stifel Nicolaus Europe Limited
Mark Young
Rajpal Padam
Madison Kominski +44 (0)20 7710 7600
Kaso Legg Communications Limited atrato@kl-communications.com
Charles Gorman +44 (0)20 3995 6673
Charlotte Francis
Notes to Editors
Atrato Onsite Energy plc (LSE: ROOF) is an investment company
focused on clean energy generation with 100% carbon traceability.
The Company specialises in UK solar, helping its clients achieve
net zero and reduce their energy bills.
The Company aims to provide investors with attractive capital
growth and long dated, index-linked income, targeting a 5% dividend
yield and a NAV total return of 8 - 10%.
Atrato Partners Limited is the Company's Investment Adviser.
Further information is available on the Company's website
www.atratorenewables.com
STRATEGIC REPORT
Chair's Statement
Dear Shareholder,
On behalf of the Board, I am pleased to present the Company's
audited full year results for the 12 months ended 30 September 2023
.
Portfolio update
The Company has experienced significant growth during the period
in which we have committed more than GBP149 million into clean
energy solar assets generating an additional 120 MW of solar PV
capacity and increasing our GAV today to GBP215 million [12] .
We are the UK's leading commercial and industrial solar platform
in the UK. Our corporate access gives us an unrivalled level of
insight and engagement with some of the largest UK corporates as
they increasingly look to secure independent sources of clean
renewable electricity and advance their net zero targets.
A good example of this insight was the origination of a highly
innovative PPA with Britvic on a 28MW ground mounted solar project
in Wellingborough, Northamptonshire. This GBP28 million project
will generate 33GWh of clean energy per annum energising 75% of
Britvic's production operations in Great Britain. This is
contracted under a unique 10-year PPA which provides energy on a
pay as they generate basis but is supplied to Britvic at a
consistent level throughout the year. This novel structure is
evidence of our ability to provide innovative and flexible
solutions to corporates.
Another example is the growth of our front-of-the-meter
strategy. In March 2023, shareholders approved an investment policy
amendment to capture the growth of opportunities in
front-of-the-meter assets commercialised through long-term sleeved
PPA's. This is an exciting development and we expect this to
provide an increasingly important source of pipeline going
forwards, allowing us to decarbonise corporate customers at
significant scale.
The Company also continued its strong track record of
successfully managing installation assets through to full
operational status. The 20MW Nissan project was energised in early
October and is now fully operational. London Road (28MW) was
energised in December 2023, in-line with expectations. Mobilisation
at Skeeby solar farm (55MW) commenced in mid-August and
installation remains on track, with energisation scheduled for the
end of March 2024.
We are also pleased to announce the energisation of our private
wire solar project for Tesco in Thetford (0.4MW) which was
energised in the first week of October. We are delighted that that
we have furthered our Tesco relationship, with Thetford
representing our 19(th) operational private wire solar system and
the first project under the new Tesco framework agreement. The
Company will continue to target new framework agreements which
enable us to efficiently roll out solar systems across large real
estate portfolios.
The successful completion of our installation assets, to PPA
signing or energisation, generated over GBP15 million of
revaluation gains which was equivalent to 10 pence per ordinary
share. 79% percent of our portfolio is now fully operational.
Sustainability update
The Company continues to place sustainability at the forefront
of everything that it does and expects to save 37,000 tonnes of
carbon emissions each year for its customers. I am delighted to
report that we have voluntarily published our first, fully TCFD
compliant annual report within these accounts. The Company has also
supported the Investment Adviser in fulfilling its responsible
investment commitments, which includes reporting to the UN
Principles for Responsible Investment (PRI) (with the Investment
Adviser's first report submitted in September 2023) and using the
Net Zero Asset Managers initiative (NZAM) as a framework to support
investing aligned with net zero emissions by 2050 or sooner. The
Company's sustainability metrics and targets have now been
published within the sustainability and TCFD sections of this
report.
Financial update
Our focus on commercial and industrial solar projects provides a
truly differentiated strategy. Our highly contracted corporate
income profile with an average duration of 11 years, of which 92%
is subject to annual inflation or fixed uplifts, is one of the
longest in the sector and one of the least sensitive to the
wholesale electricity price, which is forecast to decline over the
medium term.
This supports our objective to provide shareholders with a
long-term sustainable dividend growth. I am very pleased to
announce that in line with the progressive dividend policy set out
at IPO, the Board has increased the target dividend from 5 pence to
5.5 pence per Ordinary Share for FY24, an increase of 10 %. The
highly contracted nature of our portfolio means the Company's
12-month forward-looking dividend cover is expected to be in excess
of 1.3x.
As noted above, the Company's installation approach continues to
deliver value for shareholders. The progress on our installation
assets contributed to an increase in the NAV by 10.0 pence per
share, achieving the Company's objective set out an IPO to deliver
valuation gains to shareholders from low risk installation
assets.
Overall NAV per share declined 0.8 pence, driven by a 7.7 pence
per share decrease as result of increasing the valuation discount
rate to 7.4% from 6.6% (March 2023: 6.2%) as well as dividends paid
of 5.0 pence per share which was 11.9 pence of net income and
revaluation gains.
Portfolio performance
For the second consecutive year, portfolio performance exceeded
expectations during the year due to higher than expected levels of
irradiation. Our operational assets produced 36.3GWh, 0.7% above
budget.
Outlook
The macro environment remains challenging, however the
renewables sector continues to benefit from strong tailwinds,
namely energy security and net zero targets both at the corporate
and government levels. The Company is experiencing very strong
demand and has a strong potential pipeline of value-accretive
opportunities totalling GBP410m.
The Company now has a best-in-class reputation for delivering
flexible solar solutions, evidenced both by the increasing number
of new customer enquiries and feedback from its existing customers.
As a business, we feel very well positioned to play a key role in
supporting the UK's path to net zero in the years to come.
Growth strategy
It is our ambition to grow the Company in order to further
achieve its investment objective and in the short term the Company
has access to a GBP20 million accordion which will be used to fund
near-term commitments and pipeline. The Investment Adviser is
monitoring opportunities to recycle capital from operational assets
into installation assets which provide greater opportunities for
capital growth. The Company is also working with its advisers to
identify potential strategic investors who could provide capital to
the Company through a variety of different structures.
Juliet Davenport
Chair
10 January 2024
Investment Adviser's Report
Atrato Partners Limited is the Investment Adviser to Atrato
Onsite Energy plc and is pleased to report on the operations of the
Company for the year.
The Investment Adviser is responsible for the sourcing and
acquisition of assets as well as the day-to-day management of the
Company's investment portfolio. Further details can be found on the
Investment Adviser's website at www.atratogroup.com.
Overview [13]
The Company has a highly compelling offering to its corporate
clients, providing energy security, reduced energy costs and an
accelerated net zero transition.
During the year, the Company benefitted from both its strong
pipeline and available capital, committing over GBP72 million into
developing and acquiring 86MW of solar PV projects. Post balance
sheet, a further acquisition was made with a gross value of GBP77
million taking total investments made to date to GBP198 million.
These investments were made at the top end of the Company's returns
expectations and have increased the fund's expected pro forma
dividend cover to in excess of 1.3x.
The benefits of the Company's origination and installation
strategy have been clearly highlighted during the year, with the
yield re-rate on new assets contributing 10.0 pence to the NAV per
share. This is a result of a reduction in the risk premium applied
to installation assets as they meet key milestones such as PPA
signing or energisation. The Company also demonstrated its ability
to acquire operational projects at attractive levels.
As the Company has grown over the past two years, so has its
reputation for providing flexible and economical clean energy
solutions to its corporate clients. The Company now receives a
significant number of corporate enquiries per month and is the
leading commercial and industrial solar platform in the UK.
The investment strategy remains consistent, targeting a balance
of installation assets which provide the opportunity for NAV growth
through project de-risking and operational assets that provide
immediate income for shareholders.
Our unique focus on commercial and industrial solar projects
provides a truly differentiated renewables investment strategy
which generates a highly contracted corporate income profile with
an average duration of 11 years, of which 92% is subject to annual
inflation or fixed uplifts, which is one of the longest in the
sector and one of the least sensitive to the wholesale electricity
price.
As illustrated below this provides a truly differentiated long
term income profile to our peer group which typically hedges
exposure to volatile wholesale energy prices via the use of forward
price fixing contracts, typically for three-year periods, or
acquiring assets which benefit from longer term legacy government
subsidies.
Unlike our peer group our portfolio will continue to provide up
to 80% contracted income over the next 10 years supporting our
objective to provide shareholders with a long-term sustainable
dividend growth.
Table: +10 year forecast revenue split vs solar listed peer
group
10 years forecast revenue split
Atrato Onsite Energy
Renewables peer group
Merchant
Contracted
Highlights in the year and post balance sheet
Acquisition of Skeeby solar farm (55MW)
-- Increased site capacity from 50MW to 55MW
-- New 3-year utility PPA signed with OVO Energy
-- Energisation on track and anticipated in March 2024
Acquisition of London Road (28MW)
-- Innovative 10-year corporate PPA signed with Britvic Soft Drinks for 100% off-take
-- Successfully energised in December 2023
Acquisition of the ASG Portfolio (34MW)
-- 12-years of UK government backed income via 100% uncapped RPI FiT revenue
-- Operational asset with significant and immediate cash generation
-- Asset acquired with attractive historic low fixed rate project finance (2% cost of debt)
Signed GBP30 million revolving credit facility with NatWest
-- Secured, interest-only facility
-- 3-year initial term and 1 year extension option at a margin of 1.3% over SONIA
-- GBP20 million uncommitted accordion
Team update
During the year, a further two hires were made into the
renewable energy team.
Tim Roebuck joined the Atrato Group in November 2022 as Senior
Commercial Manager, with a focus on engaging corporates to explore
solar PV clean energy solutions, driving pipeline growth. Gabriele
Giuliani joined the Atrato Group in March 2023 as Project Manager
to support the development of the Company's renewable energy
investment strategy and manage the advancement of Atrato Onsite
Energy's pipeline projects.
Post balance sheet, a further hire was made to support the team
in transaction execution, further increasing our ability to serve
our corporate clients at speed.
Portfolio
As at 30 September 2023, GBP121 million had been committed or
deployed into UK solar technology across 40 projects with a
combined capacity of 147MW. Post balance sheet, this has increased
to 41 projects with a capacity of 182MW, across 11 off-takers. Once
operational, these assets are anticipated to generate 173GWh clean
energy per annum, avoiding the equivalent of 37,000 tonnes of
carbon emissions or powering 64,000 homes. At the year end, the
Company's portfolio was weighted toward installation phase assets
representing 69% of the portfolio, with operational, cash
generating assets making up the remaining 31%. As at the date of
this announcement, the Company's portfolio is 79% operational
assets.
A highly contracted and growing income stream remains core to
the Company's investment approach. As at the date of this
announcement, 93 % of annual revenue was contracted under PPAs or
subsidies with 92 % of revenue subject to inflation of fixed
uplifts; notably, 47% of revenue receives uncapped annual RPI or
CPI uplifts. The weighted average remaining asset life and
unexpired contracted revenue term of the portfolio are 23 years and
11 years respectively.
Portfolio summary as at 30 September 2023
Off-taker Location Sector Capacity Status Remaining Revenue
(MW) contracted type
term
(years)
Amazon UK Services
Ltd. Essex Distribution 3.1 Operational 17.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Leicestershire Distribution 2.2 Operational 18.2 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Fife Distribution 1.6 Operational 17.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Warwickshire Distribution 1.6 Operational 17.1 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Cheshire Distribution 1.5 Operational 17.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Luton Distribution 1.5 Operational 17.4 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Amazon UK Services
Ltd. Northamptonshire Distribution 0.6 Operational 16.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water
Services Limited Cambridgeshire Utility 11.7 Operational 22.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Essex Utility 0.9 Operational 21.0 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Northamptonshire Utility 0.6 Operational 20.6 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Essex Utility 0.5 Operational 19.8 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Cambridgeshire Utility 0.2 Operational 20.1 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Lincolnshire Utility 0.2 Operational 20.6 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Anglian Water PPA/
Services Limited Cambridgeshire Utility 0.2 Operational 20.1 FiT
-------------------- ----------------- --------- ------------- ------------ --------
Britvic Soft Food and
Drinks Limited Northamptonshire beverage 28.4 Installation 10.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Gardner Group
Limited Derbyshire Manufacturing 1.3 Operational 24.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Huntapac Produce
Limited Lancashire Food production 1.3 Installation 15.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Marks & Spencer PPA /
Plc Leicestershire Grocery 6.1 Operational 11.5 ROC
-------------------- ----------------- --------- ------------- ------------ --------
Nissan Motor
Manufacturing
UK Limited County Durham Manufacturing 20 Installation 20.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Ovo Energy Limited North Yorkshire Utility 55.5 Installation 2.8 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Recipharm HC
Ltd Cheshire Pharmaceuticals 1 Operational 24.5 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Greater Manchester Grocery 0.7 Operational 16.8 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Lincolnshire Grocery 0.6 Operational 18.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited North Yorkshire Grocery 0.5 Operational 18.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Greater London Grocery 0.5 Operational 16.8 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Norfolk Grocery 0.4 Installation 20.0 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Nottinghamshire Grocery 0.7 Operational 18.2 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Lincolnshire Grocery 0.5 Operational 16.5 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Kent Grocery 0.4 Operational 16.5 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Suffolk Grocery 0.4 Operational 16.7 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Essex Grocery 0.4 Operational 16.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Kent Grocery 0.3 Operational 16.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco stores
Limited Somerset Grocery 0.3 Operational 16.6 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Wiltshire Grocery 0.3 Operational 16.4 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Kent Grocery 0.3 Operational 16.8 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Kent Grocery 0.3 Operational 17.7 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Essex Grocery 0.3 Operational 16.2 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Greater Manchester Grocery 0.2 Operational 16.6 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Kent Grocery 0.1 Operational 16.2 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Tesco Stores
Limited Essex Grocery 0.1 Operational 16.3 PPA
-------------------- ----------------- --------- ------------- ------------ --------
Total 147.2 10.9
average
[14]
--------- ------------- ------------ --------
Portfolio performance
The p ortfolio of operational assets performed slightly above
expectations. In the year ended 30 September 2023, the p ortfolio
generated 36,292MWh (September 2022: 28,817 MWh) of clean energy.
The underlying operating portfolio generated revenues of GBP3.9
million (September 2022: GBP2.9 million) for the Company.
Net production variance vs. expected (GWh) from the operating
portfolio
Actual Budget GWh above % above
(GWh) (GWh) expectation expectation
------------------------- -------- ------- ------------ ------------
Year ended 30 September
2023
Total 36.292 36.028 0.264 0.7%
------------------------- -------- ------- ------------ ------------
Period to 30 September
2022
Total 28.817 27.887 0.930 3.3%
Portfolio Valuation
The valuation of the portfolio as at 30 September 2023 was GBP
99.3 million, with movement during the year detailed in the table
below.
Valuation of the Company's Portfolio is performed on a
semi-annual basis at 31 March and 30 September. The Investment
Adviser is responsible for advising the Board in determining the
valuation of the Portfolio and, when required, carrying out the
fair market valuation of the Company's investments.
GBP million
Portfolio valuation as at 30 September 2022 47.1
------------
Portfolio acquisition cost 46.8
------------
Investment distributions (0.7)
------------
Capitalised interest 2.4
------------
Portfolio Fair value movement 3.7
------------
Portfolio valuation as at 30 September 2023 99.3
------------
A discounted cash flow "DCF" valuation methodology is applied to
determine the fair value of each investment which is customary for
valuing privately owned renewable energy assets and considered
consistent with the requirements of compliance with International
Financial Reporting Standard ("IFRS") 9 and IFRS 13.
Using the DCF methodology, the fair value is derived from the
present value of each investment's expected future cash flows,
using reasonable assumptions and forecasts for revenues and
operating costs and an appropriate discount rate.
Assumptions impacting the valuation include discount rates,
annual energy production, merchant power prices, various operating
expenses and associated annual escalation rates. These are often
tied to inflation, including asset management, balance of plant,
land leases, insurance, and relevant taxes. The discount rate
applied on the post-tax levered project cash flows is the weighted
average discount rate and the valuation is benchmarked against
comparable market multiples. Asset life on the current portfolio is
assumed to be the length of the PPA and lease term as the assets
are handed over to the off-taker at the end of this term, with no
extension options included in the contracts, except for the
investments in front-of-the-meter assets where the asset life is
expected to be 30-40 years.
Discount rate for valuation
Higher discount rates have been observed across the UK
renewables sector as a result of the higher interest rate
environment. The valuation of the portfolio as at 30 September 2023
reflects an underlying weighted average post-tax discount rate of
7.4%, representing a 80 basis points increase in the year
(September 2022: 6.6%).
The increase in the discount rate was partially offset by the
addition of new assets.
The Company's future pipeline will be underwritten based on this
increased discount rate until such time it is re-evaluated and
adjusted. As a result, both the Investment Adviser and the Board
expect future projects to deliver higher unlevered returns.
Portfolio Valuation Sensitivities
The figure below shows the impact on the portfolio valuation of
changes to the key input assumptions ("Sensitivities"). The
Sensitivities are based on the portfolio as at 30 September 2023.
For each sensitivity illustrated, it is assumed that potential
changes occur independently with no effect on any other assumption.
The low sensitivity to changes in merchant power prices reflects
the long-term contracted revenues in the Company's portfolio.
Similarly, the moderate impacts due to variations in operational
expenses reflects the majority of the Company's assets having fixed
price, long-term operating expenses including operations and
maintenance ("O&M"), property leases and payments in lieu of
taxes.
Key financials and NAV
The NAV as at 30 September 2023 was announced on 4 December 2023
as 92.0 pence per share. The NAV reflects the valuation of the
Company's portfolio and incorporates the ongoing running costs and
dividend distributions.
At IPO on 23 November 2021, the Company raised gross issue
proceeds of GBP150.0 million by issuing 150,000,000 shares. As set
out in the table below, the Company's NAV as at 30 September 2023
was GBP138.1 million or 92.0 pence per share. The Company has paid
out GBP14 million in dividends to investors since IPO.
NAV Bridge for the year from 30 September 2022 to 30 September
2023
Movement in Net Asset Value from 30 September GBP million Pence per
2022 to 30 September 2023 share
NAV as at 30 September 2022 GBP139.1 92.8
------------- ----------
Asset revaluation GBP15.0 10.0
------------- ----------
Operational movements GBP4.5 3.0
------------- ----------
Net cash generated minus fund cost GBP1.0 0.6
------------- ----------
Inflation (GBP1.1) (0.8)
------------- ----------
Power Prices (GBP1.3) (0.9)
------------- ----------
Discount rate assumption (GBP11.6) (7.7)
------------- ----------
Dividends paid GBP(7.5) (5.0)
------------- ----------
NAV as at 30 September 2023 GBP138.1 92.0
------------- ----------
Asset revaluations: Includes the value increase associated with
projects progressing as they met specific key project milestones.
The latter was predominantly driven by progress on Skeeby solar
farm and Britvic's London Road project. This assumes that all other
variables are held equal.
Operational movements: Includes adjustments to individual assets
for new contract pricing, the inclusion of REGOs in the valuation
on projects where the Company benefits from REGOs and an update to
the expected commercial operations date of installation projects
where these have changed.
Net cash generated minus fund costs : Represents the net cash
inflow of the Company's revenues and operating costs.
Inflation assumption: Reflects the impact of the updated
inflation curves. The Company uses market forecast curves for CPI
and RPI.
Power prices: Reflects the movement on the portfolio since
September 2022 due to updated power price curves. The Company has
one of the lowest sensitivities to power prices in the sector. Its
high levels of contracted revenue limit its exposure to power price
volatility and hence a 10% reduction in power prices would only
have a 4.6% impact on the Company's NAV as at 30 September
2023.
D iscount rate assumption: Represents the impact on the fair
value from changes to the discount rate due to movements in
interest rates, transactional process observed in the sector and
the macro-economic environment.
Dividends paid: Dividends of GBP 7.5 million ( 5.0 pence per
share) were paid during the year in respect of the period to 30
June 2023.
The assumptions set out in this section remain subject to
continual review by the Board and the Investment Adviser.
The Company's total gain before tax for the year was GBP6.4
million (revenue profit of GBP2.7 million and capital gain of GBP
3.7 million) and earnings per share, based on distributions
received from the Company's unconsolidated subsidiary, Atrato
Onsite Energy Holdco Limited ("Holdco") (which indirectly holds the
Company's assets through underlying subsidiaries), were 4.29 pence
per share (revenue of 1.82 pence and capital of 2.47 pence).
Financing
Following the commitment of the IPO proceeds, the Company signed
a RCF with NatWest Bank. The GBP30 million secured facility has an
initial term of three years with a one-year extension option, and
includes a GBP20 million uncommitted accordion option that can be
exercised at any point during the initial 3-year term. The facility
is priced at a highly attractive margin of 1.3% over SONIA. The RCF
will allow the Company to continue to execute on its pipeline of
opportunities in the near term.
The Investment Adviser continuously monitors the debt and equity
markets on behalf of the Company. Equity markets have remained
closed to new issuance for most of the Investment Trust universe
over the year. However, the debt markets have remained open with
banks very keen to lend to the renewables sector as reflected by
the attractive margin achieved on the RCF. The Company will require
further equity capital to maintain its strong growth trajectory and
hence the Investment Adviser and the Board are considering all
options for future growth including but not limited to equity
raises, convertibles, and joint ventures.
Investment policy amendment
In March 2023, shareholders approved an investment policy
amendment to capture the growth of opportunities in
front-of-the-meter assets available to be commercialised through
long-term PPA's. This is an exciting renewables market development
that provides the Company with an additional way to help its
clients decarbonise at scale.
In September 2023, the Company made a non-material amendment to
the Investment Policy to define the term 'PPA' and to clarify the
'contract counterparty' is the entity primarily responsible for
payment of the main revenue derived from the relevant 'PPAs'.
The Company also amended the policy to clarify the 'contract
counterparty' is the entity primarily responsible for payment of
the main revenue derived from the relevant 'PPAs', instead of the
entity paying for the use and benefit of the clean energy assets.
The full investment policy is outlined on pages 19 to 23 of this
report.
The Company's investment objective remains to support the net
zero agenda whilst delivering capital growth and progressive
dividend income to its shareholders; integrate ESG best practice
with a focus on investing in new renewable energy capacity and
onsite clean energy solutions; and target long- term secure income
with limited exposure to wholesale power prices.
Dividends
During the year the Board declared four quarterly dividends
totalling 5 pence per share.
As a result, the Company achieved its 5 pence per share IPO
target for the dividend in respect of the year to 30 September
2023. After the year end, the Company declared a further dividend
of 1.26 pence per share in respect of the quarter ended 30
September 2023. The annualised dividend is 15.3% cash covered by
the current portfolio, after fund costs.
The Company will target an annualised dividend target of 5.5
pence per share for the financial year ending 30 September 2024, an
increase of 10 % from the prior year.
Annual General Meeting
We look forward to welcoming shareholders to the Company's
Annual General Meeting ("AGM") to be held on 6 March 2024. The full
AGM notice accompanies this report and can be viewed on the
Company's website at www.atratorenewables.com
Post balance sheet events
ASG Portfolio Acquisition
The Company acquired a fully operational private wire portfolio
(ASG Portfolio) with a total value of GBP77.3 million. The
portfolio comprises 34MW of solar PV systems situated on
residential rooftops across the United Kingdom and benefits from
revenue streams pursuant to the government's Feed in Tariff (FIT)
scheme, which have a 12-year unexpired term with annual, uncapped,
uplifts, linked to the retail price index (RPI) and payable
directly to the Company by the respective utility companies. The
contracts have minimal exposure to wholesale power prices - a key
focus for the Company which continues to have the lowest portfolio
sensitivity in the sector.
The ASG portfolio has generated 291GWh of renewable energy to
date, avoiding around 55,000 tonnes of CO(2) emissions for our
customers since installation. It is expected that it will generate
an additional c. 390GWh over its remaining life, equating to a
further carbon emission saving of around 75,000 tonnes.
Energisation of installation assets
We are pleased to announce that our 20MW Nissan project in
Sunderland was energised on 9 October 2023. The ground mounted
private wire project is expected to generate c. 20% of the power
needed for the Sunderland plant and has been commercialised through
a 20-year, 100% take-or-pay PPA agreement.
Works completed on Tesco, Thetford (0.4MW), in the first week of
October, representing the Company's 19(th) Tesco private wire asset
and the first system delivered under our new Tesco framework
agreement. The system is fully operational and supplying clean
energy directly to the Tesco supermarket. Similarly, construction
works on our private-wire system to Huntapac (1.3MW) also completed
in the first week of October. The system is now live, generating
and supplying clean electricity to Huntapac.
Pipeline
The Company has a significant pipeline of behind-the-meter and
front-of-the-meter solar assets that continues to grow. At the time
of the interim results in March 2023, the Company announced an
extensive pipeline of 420MW (over GBP340 million). Since then, the
pipeline has grown to 485MW at a value of over GBP400 million.
60MW of the pipeline relate to operational assets, while the
remaining 425MW relates to new installation projects. From this
total pipeline, the Investment Adviser has a near-term pipeline and
if progressed, these projects along with other future pipeline
opportunities are expected to be funded by the remaining liquidity
available under the Company's RCF accordion option.
The Company continues to experience very strong demand from its
corporate clients for long-term renewable energy PPAs.
Sustainability
During the year, the Company continued to develop its
sustainability strategy, with a focus on defining the Company's
investment impact. This includes environmental, social and
governance risk management, as well as quantifying positive and
negative impacts from its investment activities. These actions are
designed to ensure that investments are made having assessed all
aspects of risks and opportunities to preserve and grow capital for
the long term. This year marks the first year the Company has
published its full Greenhouse Gas Emissions (including Scope 1, 2
and 3) inventory and disclosed against all 11 TCFD recommendations
(see TCFD Report section on page 33. The Company is proud to have
retained the London Stock Exchange' (LSE) Green Economy Mark since
IPO in 2021. The Company is also pleased to have strengthened its
ESG policies with the publication of standalone Environment and
Biodiversity Policies.
The Company is guided by four core ESG Principles, linked to the
United Nations (UN) Sustainable Development Goals (SDGs), which
focus the Company's ESG activities:
Principle 1 Principle 2 Principle 3 Principle 4
======================== ========================= ==================== ===============================
Climate/Net Environment Social Governance
Zero
------------------------- -------------------- -------------------------------
Support the attainment Facilitate the Bring value to Deliver the Company's
of the UK emissions efficient and the communities investment objective
targets through considered use in which we are through a robust
the creation of finite resources active governance framework
of new sustainable that recognises
energy resource its ethical responsibilities
to all stakeholders
------------------------- -------------------- -------------------------------
UN SDG 7: Affordable UN SDG 15: Life UN SDG 8: Decent UN SDG 5: Gender
and Clean Energy on Land work and economic Equality
UN SDG 13: Climate UN SDG 12: Responsible growth
Action production and
consumption
------------------------- -------------------- -------------------------------
The Company's ESG Principles and approach to Sustainability,
including ESG policies, standards and reporting metrics, are
covered in more detail in the Sustainability Report section on
pages 27 to 43.
The Company's approach to sustainability is underpinned by the
Board's commitment to good stewardship and long-term value creation
for our stakeholders. Our aim is to continue to enhance and refine
our sustainability strategy and reporting. These actions are
designed to ensure that investments are made having assessed all
aspects of risks and opportunities to preserve and grow capital for
the long term.
Outlook
The Company is on a strong growth trajectory, and will continue
to utilise its RCF with NatWest, by taking a selective approach to
source the most attractive opportunities from its extensive
pipeline. The UK renewables sector is experiencing favourable
tailwinds from the combination of the increased focus on energy
security and the global drive towards Net Zero. The Company finds
itself at the right place and the right time to help its corporate
clients decarbonise at scale.
Looking forward, limited exposure to power price volatility,
strong covenant off-take and inflation-linkage across a large
proportion of the portfolio should deliver both stable and growing
cash flows for shareholders.
Investment Policy
The Company will seek to achieve its investment objective by
investing in behind-the-meter (private wire network) solar
photovoltaic generation systems and associated infrastructure
(Onsite Solar Assets) (for example, solar photovoltaic generation
systems located on rooftops). Each such system will be
commercialised through one or more power purchase agreements and/or
other revenue agreements associated with the system with a Contract
Counterparty in relation to the Onsite Solar Asset. Any surplus
electricity production will typically be sold by the Company to the
public power grid. The Company may also make investments in solar
photovoltaic generation systems and associated infrastructure which
are not located on the site of a Contract Counterparty or connected
to a Contract Counterparty via a private wire network, provided
that such systems are commercialised through arrangements which, in
respect of initial contract length and unit price certainty, are
materially similar to those PPAs through which an Onsite Solar
Asset may be commercialised (Long-Term Grid Assets).
The Company may also make investments in Other Clean Energy
Technologies up to a maximum of 30 per cent. of the Company's Gross
Asset Value (calculated at the time of investment).
Origination of new asset opportunities will be a key component
of the Company's investment strategy. The Company therefore intends
as part of its strategy alongside the holding of Operational Assets
to pursue investment opportunities in Installation Assets and some
Pre-Installation Assets. It is anticipated that the installation
phase of an Onsite Solar Asset's lifecycle will generally be a
period of less than 4 months such that there is expected to be a
high turnover of such Installation Assets that will become
Operational Assets to be held by the Company. As the Company's
portfolio grows it is expected that the majority of the Company's
underlying investments will be represented by Operational Assets,
notwithstanding that additional Installation Assets and
Pre-Installation Assets may be acquired.
For the purposes of the Company's investment policy:
Clean Energy Assets means Onsite Solar Assets, Long-Term Grid
Assets and other assets which qualify as Other Clean Energy
Technologies;
Contract Counterparty means the entity which is primarily
responsible for payment of the main revenue derived from the
relevant PPAs associated with Clean Energy Assets. Contract
Counterparties will be non-domestic entities for example occupiers
of industrial and commercial properties;
Installation Assets means Clean Energy Assets which have in
place the required suite of material agreements to carry out the
asset installation, including, as applicable, the property rights,
permissions and revenue arrangements, but which have not yet become
Operational Assets;
Other Clean Energy Technologies means infrastructure assets
which facilitate the reduction of greenhouse gas emissions and
which typically derive the majority of their revenues through
agreements with non-domestic customers. Examples include but are
not limited to electric vehicle charging infrastructure, onsite
energy storage and any energy generation asset (whether or not
connected to a public power grid) other than an Onsite Solar Asset
or Long-Term Grid Asset which does not emit carbon dioxide to the
atmosphere at the point of generation but excluding nuclear
energy;
Operational Assets means Clean Energy Assets which have been
installed, commissioned and which are capable of generating
revenues;
PPA means any power purchase agreement and/or any revenue
agreement associated with the Clean Energy Asset between two or
more parties whether or not such agreements are actually described
on their face as a 'power purchase agreement', 'PPA' or by some
other name, description or title; and
Pre-Installation Assets means Clean Energy Assets which have not
yet been sufficiently progressed to be regarded as an Installation
Asset.
The Company will invest in Clean Energy Assets predominantly
located in the UK and the Republic of Ireland. Subject to the
investment restrictions set out below, the Company may also make
investments in Clean Energy Assets located in other OECD
countries.
Assets may be held in special purpose vehicles (SPVs) into which
the Company will invest via equity and/or shareholder loans.
The Company will typically seek sole ownership of such SPVs but
may acquire a mix of controlling and non-controlling interests in
Clean Energy Assets and may use a range of instruments in pursuit
of its investment objective, including but not limited to equity,
mezzanine or debt instruments.
In circumstances where the Company does not hold a controlling
interest in the relevant investments, the Company will seek to
secure its rights through contractual and other arrangements to,
inter alia, ensure that the Clean Energy Asset is operated and
managed in a manner that is consistent with the Company's
investment policy and that the Company has appropriate access to
information rights to enable it to comply with its continuing
obligations under the Listing Rules, the Disclosure Guidance and
Transparency Rules and UK MAR.
The Company may also agree to forward fund by way of secured
loans the pre-installation and/or installation costs of Clean
Energy Assets where it retains the right (but not the obligation)
to acquire the relevant plant once operational. Such forward
funding shall be subject to the investment restrictions below and
will only be undertaken where supported by appropriate security
(which may include financial instruments as well as asset-backed
guarantees). Forward funding of any Pre-Installation Assets shall
count towards the limit on investment in Pre-Installation
Assets.
Whilst the Company does not typically expect to provide forward
funding, the right to do so, subject to the above limitations,
enables the Company to retain flexibility in the event of changes
in the asset pipeline over time.
Investment restrictions
In order to spread its investment risk, the Company has adopted
the following investment restrictions: -- the proportion of the
Company's Gross Asset Value attributable to an investment(s)
associated with a single Contract Counterparty shall not, at the
time of investment, exceed 30 per cent. of the Company's Gross
Asset Value;
-- once the Net Initial Proceeds have been fully deployed, the
proportion of the Company's Gross Asset Value attributable to
investments associated with the Company's five largest Contract
Counterparties (by the value of revenues derived from those
Contract Counterparties) shall not exceed 75 per cent. of the
Company's Gross Asset Value at the time of investment;
-- no investment by the Company in any Clean Energy Asset shall,
at the time of investment, exceed 25 per cent. Of the Company's
Gross Asset Value;
-- the Company's five largest investments in separate Clean
Energy Assets shall not, at the time of investment, exceed 60 per
cent. of the Company's Gross Asset Value;
-- the Company's investments in Clean Energy Assets located in
OECD countries other than the UK and the Republic of Ireland shall
not, at the time of investment, exceed 15 per cent. of the
Company's Gross Asset Value;
-- the Company's investments in Pre-Installation Assets shall
not, at the time of investment, exceed 15 per cent. of the
Company's Gross Asset Value; and
-- forward funding shall not, at the time such arrangements are
entered into, exceed in aggregate 20 per cent. of the Company's
Gross Asset Value. The Company will also ensure diversity in its
third-party installation, operations and maintenance contractors
and diversification will also be achieved by assets being located
across various geographical locations within the UK and the
Republic of Ireland. In addition to the investment restrictions set
out above, the Company will also comply with the following
investment restrictions for so long as they remain requirements of
the Financial Conduct Authority:
-- neither the Company nor any of its subsidiaries will conduct
any trading activity which is significant in the context of the
Group as a whole;
-- the Company will, at all times, invest and manage its assets
in a way which is consistent with its objective of spreading
investment risk and in accordance with its published investment
policy; and
-- not more than 10 per cent. of the Company's Gross Asset
Value, at the time of investment, will be invested in other
closed-ended investment funds which are listed on the Official
List. For the purposes of the Company's investment policy and the
investment restrictions set out above, the Company's Gross Asset
Value will take into account any borrowings to be incurred by the
Group in respect of amounts committed for investment but not yet
incurred. The investment limits set out above apply only at the
time of investment and the Company will not be required to dispose
of any asset or to rebalance the portfolio of Clean Energy Assets
as a result of a change in the respective valuations of its assets.
The investment limits set out above will apply to the Group as a
whole on a look-through basis, such that where assets are held
through SPVs or other intermediate holding entities, the Company
will look through the holding vehicle/SPV to the underlying assets
when applying the investment limits.
Gearing policy
The Company may, in pursuit of its investment objective, make
use of medium and long-term external debt (including at the SPV
level) of up to 40 per cent. of the Company's Gross Asset Value
immediately following drawdown of the financing and assessed on a
look-through basis. In addition, the Company and/or its
subsidiaries may make use of short-term debt (being typically for a
term of no more than 12 months), such as revolving credit
facilities, to assist with the acquisition of suitable
opportunities as and when they become available. Such short-term
debt 50 shall not exceed 20 per cent. of the Company's Gross Asset
Value immediately following drawdown of the financing and assessed
on a look-through basis.
Hedging policy
The Company may enter into hedging arrangements in respect of
interest rates and/or power prices. The Company will not undertake
any speculative hedging transactions and hedging transactions shall
be limited to those which are necessary or desirable for the
purposes of efficiently managing the Company's investments and
protecting or enhancing returns therefrom. The Company may make use
of currency hedging where investments are made in currencies other
than pounds Sterling with the objective of reducing the Company's
exposure to fluctuations in exchange rates. Cash management policy
The Company may in its absolute discretion decide to hold cash on
deposit and may invest in cash equivalent instruments, which may
include short-term investments in money market type funds and
tradeable debt securities (Cash and Cash Equivalents). There is no
restriction on the amount of Cash and Cash Equivalents that the
Company may hold.
Changes to and compliance with the investment policy
The Company will at all times invest and manage its assets in
accordance with its published investment policy. Material changes
to the Company's investment policy may only be made in accordance
with the prior approval of the Shareholders by way of ordinary
resolution and the prior approval of the FCA in accordance with the
Listing Rules. Non-material changes to the investment policy must
be approved by the Board, taking into account advice from the AIFM
and the Investment Adviser where appropriate. In the event of a
breach of the investment policy, including the investment
restrictions set out above, the AIFM shall inform the Board upon
becoming aware of such breach and if the Board considers the breach
to be material, notification will be made to a Regulatory
Information Service
Our Market
Power prices
During the financial year, UK wholesale electricity prices saw a
normalisation following the peak that occurred in the second half
of 2022, when the average daily price on the N2EX day ahead auction
was GBP128/MWh. The fall in wholesale energy prices was driven by
the decline in natural gas prices, albeit they are still trading
above the long-term average. For the month of September 2023, there
was a 69% decrease in the average auction price to GBP83/MWh, when
compared with GBP271/MWh for the same month in the prior year.
Bloomberg baseload forward winter 1-year prices September 2021
to September 2023
With energy prices rising at a significant pace in August 2022,
the Government announced a GBP211/MWh price cap for businesses (the
Energy Bill Relief Scheme) from 1(st) October 2022 for their price
of electricity. The price cap was introduced by the Government for
the six months to March 2023, to support businesses struggling with
their energy bills. This intervention restored some stability in
the energy price market, giving households and businesses more
certainty around their energy bills. Following the end of the price
cap, the Government introduced a more targeted scheme in April 2023
to continue to support businesses with their energy costs which
will run until March 2024. The Energy Bills Discount Scheme targets
its support of businesses that are more vulnerable to rising energy
prices, due to their energy intensive operations, and does so
through a discount on the wholesale element of business energy
bills, when it reaches a certain threshold (over GBP302/MWh).
The investment opportunity
The Company provides customers with fully funded, affordable
clean energy via a PPA. PPAs can be an attractive route for
corporates to achieve sustainability goals whilst enhancing long
term energy security and typically reducing electricity costs. Once
fully operational the portfolio will generate 173GWh of clean
electricity per annum and supply to 11 corporates across the
UK.
Over the past year the Company developed an innovative "sleeved"
PPA with Britvic. Sleeved PPAs provide direct agreements between
generators and business consumers for grid connected
(front-of-the-meter), offsite renewable energy generation. They can
be structured with many of the same attractive fundamentals as
behind-the-meter solar opportunities, namely: strong covenant
off-takers, fixed price tariffs, 100% contracted off-take, and
index-linked income. The Company secured a 10-year, CPI linked
off-take agreement with Britvic to supply 100% of the energy
generated on its 28MW London Road site. The Investment Adviser is
seeing increased corporate demand for large scale clean energy
generation via sleeved PPAs as corporates look to reach renewables
commitments and achieve net zero across their operations and supply
chains.
Our portfolio
As at 30 September 2023
Number of renewable energy Off-takers supplied Portfolio generating
assets capacity
------------------- --------------------------
40 10 147 MW
------------------- --------------------------
Clean electricity generated Tonnes of CO(2e) Weighted average unexpired
since IPO avoided contracted term
------------------- --------------------------
65 GWh 13,627 11 years
------------------- --------------------------
Portfolio Off-takers Status
Weighted by invested capital
Case Studies
Tesco
Type Private wire PPA
PPA length 20 years
Size 0.4MW
Status Commissioned in October 2023
The Company has continued to develop its strong relationship
with Tesco over the last 12 months and now has 19 operational
private wire solar systems on Tesco supermarkets. The most recent
highlight was the completion of a 0.4MW system at a Tesco
supermarket site in Thetford, Norfolk. The installation commenced
in July and was completed in September 2023 and is now supplying
the supermarket with on-site clean electricity. The Thetford site
is the first installation under the new framework agreement between
the Company and Tesco. There are a further 69 identified Tesco
sites which the Company has under exclusivity as part of its
strategic framework agreement with Tesco.
Tesco said: ""We are really pleased to be working alongside
Atrato Onsite Energy to boost our onsite renewable energy
generation at supermarkets across the UK, moving us further towards
our target to be carbon neutral in our own operations by 2035".
Britvic
Type Sleeved PPA
PPA length 10 years
Size 28MW
Status Energised in December 2023
In July 2023 the Company agreed a PPA with Britvic for the
off-take of energy at its site in Northamptonshire. The Company's
new solar installation in Northamptonshire will generate energy
exclusively for Britvic. It will have a total capacity of 28MW and
will be capable of generating 33.3GWh of clean energy per annum,
the equivalent of powering 11,500 homes or planting 260,000 trees.
The electricity generated will be enough to power 75% of Britvic's
current operations in Great Britain, including its Beckton and
Leeds factories, which can produce 2,000 recyclable bottles per
minute for a portfolio of iconic brands including Tango, Pepsi and
Robinsons. Britvic has committed to achieving net zero carbon
emissions by 2050 and has led the industry as the first UK soft
drinks company to have a 1.5degC target verified by the Science
Based Targets initiative. Britvic has demonstrated its commitment
to this goal, having reduced its direct carbon emissions by 34%
since 2017 and generated 57% of its energy needs from renewable
sources in 2022, up from 28% in 2018.
Nissan
Type Private wire PPA
PPA length 20 years
Size 20MW
Status Commissioned in October 2023
Our 20MW ground mounted solar PV system for Nissan Motor
Manufacturing UK Limited ("Nissan") was energised in October,
becoming one of the largest private wire installations in the UK.
The Nissan site can generate 19.2GWh of clean energy per year, the
equivalent of powering 7,000 homes or planting 170,000 trees. This
clean energy will be used to power up to 20% of the Sunderland
site, which is the centre of manufacturing operations for Nissan in
the UK. Over 6,000 employees work on the 89 acres 362,000m(2)
campus that is set to become Nissan's flagship electric vehicle
("EV") hub, combining renewable energy, EVs and battery production
into a single ecosystem. The Company's solar PV system forms part
of 'Ambition 2030' - Nissan's carbon neutrality target.
Sustainability Report
Introduction
Since IPO, sustainability related priorities have been
identified as key to delivering value for the Company's
stakeholders. As long-term investors, the Company is fully
committed to integrating sustainable practices into its operations
and expects that its business partners should do the same. During
the reporting year, the Company has continued to develop its
sustainability strategy and identify opportunities to enhance its
sustainability performance. The Company is proud to have retained
the London Stock Exchange's (LSE) Green Economy Mark [15] since IPO
in 2021. This Sustainability Report provides an overview of our
approach to sustainability and the progress we have made. The
Company remains committed to further development of our
sustainability strategy and positive impact as it continues to
integrate ESG best practice and contribute towards a net zero
carbon future.
ESG Principles and Approach
The Company's activities align with the UN Sustainable
Development Goals (SDG) Agenda 2030, and we have identified the
following key SDGs as the most relevant to the Company:
-- SDG 7 (Affordable & Clean Energy)
-- SDG 12 (Responsible Consumption & Production)
-- SDG 13 (Climate Action)
The primary Sustainable Development Goals aligned to the Company's
ESG Principles
SDG 7 Ensuring a well-established energy
system that supports all business
Affordable and Clean Energy activities of the Company's clients
as well as forming part of the
energy transition to renewable
energy remains our focus. The Company
can accelerate the transition to
an affordable, reliable and sustainable
energy system by investing in solar
energy projects.
----------------------------------------------
SDG 12 The Company is committed to a best
practice approach to asset procurement,
Responsible Consumption maintenance, decommissioning and
& Production component recycling. The Company
has developed specific policies
to ensure responsible investment
practices, including in relation
to modern slavery and human trafficking.
----------------------------------------------
SDG 13 Through clean energy asset investments,
the Company's portfolio is directly
Climate Action contributing to a net zero carbon
future and the attainment of the
UK's net zero target. The Company
evaluates and reports on its climate-related
risks and opportunities and its
greenhouse gas emissions profile.
----------------------------------------------
In order to focus the Company's ESG activities and maximise the
value delivered in the context of its investment objectives, the
Company has identified four ESG principles (the ESG Principles)
linked to the UN SDGs, that it believes are specifically relevant
to its activities. The four principles are:
1. Support the attainment of the UK emissions targets through
the creation of new sustainable energy resource;
2. Facilitate the efficient and considered use of finite resources;
3. Bring value to the communities in which we are active;
4. Deliver the Company's investment objective through a robust
governance framework that recognises its ethical responsibilities
to all stakeholders.
The Company is aware that its ability to manage ESG risks and
opportunities is fundamental to the delivery of long-term
sustainable returns for its investors and that its activities and
its method of delivery have the potential to impact on a broad
range of stakeholders. This includes recognising a sustainability
responsibility beyond just climate-related considerations but to
all material ESG issues. It therefore intends to ensure that ESG
considerations, underpinned by the four ESG Principles, are
reflected in all stages of the asset lifecycle and throughout all
of its areas of operation.
Building on the four ESG Principles, and SDG alignment, the
Company has committed to the following priority activities for
FY24:
The Company looks forward to reporting on progress with these
activities in the next reporting cycle.
Overview of ESG Approach:
Principle 1 Principle 2 Principle 3 Principle 4
======================== ====================== ================== ===============================
Climate/Net Environment Social Governance
Zero
---------------------- ------------------ -------------------------------
Support the attainment Facilitate the Bring value to Deliver the Company's
of the UK emissions efficient and the communities investment objective
targets through considered use in which we are through a robust
the creation of finite resources active governance framework
of new sustainable that recognises
energy resource its ethical responsibilities
to all stakeholders
---------------------- ------------------ -------------------------------
ESG Principle 1: Net Zero/Climate
Emissions
To ensure a robust and comprehensive understanding of the
Company's greenhouse gas emissions (GHG) profile, the Company has
engaged third party sustainability consultants, Anthesis, to assist
in the preparation and analysis of the Company's GHG Inventory. In
relation to the Streamlined Energy and Carbon Reporting (SECR)
requirements [16] , the Company is considered to be a "low energy
user" (<40,000KWh) and therefore falls below the threshold to
include an energy and carbon report. However, the Company has
chosen to voluntarily disclose its GHG emissions (calculated using
the GHG Protocol standard). In terms of data quality, 97% of
emissions are based on actual data.
Following the operational control approach of the GHG Protocol,
the Company must include the emissions of the Holdco and SPVs in
its inventory as they are 100% wholly owned subsidiaries of the
parent company. However, as the Company, the Holdco and SPVs are
investment entities, the SPVs are classed as investments of the
Holdco and the Holdco is classed as an investment of the
Company.
The Company's GHG Inventory Organisational Boundary is explained
below:
Scope 3 (indirect emissions occurring within the Company's value
chain) accounts for 100% of the Company's emissions profile,
totalling 41,364 tCO2e. The largest proportion of emissions comes
from investments with 41,136 tCO2e. There are three material
sources of emissions from the Company's investments: capital goods,
purchased goods and services, and waste. Emissions from capital
goods make up 77% of the Company's total carbon footprint for FY23.
The source of these emissions is the embodied carbon from the
purchase of new solar photovoltaic ("solar PV") modules.
The following table provides a summary of the Company's FY23 GHG
Inventory:
Scope Category FY23 (tCO(2) FY23 % of Total
e)
Scope
3 1. Purchased goods and services 226 0.5%
-------------------------------------- ------------- ----------------
5. Business Travel 1 0%
---------------------------------------------- ------------- ----------------
15. Investments
15a. Purchased goods and 41,136 99.5%
services
15b. Capital Goods 8,640 21%
15c. Waste
32,046 77.5%
451 1%
-------------------------------------- ------------- ----------------
Total Scope 3 Emissions 41,364 100%
------------- ----------------
The following figure shows the Company's Scope 3 emissions
breakdown:
The Company does not currently purchase offsets and instead
focuses on deploying more capital into renewable energy
generation.
Net Zero and Science Based Targets
In accordance with the Company's investment objectives, the
Company invests in renewables infrastructure projects which
generate clean energy and contribute directly to the UK's net zero
transition.
The Science Based Target Initiative (SBTi) has not yet published
guidance for the renewables sector. In the absence of available
sector guidance, the Company is currently engaging with SBTi and
external consultants to identify the most applicable guidance or
methodology for the Company to use to show net zero alignment given
the Company's renewable asset base. The Company's key
climate-related target is to continue to provide 100% of
electricity generation finance for only renewable electricity
through 2030. [17]
Climate
The Company has voluntarily reported against the TCFD
recommendations, as a framework to effectively disclose the
Company's climate-related risks and opportunities. See the TCFD
report below on page 33 . Details of the Company's climate-related
targets are also included in the TCFD report on page 33 .
2024 Priority Activity - Net Zero Transition and addressing
climate risks: The Company is committed to continuing to analyse
its greenhouse gas (GHG) emissions profile, prepare a GHG inventory
annually and voluntarily report on its Scope 1, 2 and 3 emissions.
The Company will utilise the results of the GHG inventory to assess
available emissions reductions opportunities. The Company will
continue to engage with the SBTi to identify the most applicable
methodology for the Company to use to show net zero alignment given
the Company's renewable asset base. The Company is also committed
to ongoing annual TCFD reporting, as a framework to effectively
disclose the Company's climate-related risks and opportunities.
ESG Principle 2: Environment
Resource efficiency
Water usage and waste is minimal in the direct operations of the
Company and the Investment Adviser. [18] The Company is committed
to eliminating unnecessary consumption and minimising waste within
the portfolio. Over the next year, the Company will review its data
collection processes in relation to collection of waste related
data. This is driven by a focus on improving the amount of actual
data recorded from the operational waste related to the
installation and maintenance of the solar PV assets at the sites
owned by the SPVs. This will further improve understanding of the
Company's waste profile, and support measures to reduce the
quantity of waste going to landfill in favour of recycling or
recovery, and ultimately reduce emissions from waste (which form
part of the Company's Scope 3 emissions).
The Company's focus on onsite energy generation, and its rooftop
solar assets in particular, generally support renewable energy
generation without competing with alternative land use such as
green or public spaces, food production or housing. The amount of
MW that the Company has on rooftops is equivalent to 144 acres of
land, if these solar rooftops were ground mounted. [19]
End of life
The Company's expectation is that onsite solar assets will
typically be transferred to the contract counterparty at expiry of
the PPA term or upon implementation of any buy-out provisions.
However, there may be opportunities for entering into a replacement
PPA, including where the site is suitable for re-powering with
updated equipment. In the event that the Company is required to
decommission a site this would be carried out in accordance with
the prevailing industry best practice, including with respect to
the recycling of equipment and materials.
Environmental fines
The Company did not receive any environmental fines or penalties
during the year (September 2022: nil).
Biodiversity
The Company acknowledges that society, business, and finance
depend on nature's assets and the services they provide. The
Company supports the aim of the Taskforce on Nature-related
Financial Disclosures (TNFD) to provide a framework for
organisations to report and act on evolving nature- related risks.
The Company is committed to further understanding and evaluating
the nature-related dependencies, impacts, risks and opportunities
(including in relation to biodiversity) relevant to the Company and
looks forward to reporting on this in due course.
2024 Priority Activity - Enhancing biodiversity : The Company is
committed to exploring on site nature-related opportunities on the
ground mounted solar sites. For example, through pre-construction
ecological assessments and where possible, initiatives to obtain
site-specific ecological management and biodiversity enhancement
plans.
ESG Principle 3: Social
Local employment
The development and building of solar projects creates direct
employment opportunities and the Company encourages its EPC
contractors to use local sub-contractors (for services such as
fencing works, landscaping and civil works) where possible.
Charitable giving
The Company has made a commitment to donate one per cent of the
previous year's profits to charitable causes through an independent
foundation. 2023 is the second year of operations for the Company,
and no profit was achieved in the prior year.
See the Corporate Social Responsibility overview on page 43 for
information on the Investment Adviser's charitable giving and
volunteering.
Responsible supply chain
The Company is committed to trade ethically, source responsibly
and avoid modern slavery or human trafficking in its supply chains
or in any part of its business. See the Supply Chain Sustainability
overview on page 42 to 43 for more details.
2024 Priority Activity - Strengthening sustainability in the
supply chain : The Company is committed to ensuring that it trades
ethically, sources responsibly and that there is no modern slavery
or human trafficking in its supply chains or in any part of its
business. As part of this commitment the Company will continue to
engage with industry bodies, NGOs, and other stakeholders on
responsible procurement initiatives with a focus on continual
improvement. This includes undertaking an annual review of the
Company's Modern Slavery Statement.
ESG Principle 4: Governance
Responsible business
The Company believes that responsible business practices and
strong ethics in governance are key to long-term success and value
creation. The Company is committed to upholding strong ethics and
integrity in governance including by managing conflicts of interest
and maintaining clear and up to date governance and ESG policies. A
summary of the Company's ESG Policies and Standards is provided on
the following page 33 . The Company's Investment Adviser is a
signatory to both PRIPRI Reporting Framework and NZAM, and the
Company is committed to ongoing retention of the LSE's Green
Economy Mark
Diversity, Equity, and Inclusion
The Company does not have any direct employees because of its
external management structure and only has non-executive Directors
on the Board. However, the Company receives professional services
from a number of different providers, principal among them being
the Investment Adviser. The Investment Adviser supports equal
opportunities regardless of age, race, gender or personal beliefs
and preferences, both in their recruitment and when managing
existing employees. The Company's Diversity Policy (published on
its website) sets out the approach to diversity on the Board of the
Company. The Board supports the FTSE Women Leaders Review and its
voluntary target for FTSE 350 boards to have a minimum of 40% of
women on boards. The Board of the Company currently has 67% women
representation. The Company also supports the Parker Review's
recommendations to increase ethnic and cultural diversity on
boards, the development of a pipeline of candidates, the planning
for succession through mentoring and sponsoring, and enhancing
transparency and disclosure to record and track progress against
the objectives.
Training
The Company's Investment Adviser is committed to providing all
of the Investment Adviser's staff with ESG training to improve
their understanding of ESG-related risks and opportunities. In FY23
100% of the Investment Adviser's staff undertook this training. As
part of the Company's commitment to enhancing sustainability
performance, training requirements relating to Company's Board and
the Investment Adviser will be reviewed over the coming year.
2024 Priority Activity - Upholding responsible investment
commitments : The Company will continue to support the work of its
Investment Adviser to report against the PRI Reporting Framework
and the NZAM signatory commitments, including the commitment to
achieve net zero alignment by 2050 or sooner. As part of the
Company's commitment to responsible business practices and
enhancing sustainability performance, training requirements
relating to Company's Board and the Investment Adviser will be
reviewed over the coming year.
ESG Reporting Metrics Table
We acknowledge that the IPO proceeds are now fully committed,
and the portfolio is expected to be fully operational in early
2024. Therefore, we have revised our ESG reporting metrics to
better capture the operating environment that we are in. Going
forwards we will capture the following metrics which we feel are
the most relevant for benchmarking and measuring progress against
the Company's four ESG Principles.
ESG Principle ESG Reporting Metrics FY23 Result
Principle
1:
Climate (a) Total renewable
Change/Net generation capacity
Zero Transition created (GWh) 36.3
-------------------------------- --------------------------
(b) Equivalent number
of homes powered by
renewable energy 64,000
--------------------------------------------------- --------------------------
(c) Avoided greenhouse
gas emissions (tCO2e) 7,627
--------------------------------------------------- --------------------------
(d) Average carbon payback Research has shown
(years) that the average
carbon payback
period for solar
panels is 1-4
years. [20] The
Company is exploring
how it can calculate
this metric specifically
for the assets
within its portfolio
through further
analysis of the
embodied carbon
of its solar panels.
-------------------------------- --------------------------
(e) Investment Adviser The GHG Inventory
(IA) carbon footprint for the IA is
currently being
prepared by Anthesis
and will be reported
on in the next
ARA.
-------------------------------- --------------------------
(f) Scope 1 carbon emissions nil
(tCO2e)
-------------------------------- --------------------------
(g) Scope 2 carbon emissions nil
(tCO2e)
-------------------------------- --------------------------
(h) Scope 3 carbon emissions
(tCO2e) 41,364
--------------------------------------------------- --------------------------
Principle (a) The amount of MW 144 acres
2: Environment that the Company has
on Rooftops and how
many acres is this equivalent
to, if these rooftops
were on the ground [21]
-------------------------------- --------------------------
Principle (a) The number of local Regional breakdown
3: contractors/technicians North: 6
Social we have used in all Wales and Midlands:
of our projects by region 34
East: 18
South West: 40
South East: 15
Scotland: 2
Multi-region:
2
-------------------------------- --------------------------
(b) Confirmation of The Company did
application of at least not generate a
1 per cent. of the Company's cash profit during
cash profit for the the previous FY
previous FY and at least therefore no financial
3 per cent of the IA's contribution to
cash profit for the charitable causes
previous FY (as they was made.
relate to its activities
under the IA Agreement)
to charitable causes
via (once established)
an independent foundation
--------------------------------------------------- --------------------------
(c) Hours committed 16 hours
to education schemes
around sustainable energy
--------------------------------------------------- --------------------------
Principle (a) Reporting against The IA's first
4: Governance UN PRI framework by PRI Report was
the IA submitted in September
2023.
-------------------------------- --------------------------
(b) Confirmation of Retained since
award and retention the Company IPO
of LSE's Green Economy in 2021.
Mark
--------------------------------------------------- --------------------------
(c) Confirmation of First TCFD report
status as TCFD supporter included in this
ARA.
--------------------------------------------------- --------------------------
The Company recognises that as the portfolio continues to grow
and the sustainability regulatory and reporting landscape further
evolves, further ESG data collection and data quality improvements
will be needed. The Company is committed to ongoing engagement with
its stakeholders to allow improved ESG metrics and targets
reporting and assessment of our ESG performance.
ESG Policies and Standards
The Company's approach to sustainability is governed using a
comprehensive framework of policies and standards. Policies are
updated on a regular basis to ensure they remain up to date with
the latest approaches to sustainability management and performance
improvement.
Policy Location
Modern Slavery Statement Available on the Company's website
-----------------------------------
Module Procurement Policy Available on the Company's website
-----------------------------------
Anti-Bribery Policy Available on the Company's website
-----------------------------------
Anti-Tax Evasion Policy Available on the Company's website
-----------------------------------
Conflicts of Interest Policy Available on the Company's website
-----------------------------------
Board Tenure Policy Available on the Company's website
-----------------------------------
Diversity Policy Available on the Company's website
-----------------------------------
ESG Policy Available on the Company's website
-----------------------------------
Investment Policy Available on the Company's website
-----------------------------------
Environment Policy Available on the Company's website
-----------------------------------
Biodiversity Policy Available on the Company's website
-----------------------------------
Supply Chain Human Rights Policy Available on the Company's website
-----------------------------------
As further ESG policies are developed these will be published on
the Investment Adviser's website or that of the Company's as
appropriate, once available.
ESG Monitoring and Reporting
The Company is committed to measuring and evaluating its
sustainability performance and maximising the value delivered in
the context of its investment objectives. The Company will annually
report against TCFD reporting requirements (with the Company's
first TCFD report included below) as well as disclosing the
emissions of its own operations and where possible, those of its
advisors. In addition, the Company's Investment Adviser, as a
signatory to PRI, will continue to report annually against the PRI
reporting framework.
Emerging sustainability-related regulation and reporting
requirements are monitored by the Company's Investment Adviser. The
Company is aware that nature loss and biodiversity have emerged as
a key focus within the broader sustainability landscape and that
regulatory and reporting requirements are evolving rapidly as a
result. The Company is preparing for the introduction of mandatory
Biodiversity Net Gain Assessments (BNG) (as part of future planning
permissions) and is monitoring the voluntary uptake of the recently
launched final recommendations of the Taskforce on Nature-related
Financial Disclosures (TNFD).
More broadly, the Company aims to continue to enhance reporting
and engagement with stakeholders on its sustainability performance
and targets.
TCFD report
Introduction
The Company is dedicated to mitigating climate-related risks and
maximising the potential for climate-related opportunities. The
Company's primary business activity is to invest in solar PV
systems, demonstrating its commitment to the climate transition.
The Company assesses the risks that climate change poses to its
business activities at various stages, including pre-investment and
during the operation of assets.
The Company is supported by the Investment Adviser who, as a
signatory of PRI and NZAM, is committed to assisting the Company in
achieving its sustainability and climate goals to combat the
climate crisis.
This disclosure represents the Company's first reporting in line
with TCFD, consistent with the four pillars and 11 recommendations.
The Company anticipates that this disclosure will improve over time
as management of climate-related issues continues to be embedded
across the business. Planned improvements for the metrics and
targets disclosure include engaging the supply chain to provide
more accurate data, whereas plans to conduct a quantitative
scenario analysis in future will enhance the quality of the
strategy disclosure.
The Company has prepared this disclosure using a consistent
principle of materiality as applied elsewhere in the annual report.
Stakeholders of the Company and the Investment Adviser have been
consulted on the materiality of climate issues. The climate
information that stakeholders deem to be important, or that
stakeholders use to make decisions, is considered material.
Governance
Describe how the board exercises oversight of climate-related
risks and opportunities:
The Board and AIFM, are responsible for the investment decisions
of the Company and for overseeing the services delivered by the
Investment Adviser to ensure that climate-related priorities are
incorporated into the investment strategy. The Company's business
plan naturally considers climate-related issues by investing
exclusively in low-carbon technologies. Climate risks are
considered when planning future developments, as extreme weather
events can cause installation delays, which can impact revenue. The
Company considers climate opportunities when making growth plans
because the business model is directly affected by emerging climate
legislation. For example, the introduction of carbon price
legislation or an increase in carbon prices could lead to higher
demand for solar PV.
Climate-related matters are a standing agenda item as part of
the Investment Advisers' report to the Board at quarterly meetings.
The Board requires the Investment Adviser to report against ESG
metrics (see the Metrics and Targets section for more details) at
each quarterly Board meeting and to highlight how each metric may
be impacted by investment decisions. Following the 2023 reporting
process, the Board will consider the potential cost implications of
the climate scenario analysis results and updating risk management
policies.
The two Board committees include the Audit Committee and
Management Engagement Committee. Whilst the Investment Adviser and
AIFM have joint responsibility for the maintaining Company's risk
register and internal controls, this is subject to the supervision
and oversight of the Board. The Audit Committee has responsibility
for reviewing such processes on an annual basis to ensure that
climate-related risks are effectively identified and managed. The
Audit Committee also receives updates on climate-related risks and
opportunities from the Investment Adviser when needed.
Climate-related issues do not fall under the remit of the
Management Engagement Committee. The Company's governance structure
is presented on page 62 .
Describe management's role in assessing and managing
climate-related risks and opportunities :
The Investment Adviser is responsible for delivering the climate
risk strategy on behalf of the Company and for advising the Board
on matters related to climate risk . Steve Windsor, Principal and
Sustainability Champion at the Investment Adviser , is responsible
for oversight, monitoring, and management of climate-related risks
and opportunities. The Investment Adviser's Head of Sustainability,
Isabelle Smith, is responsible for the operational delivery of
climate-related risk measures and leads the provision of climate
risk advice to the Company. The Head of Sustainability reports to
the Chief Operations Officer of the Investment Adviser.
The Head of Sustainability is a standing attendee of the
Investment Adviser's Investment Committee, assuming responsibility
for delivering the Company's sustainability strategy. The role
involves preparing climate-related disclosures and reports,
embedding ESG and climate-related policies into the business,
monitoring climate issues, and implementing changes that will
either improve the Company's resilience to climate-related risks or
allow it to take advantage of climate-related opportunities. The
Head of Sustainability will communicate progress against
climate-related metrics to the Board on a quarterly basis, as
outlined in the Company's ESG policy .
Identification of assets' climate-related risks and
opportunities already forms part of the Investment Adviser's
investment process during the due diligence phase. Potential issues
are raised by investment teams with the Head of Sustainability. The
Company plans to enhance this process to ensure that the key
climate-related risks and opportunities identified through scenario
analysis (see the Strategy section) are included in the asset-level
risk analysis.
Strategy
Describe the climate-related risks and opportunities the
organisation has identified over the short, medium, and long
term:
An initial screening was conducted to define likely material
climate-related issues and suitable time horizons over which to
assess their potential. Table 1 and Table 2 show t he initial list
of risks and opportunities identified in the screening, which are
aligned to the climate-related risks and opportunities suggested by
the TCFD. Risk and opportunity types were assigned a preliminary
rating (Lower, Moderate or Higher) based on stakeholder
consultations, a review of peer organisations, and the judgment of
the Investment Adviser. This was followed by a more detailed review
and scenario analysis of the three most material risks and
opportunities, as shown in Table 3.
For preliminary ratings, a Material Time Horizon was also
defined according to the time horizon over which each
risk/opportunity is expected to first materialise. The short-,
medium-, and long-term time horizons were defined according to the
Company's operational milestones and aligned to the assessment of
specific risks and opportunities. The short-term time horizon
(2023-2025) covers the period up to the completion of in-progress
deals and projects under construction (up to 12 months). It also
covers the scheduled continuation vote for the Company in November
2024. The medium-term horizon (2026-2035) is defined relative to
the mid-term of power purchase agreements ("PPAs") within the
existing portfolio of off-takers. The average length of term
remaining within the current portfolio (as of September 2023) is c.
17 years. The long-term time horizon (2036-2050) has also been set
relative to the length of existing PPAs, to extend beyond the
longest-term PPA within the Company portfolio.
Table 1 : Preliminary ratings of all risks identified in the
climate risk and opportunity screening
Category Risk Type Description Preliminary Ratings Material
Time Horizon
Financial Probability
Impact
---------- ------------ --------------
Transition 1. Policy A change in government Higher Moderate Medium
and legal: subsidies or taxation
Change in could lead to an
government increase in costs
energy policy or reduction in
revenues.
------------------- ---------------------------- ---------- ------------ --------------
2. Technology: Developments in Lower Moderate Long
Less competitive renewable energy
renewable technology could
energy technology reduce the competitiveness
of the Company's
assets leading
to impairment and/or
a reduction in
revenue.
------------------- ---------------------------- ---------- ------------ --------------
Physical 3. Acute: Disruption to the Moderate Moderate Short
Extreme installation and
rainfall maintenance of
assets can delay
the commencement
of PPAs, causing
reduced cash-flow
and additional
labour costs.
------------------- ---------------------------- ---------- ------------ --------------
4. Chronic: Components within Lower Moderate Long
Extreme solar arrays, such
heat as inverters and
transformers, can
be susceptible
to failure in extreme
heat. They require
greater levels
of maintenance,
which can increase
operational costs.
------------------- ---------------------------- ---------- ------------ --------------
Table 2 : Preliminary ratings of all opportunities identified in
the climate risk and opportunity screening
Category Opportunity Description Preliminary Ratings Material
Type Time Horizon
Financial Probability
Impact
---------- ------------ --------------
Transition 1. Markets: Increased demand Moderate Moderate Medium
Increased and diversification
customer of customer base
demand for as more companies
low-carbon require low carbon
energy technologies to
meet their net
zero targets. This
could lead to increased
revenues for the
Company.
----------------- --------------------------- ---------- ------------ --------------
2. Markets: Government subsidies Lower Moderate Medium
Additional or tax relief for
government renewable energy
subsidies could lead to lower
operating and/or
capital costs for
the Company.
----------------- --------------------------- ---------- ------------ --------------
3. Products Advancements in Lower Moderate Medium
and services: solar technology
Technological could improve the
advantage Company's market
performance relative
to other forms
of renewable energy,
which could increase
revenues.
----------------- --------------------------- ---------- ------------ --------------
4. Products A position as a Moderate Higher Medium
and services: supplier of renewable
Advantage energy with strong
of ESG efforts ESG principles,
and commitments policies and commitments,
can make the Company
more attractive
to customers, thereby
increasing revenue.
----------------- --------------------------- ---------- ------------ --------------
The three most material risks and opportunities were evaluated
through forward-looking qualitative scenario analysis. The results
of this analysis are shown in Table 3. Further details relating to
the methodology behind the scenario analysis can be found in
Appendix A.
Table 3 : Results from scenario analysis for most material
risks
Risk / Opportunity Scenario Financial Probability Overall rating by
Type Impact time horizon
Short Medium Long
(2023-25) (2026-2035) (2036-2050)
----------- ------------- -------------
Transition risk: Preliminary Higher Moderate Moderate Moderate Moderate
Policy and legal: Rating
Change in government
policy
------------ ---------- ------------ ----------- ------------- -------------
<2(o) Higher Lower Moderate Higher Lower
C
------------ ---------- ------------ ----------- ------------- -------------
>4(o) Higher Moderate Lower Higher Higher
C
------------ ---------- ------------ ----------- ------------- -------------
Physical risk: Extreme Preliminary Moderate Moderate Lower Moderate Higher
rainfall (acute) Rating
------------ ---------- ------------ ----------- ------------- -------------
<2(o) Moderate Moderate Lower Moderate Moderate
C
------------ ---------- ------------ ----------- ------------- -------------
>4(o) Moderate Moderate Lower Moderate Higher
C
------------ ---------- ------------ ----------- ------------- -------------
Transition opportunity: Preliminary Moderate Higher Moderate Moderate Lower
Products and services: Rating
Advantage of ESG
efforts and commitments
------------ ---------- ------------ ----------- ------------- -------------
<2(o) Moderate Higher Higher Lower Lower
C
------------ ---------- ------------ ----------- ------------- -------------
>4(o) Moderate Lower Lower Lower Lower
C
------------ ---------- ------------ ----------- ------------- -------------
Describe the impact of climate-related risks and opportunities
on the organisation's businesses, strategy, and financial
planning:
The UK aims to achieve net zero emissions by 2050 and has an
interim target to decarbonise the electricity sector by 2035, which
is expected to require a five-fold increase in solar generation
[22] . The Company's operating model facilitates the UK's climate
goals through the provision of additional solar capacity.
Climate-related opportunities have direct implications for
increasing the Company's revenue through an anticipated growth in
the scale of the commercial PPA market. Most climate-related risks
are seen as a function of the overarching opportunity presented by
the transition to net zero and are most likely to materialise in
relation to Company revenue streams and the speed or scale with
which revenue growth is achieved.
The Company's exposure to physical climate-related risks is
relatively limited compared to transitional risks and
opportunities. Chronic risks, such as heat and water stress, have
little to no impact on Company operations. Some acute physical
risks result in disruption to the operational capability of the
Company's solar assets, impacting revenue. The Company is
responsible for the installation of solar modules at site, as well
as ongoing maintenance over the term of the PPA. The Company
oversees installation of both roof and ground mounted arrays,
though the majority of the existing portfolio's installed capacity
(c. 80%) is ground mounted. Exposure of assets to extreme weather
can limit their operational capability, warranting repairs, as well
as causing delays during the installation stage for new assets.
This was observed most recently in 2022, when extreme rainfall
during installation rendered sites unsafe for contractors to access
and resulted in waterlogged cable trenches. Standing water, coupled
with freezing overnight temperatures, caused delays to installation
and also resulted in additional labour costs. It is likely that
more frequent and intense weather events (most notably extreme wind
and rainfall) will result in the requirement for additional
maintenance of assets and necessitate repairs to site
infrastructure as well as leading to larger risks during
installation of assets in future. The Company has identified
financial indicators to measure the extent of these impacts and
will report on these in 2024.
The Company procures solar assets on a rolling basis from third
party suppliers, before transferring the assets out of Company
ownership at the expiry of the PPA. Winning competitive PPA tenders
is critical to the Company's commercial success, and the Company's
reputation plays a significant role in winning such tenders. As
commercial off-takers are already motivated by their own ESG
targets and goals, the Company's ESG performance may be subject to
greater scrutiny, which will extend into its supply chain. The
Company's policies and commitments around modern slavery and supply
chain due diligence and procuring solar modules with traceability
reports at a premium from third party suppliers acts as a positive
market differentiator in this way. Traceable modules are of
certified origin and uphold proper labour standards during raw
material extraction and module manufacturing. As the market for
commercial PPA grows, this reputational positioning is likely to
create further opportunities. Additionally, the Company anticipates
that over time, access to the most competitive rates of finance and
capital will be increasingly contingent on ESG performance and
transparency, which is categorised as a reputational risk for TCFD
purposes.
Risks and opportunities related to climate policy and
legislation are likely to impact the Company's financial planning.
Within its investment strategy, the Company retains the capability
to add a broader range of energy-related products beyond solar
modules to its portfolio, such as electric vehicle charging
infrastructure and battery energy storage systems. This flexibility
increases the potential scope for technological opportunities and
mitigates technological risks. Procuring modules on a rolling basis
further mitigates this risk.
Potential market changes arising from the Government's Review of
Electricity Market Arrangements (REMA), [23] such as locational
pricing and specific support for PPA markets, could influence the
future pricing of solar-generated electricity and may affect the
Company's investment strategy. Locational pricing may motivate a
stronger investment focus on specific regions of the UK and
depreciate the returns of existing PPA contracts in less favourable
locations. This impact is mitigated by the diversity in site
geography among existing assets. Existing PPA terms mitigate the
impact of these market-led changes in legislation with longer term
, fixed-price structures that safeguards the Company in the event
of changes in legislation.
Describe the resilience of the organisation's strategy, taking
into consideration different climate-related scenarios, including a
2degC or lower scenario:
For this reporting period, a qualitative scenario analysis was
completed for the risks and opportunities described in Table 3.
These were assessed under the defined short-, medium- and long-term
time horizons under two future scenarios. The first is a high
emissions scenario, commensurate with current policies and the
IPCC's Representative Concentration Pathway (RCP) 8.5, which is
consistent with >4(o) C of warming. The second is a low
emissions scenario, commensurate with 2050 Net Zero targets and the
IPCC's RCP2.6, which is consistent with <2(o) C of warming. The
Company plans to improve its assessment of climate-related risks
and opportunities by undertaking further qualitative scenario
analysis in 2024. The Company intends to apply quantitative
scenario analysis in future to factor in the financial impacts of
the material risks and opportunities. Quantitative financial
analysis was not completed in 2023, as the financial costs of
managing the material risks require further research and access to
more granular data. The Company plans to undertake such research
and implement data quality improvements over the next 12 months to
facilitate the enhanced analysis.
Extreme Rainfall
Research has indicated that extreme weather events can extend
the length of construction projects by up to 21% in the UK, [24]
whilst flood damage caused by extreme rainfall regularly exceeds
hundreds of millions of pounds each year. [25] The Company has
already experienced delays to installations caused by extreme
weather, particularly during winter months when the impacts of
extreme rainfall are compounded with lower temperatures.
The risk of extreme rainfall at existing portfolio sites is
similar in the short- and medium-term for both scenarios. Over the
long-term horizon, extreme rainfall is expected to increase by
about 9% within the low-emissions scenario across the Company's
sites, whilst the increase in extreme rainfall is over 12% over the
long-term horizon in the high emissions scenario. These increases
in likelihood are broadly representative of future changes across
the UK as a whole over the same timescale, which is representative
of the Company's portfolio being geographically spread across the
country. The analysis suggests an increased likelihood of
disruption to maintenance operations (at existing sites) as well as
an increased likelihood that installations at new ground mounted
sites across the UK will be disrupted by extreme rainfall in the
long-term.
Alongside the analysis of existing sites, an assessment was
conducted of UK areas likely to experience the most extreme
rainfall in future years. This information can be used to assess
the medium and long-term risk for future sites, particularly for
future ground mounted sites. In response to disruption delaying
commercial operation dates, the Company has taken measures on more
recent installations to mitigate adverse weather impacts.
Mitigating actions include prioritising the installation of solar
arrays at the boundary of a site according to potential exposure to
extreme rainfall and high winds. This, combined with measures to
protect the depth of cabling trenches, provides greater protection
for arrays installed on the interior of the site. Ultimately this
may result in the Company making additional capital investment
provisions; the extent of which will be further explored and
estimated over the next 12 months.
Policy and Legal
The unstable policy landscape within the energy sector poses a
material risk to the Company. The increased uncertainty can impede
off-takers' willingness to enter into longer term contracts. Policy
instability can also affect national energy prices, affecting the
commercial case and payback period of renewables when comparing
against other options in the market. Analysis of this risk is
intended to represent a range of potential policy interventions
that may influence the Company's competitiveness within the wider
energy market. The use of instruments such as windfall taxation,
subsidies, and capital allowances may have a material bearing on
the performance of the Company in future years.
Carbon price projections within the energy supply sector have
been used as a proxy to estimate the probability of future policy
changes that affect the Company's ability to remain competitive on
the energy market. Higher carbon prices reflect a higher likelihood
of a policy environment conducive to solar assets being an
attractive option for PPA off-takers. In the low-emissions
scenario, carbon prices increase into the medium- and long-term,
whilst in the high-emissions scenario the carbon price is low
across all time horizons. Policy and legal risk is assessed to be
higher over the medium and long-term, particularly in the
high-emissions scenario. This represents the time horizon over
which the Company will seek PPA contract renewal and/or new
off-taker contracts and suggests that the Company could be
operating in a more challenging policy environment at that
time.
The multi-decade duration of PPAs reduces the Company's exposure
to market volatility arising from policy and legal changes. To
monitor new policy developments and the impact these may have on
the Company, horizon scanning of emerging regulations is undertaken
annually. Following the completion of the scenario analysis
conducted for this report, a historic consensus was reached at
COP28 in Dubai to transition away from all fossil fuels to enable
the world to reach net zero by 2050. [26] In addition, the Global
Renewables and Energy Efficiency Pledge, aiming to triple worldwide
installed renewable energy generation capacity by 2030, was
endorsed by the United Kingdom and more than 100 other countries at
COP28. [27] Both of these examples highlight the increasing
international efforts to accelerate the clean energy transition and
the evolving international policy and legal landscape in relation
to renewable energy. The Company will continue to monitor such
international efforts and the resulting impact on domestic
policy.
Products and Services
A positive reputation with customers provides the Company with
an opportunity to improve its competitive position and maximise its
growth in the PPA market. The Company's alignment between its own
ESG practices with those of potential off-takers represents a
market differentiator that can create commercial opportunities for
increased revenue.
National scenarios for solar technology investment were used as
a proxy to gauge the future probability of increased competition
within the solar PPA market. [28] In the low emissions scenario, it
is anticipated that investment into renewables will peak in the
short-medium term, in turn scaling up the off-taker market. In a
high emissions scenario, where emissions reductions and ESG garner
less interest in the private sector, investment is relatively low
across future time horizons. This implies a potential opportunity
that is strongest in the medium term as more commercial off-takers
seek long-term PPA arrangements. This also overlaps with the
Company's developing reputation as they mature through future
rounds of fundraising beyond the short-term continuation vote.
The Company maintains a positive reputation with customers via
its ethical supply chain practices. For example, the Module
Procurement Policy requires newly acquired solar PV systems to be
ethically sourced and for module suppliers to meet certain
criteria. The Company's aim to source low-emitting solar PV modules
will also attract customers with targets to reduce emissions in
their supply chains.
Risk Management
Describe the organisation's processes for identifying and
assessing climate-related risks:
The Company identifies and evaluates its principal risks,
including climate-related risks, using a matrix where each risk is
rated on a scale of rare, low, moderate, or high. The risks are
assessed at every quarterly risk review, as well as on an ad hoc
basis when significant risks arise. In 2022, extreme rain was
included under the category of "Operational, climate, and ESG
risks", whilst policy and legal risk was included under " Economic
and regulatory conditions, locally and globally". Both risks were
rated as moderate impact and moderate probability. Details of the
risk matrix and risk management process can be found on page
48.
Existing and emerging climate-related regulations are considered
as part of the risk management process. In 2022, the impact of
higher energy prices and energy-related legislation in the UK were
noted as emerging risks and the increased irradiation due to
climate change leading to higher yields (termed the "brightening
effect") as an emerging opportunity.
Prior to the purchase of every asset, the Investment Adviser
undertakes due diligence on behalf of the Company, where
climate-related risks and opportunities are identified and
assessed. The outcomes of the assessment are recorded in the
Investment Committee papers. The due diligence process includes a
review of asset exposure to climate-related impacts, an estimate of
avoided greenhouse gas emissions, and consideration of asset
maintenance and decommissioning. The assessment of exposure to
physical risks (for example, flooding due to extreme rainfall or
damage from extreme wind) allows the Company to understand the
magnitude of these risks at each site.
Describe the organisation's processes for managing
climate-related risks:
As part of the Company's risk management, climate-related risks
are mitigated through the due diligence process. The outcomes of
the due diligence process inform the design and construction of the
assets to ensure they mitigate against any identified
climate-related risks. To facilitate ongoing monitoring of risks,
weather stations are installed on larger projects to collect data
on climate-related issues such as irradiation, wind speed, wind
direction, and temperature.
In some instances, risks are transferred to third parties.
Specific contractors, for example, operations and maintenance
("O&M") contractors, are responsible for oversight of the
assets and associated risks. In addition, insurance is in place for
significant climate-related incidents, transferring the financial
risk from the Company to the insurer.
Climate-related risks and opportunities are prioritised using
the risk matrix in the same way as non-climate risks. The results
of the scenario analysis, which provide an assessment of the
materiality of each risk and opportunity, will be incorporated into
the risk management process in the next financial year to further
aid the prioritisation of these risks.
Describe how processes for identifying, assessing, and managing
climate-related risks are integrated into the organisation's
overall risk management:
Climate-related risks are incorporated into the Company's risk
matrix. As part of the due diligence process undertaken for all
assets pre-investment, transitional and physical climate risks are
identified and assessed alongside other risk types. They are also
considered in the standard ongoing monitoring of risks throughout
each asset's lifecycle. The Investment Adviser is responsible for
monitoring all risks and intends to discuss them with the Board at
quarterly meetings, where the Board considers the controls and
mitigations in place for material risks, both non-climate and
climate.
Metrics and Targets
Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its strategy
and risk management process:
The metrics used to monitor climate-related performance, along
with the baseline progress for this first year of reporting, are
provided in Table 4. The metrics align with the Company's ESG
principle to support the attainment of the UK emissions targets
through the creation of new sustainable energy resources (more
information on the ESG principles can be found in the Investor
Prospectus).
There were no significant events that impacted the metrics and
targets in the reporting period. Metrics and targets are not
currently linked to remuneration policies for the Investment
Adviser or other personnel. This will be considered by the Company
over the next 12 months, along with the potential for some of the
metrics to be developed into specific targets.
Table 4 : Climate-related Metrics
Metric Baseline Progress
(as of September
2023) [29]
1 Avoided emissions (tCO2e) 37,000
--------------------------------------------- ------------------
New renewable energy generation capacity
2 (GWh) 143
--------------------------------------------- ------------------
3 Amount of capital deployed towards renewable 121
energy (GBPM)
--------------------------------------------- ------------------
Equivalent
number
of
homes
powered
by
renewable
4 energy 64,000
--------------------------------------------- ------------------
Disclose Scope 1, Scope 2 and, if appropriate Scope 3 greenhouse
gas (GHG) emissions and the related risks:
The Company completed its first full Scope 1, 2 & 3 GHG
inventory in 2023 based on FY23 (1 October 2022 - 30 September
2023) data. The GHG inventory was calculated in line with the GHG
Protocol Guidance, including all relevant scopes and categories.
The Company defines its organisational boundary using the
operational control approach. The Company does not have any Scope 1
& 2 emissions, rather all emissions are included in Scope 3. As
expected, due to the Company's status as an investment entity, the
majority of emissions come from its direct investment in Atrato
Onsite Energy Holdco Limited and indirect investment in various
Special Purpose Vehicles ("SPVs"). Within the Scope 3 Investments
category, the largest source of emissions arises from the
procurement of solar panels by the SPVs.
The 2023 UK Government Conversion Factors were the main source
for emission factors. For emissions relating to the solar panels,
EcoInvent 3.7 emission factors were used. Purchased goods and
services and some business travel were calculated using spend,
whereas the rest of the inventory was calculated using activity
data. Some of the emissions were estimated to fill missing data
gaps. The Company plans to continue iteratively improving its data
collection process each year to reduce the amount of estimated
data. A summary of the GHG inventory is provided in Table 5.
FY23 represented a normal year of business for the Company. The
FY23 GHG inventory improved upon the Company's initial measure of
its emissions relating to the procurement of its solar panels in
2022. As per best practice, carbon offsets are not included in the
Company's emissions reporting. Currently, the Company does not
purchase offsets and instead focuses on employing more capital into
renewable energy generation.
Table 5 : Greenhouse Gas Emissions
Scope and Description FY23 Emissions FY22 Emissions
Category [30] (tCO(2) (tCO(2) e)
e)
The Company does not have
Scope 1 any Scope 1 emissions. 0 0
-------------------------------- --------------- ---------------
The Company does not have
Scope 2 (location-based) any Scope 2 emissions. 0 0
-------------------------------- --------------- ---------------
Scope 2 (market-based) 0 0
--------------- ---------------
This includes emissions
relating to the Company's
purchased goods and services
and business travel, plus
the emissions relating
to the Company's investment
in solar panels and the
waste generated during
Scope 3 installation and maintenance. 41,364 14,751 [31]
-------------------------------- --------------- ---------------
Total Scope 1, 2 & 3 Emissions (location-based) 41,364 14,751
--------------- ---------------
There was a significant increase in total emissions in FY23
compared with FY22. This is due to an increase in the number of
emissions categories included in the analysis (in FY22 only the
measurement of the solar panels was in scope), and because there
was an increase in the number of solar assets purchased. Since FY23
is the first year where a full GHG inventory has been completed, it
will be used as the baseline year for future comparisons.
Table 6 : Other Metrics
Other Metrics FY23 FY22
Carbon footprint of investments (Scope
1 & 2 tCO2e/GBPM invested) 0 0
----- -----
Carbon intensity of investments (Scope
1 & 2 tCO2e/GBPM revenue) 0 0
----- -----
Exposure to carbon-related assets (%
of portfolio) 0% 0%
----- -----
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance against
targets:
The targets used to manage performance against climate risks and
opportunities are included in Table 7. The Company's strategic and
financial goals are inextricably linked to climate change due to
the core business model of financing renewable energy projects. For
example, targets 1 and 2, which relate to earning revenue by only
providing finance to clean energy projects, represents both
financial and climate-related opportunities for the business. The
provision of additional renewable energy will enable the Company to
meet increasing demand for renewables from its customers as they
aim to reach their own net zero targets, whilst also creating
revenue growth for the Company.
Table 7 : Climate-related Targets
Target Baseline Progress
(as of September
2023) [32]
Continue to provide 100% of electricity
generation finance for only renewable
1 electricity through 2030 [33] 100%
--------------------------------------------- ------------------
100% of revenue to come from the financing
2 of low-carbon products 100%
--------------------------------------------- ------------------
3 100% of Investment Adviser staff to receive In progress.
training on climate risks and opportunities
by Q2 2024
--------------------------------------------- ------------------
In 2024, the Company will continue to build on the qualitative
scenario analysis conducted in 2023 to gain further understanding
of the actual and potential impacts of climate-related risks and
opportunities on the Company. The Company will use the outcomes of
this analysis to ensure the most appropriate targets and metrics
are utilised to manage its climate-related risks and
opportunities.
Appendix
Appendix A: Methodology notes for scenario analysis
The qualitative scenario analysis described in this report is
underpinned by the following standard formula for risk:
Risk = Probability x Impact
This approach is considered best practice and is consistent with
approaches taken in major financial risk, climate risk and
transitional planning frameworks. This approach also considers
ROOF-specific inputs as part of its impact scoring, going beyond
generic climate modelling which inform likelihood scores.
For scenario analysis ratings, probability and impact are each
scored on a scale of 1-5 and are multiplied together to give an
overall risk rating on a scale of 1-25 for each time horizon. Risk
scores between 1 and 5 are deemed "Lower", 6-12 are deemed
"Moderate" and 13-25 are deemed "Higher". The ratings given in
Table 2 above are based on a weighted average across sites within
the portfolio, based on the proportional capacity relative to the
total installed capacity.
Probability
A 1-5 probability score has been assigned for each risk type.
This score represents the likelihood of the risk occurring at a
given location, or within a specific timeframe or future scenario.
Probability scores are based on generic climate scenario data.
Within data published by the IPCC Atlas and Network for Greening
the Financial System (NGFS Scenarios Database ), proxies have been
identified for each risk type. Raw values are converted to a
continuous score between 1-5 for each risk type, as described
below.
Risk/opportunity IPCC Raw Unit Justification
Type or NGFS
sub-data
set
Extreme Maximum mm of rain The data selected measures the anticipated
rainfall 5-day changes in the frequency of acute
(acute) precipitation rainfall events (i.e. five-day downpours)
(Rx5day, which make it more likely that sites
IPCC Atlas) will be impacted by waterlogging.
Locations analysed include existing
sites but also consider UK-wide trends
in how extreme rainfall may change
across all other local authority regions.
This allows management to consider
the likelihood of disruption at future
investment locations and also at existing
sites, as these may still require
maintenance and upkeep.
---------------- ------------ -----------------------------------------------
Legal NGFS: USD/tCO(2) The data selected is intended to represent
& policy Energy the likelihood of policies and taxes
supply that will discourage the transition
sector to net zero. Carbon pricing in the
carbon energy supply sector is a good proxy
pricing for the strength of government intervention;
up to the higher the carbon price it is
2050 assumed that the response to decarbonising
power is stronger and installing renewables
becomes easier/more attractive, through
more favourable policies such as taxes,
grants, levies and allowances.
---------------- ------------ -----------------------------------------------
Products NGFS: bnUSD/year Investment in solar generation acts
& services EU solar as a data proxy for the level of commercial
investment market demand and the subsequent growth
to 2050 in the number of 'ESG mature' off-takers
in the market nationally. It assumes
that the volume of more 'ESG mature'
off-takers will change in line with
national renewables capacity. Greater
'ESG maturity' refers to off-taking
organisations that are more sensitive
to their suppliers' ESG activities,
and whose purchasing activities are
more easily influenced by good ESG
performance; something ROOF view as
a strength and differentiator against
their competition.
---------------- ------------ -----------------------------------------------
Impact
Impact scores assess the Company's sensitivity and/or
vulnerability to risks and opportunities based on current or
historic company-specific data and insight. Similar to Probability,
a 1-5 risk score is assigned to each indicator. There are several
considerations made when choosing these indicators:
-- Impact pathway: a defined financial statement line item that
can be expected to be materially affected by a risk/opportunity
e.g., revenue, cost of sales, operating costs, assets, cash etc. A
risk/opportunity may have multiple impact pathways, but the scope
of this analysis has limited consideration to the most material
pathway.
-- Impact indicator: multiple impact indicators can combine to
give an overall impact score and can represent a combination of the
Company's own data. Where more than one impact indicator has been
used in this analysis for a given risk/opportunity, the final
impact score has been defined according to an equal weighting
between the two. Future analysis may define additional impact
indicators with different weightings given towards the impact
score.
-- Financial materiality alignment: where possible, the higher
impact scores (i.e. a 5) have been aligned to the most financially
material outcomes. In some cases this has been adapted according to
proxies e.g. the capacity of individual sites.
The table below describes the impact scores used in the scenario
analysis:
Risk/ Impact Justification
Opportunity Indicator
Type
Extreme Generating Waterlogging of ground mounted sites results
rainfall capacity in delays to installation and delays activation
(acute) at each date beyond which arrays can begin generating
site power. The larger the site, the larger the
financial exposure, as income is directly
linked to generating capacity.
--------------- -----------------------------------------------------
Legal & Proportion The proportion of the existing portfolio
Policy of portfolio that has been transferred out of ownership
transferred within a given time horizon. Higher scores
from balance indicate that the proportional value of
sheet assets transferred out of ROOF control is
more financially material, and therefore
the relevance of capital allowances and
impact on net profit will be greater. Site
capacity has been adopted as a proxy for
asset value.
--------------- -----------------------------------------------------
Legal & Remaining The timing of the lease term is critical
Policy lease in understanding when the potential impact
term will be realised. Impact scores have therefore
been assigned to each site, to reflect the
fact that the impact will vary depending
on time horizon.
Whilst it is unlikely an asset would be
transferred before the end of its lease
term, this indicator has been assigned a
rating of 3 as ROOF would, in theory, have
the option to reach an agreement to do this
if they felt it was commercially in their
interest and there was mutual benefit to
the new owner recipient or transferee.
Tax deferrals are not considered for this
exercise and it is assumed that profit is
impacted in the year of lease term end.
--------------- -----------------------------------------------------
Products ESG maturity Details on future client / client sectors
& Services of target were not available at the time of constructing
client the model; so it was not possible to assign
different ESG maturity and/or financial materiality
ratings. These indicators will serve as a
template by which can look to weight impact
in future, i.e. if a sector is perceived to
be more sensitive to ESG requirements than
other sectors; this could be assigned a 4
or a 5. A rating of 3 has been assigned in
the interim.
The model has taken ROOF's current client
portfolio book as an illustrative example
for rating the future client portfolio.
The implications of assigning a 3 rating will
be that all clients are assumed to be equal
in impact, with overall variance in risk being
driven by the probability score.
--------------- -----------------------------------------------------
Limitations of this analysis:
- Site capacity was used as a proxy for materiality throughout the analysis.
- Alignment of Company time horizons with climate modelling
timescales warranted the use of historic precipitation data for
short term probability scoring.
Supply Chain Sustainability
Following the 2021 publication of the Sheffield Hallam
University Report on Uyghur Forced Labour and Global Solar Supply
Chains, there has been increasing focus on supply chain
transparency in the solar industry. The United States has since
enacted the Uyghur Forced Labor Prevention Act which aims to ensure
that goods made with forced labour in the Xinjiang Uyghur
Autonomous Region ("XUAR") of the People's Republic of China do not
enter the United States market. The European Union is also working
towards an EU ban on products made with forced labour with proposed
regulation at draft stage. Industry initiatives have also been
launched, such as Solar Energy UK's Responsible Sourcing Steering
Group and the Solar Stewardship Initiative (SSI) developed by Solar
Energy UK and SolarPower Europe. The Company is proud to be a
member of Solar Energy UK. The Investment Adviser's Head of
Sustainability is a member of the Solar Energy UK's Responsible
Sourcing Steering Group.
The Company is committed to trade ethically, source responsibly
and avoid modern slavery or human trafficking in its supply chains
or in any part of its business. The Company's approach reflects its
commitment to acting ethically and with integrity in all business
relationships. Building on this commitment, the Company's
Investment Adviser works collaboratively with its business partners
and seeks to ensure that their suppliers share the Company's values
and comply with relevant legislation.
The Company's commitment is guided by the principles in the
Modern Slavery Act 2015 within the UK and associated global
initiatives such as the UN Guiding Principles on Business and Human
Rights, the UN Global Compact, and the OECD Due Diligence Guidance
for Responsible Business Conduct. The Company's approach to ethical
business is governed using a comprehensive framework of policies
and standards including the Company's Modern Slavery and Human
Trafficking Statement and Module Procurement Policy. It is
acknowledged however that beyond the suppliers that the Company and
the Investment Adviser deal with directly, there is a complex and
extensive supply chain where there are no direct contractual
relationships. As a result, there will be limitations to what can
be achieved in practice. However, the Company will continue to
identify opportunities to further reduce the risk of human
trafficking and modern slavery, increase transparency in the
Company's operations and supply chain and respond effectively to
new risks as they are identified. As part of this, the Company will
continue to engage with industry led initiatives on human rights
and the prevention of modern slavery. This includes participating
in relevant industry associations such as Solar Energy UK and
engaging with the SSI - particularly as it develops its planned
Supply Chain Traceability Standard, due to launch in late 2024. The
Company's policies, standards and processes will continue to evolve
in this area as industry progress is made.
The Company acknowledges training as an important aspect of risk
management. As part of the Company's commitment to mitigate risks
as far as possible and further develop its due diligence
mechanisms, training requirements relating to Company's Board and
the Investment Adviser will be reviewed over the coming year.
Procurement policy
The Investment Adviser has developed a procurement policy that
attempts to mitigate the exposure to forced labour issues that are
present in the solar PV industry. The Module Procurement Policy is
reviewed semi-annually. The Board's obligations and commitments
relating to equipment procurement are documented in the Company's
Modern Slavery and Human Trafficking statement and are included in
the Company's prospectus dated 1 November 2021 (Part 4 ESG and
Sustainability).
Application of the Supplier Criteria
The availability of independent and corroborated information
regarding modern slavery in the Chinese region of Xinjiang and the
involvement (whether directly or indirectly) of individual
manufacturers is limited. However, the supplier criteria ("Supplier
Criteria") is updated to reflect industry best practice as it
evolves with the improving availability of standardised and audited
information. Suppliers are excluded if they are unable to meet our
Supplier Criteria, which include:
The Module Procurement Policy was approved by the Company's
Board of Directors in June 2022 and the Investment Adviser is
responsible for maintaining the Module Procurement Policy. Please
see the Module Procurement Policy, available on the Company's
website, for more information.
Contractual commitments
In all contracts which relate to the procurement of modules, the
Investment Adviser will require the inclusion of a commitment from
its counterparty to the eradication of all forms of forced labour
in the supply chain for those modules.
As part of the Company's supplier selection process for possible
installers and operators, due diligence activities will also
consider local procurement content as well as equal opportunities.
The Company believes that its investments should benefit local
stakeholders at every level including opportunities to work in
developing local infrastructure. The Investment Adviser will track
local content involvement as transactions are developed.
Carbon emissions
The Company is considered to be a "low energy user"
(<40,000KWh) and therefore falls below the threshold required to
make a Streamlined Energy and Carbon Reporting (SECR) disclosure.
However, the Company has voluntarily reported its greenhouse gas
emissions within its TCFD report.
Corporate Social Responsibility
The Company has made a commitment to donate one per cent of the
previous year's cash profits to charitable causes through an
independent foundation. 2023 is the second year of operations for
the Company, a cash profit was not achieved in the prior year.
The Investment Adviser is establishing The Atrato Foundation
(the "Foundation") as a UK charity. The Investment Adviser will
develop a selection policy to evaluate charities that help in the
growth and acceptance of sustainable energy generation.
The Foundation will support charities promoting education,
training and personal development with respect to skills relevant
to the clean energy sector. It will also support the Board's agenda
of diversity, equal opportunity and social mobility. It will
achieve this by working with the Investment Adviser to provide
training and education.
The Investment Adviser has also committed to make donations to
the Foundation of 3% of profits. The minimum funding level for
donation is set at GBP5,000.
In addition, employees at the Investment Adviser currently
volunteer on several charitable initiatives including mentoring
young people in schools and select students through IntoUniversity.
STEM and IntoUniversity are aimed at supporting students from
underprivileged and diverse backgrounds into work and
higher/further education.
Board developments and activities as per Section 172(1)
Statement
Section 172 of the Companies Act 2006 (the "Act") requires the
Board to act in the way that it considers would most likely promote
the success of the Company for the benefit of its members as a
whole, whilst having regard to the matters set out in section
172(1)(a-f). The Board believes that over the course of the year
ended 30 September 2023, it has taken into consideration the
interests of all stakeholders in its decision-making and its report
on how the Directors have discharged their duty under section 172
is set out below.
Details of the Company's key stakeholders and how the Board
engages with them can be found on pages 45 to 47 .
s172 Factor Our approach Evidence of compliance
A. The likely The Board has regard to its Key stakeholder relationships
consequences wider obligations under Section on pages 45 to 47 .
of any decision 172 of the Act. As such, strategic Board activities during
in the long discussions involve careful the year on page 44
term consideration of the longer-term .
consequences of any decisions
and their implications on shareholders
and other stakeholders, as well
as the risk to the longer-term
success of the Company. Any
recommendation is supported
by detailed cash flow projections
based on a range of scenarios
to stress test against varying
levels of funding availability
and borrowing strength, as well
as a range of wider economic
and market conditions.
------------------------------------------ ------------------------------
B. The interests The Company does not have any Key stakeholders on
of the Company's employees because of its external pages 45 to 47.
employees management structure.
Culture on page 61.
The Company receives professional
services from a number of different
providers, principal among them
being the Investment Adviser.
Through regular engagement with
the Investment Adviser in its
regular quarterly meetings and
otherwise, as required, the
Board aims to gain a rounded
and balanced understanding of
the impact of its decisions
on the Company's stakeholders.
The Directors also have regard
to the interests of the individuals
who are responsible for delivery
of the investment advisory services
to the Company to the extent
that they can. The interests
of individuals in other service
providers to the Company are
also considered.
------------------------------------------ ------------------------------
C. The need The Board believes that building Key stakeholders on
to foster the effective business relationships pages 45 to 47 .
Company's business with suppliers, customers and
relationships other key counterparties is
with suppliers, crucial to preserving long-term
customers and shareholder value. In addition
others to the Investment Adviser, the
Company Secretary, the Broker,
the external legal counsel,
its public relations agency,
the Auditor and the tax advisers,
the Company fosters its business
relationships at the operational
level with various asset-level
counterparties, local communities
and the Company's debt providers.
------------------------------------------ ------------------------------
D. The impact The Board receives regular reports Key stakeholders on
of the Company's from the Investment Adviser pages 45 to 47 .
operations on the safety performance of
on the community the Company's asset-level counterparties ESG policy and strategy
and the environment to help ensure the safety and on pages 27 to 43 .
comfort of communities situated The Board's approach
in the vicinity of Company assets. to sustainability on
The Board also recognises the page 2.
important role the Company's
solar assets play in the transition
to the use of cleaner energy
and the reduction in society's
reliance on fossil fuels.
The impact on the community
is covered in the sustainability
section of this Report.
------------------------------------------ ------------------------------
E. The desirability The Board is mindful that the Chair's letter on corporate
of the Company ability of the Company to continue governance on pages
maintaining to carry out its investment 55 to 61 .
a reputation business and to finance its Principal risks and
for high standards activities depends heavily on uncertainties on pages
of business the Company maintaining high 48 to 54.
conduct standards of conduct in its Culture on page 61.
engagement with its stakeholders
and, in part, on the reputation
of the Board, the Investment
Adviser and the investment advisory
team.
The reputational risk of falling
short of the high standards
expected is included in the
Audit Committee's review of
the Company's risk register,
which is conducted at least
annually.
------------------------------------------ ------------------------------
F. The need The Board recognises the importance Chair's letter on corporate
to act fairly of treating all members fairly governance on pages
as between and, accordingly, works with 55 to 61 .
members of the investor relations function Key stakeholders on
the Company of the Investment Adviser to pages 45 to 47 .
engage with shareholders in
order that their views ca n
be considered when shaping the
Company's strategy.
------------------------------------------ ------------------------------
Our Key Stakeholder Relationships
Building strong relationships with our key stakeholders is a
critical element to our success. The Board recognises that the
foundation underpinning effective corporate governance is
determined on how it aligns the strategic decisions of the Company
with the views of its various stakeholders. We aim to build long
lasting relationships with all our key stakeholders based on
professionalism and integrity.
The Board regularly consults with the Investment Adviser, who in
turn manages and fosters the relationships with our clients, supply
chain, key partners and advisers.
Investor engagement
The Company's shareholders are an important stakeholder group
and the ultimate owners of the business . To deliver our strategy,
it is vital that shareholders continue to understand and support
the Company's performance, investme n t thesis as well as the wider
market in which we operate. The Board oversees the Investment
Adviser's formal investor relations programme which is supported by
the Company's broker and public relations consultants , providing
shareholders with frequent business updates as well as facilitating
regular meetings both in person and on-line. The Board aims to be
open with shareholders and available to them, subject to compliance
with relevant securities laws.
How did we engage?
-- The 2023 AGM was held as a physical meeting in London and was
attended by all the board. The meeting details were announced by
RNS and open to all shareholders.
-- The Company's broker arranged a roadshow for institutional
shareholders following the FY 23 interim results
-- The Board approves all resolutions and related documentation
to be put to shareholders at the AGM, together with circulars,
prospectuses, listing particulars and regulatory announcements
concerning the Company.
-- The Company's website contains comprehensive information
about its business, regulatory news and press releases alongside
information about its approach to ESG issues.
-- The formal investor relations programme is designed to
promote engagement with major investors, generally defined as those
holding more than approximately 1% of the shares in the Company.
Major investors are offered meetings after each results
announcement or other significant announcements. The Investment
Adviser also held multiple virtual and in person meetings with
prospective investors.
Topics discussed
-- Financial performance of the Company and disclosures contained within the interim report
-- Share price performance and pathway to reducing the discount to NAV
-- Macroeconomic themes including the impact of inflation,
merchant power prices and government decisions in relation to
energy prices.
How did we respond?
-- Investor feedback has helped shape our disclosures, with
additional supplementary information provided in these annual
results.
-- Feedback suggest that the use of virtual meetings has
improved accessibility to our international and regional based
Shareholders. We anticipate that on-line engagement will continue
to play an important part in engagement with our shareholders in
addition to helping to reduce associated carbon emissions in line
with our sustainability strategy. Further details on our
sustainability strategy can be found on pages 27 to 43 .
EPC contractors
We recognise the importance of EPC contractors to our business,
not only to develop and build the solar projects for us and our
clients, but also to recognise us as an experienced partner to fund
their projects and to deliver a constant stream of pipeline work
for us. We currently have a strong relationship with selected EPC
contractors, and regularly interact with them during the design and
installation process of a project. Our EPC contractors on site are
currently performing in line with our expectations. No major health
and safety incidents have been reported at the time of writing this
report.
How did we engage?
-- Regular meetings held with EPC contractors to discuss
development pipeline and performance on current projects in
construction.
-- We carried out site visits, both internally and using third
party technical advisors, to assess construction quality and verify
construction is in line with contractual timelines.
Topics discussed
-- Issues on sites, particularly those related to safety on site and timelines.
-- New PPA projects on the horizon, contractors' ability to
deliver such sites, and potential PPA pricing.
-- Design issues pre-construction, to ensure that solar PV
plants are in line with our specifications.
-- Topics related to commissioning, acceptance and handover documentation.
How did we respond?
-- We provided PPA prices to EPC contractors for projects that met our investment criteria.
-- We translated contractor's reports and provided them to the
off-takers as required under the PPA.
-- We manage the EPC contractors to ensure that projects are
built on time and budget, and that all acceptance criteria are
being met.
Operations and maintenance contractors
The Company recognises the importance of the operations and
maintenance contractors to ensure the ongoing operation of the
projects. The relationship with these providers is managed via the
asset manager who has regular interaction with the providers to
ensure the ongoing performance of the sites. The Investment Adviser
oversees this interaction and is regularly updated on performance
and health and safety related situations.
The Investment Adviser
The Board's main working relationship is with the Investment
Adviser. The Investment Adviser brings a depth of experience in the
renewable energy sector. This gives the Company a competitive
advantage through its knowledge, specialist focus and network of
industry contacts. The Investment Adviser has a crucial role in the
performance and long-term success of the Company. The Board has a
diverse skillset and is experienced across a range of disciplines
both in the listed and private sectors. As such they are well
placed to work with the Investment Adviser and engage efficiently
with them. Full details of the Board's experience is available on
page 55.
Whilst the Company has no employees, the Board has regard to the
interests of the individuals who are responsible for delivery of
investment advisory services to the Company to the extent that they
are able to do so. The Board does not have direct responsibility
for any employees.
The Board and the Investment Adviser maintain a positive and
transparent relationship to ensure alignment of values and business
objectives.
How did we engage?
-- The Board engages with the Investment Adviser at a minimum on
a quarterly basis which follows the Company corporate calendar. In
addition to the scheduled quarterly meetings, the Board also have
separate unscheduled Board meetings to approve recommendations for
all acquisitions, approval of asset management opportunities, and
appointment of advisers.
-- The Management Engagement Committee met during the year and
has performed a detailed review of the Investment Adviser's
performance.
-- The Directors obtain and assess feedback from investors,
advisers and other market participants, where appropriate, in order
to monitor standards of conduct, including the conduct and
reputation of the Investment Adviser and the reputation of the
business.
-- The Board also engages with the Investment Adviser through
the annual strategy day in addition to informal meetings as and
when required. For the 2023 strategy day the Investment Adviser
took the board on a site visit of the London Road project as well
as presenting an in depth presentation on fund performance, macro
backdrop and future strategy.
Topics discussed
-- The process for operating the delegated authorities and
related controls at the Investment Adviser.
-- Deployment speed and pipeline updates.
How did we respond?
-- Included a section on activities undertaken pursuant to the
delegated authorities within the quarterly Investment Advisers
report.
-- Established monthly meetings to update the Board on the pipeline and deployment progress.
Asset Manager
We recognise that the success of the Company relies on the
continued success of the asset manager, appointed by Holdco and
managed by the Investment Adviser, to provide financial and
technical services on the projects. The asset manager relies on the
quality of the operations and maintenance contractors to succeed.
Therefore, we place particular emphasis on having a strong
relationship with the asset manager to better understand the
challenges and opportunities facing their business.
How did we engage?
Regular meetings between the Investment Adviser and the asset
manager are held to understand current and future needs. Any
potential opportunities or risks facing the Company are fed back to
the Board to help inform future strategy. The Investment Adviser
visits sites on a periodic basis and feeds back on material issues
to the Board.
Topics discussed
-- Issues on sites, particularly in connection with the asset
managers ability to monitor the meters and operation and
maintenance contractors remotely.
-- Performance of the solar assets and their generation during the relevant year.
-- Performance of the operations and maintenance service providers.
-- Financial issues that have arisen on any of the assets in the portfolio.
How did we respond?
-- The asset manager's monitoring software is connected to all sites.
-- Monthly and quarterly reports provided by the asset manager
are reviewed and discussed at informal weekly meetings with the
Investment Adviser and the formal quarterly Board meetings.
Our Suppliers
The Company's key suppliers include professional firms such as
accounting and law firms and transaction counterparties, which can
vary in size and sophistication.
Whilst most engagements are subject to a tender process to
ensure the Company continues to obtain value for money, we aim to
partner with suppliers who share our values and ethos and work to
secure the best people with an established track record and, where
possible, retain key partners on successive transactions and
workstreams.
Where material counterparties are new to the business, checks,
including anti money laundering checks, are conducted prior to
transacting any business to ensure that no reputational or legal
issues would arise from engaging with that counterparty. The
Company also reviews the compliance of all material counterparties
with relevant laws and regulations such as the Criminal Finances
Act 2017.
The Company and its subsidiary entities have a policy of paying
suppliers in accordance with pre agreed terms as reported in the
Supplier Payment Policies:
How did we engage?
-- Key suppliers such as our Company's corporate broker Stifel
are invited to attend the quarterly Board meetings in order for the
Board to be kept informed of the current market within which we
operate.
-- The Board and its Committees were able to speak with
accounting and law firms on an informal or one to one basis to
discuss specific issues relating to the Company.
Topics discussed
-- Service levels and annual performance.
-- Fees charged by key suppliers engaged during the year.
-- Relationship management.
How did we respond?
-- There was direct engagement between the Investment Adviser
and the Board in respect of suppliers engaged during the year.
Feedback has continued to be positive on all our key supplier
arrangements.
-- The Board has established a Management Engagement Committee,
which reviews the supplier performance and fees on an annual basis
to ensure that the Company continues to obtain best value for money
on services procured.
-- Face to face meetings with key service providers are arranged
in order to discuss the ongoing relationship with the Company -
these are held without the Investment Adviser present.
-- The Company has implemented a procurement policy, which aims
to eliminate the practices of modern slavery in the supply chain of
module suppliers. Our procurement policy states that the purchasing
of panels should include a guarantee that the raw materials and
manufacturing will exclude any forced labour and should be procured
outside of the regions where these practices are known to be
happening. The policy, which has been developed in line with the
UK's Modern Slavery Act 2015, is set out below and is reviewed
annually. Suppliers are reviewed at least semi-annually to ensure
that procurement procedures are up to date and align with the
Company's procurement policy.
Supplier payment policies
The Company and its subsidiary undertakings seek to always pay
suppliers within the pre-agreed credit terms.
Modern slavery and human trafficking policy
The Company is committed to maintaining the highest standards of
ethical behaviour and expects the same of its business partners.
Slavery and human trafficking are entirely incompatible with the
Company's business ethics. We believe that every effort should be
made to eliminate slavery and human trafficking in the Company's
supply chain. The Board has considered and approved our Modern
Slavery Statement, which demonstrates our commitment to seeking to
ensure that there is no slavery, forced labour or human trafficking
within any part of our business or suppliers. A copy of our Modern
Slavery Statement is available at
https://atratorenewables.com/regulatory-documents/.
Our Key Stakeholder Relationships
Some examples of how the Board has considered stakeholder
interests and s.172 matters in its decision making during the
period are set out below.
Decision Stakeholders Board rationale Impact
and considerations
New RCF agreement Shareholders The facility Proceeds were
was important used to acquire
as it provided further assets
additional liquidity and grow the
to acquire pipeline Company.
assets. The Board
also carefully
weighed the risks
associated with
the entry into
the facility
against the longer-term
consequences
of not being
able to fund
pipeline acquisitions
which would have
implications
for shareholders
as their preference
is to grow the
fund to a level
that is considered
scaled.
------------- ------------------------- -----------------
E-Comms adoption Shareholders E-Comms was adopted Not yet fully
Communities in light of the implemented.
benefits which
would flow from
the corresponding
reduced paper
usage. The Board
also considered
the fact that
this change in
practices would
reduce expenses
incurred by the
Company.
------------- ------------------------- -----------------
Investment Policy Shareholders The change to Britvic's 28MW
amendment the policy was 'London Road'
adopted on 10 project was
March 2023 and acquired which
was considered - enables the
appropriate as Company to
it enabled the decarbonise
Company to offer at scale.
a wider spectrum
of solar solutions
to better position
the Company within
the changing
market backdrop
and this was
expected to increase
returns to shareholders
in the long term.
------------- ------------------------- -----------------
Risk Management
The Board has ultimate responsibility for the Company's risk
management and internal controls, with the Audit Committee
reviewing the effectiveness of the Board's risk management
processes on its behalf. The Investment Policy sets out the level
of risk that the Company is willing to take and the constraints
that the Board determines that the Investment Adviser must adhere
to on behalf of the Company. The AIFM also undertakes risk
management subject to the overall policies, supervision and review
of the Board.
The Board and the AIFM recognise that effective risk management
is key to the Company's success. Risk management ensures a defined
approach to decision making that seeks to decrease the uncertainty
surrounding anticipated outcomes, balanced against the objective of
creating value for Shareholders.
The Board determines the level of risk it will accept in
achieving its business objectives, and this has not changed
throughout the year. We have no appetite for risk in relation to
regulatory compliance or the health, safety and welfare of our
contractors, service providers and the wider community in which we
work. We continue to have a moderate appetite for risk in relation
to activities which drive revenues and increase financial returns
for our investors.
There are a number of potential risks and uncertainties which
could have a material impact on the Company's performance over the
forthcoming financial year and could cause actual results to differ
materially from expected and historical results.
The risk management process includes the Board's identification,
consideration and assessment of those emerging risks which may
impact the Company. Emerging risks are specifically covered in the
risk framework, with assessments made both during the regular
quarterly risk review and as potentially significant risks arise.
The quarterly assessment includes input from the Investment Adviser
and review of information by the AIFM, prior to consideration by
the Audit Committee.
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.
During the year under review, the Directors have not identified,
nor been advised of, any failings or weaknesses which they have
determined to be of a material nature. The principal risks and
uncertainties which the Company faces are set out below.
Information about the Company's internal control and risk
management procedures are detailed in the report from the Audit
Committee on pages 68 to 71. The principal financial risks and the
Company's policies for managing these risks, and the policy and
practice with regard to the financial instruments, are summarised
in Note 19 to the financial statements.
The matrix below illustrates our assessment of the impact and
the probability of the principal risks identified after the
application of mitigating measures. The rationale for the perceived
increases and decreases in the risks identified is contained in the
commentary for each risk category. A new risk relating to the share
price discount and continuation of the Company has been added this
year.
This risk map shows our assessment of each area of principal
risk after mitigation:
Change since prior
year
1 Deployment of capital and pipeline Reduced
Performance of third-party service
2 providers No change
3 Investment performance and measurement No change
4 Changes in cost of finance No change
5 Project counterparty risk No change
6 Power Price risk No change
7 Operational risk No change
Economic and regulatory conditions,
8 locally and globally No change
9 ITC tax status and changes in tax legislation No change
Local and global political risk and
10 impact of pandemics No change
Continuation of the company and share
11 price New risk - increased
Principal Risks
----------------------------------------------------------------------------------------------------
Risk category Potential impact Mitigation
----------------------------- -------------------------------- -----------------------------------
1. Ability to In line with the majority During the year the Company
fund pipeline of the listed renewables entered into an GBP30 million
Probability: market, the Company RCF which was a further
Low is trading at a material GBP20 million accordion
Impact: High discount to NAV and option, providing significant
is therefore restricted debt capacity. In addition
in its ability to raise to the public market fundraising,
capital via a public there are a number of other
placing. The Investment options available to it
Adviser has a significant that it will consider with
pipeline in excess of its broker.
GBP400 million that Once the portfolio is fully
requires funding. There operational the Company
is a risk that the Company will be generating significant
is uncompetitive and free cash flow which can
fails to secure the be used to fund further
assets that meet the projects.
investment objectives The Company will consider
in a timely manner to all available fund options
provide the target return across equity and debt
to the investors. products. It will also
Delays in deployment investigate joint ventures
will impact returns. as an alternative to raising
equity via equity capital
There is a risk that markets.
due diligence carried
out on acquisition of
or investment in any
Clean Energy Asset is
insufficient and does
not reveal all the facts
that are relevant to
the opportunity, leading
to the Company overpaying.
----------------------------- -------------------------------- -----------------------------------
2. Performance The Company has no employees The Company will engage
of third-party and is reliant on third with reputable and knowledgeable
service providers party services providers service providers to provide
Probability : to perform services, due diligence and appropriate
Low particularly the Investment contractual protection
Impact: High Adviser & AIFM, their for liabilities is sought.
systems, reputation The Board has established
and any conflicts of a Management Engagement
interest between their Committee to keep the performance
clients. The achievement of the Investment Adviser
of the Company's investment under continual review.
objective depends heavily The AIFM and the Investment
upon the experience Adviser have robust processes
and expertise of the and systems in place including,
Investment Adviser's but not limited to, a conflicts
team. of interest policy and
There is no certainty register and a business
that the Company could continuity plan, which
find a replacement Investment was tested during the pandemic
Adviser in the event and all staff were able
of resignation of the to work remotely without
Investment Adviser or loss of function or data.
termination of the Investment Systems are tested and
Advisory Agreement. frequently backed up.
Operational risks which
disrupt the Investment
Adviser's & the AIFM's
business could impact
their systems and their
ability to provide services
to the Company.
The Company's performance
can be affected by the
reputation of the Investment
Adviser. The Investment
Adviser and AIFM provide
services to other clients
which could be in direct
competition with the
Company. Contractual
limitations on the liability
of and indemnification
in favour of the Investment
Advisor means that the
Company may have no
recourse to recover
losses from the IA.
----------------------------- -------------------------------- -----------------------------------
3. Investment Investment valuation The Investment Adviser
performance and and decisions are based bases assumptions on industry
measurement on financial projections, data and reputable solar
Probability: judgements and assumptions irradiance databases. The
Moderate captured in a financial P50 irradiance scenario
Impact: High model. These assumptions is used as a base case
may change from to time and sensitivity to changes
to time and the actual in irradiation are assessed.
performance may vary Assumptions are updated
significantly from the and benchmarked frequently
assumptions. and the model itself is
Assumptions are reliant regularly reviewed. The
on various factors, Investment Adviser is engaging
including environmental a third party specialist
conditions, which are to review and update the
not guaranteed. Historical model functionality.
trends are only an indication
of future conditions.
The financial model
may contain errors that
will impact the forecast
returns.
----------------------------- -------------------------------- -----------------------------------
4. Changes in The discount rates used The discounts rates are
cost of finance in the valuation represents reviewed on a regular basis
the Investment Adviser's and updated, where appropriate,
Probability: and the Board's assessment to reflect changes in the
High of the rate of return market and in project risk
Impact: Moderate in the market for assets characteristics.
with similar characteristics
and risk profile. Increased
underlying interest
rates or expectations
of prolonged high inflation
may lead to increased
discount rates being
applied by the market
and a consequential
decrease in the portfolio Any future debt would be
value. subject to the 40% cap
set out in the investment
The Company's use of policy. The Company will
debt may also be affected enter interest rate caps
by changes in the cost and swaps where appropriate
and availability of to mitigate the risk of
finance. While the use interest rate rises.
of borrowings should
enhance the total return
on the ordinary shares,
it is possible that
borrowing costs will
exceed income and therefore
returns will be negatively
impacted.
----------------------------- -------------------------------- -----------------------------------
5. Project delivery Each revenue generation The portfolio of off-takers
& counterparty agreement is subject is diversified to alleviate
risk to the credit worthiness concentration risk. Credit
of the counterparty assessments are conducted
Probability: and in the event of prior to and during the
Moderate non-payment or insolvency PPA term to identify default
Impact: Low of the off-taker, the risk. Each property is
revenue will be lost assessed for suitability
and there is no guarantee for alternative occupiers
that an alternative and the availability of
user is found. an export connection to
the grid to allow for sale
of generation via the public
grid to a licensed supplier.
Service providers are
engaged to install, Service providers are subject
operate and manage Clean to credit assessments and
Energy Assets. If these appropriate security is
providers fail to perform, sought where advance payments
experience significant are required. Performance
delays or have financial levels are stipulated in
difficulties, the financial the contracts and performance
performance, including is regularly monitored
ability to pay dividends and reported on, by the
& the NAV valuation, Investment Advisors asset
together with the reputation management team, during
of the Company could the period of contract
be adversely affected. performance.
----------------------------- -------------------------------- -----------------------------------
6. Power price I nvestments in Clean The Company's strategy
risk Energy Assets may have is to seek to enter long
Probability: exposure to power prices. term fixed price PPAs for
Moderate Where the counterparty at least 80% of the energy
Impact: Low does not use all the generated from its Onsite
electricity generated Solar Assets. Any excess
the rate at which the generation is exported
excess can be sold will to the grid under shorter
be determined by market term arrangements. The
prices, which may be sensitivity of the NAV
lower than the contracted to a change in wholesale
rates. power prices is monitored
by the Investment Adviser
OFGEM regulates energy and the impact of any new
markets. A change of asset on the portfolio
UK government or OFGEM's sensitivity is reported
direction and regulations during the investment approval
could lead to unfavourable process.
energy or grid policies
and potentially reduce The Investment Adviser
merchant power prices. has a data analytics resource
to assist with analysing
If market rates are information for reporting
very low, users may to the AIFM and the Board
not be willing to enter and the Board will respond/take
into an agreement for action as appropriate.
supply from the Company.
The Company is well positioned
to both monitor the political
landscape as well as engage
in consultations and contribute
to policy making. As the
operating portfolio grows,
this ability to engage
and contribute will grow
in significance
Third party wholesale power
price forecasts are monitored
by the Investment Adviser
relative to the prices
available under PPAs for
Onsite Solar Assets to
confirm that PPAs remain
attractive.
----------------------------- -------------------------------- -----------------------------------
7. Operational The Company's indirect When conducting due diligence
risk subsidiaries own assets on potential investments,
Probability: on third party property the Investment Adviser
Moderate and assume obligations considers the potential
Impact: Moderate under the contracts impact of asset failures
and could be liable and provides for appropriate
for non-performance. contractual and insurance
In some instances, parent protections. Security around
company guarantees are assets is reviewed regularly
required in respect and assets are inspected
of a portfolio company's regularly for damage or
obligations under its for signs of decay.
contracts.
Technical due diligence
Assets can fail due is undertaken prior to
to technical faults, acquisition or development
lifespan and theft of of an asset to identify
components and there risks and appropriate mitigating
is a risk of an absence measures. Installation
of direct connection contracts include taking
to the grid. Where a over provisions and defects
connection exists, there liability periods, and
is a risk the connection major equipment is supplied
fails. with long-term warranties.
Clean Energy Assets
can cause environmental Environmental surveys are
hazards and nuisance. undertaken, where appropriate.
In addition, a ssets Energy generation is based
profitability is dependent on P50 forecasts which
upon weather conditions are deemed appropriate
over which the Company for long-term assets.
has no control.
Insurances may not cover Insurance brokers advise
specific risks and changes on appropriate insurance
in environmental laws coverage.
may have an impact on
the Company's activities.
----------------------------- -------------------------------- -----------------------------------
8. Economic and The Company and its The Investment Adviser
regulatory conditions, portfolio may be materially will continually monitor
locally and globally affected by conditions the macro environment and
in the global financial ensure that it adopts appropriate
Probability: markets and economic mitigating strategies,
Moderate conditions, including including hedging, entering
Impact: Moderate inflation and deflation, long term contracts and
business and consumer linking pricing to inflation.
confidence, currency
exchange rates and controls,
trade barriers and commodity
prices. These factors
are outside the Company's
control and may affect
the valuation of its
investments.
The Investment Adviser
Brexit continues to engages with industry specialists
cause financial and to ensure it is up to date
regulatory uncertainty, with any potential changes
both in the short and and will where possible
longer term. This could feed into consultations.
cause volatility in
the energy and financial
markets and impact supply
chains and increase
costs.
There is a risk of loss
of supply licence or
similar exemptions.
Any government subsidies
and incentives to which
the portfolio is entitled
may reduce over time.
Regulations around renewable
energy may change without
significant notice,
invalidating the operating
model of the Company.
Network charges are
subject to change.
----------------------------- -------------------------------- -----------------------------------
9. ITC tax status The Company may breach The Investment Adviser
and changes in the conditions of an has engaged specialist
tax legislation Investment Trust leading tax advisers for compliance
to it being subject and monitors and regularly
Probability: to UK tax on gains. reports to the board on
Low compliance with the Investment
Impact: High Trust Company conditions
referencing the tax structuring
Tax legislation is subject advice received at IPO.
to change in both the
UK and any other jurisdiction The Investment Adviser
in which the Company with the appointed tax
invests. There is a adviser monitor potential
risk that corporation changes in tax legislation,
or other tax rates may including rates, and assess
increase as governments their impact on the Company
seek to finance deficits and its investment portfolio.
arising from, amongst
other things, the consequences
of the COVID-19 pandemic.
----------------------------- -------------------------------- -----------------------------------
10. Local and The ongoing instability The Investment Adviser
global political caused by conflicts will monitor industry and
risk and impact in both Ukraine and national news to ensure
of pandemics the middle east together that any proposed changes
with the threat from are anticipated, and appropriate
Probability: China in relation to mitigations are taken.
Low Taiwan continue to cause
Impact: Moderate significant volatility
in energy and financial Asset performance can be
markets. monitored remotely and
regular contact with the
A pandemic, like COVID-19, service providers is maintained
could create operational to ensure ongoing service.
challenges for the assets Assets, where practicable,
incurring failures, benefit from the ability
as service providers to export excess generation
may not be able to attend to the grid.
to the failures. Energy
demand at certain sites
may be reduced. A pandemic
could also disrupt supply
chains, delaying installation
assets.
----------------------------- -------------------------------- -----------------------------------
11. Continuation If the Company does The Company has one more
of the Company not have a NAV of greater year to raise additional
and share price than or equal to GBP250m capital to prevent this
on the third anniversary provision being triggered.
Probability: of admission (23 November The Board and its Investment
Moderate 2024) The Board will Adviser are optimistic
Impact: Moderate propose a discontinuation that the total NAV will
resolution at the AGM. be greater than GBP250m
This resolution requires by the third anniversary,
75% or more shareholder but will monitor the situation
votes. at each Board meeting.
The Investment Adviser
If the Company's shares is proactively looking
continue to trade at at ways to increase the
a discount to NAV it NAV.
will not be possible
to issue additional The ability to raise additional
shares to raise equity equity requires the Company's
funding. shares to be trading at
a premium, which is in
large part dependent on
market conditions and sentiment.
The Investment Adviser
and the Broker will monitor
the discount regularly
and inform the Board if
shares are trading at a
significant discount. The
Directors may repurchase
shares if they have traded
at more than a 10% discount
during any 12 month rolling
period starting on the
date 18 months from Initial
Admission.
----------------------------- -------------------------------- -----------------------------------
Emerging Risks
The Directors have identified the following emerging risks:
Debt financing covenants
During the year the Company took on debt financing, through the
use of its RCF and the acquisition of a ASG portfolio, post balance
sheet date, which contained existing project finance. This finance
contains covenants, which if breached will lead to forced sale of
assets or require significant cash injections. The Board, through
the AIFM and Investment Adviser will monitor compliance with
covenants to ensure sufficient headroom and provide early warning
of any issues that may arise.
Share price discount and discontinuation vote
The Company's shares have been trading at a discount to NAV
which restricts the ability to issue new shares and therefore
access additional equity. The Company has an active pipeline which
requires funding. The Investment Adviser and the Board continue to
monitor the share price and work closely with the broker to assess
financing opportunities.
Going concern
In light of the current macroeconomic backdrop, the Directors
have continued to place significant focus on the appropriateness of
adopting the going concern basis in preparing the Company's
financial statements for the year ended 30 September 2023. In
assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting
Council.
The Board regularly monitors the Company's ability to continue
as a going concern. Included in the information reviewed at
quarterly Board meetings are summaries of the Company's liquidity
position, cash flow forecasts, scenarios and sensitivities,
operational and market impact, and the financial strength of its
customers. Based on this information, the Directors are satisfied
that the Company is able to continue in business for the
foreseeable future, being a period of at least twelve months from
the date of approval of the financial statements, and therefore
have adopted the going concern basis in the preparation of these
financial statements.
In light of the Company's current position and principal risks,
the Board has assessed the prospects of the Company for the period
to 10 January 2025, reviewing the Company's liquidity position, and
the financial strength of its counterparties, together with
forecasts of the Company's future performance under various
scenarios. The Board has concluded there is a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities over that period.
The Company generated a net cash outflow from operating
activities in the year of GBP3.1 million, with its cash balances at
30 September 2023 totalling GBP37.9 million. The Company had
GBP26.3 million in capital commitments as at the balance sheet
date. Contractual income for the year has been collected in full.
The Company's subsidiary, Holdco, secured a RCF of GBP30 million in
September 2023, which benefits from an accordion of GBP20 million.
As at 30 September 2023, the facility was unutilised. Since balance
sheet date GBP25 million of the RCF has been allocated to post
balance sheet events.
All clients credit risk is assessed at engagement with an annual
review to highlight any risk arising post engagement.
As a result, the Directors believe that the Company is well
placed to manage its financing and other business risks and will
remain viable, continuing to operate and meeting its liabilities as
they fall due over the assessment year. The Directors are therefore
of the opinion that the going concern basis adopted in the
preparation of the financial statements is appropriate.
Viability Statement
The Board has assessed the prospects of the Company over the
five years from the balance sheet date to 30 September 2028, which
is the period covered by the Company's longer term financial
projections. The Board considers five years to be an appropriate
forecast period, although the Company's contractual income extends
beyond five years, since the availability of most finance and
market uncertainty reduces the overall reliability of forecast
performance over a longer period.
The assumptions underpinning these forecast cash flows were
sensitised to explore the resilience of the Company to the
potential impact of the Company's significant risks, or a
combination of those risks. The principal risks on pages 49 to 52
summarise those matters that could prevent the Company from
delivering on its strategy. A number of these principal risks,
because of their nature or potential impact, could also threaten
the Company's ability to continue in business in its current form
if they were to occur. The Directors paid particular attention to
the risk of a deterioration in economic outlook which could impact
solar assets, including taxes on power generation companies, which
would have a negative impact on valuations. In assessing the
resilience of the Company, consideration was given to operations,
the geographical diversification and availability of alternative
service providers who could take over existing contracts or provide
additional services to ensure business continuity.
The sensitivities performed were designed to be severe but
plausible; and to take full account of the availability of
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks. Based on the
sensitivity results on the Portfolio, a combination of generation
(60% of capability), inflation 100bps higher, interest rates 100bps
higher than Sonia and operating cost increases of 20% were applied
to assess the Company's resilience. The outcome of these results
supported the Company's resilience. In addition, the Board
considered the strength of services providers and the availability
of alternative options to replace underperforming providers.
The Board considers the resilience of projected liquidity, as
well as compliance with the Investment Trust Company ("ITC") rules,
under a range of RPI and valuation assumptions.
The principal risks and the key assumptions that were relevant
to this assessment are as follows:
Risk Assumption
Inflation The increase in inflationary costs is managed by
risk capping the inflation applicable to main supplier
contracts in line with inflation caps applied to
PPA revenues.
---------------------------------------------------
Liquidity The Company continues to generate sufficient cash
risk to cover its costs while retaining the ability to
make distributions.
---------------------------------------------------
Off-taker Off-takers comply with their obligations over the
risk term of the PPA and no key off-taker suffers an
insolvency event over the term of the review.
---------------------------------------------------
Based on the work performed, the Board has a reasonable
expectation that the Company will be able to continue in business
over the five-year period of its assessment.
Not withstanding the analysis assessed above, the Company's
Prospectus included a Discontinuation Resolution at the annual
general meeting following the third anniversary of admission to the
London Stock Exchange. This resolution is effective should the
Company's Net Asset Value not be GBP250 million or above. The
Directors have considered this in their assessment and recognise
the risk and have assessed there to be sufficient appetite for the
continuation of the fund at this time.
Other disclosures
Disclosures in relation to the Company's business model and
strategy have been included within the Investment Adviser's report
on pages 10 to 23. Disclosures in relation to the main industry
trends and factors that are likely to affect the future performance
and position of the business have been included within "Our Market"
on page 26. Disclosures in relation to environmental and social
issues have been included within the ESG section on pages 27 to
43.
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 effectiveness of these policies. As the
Company has no employees, all the Directors are non-executive and
it has outsourced all its functions to third party service
providers these requirements technically do not apply, and the
Company has therefore not reported further in respect of these
provisions. Despite this, both the Board and the Investment Adviser
will remain vigilant of any social and community issues and human
rights concerns. Details of the Company's anti-corruption and
anti-bribery policies are detailed on page 33. An assessment of the
effectiveness of these policies is not made within this report.
The Company has implemented a procurement policy, developed in
line with the UK's Modern Slavery Act 2015 and detailed on page
43.
Diversity
As at 30 September 2023, the Board comprised two female and one
male Directors. See pages 59 and 60 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.
Key Performance Indicators (KPIs)
The Company's Board of Directors meets regularly and at each
meeting reviews performance against a number of key performance
indicators, which include:
-- Portfolio yield - the Company's objective is to seek to
provide Shareholders with an attractive level of distributions with
modest capital growth over the long term. In alignment with the
target at the time of the Company's IPO, an annualised dividend of
five pence per share (2022: five pence per share) has been
declared, while the deployment of capital has secured a portfolio
yield of 9%. The Portfolio yield is the average yield of the next
five years for the existing portfolio, where the yield is net cash
generated in each year from the Portfolio over the cost of
investment.
-- Dividend cover forecast - dividends form a key component of
the total return to Shareholders. As at 30 September 2023, dividend
cover of operational projects was 0.15x (2022: 1.04x). Once the
portfolio is fully operational in March 2024, dividend cover is
expected to be in excess of 1.3x (2022: 0.5x).
-- Ongoing charges ratio - the expenses of managing the Company
are carefully monitored by the Board. The standard performance
measure of these is the ongoing charges ratio ("OCR"), which is
calculated by dividing the sum of such expenses over the course of
the year by the average NAV over the year. This ratio provides a
guide to the effect on this performance of annual operating costs.
The Company's OCR for the year was 1.8 % (2022: 1.4%) against a
target of 1.5 %. The increase in OCR was principally driven by the
lower average NAV in 2023 (GBP138.6 million) compared to 2022
(GBP143.0 million).
-- Premium / discount of share price to NAV per share - The
Board monitors the price of the Company shares in relation to their
NAV and the premium / discount at which the shares trade. The level
of discount or premium is mostly a function of investor sentiment
and demand for the shares, over which the Board may have limited
influence. The share price stood at a 22.2 % discount (2022: 7.2%
premium) as at 30 September 2023.
-- Environmental KPIs - these are included as part of the Sustainability Report, on page 32.
Approval
This Strategic Report has been approved by the Board and signed
on its behalf by:
Duncan Neale
Director
10 January 2024
Extracts from the Directors' Report
Results and dividends
The results for the year ended 30 September 2023 are set out in
the financial statements on pages 88 to 91 . It is the policy of
the Board to declare and pay dividends as quarterly interim
dividends.
In respect of the financial year ended 30 September 2023, the
Company has declared interim dividends amounting to an aggregate of
5.0 pence per share. The following dividends were declared during
the year and subsequently:
Date declared Amount per share (pence) Payment date
---------------- ------------------------ ----------------
26 January 2023 1.26 24 February 2023
---------------- ------------------------ ----------------
19 April 2023 1.23 26 May 2023
---------------- ------------------------ ----------------
27 July 2023 1.25 25 August 2023
---------------- ------------------------ ----------------
22 November 2023 1.26 18 December 2023
---------------- ------------------------ ----------------
Share capital structure
As at 30 September 2023, and at the date of this report, the
Company's issued share capital consisted of 150,000,000 ordinary
shares of GBP0.01 each nominal value, all fully paid. 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. At 30 September 2023, and at the date of this
report, the total voting rights in the Company were
150,000,000.
No shares were issued or bought back by the Company during the
year.
Further details of the share capital are summarised in note 14
of the financial statements.
For and on behalf of the Board
Duncan Neale
Director
10 January 2024
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with UK adopted
international accounting standards and applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
are required to prepare the Company financial statements in
accordance with UK adopted international accounting standards.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss for the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial 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 "Act").
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Act. 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 provide the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
The Directors have delegated the hosting and maintenance of the
Company's website content to Squibble Design and its materials are
published on www.atratorenewables.com.
Directors' responsibilities pursuant to DTR4
The Directors confirm that, to the best of their knowledge:
-- the financial statements, which have been prepared in
accordance with the applicable set of accounting standards, give a
true and fair view of the assets, liabilities, financial position
and profit of the Company.
-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
-- they consider the Annual Report and Accounts, taken as a
whole, are fair, balanced and understandable and provides 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.
Juliet Davenport
Chair
10 January 2024
Alternative Investment Fund Manager's Report
Background
The Alternative Investment Fund Manager's Directive (the
"AIFMD") came into force on 22 July 2013. The objective of the
AIFMD was to ensure a common regulatory regime for funds marketed
in or into the EU which are not regulated under the UCITS regime.
This was primarily for investors' protection and also to enable
European regulators to obtain adequate information in relation to
funds being marketed in or into the EU to assist their monitoring
and control of systemic risk issues.
JTC Global AIFM Solutions Limited (the "AIFM") is a non-EU
Alternative Investment Fund Manager (a "Non-EU AIFM"), the Company
is a non-EU Alternative Investment Fund (a "Non-EU AIF") and the
Company is currently marketed only into the UK. Although the AIFM
is a non-EU AIFM, so the depositary rules in Article 21 of the
AIFMD do not apply, the transparency requirements of Articles 22
(Annual report) and 23 (Disclosure to investors) of the AIFMD do
apply to the AIFM and therefore to the Company. In compliance with
those articles, the following information is provided to the
Company's shareholders by the AIFM.
1. Material Changes in the Disclosures to Investors
During the financial year under review, there were no material
changes to the information required to be made available to
investors before they invest in the Company under Article 23 of the
AIFMD from that information set out in the Company's prospectus
dated 1 November, 2021, save as disclosed below and in certain
sections of the annual financial report, those being the Chair's
Statement, Investment Adviser's Report, the sections headed "Our
Market", "Sustainability" and "Our Principal Risks" and the
Directors' Report.
2. Risks and Risk Management Policy
The current principal risks facing the Company and the main
features of the risk management systems employed by AIFM, the
Investment Adviser and the Company to manage those risks are set
out in the section headed "Our Principal Risks", the Directors'
Report, the Audit Committee Report and in the notes to the
financial statements.
3. Leverage and borrowing
The Company is entitled to employ leverage in accordance with
its investment policy and as set out in the Company's prospectus.
As at the balance sheet date, the Company had not drawn down any
debt. There were no changes in the Company's borrowing powers and
policies.
4. Environmental, Social and Governance ("ESG") Issues
Because the AIFM is a non-EU AIFM and the Company is not
marketed into the EEA, the AIFM is not required to comply with
Regulation (EU) 2019/2099 on Sustainability-Related Disclosures in
the Financial Services Sector (the "SFDR") in respect of the
Company.
As a member of the JTC group of Companies, the AIFM's ultimate
beneficial owner and controlling party is JTC Plc, a
Jersey-incorporated company whose shares have been admitted to the
Official List of the UK's Financial Conduct Authority and to
trading on the London Stock Exchange's Main Market for Listed
Securities (mnemonic JTC LN, LEI 213800DVUG4KLF2ASK33). In the
conduct of its own affairs, the AIFM is committed to best practice
in relation to ESG matters and has therefore adopted JTC Plc's ESG
framework, which can be viewed online at
https://www.jtcgroup.com/esg/. JTC Plc's sustainability report can
also be viewed online at
https://www.jtcgroup.com/wp-content/uploads/2023/AR/sustainability_jtcAR22_230418.pdf.
As at the date of this report, JTC Plc is a signatory of the
U.N. Principles for Responsible Investment. The JTC group is also
carbon neutral, works to support the achievement of ten of the
U.N.'s Sustainable Development Goals and reports under TCFD and
under the SASB framework.
The AIFM and Atrato Partners Limited ("Atrato") as the Company's
alternative investment fund manager and investment adviser
respectively do consider ESG matters in their respective
capacities, as explained in the Company's prospectus dated 1
November, 2021, a copy of which can be found at
https://jtcglobalaifmsolutions.com/clients/atrato-onsite-energy-plc/.
Since the publication of those documents, the AIFM, Atrato and
the Company have continued to enhance their collective approach to
ESG matters and detailed reporting on (a) enhancements made to each
party's policies, procedures and operational practices and (b) our
collective future intentions and aspirations is included in the
Investment Adviser's Report, Sustainability Report, the Section 172
(1) Statement and the section entitled "Our Key Stakeholder
Relationships."
The AIFM also has a comprehensive risk matrix (the "Matrix"),
which is used to identify, monitor and manage material risks to
which the Company is exposed, including ESG and sustainability
risks, the latter being an environmental, social or governance
event or condition that, if it occurred, could cause an actual or a
potential material negative impact on the value of an investment.
We also consider sustainability factors, those being environmental,
social and employee matters, respect for human rights,
anti-corruption and anti-bribery matters.
The AIFM is cognisant of the announcement published by H.M.
Treasury in the UK of its intention to make mandatory by 2025
disclosures aligned with the recommendations of the Task Force on
Climate-Related Disclosures, with a significant proportion of
disclosures mandatory by 2023. The AIFM also notes the roadmap and
interim report of the UK's Joint Government-Regulator TCFD
Taskforce published by H.M. Treasury on 9 November, 2020. The AIFM
continues to monitor developments and intends to comply with the
UK's regime to the extent either mandatory or desirable as a matter
of best practice.
5. Remuneration of the AIFM's Directors and Employees
During the financial year under review, no separate remuneration
was paid by the AIFM to two of its executive directors, Graham
Taylor and Kobus Cronje, because they were both employees of the
JTC group of companies, of which the AIFM forms part. The third
executive director, Matthew Tostevin, is paid a fixed fee of
GBP10,000 for acting as a director. Mr Tostevin is paid additional
remuneration on a time spent basis for services rendered to the
AIFM and its clients. Other than the directors, the AIFM has no
employees. The Company has no agreement to pay any carried interest
to the AIFM. During the year under review, the AIFM paid GBP10,000
in fixed fees and GBP52,203.29 in variable remuneration to Mr
Tostevin.
6. Remuneration of the AIFM Payable by the Company
The AIFM was during the year under review paid a fee of 0.04%
per annum of the net asset value of the Company, subject to a
minimum of GBP50,000 per annum, such fee being payable quarterly in
arrears. Other significant non-routine work may be agreed between
the AIFM and the Company and charged for on a time-spent basis. The
total fees paid to the AIFM during the year under review were
GBP55,873.
JTC Global AIFM Solutions Limited
Alternative Investment Fund Manager
10 January 2024
Statement of Comprehensive Income
Year ended 30 September 2023
Year Ended 30 September Year Ended 30 September
2023 2022
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----- -------- ------- ------- --------- --------- ---------
Movement in fair value
of investments 4 - 3,705 3,705 - (1,850) (1,850)
Investment Income 5 3,919 - 3,919 483 - 483
Bank interest 5 1,366 - 1,366 298 - 298
----------------------- ----- -------- ------- ------- --------- --------- -----------
Total net income 5,285 3,705 8,990 781 (1,850) (1,069)
----------------------- ----- -------- ------- ------- --------- --------- ---------
Investment advisory
fees 6 (1,444) - (1,444) (1,285) - (1,285)
Other expenses 7 (1,115) - (1,115) (684) (401) (1,085)
----------------------- ----- -------- ------- ------- --------- --------- ---------
Profit/(loss) before
taxation 2,726 3,705 6,431 (1,188) (2,251) (3,439)
----------------------- ----- -------- ------- ------- --------- --------- ---------
Taxation 9 - - - - - -
----------------------- ----- -------- ------- ------- --------- --------- ---------
Profit/(loss) and
total comprehensive
income for the year 2,726 3,705 6,431 (1,188) (2,251) (3,439)
----------------------- ----- -------- ------- ------- --------- --------- ---------
Earnings per share
(pence) - basic and
diluted 8 1.82p 2.47p 4.29p (0.92p) (1.75p) (2.67p)
----------------------- ----- -------- ------- ------- --------- --------- ---------
The "total" column of the Statement of Comprehensive Income is
the profit and loss account of the Company prepared in accordance
with the requirements of the Act and in accordance with
international accounting standards adopted by the UK. The
supplementary revenue return and capital columns have been prepared
in accordance with the Association of Investment Companies
Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year.
Profit/(loss) on ordinary activities after taxation is also the
total comprehensive income for the year.
The accompanying Notes on pages 92 to 112 are an integral part
of these financial statements.
Statement of Financial Position
As at 30 September As at 30 September
2023 2022
Notes GBP'000 GBP'000
---------------------------------- ----- ---------------------- ------------------
Non-current assets
Investments at fair value through
profit or loss 4 99,289 47,105
Current assets
Fixed deposits 10 - 20,000
Cash and cash equivalents 11 37,867 69,361
Other receivables and prepayments 12 1,549 3,215
---------------------------------- ----- ---------------------- ------------------
39,416 92,576
Current liabilities
Trade and other payables 13 (648) (555)
---------------------------------- ----- ---------------------- ------------------
Net current assets 38,768 92,021
Net assets 138,057 139,126
---------------------------------- ----- ---------------------- ------------------
Capital and reserves
Share capital 14 1,500 1,500
Capital reduction reserve 16 133,691 141,065
Revenue and capital reserve 2,866 (3,439)
Total Shareholders' funds 138,057 139,126
---------------------------------- ----- ---------------------- ------------------
Net assets per share (pence) 17 92.0 92.8
Approved and authorised by the Board of Directors for issue and
signed on its behalf by:
Duncan Neale
Director
10 January 2024
Atrato Onsite Energy Plc was incorporated in England and Wales
with registered number 13624999 .
The accompanying Notes on pages 92 to 112 are an integral part
of these financial statements.
Statement of Changes in Equity
Year ended 30 September 2023
Capital
Share Share reduction Capital Revenue
capital premium reserve Reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----- ------- ------- --------- ------- ------- -------
As at 1 October 2022 1,500 - 141,065 (2,251) (1,188) 139,126
Profit and total comprehensive
income for the year - - - 3,705 2,726 6,431
Dividend distribution 15 - - (7,374) - (126) (7,500)
------------------------------- ----- ------- ------- --------- ------- ------- -------
Closing equity as
at 30 September 2023 1,500 - 133,691 1,454 1,412 138,057
------------------------------- ----- ------- ------- --------- ------- ------- -------
Period from Incorporation on 16 September 2021 to 30 September
2022
Capital
Share Share reduction Capital Revenue
capital premium reserve Reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ----- ------- --------- --------- ------- ------- -------
Opening equity
as at
16 September -
2021 - - - - -
Transactions
with
Shareholders
Shares issued
at IPO 14 1,500 148,500 - - - 150,000
Share issue costs - (2,920) - - - (2,920)
Transfer to capital
reduction reserve 14 - (145,580) 145,580 - - -
Dividend distribution 15 - - (4,515) - - (4,515)
---------------------- ----- ------- --------- --------- ------- ------- -------
Total transactions
with Shareholders 1,500 - 141,065 - - 142,565
---------------------- ----- ------- --------- --------- ------- ------- -------
Loss and total
comprehensive
income for the
period - - - (2,251) (1,188) (3,439)
---------------------- ----- ------- --------- --------- ------- ------- -------
Closing equity
as at 30 September
2022 1,500 - 141,065 (2,251) (1,188) 139,126
---------------------- ----- ------- --------- --------- ------- ------- -------
The Company's distributable reserves consist of the capital
reduction reserve, capital reserve attributable to realised gains
and revenue reserve. Total distributable reserves as of 30
September 2023 were GBP136.6 million (2022: GBP137.6 million).
The Company may use its distributable reserves to fund
dividends, redemptions of shares and share buy backs.
The accompanying notes on pages 92 to 112 are an integral part
of these financial statements.
Statement of Cash Flows
Restated*
As at 30 September As at 30 September
2023 2022
Notes GBP'000 GBP'000
------------------------------------- ----- ------------------ -------------------
Operating activities
Profit/(loss) on ordinary activities
before taxation 6,431 (3,439)
Adjustment for unrealised losses
arising on the revaluation of
investments at the year ending (3,705) 1,850
Interest income (5,285) (781)
Decrease / (increase) in other
receivables and prepayments* 110 (650)
Increase in trade and other
payables 93 555
------------------------------------- ----- ------------------ -------------------
Net cash flow used in operating
activities (2,356) (2,465)
------------------------------------- ----- ------------------ -------------------
Investing activities
Purchase of investments 4 (46,887) (48,955)
Repayment of shareholder loans 670 -
Decrease / (increase) in fixed
deposit 20,000 (20,000)
Working capital financing* 1,073 (2,565)
Increase in interest receivable - 614
Interest income received 3,506 167
------------------------------------- ----- ------------------ -------------------
Net cash flow used in investing (21,638) (70,739)
------------------------------------- ----- ------------------ -------------------
Financing activities
Proceeds of share issues 14 - 150,000
Share issue costs - (2,920)
Dividends paid 15 (7,500) (4,515)
------------------------------------- ----- ------------------ -------------------
Net cash flow from financing (7,500) 142,565
------------------------------------- ----- ------------------ -------------------
Decrease / (increase) in cash (31,494) 69,361
------------------------------------- ----- ------------------ -------------------
Cash and cash equivalents at 69,361
start of the year -
------------------------------------- ----- ------------------ -------------------
Cash and cash equivalents at
end of the year 37,867 69,361
------------------------------------- ----- ------------------ -------------------
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
-------------------------------------- ------------------ ------------------
Cash and cash equivalents
Cash at bank 37,867 49,361
Fixed deposits with original maturity
less than 3 months - 20,000
-------------------------------------- ------------------ ------------------
Total cash and cash equivalents at
end of the year 37,867 69,361
-------------------------------------- ------------------ ------------------
* The Company has assessed that prior year classification of
GBP2,565,000 relating to Working Capital finance given to its
subsidiary, within increase in other receivables and prepayments in
the operating cash flow section should have been classified as
investing cash flows. The prior year cash flow statement has been
adjusted to reduce the increase in other receivables and
prepayments to GBP650,000 from GBP3,215,000.
The accompanying Notes on pages 92 to 112 are an integral part
of these financial statements.
Notes to the Financial Statements
For the year ended 30 September 2023
1. General Information
Atrato Onsite Energy Plc is a closed-ended investment company
domiciled and incorporated in the United Kingdom on 16 September
2021 with registered number 13624999. The registered office of the
Company is at 6th Floor 125 London Wall, London, United Kingdom,
EC2Y 5AS. Its share capital is denominated in Pounds Sterling (GBP)
and currently consists of one class of ordinary shares. The shares
are publicly traded on the London Stock Exchange under a premium
listing. The Directors intend, at all times, to conduct the affairs
of the Company so as to enable it to qualify as an investment trust
for the purposes of section 1158 of the Corporation Tax Act 2010,
as amended.
The financial statements of the Company are for the year ended
30 September 2023 and have been prepared on the basis of the
accounting policies set out below.
At the Company's IPO, 150,000,000 shares were admitted to the
premium segment of the LSE on 23 November 2021, upon raising gross
proceeds of GBP150.0 million.
The Company's investment objective is to: support the net zero
agenda whilst delivering capital growth and progressive dividend
income to its shareholders; integrate ESG best practice with a
focus on investing in new renewable energy capacity and onsite
clean energy solutions; and target long-term secure income with
limited exposure to wholesale power prices.
The financial statements comprise only the results of the
Company, as its investment in Atrato Onsite Energy Holdco Limited
(Holdco) is included at fair value through profit or loss as
detailed in the significant accounting policies below. The Company
and its subsidiary invest in a diversified portfolio of onsite
energy assets generally on the rooftops of UK commercial buildings,
which benefit from long-term growing income streams with limited
exposure to wholesale power prices.
Atrato Partners Limited provides investment advisory services
and JTC Global AIFM Solution Limited as the AIFM provides
investment management services to the Company, each under the terms
of the agreement between it and the Company.
2. Basis of Preparation
The financial statements, which aim to give a true and fair
view, have been prepared in accordance with UK adopted
International Accounting Standards and the applicable legal
requirements of the Companies Act 2006.
The financial statements have also been prepared as far as is
relevant and applicable to the Company in accordance with the
Statement of Recommended Practice ("SORP") "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" issued by
the Association of Investment Companies in April 2022 where the
SORP is not inconsistent with IFRS.
The financial statements are prepared on the historical cost
basis, except for the revaluation of certain financial instruments
at Fair Value through Profit and Loss ("FVTPL"). The principal
accounting policies adopted are set out below. These policies have
been consistently applied throughout the year ended 30 September
2023
The financial statements are prepared on the going concern
basis.
The currency of the primary economic environment in which the
Company operates and where its investments are located (the
functional currency) is Pounds Sterling. The financial statements
are presented in Pounds Sterling and rounded to the nearest
thousand.
Estimates and underlying assumptions are reviewed regularly on
an on-going basis. Revisions to accounting estimates are recognised
in the year in which the estimates are revised and in any future
years affected. The significant estimates, judgments or assumptions
for the year are set out below under "Critical accounting
judgements, estimates and assumptions".
The comparatives shown in these financial statements refer to
the period ended 30 September 2022.
Basis of consolidation
The Company has adopted the amendments to IFRS 10, which states
that investment entities should measure all of their subsidiaries
that are themselves investment entities at fair value.
The Company owns 100% of its subsidiary, HoldCo. The Company
invests in special purpose vehicles through its investment in
HoldCo. The Company and HoldCo meet the definition of an investment
entity as described by IFRS 10. Under IFRS 10 investment entities
measure subsidiaries at fair value rather than being consolidated
on a line-by-line basis, meaning HoldCo's cash, debt and working
capital balances are included in the fair value of the investment
rather than in the Company's current assets. HoldCo has one
investor, which is the Company, who has outsourced some investor
related services to a third party relating to the operational and
financial management of the underlying Special Purpose Vehicles
("SPV"). However, in substance, HoldCo is investing the funds of
the investors of the Company on its behalf and is effectively
performing investing activity on behalf of many unrelated
beneficiary investors.
Characteristics of an investment entity
Under the definition of an investment entity, the Company should
satisfy all three of the following tests:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b) the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both (including having an exit
strategy for investments); and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
In assessing whether the Company meets the definition of an
investment entity set out in IFRS 10, the Directors note that:
a) the Company has multiple investors and obtains funds from a
diverse group of shareholders who would otherwise not have access
individually to investing in renewable energy and infrastructure
assets;
b) the Company's purpose is to invest funds for both investment
income and capital appreciation. HoldCo and SPVs will have
indefinite lives. However, the underlying assets do not have
unlimited life and have minimal residual value at the end of that
life, meaning they will not be held indefinitely. The Company
intends to hold the renewable assets on a long-term basis to
achieve its investment objectives and hand the assets over to the
lessor at the end of the PPA; and
c) the Company measures and evaluates the performance of all of
its investments on a fair value basis which is the most relevant
for investors in the Company. Management uses fair value
information as a primary measurement to evaluate the performance of
all of the investments and in decision making.
The Directors are of the opinion that the Company meets all the
typical characteristics of an investment entity and therefore meets
the definition set out in IFRS 10.
The Directors agree that investment entity accounting treatment
reflects the Company's activities as an investment trust.
The Directors have considered the potential impact on the income
statement and the statement of financial position were Holdco to be
consolidated and assessed the changes not to be significant to the
net asset value and loss for the year. The Directors believe the
treatment outlined above provides the most relevant information to
investors.
Going concern
The Directors have adopted the going concern basis in preparing
the financial statements. The following is a summary of the
Directors' assessment of the going concern status of the Company,
which considered the adequacy of the Company's resources, the
impacts of climate change and the continued unrest in Ukraine.
In reaching their conclusion, the Directors considered the
Company's cash flow forecasts, cash position, income and expense
flows. The Company's net assets at 30 September 2023 were GBP138.1
million. As at 30 September 2023, the Company held GBP37.8 million
in cash. The Company continues to meet its day-to-day liquidity
needs through its cash resources. The total ongoing expenses for
the year ended 30 September 2023 was GBP2.6 million, which
represented approximately 1.8% of average net assets during the
year. At the date of approval of this Annual Report, based on the
aggregate of investments and cash held, the Company had substantial
cover for its operating expenses.
The major cash outflows of the Company are the costs relating to
the acquisition of new investments and the payment of dividends.
The Directors review finance reporting at the quarterly Board
meeting, which includes reporting related fund investment limits.
The Directors are confident that the Company has sufficient cash
balances and access to equity and debt markets, in order to fund
commitments to acquisitions detailed in note 22 to the financial
statements, should they become payable. The Company has provided an
initial GBP125 million loan facility, of which GBP64 million (2022:
GBP48.4 million) had been drawn by 30 September 2023, to its
immediate subsidiary repayable on 31 December 2028. The facility
has been provided out of the GBP150 million raised in the initial
public offering. As at 30 September 2023, the Company had capital
commitments of GBP25.8 million (2022: GBP1.4 million). A RCF for
GBP30 million with an accordion to increase the facility to GBP50
million, has been secured by Holdco. This facility provides
additional capacity for the Company to invest in new opportunities
and meet the Company's commitments.
In light of the macro-economic situation brought about by the
Russian invasion of Ukraine and the potential invasion of Taiwan,
the Directors have fully considered each of the Company's
investments and the sourcing of supplies. The Directors do not
foresee any immediate material risk to the Company's investment
portfolio and income from underlying SPVs. A prolonged and deep
market decline could lead to falling values in the underlying
investments or interruptions to cashflow, however the Company
currently has sufficient liquidity available to meet its future
obligations. The Directors are also satisfied that the Company
would continue to remain viable under downside scenarios, including
increasing inflation scenarios.
Underlying SPV revenues are derived primarily from the sale of
electricity by project companies through PPAs in place with
creditworthy corporations. Most of these PPAs are contracted over a
long period with a weighted average remaining term as at 30
September 2023 of 11 years (September 2022: 19 years). The decrease
is due to the three year term on the 55MW site in North
Yorkshire.
During the year end up to the date of this report, there has
been no significant impact on revenue and cash flows of the SPVs.
The SPVs have contractual operating and maintenance agreements in
place with appropriately qualified service providers. Therefore,
the Directors and the Investment Adviser do not anticipate a
material threat to SPV revenues.
The market and operational risks and financial impact as a
result of the ongoing conflict in the Ukraine, were discussed by
the Board, with updates on operational resilience received from the
Investment Adviser and other key service providers. The Investment
Adviser actively monitors risks with the potential to impact the
Company's investments through its recurring engagement with service
providers including operators, installation contractors, and
project asset managers. The Board was satisfied that the Company's
key service providers have the ability to continue to operate.
Over the past year inflation slowed and started to decrease,
however slower than forecasts expected. Having considered the
impact of inflation, the Board do not anticipate a material adverse
effect on the portfolio.
The Company's ability to continue as a going concern has been
assessed by the Directors for a year from the date these financial
statements were authorised for issue.
Critical accounting judgements, estimates and assumptions
Preparation of the financial statements requires management to
make judgments, estimates and assumptions that affect the
application of accounting policies and the reported amount of
assets, liabilities, income and expenses. Estimates, by their
nature, are based on judgment and available information; hence
actual results may differ from these judgments, estimates and
assumptions. The estimates and assumptions that have a significant
risk of causing a material adjustment to the carrying value of
assets and liabilities are those used to determine the fair value
of the investments as disclosed in note 4 to the financial
statements.
Key sources of estimation uncertainty: investments at fair value
through profit or loss
The Company's investments in unquoted investments are valued by
reference to valuation techniques approved by the Directors and in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines.
The Company's investment in Holdco has been made through equity
and loans, providing Holdco with funds to invest in the Portfolio
through equity and loans. The Company used discounted cash flow
("DCF") models to determine the fair value of the underlying assets
in HoldCo. The value of HoldCo not apportioned to the investment in
the underlying entities includes any working capital not accounted
for in the DCF models, such as cash or entity level payables and
receivables. The fair value of each asset is derived by projecting
the future cash flows of an asset, based on a range of operating
assumptions for revenues and expenses, and discounting those future
cash flows to the present with a discount rate appropriately
calibrated to the risk profile of the asset and market dynamics.
The key estimates and assumptions used within the DCF include the
discount rates, annual energy production, future power prices and
various operating expenses and associated annual escalation rates
often tied to inflation, including operations and maintenance,
asset management, land leases and insurance. A change in the key
valuation assumptions would lead to a corresponding change in the
fair value of the investments as described in note 4 to the
financial statements. The Company's investments at fair value are
not traded in active markets.
The estimates and assumptions are those used to determine the
fair value of the investments as disclosed in note 4 to the
financial statements. As noted above, the Board has concluded that
the Company meets the definition of an investments entity as
defined in IFRS10. This conclusion involved a degree of judgement
and assessment as to whether the Company meets the criteria
outlined in the accounting standards.
As disclosed in note 21, the Company provided parent company
guarantees to some investments from which the expected economic or
cash outflows are expected to be GBPnil.
Segmental reporting
The Board is of the opinion that the Company is engaged in a
single segment of business, being investment in renewable energy
infrastructure assets to generate investment returns whilst
preserving capital. The financial information used by the Board to
manage the Company presents the business as a single segment.
All the Company's income is generated within the UK.
All the Company's non-current assets are located in the UK.
Adoption of new and revised standards
The Company has adopted all the applicable and effective IFRSs
since incorporation. The relevant new and amended standards and
interpretations that are issued, but not yet effective, up to the
date of issuance of the Company's financial statements, are
disclosed below. These standards are not expected to have a
material impact on the entity in future reporting periods and on
foreseeable future transactions.
- Amendments to IAS 1: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to
76 of IAS 1 to specify the requirements for classifying liabilities
as current or non-current. The amendments are effective for annual
reporting periods beginning on or after 1 January 2024.
- New standard not yet adopted: IFRS 17 Insurance Contracts
IFRS 17 is applicable for annual periods beginning on or after 1
January 2023. The Directors do not expect that the adoption of the
standard will have a material impact on the Company's reported
results.
3. Significant accounting policies
a) Statement of compliance
The financial statements have been prepared in accordance with
UK-adopted International Accounting Standards ("IAS").
The principal accounting policies of the Company are set out
below.
IFRS 9 Classification of Financial Assets and Financial
Liabilities
Financial Assets and Financial Liabilities
Financial assets and financial liabilities are recognised in the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. Financial
assets and financial liabilities are initially measured at fair
value. Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at FVTPL are recognised immediately in profit or
loss.
The Company holds both a debt instrument and a controlling
interest in equity shares in Holdco. The Company measures the fair
value of its investments in Holdco on an aggregate basis as this is
how the instruments are managed, potentially divested and how the
fair value would be maximised.
Classification of investments
Fair value through profit or loss
The Company classifies its investments based on both the
Company's business model for managing those financial assets and
the contractual cash flow characteristics of the financial assets.
The portfolio of financial assets is managed, and performance is
evaluated on a fair value basis. The Company is primarily focused
on fair value information and uses that information to assess the
assets' performance to make decisions. The Company has not taken
the option to irrevocably designate any equity securities as fair
value through other comprehensive income. The collection of
contractual cash flows is only incidental to achieving the Company
business model's objective. Consequently, all investments are
measured at FVTPL. Once invested, the Company's indirect
investments in SPVs will be designated at FVTPL, as SPVs are
themselves considered to be investment entities and exist only to
hold underlying assets in line with the overarching AIFM agreement,
and therefore will not be consolidated but held at FVTPL in line
with IFRS 10.
Financial instruments and equity
Financial assets such as cash at bank, fixed deposits at bank,
trade receivables, loans and other receivables that are
non-derivative financial assets and that have fixed or determinable
payments that are not quoted in an active market are classified as
loans and other receivables measured at amortised cost.
Debts and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all its
liabilities. Equity instruments issued by the Company are
recognised at the point proceeds are received, net of direct issue
costs.
Repurchase of the Company's own equity instruments is recognised
and deducted directly in equity. No gain or loss is recognised in
profit or loss on the purchase, sale, issue or cancellation of the
Company's own equity instruments.
Recognition, derecognition and measurement
Purchases and sales of investments are recognised on the trade
date - the date on which the Company commits to purchase or sell
the investment and the contract to purchase or sell is wholly
unconditional. Financial assets at FVTPL are initially recognised
at fair value. Transaction costs are expensed as incurred in the
Statement of Comprehensive Income. Financial assets are
derecognised when the rights to receive cash flows from the
investments have expired or the Company has transferred
substantially all risks and rewards of ownership. Loans, trade, and
other receivables are measured at amortised cost using the
effective interest method, less any impairment. They are included
in current assets, except where maturities are greater than 12
months after the year end date in which case they are classified as
non-current assets.
Subsequent to initial recognition, all financial assets and
financial liabilities at FVTPL are measured at fair value. Gains
and losses arising from changes in the fair value of the 'financial
assets or financial liabilities at FVTPL' category are presented in
the Statement of Comprehensive Income.
Income from financial assets at FVTPL is recognised in the
Statement of Comprehensive Income within "income" when the
Company's right to receive payments is established.
Financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs. Financial
liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an
effective yield basis.
Gains and losses on fair value of investments in the Statement
of Comprehensive Income represent gains or losses that arise from
the movement in the fair value of the Company investment in
HoldCo.
Dividends, if any from HoldCo are recognised when the Company's
right to receive payment has been established.
Investment income comprises interest income received from the
Company's subsidiary and interest income on fixed deposits .
Interest income from fixed deposits is recognised in the Statement
of Comprehensive Income using the effective interest method.
b) Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Statement of Comprehensive Income, all expenses, including
investment advisory fees, are presented in the revenue column of
the Statement of Comprehensive Income as they are directly
attributable to the operations of the Company with the exception of
costs incurred in the initial public offering that were not off-set
against the share premium, which have been charged as a capital
item in the Statement of Comprehensive Income.
Details of the Company's fee payments to the Investment Adviser
are disclosed in note 6 to the financial statements.
c) Taxation
Investment trusts which have approval under Section 1158 of the
Corporation Tax Act 2010 are not liable for taxation on capital
gains. Shortly after listing the Company received approval as an
Investment Trust by HMRC.
Taxation on the profit or loss for the year comprises current
and deferred tax. Taxation is recognised in the income statement
except to the extent that it relates to items recognised as direct
movements in equity, in which case it is also recognised as a
direct movement in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to the tax payable in
respect of previous years.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is
realised. Deferred tax is charged or credited to the Statement of
Comprehensive Income except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off tax assets against tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current
tax assets and liabilities on a net basis.
d) Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in deposits
held at call with banks and other short-term deposits with original
maturities of three months or less and subject to an insignificant
risk of changes in value. This is measured using the effective
interest rate method.
Short-term investments that are not held for the purpose of
meeting short-term cash commitments and restricted accounts are not
considered as cash and cash equivalents. For the purpose of the
statement of cash flows, cash and cash equivalents consist of cash
and cash equivalents as defined above.
e) Fixed deposits
Cash that is placed on fixed deposits for longer than three
months at the inception of the deposit is disclosed in fixed
deposits. This is measured using the effective interest rate
method.
f) Other receivables and prepayments
Other receivables and prepayments are recognised initially at
fair value and subsequently measured using the effective interest
method.
g) Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently measured using the effective interest method.
h) Dividends
Subject to the provisions of company law, the Company may by
resolution declare dividends in accordance with the respective
rights of the shareholders, but no dividend shall exceed the amount
recommended by the Board of Directors. Dividends payable are
recognised as distributions in the financial statements when the
Company's obligation to make payment has been established.
i) Equity
Share capital consists of ordinary shares and is classified as
equity.
j) Share premium account
The surplus of net proceeds received from the issuance of new
shares over their par value is credited to this account and the
related issue costs are deducted from this account. This is a
non-distributable reserve.
k) Capital reserve
The net profit or loss arising in the Statement of Comprehensive
Income during the year is added to or deducted from this reserve
where they are capital in nature. The realised element of the
capital reserve forms part of distributable reserves and may be
distributed.
l) Revenue reserve
The net profit or loss arising in the Statement of Comprehensive
Income during the year is added to or deducted from this reserve
where they are revenue in nature. This is a distributable
reserve.
m) Capital reduction reserve
On 28 January 2022, the Company lodged with the Registrar of
Companies its statement of capital and successful court application
which permitted the transfer of GBP145,579,902 from its share
premium account to the capital reduction reserve (refer to note 4).
This is a distributable reserve.
n) Capital management
The Company's capital is represented by the ordinary shares,
share premium account, profit and loss account and capital
reduction reserve. The Company is not subject to any externally
imposed capital requirements.
The capital of the Company is managed in accordance with its
investment policy, in pursuit of its investment objective. Capital
management activities may include the allotment of new shares and
the buy back or re-issuance of shares from treasury.
o) Foreign currencies
Items included in the financial statements are presented in
Pounds Sterling because that is the currency of the primary
economic environment in which the Company operates and is the
Company's functional currency.
Transactions and balances
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated at the foreign exchange rate ruling
at that date.
Foreign exchange differences arising on translation are
recognised in the Statement of Comprehensive Income.
4. Investment held at fair value through profit or loss
The Company owns 100% of its subsidiary Holdco through which the
Company has acquired all its underlying investments in SPVs. As at
30 September 2023, the cost of the equity investment in Holdco is
GBP33 million, while the debt investment in Holdco is GBP64
million.
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
------------------------------------ ------------------ ------------------
(a) Summary of valuation
Analysis of closing balance:
Investment at fair value through
profit or loss 99,289 47,105
------------------------------------ ------------------ ------------------
Total investment 99,289 47,105
(b) Movements during the year:
Opening balance of investment 47,105 -
Additions, at cost 46,796 48,955
Capitalised interest 2,392 -
------------------------------------ ------------------ ------------------
Cost of investment 96,293 48,955
Revaluation of investments to fair
value:
Realisation of fair value (709) -
Unrealised movement in fair value
of investment 3,705 (1,850)
------------------------------------ ------------------ ------------------
Fair value of investment 99,289 47,105
(c) Profits or loss on investment
in the year:
Unrealised movement in fair value
of investment 3,705 (1,850)
Profit / (loss) on investment 3,705 (1,850)
------------------------------------ ------------------ ------------------
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the financial assets or
financial liabilities is determined on the basis of the lowest
level input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their
entirety into only one of the following 3 levels:
Level 1
The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement
date.
Level 2
Inputs other than quoted prices included within Level 1 that are
observable (i.e. developed using market data) for the asset or
liability, either directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
30 September
2023
Level Level
1 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------- ------- ------- -------
Investment at fair value through
profit or loss
Equity investment in Holdco - - 38,147 38,147
Debt investment in Holdco - - 61,142 61,142
------------------------------------ ------- ------- ------- -------
Total investment as at 30 September
2023 - - 99,289 99,289
------------------------------------ ------- ------- ------- -------
30 September
2022
Level Level
1 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------- ------- ------- -------
Investment at fair value through
profit or loss
Equity investment in Holdco - - - -
Debt investment in Holdco - - 47,105 47,105
------------------------------------ ------- ------- ------- -------
Total investment as at 30 September
2022 - - 47,105 47,105
------------------------------------ ------- ------- ------- -------
The financial instruments held at fair value are the instruments
held by the Company in the SPVs indirectly via Holdco, which are
fair valued at each reporting date. The investments have been
classified within level 3 as the investments are not traded and
contained certain unobservable inputs. The Company's investment in
Holdco is also considered to be level 3 assets. There have been no
transfers between levels during the year. As the fair value of the
Company's equity and loan investments in Holdco is ultimately
determined by the underlying fair values of the equity and loan
investments, made by Holdco, the Company's sensitivity analysis of
reasonably possible alternative input assumptions is the same as
for those investments. Except for the availability of cash in the
relevant entity, there are no restrictions in relation to the
loans.
The movement on the Level 3 unquoted investment during the year
is shown below:
As at As at
30 September 30 September
2023 2022
GBP'000 GBP'000
------------------------------------------------ ------------ ------------
Opening balance 47,105 -
Additions during the Year 49,188 48,955
Realised gain on sale of contract (709) -
Unrealised movement in fair value of investment 3,705 (1,850)
------------------------------------------------ ------------ ------------
Total investment 99,289 47,105
------------------------------------------------ ------------ ------------
Valuation methodology
The Company owns 100% of its subsidiary Holdco through which the
Company has acquired all its underlying investments in SPVs. As
discussed in Note 2, the Company meets the definition of an
investment entity as described by IFRS 10, and as such the
Company's investment in Holdco is valued at fair value.
Fair value of operating assets is derived using a DCF
methodology, which follows International Private Equity Valuation
and Venture Capital Valuation Guidelines. DCF is deemed the most
appropriate methodology when a detailed projection of future cash
flows is possible. The fair value of each asset is derived by
projecting the future cash flows of an asset, based on a range of
operating assumptions for revenues and expenses, and discounting
those future cash flows to the present day with a post-tax discount
rate appropriately calibrated to the risk profile of the asset and
market dynamics. Due to the asset class and available market data
over the forecast horizon, a DCF valuation is typically the basis
upon which renewable assets are traded in the market.
The Company measures the total fair value of Holdco by its net
asset value, which is made up of cash at bank and other receivables
(GBP1.3 million) (2022:GBP3.4 million), trade payables and accruals
(GBP1.2 million) (GBP2022: GBP0.3 million) and the aforementioned
fair value of the underlying investments (GBP187.0m) as derived
from the DCF of each asset. As at 30 September 2023, Holdco net
current liability is offset by the fair value of the underlying
investments, resulting in a reduction in the fair value of the
Portfolio.
The Directors have satisfied themselves as to the methodology
used, the discount rates and key assumptions applied and the
valuation.
Valuation analysis
An analysis of the key assumptions is produced to show the
impact on NAV of changes to key assumptions. For each of the
scenarios, it is assumed that potential changes occur independently
of each other with no effect on any other key assumption, and that
the number of investments in the portfolio remains static
throughout the modelled life. Accordingly, the NAV per share
impacts are discussed below.
(i) Discount rates
Post-tax unlevered discount rates applied in the DCF valuation
are determined by the Investments Adviser using a multitude of
factors, including post-tax discount rates disclosed by the
Company's peers in the renewable energy sector, phase at which the
project is, credit risk of key counterparties, exposure to merchant
power risk, adjustment due to the portfolio being unlevered as well
as the internal rate of return inherent in the original purchase
price when underwriting the asset. The DCF valuations uses one
post-tax discount rate applied to cash generated by each asset over
the contract term.
The post-tax discount rates used in the DCF valuation of the
investments and forecast cash flows are considered judgemental
input through which an increase or decrease would have a material
impact on the fair value of the investments at FVTPL. As of 30
September 2023, the blended post-tax discount rates applied to the
portfolio ranged from 6.5% to 9.0% with the overall weighted
average of 7.4%.
An increase of 50bps and decreases of 50bps and 100bps in the
discount rates would have the following impact on NAV:
Discount Rate +100 + 50 bps - 50 bps -100bps
bps
===================================== ======= ======== ======== =======
Increase/(decrease) in NAV (GBP'000) (9,755) (5,070) 5,498 11,477
NAV per share 85.5p 88.7p 95.7p 99.7
NAV per share change (6.5p) (3.4p) 3.7p 7.7p
Change (7.1)% (3.7)% 4.0% 8.3%
(ii) Energy Production
Energy production, as measured in MWh per annum, assumed in the
DCF valuations is based on a P50 energy yield profile, representing
a 50% probability that the energy production estimate will be met
or exceeded over time. An independent engineer has derived this
energy yield estimate for each asset by considering a range of
irradiation, weather data, ground-based measurements and
design/site-specific loss factors including module performance,
module mismatch, inverter losses, and transformer losses, among
others. The P50 energy yield case includes a 0.5% annual
degradation through the entirety of the useful life. In addition,
the P50 energy yield case includes an assumption of availability,
which ranges from 99% to 100%, as determined reasonable by an
independent engineer at the time of underwriting the asset.
Solar assets are subject to variation in energy production over
time. An assumed "P90" level of energy yield (i.e. a level of
energy production that is below the "P50", with a 90% probability
of being exceeded) would cause a decrease in the total portfolio
valuation, while an assumed "P10" level of power output (i.e. a
level of energy production that is above the "P50", with a 10%
probability of being achieved) would cause an increase in the total
portfolio valuation.
The application of a P90 and a P10 energy yield case would have
the following impact on NAV:
Energy Production P90 P10
===================================== ======= =====
Increase/(decrease) in NAV (GBP'000) (8,454) 8,138
NAV per share 86.4p 97.5p
NAV per share change (5.6p) 5.4p
Change (6.1)% 5.9%
(iii) Merchant Power Prices
The Company's assets have long term PPAs at fixed or
index-linked uplifts and some incentive contracts with credit
worthy energy purchasers. Excess generation not consumed under the
PPA agreement in place sell to the network, which is 6% of the
portfolio based on current market prices for 2024. Thus, PPA prices
are not materially impacted by fluctuations in market prices.
Excess generation that is exported to the network is priced on the
solar PV curtailed capture price forecast, that are derived from
the forecast power price curves provided by an independent third
parties. Power price forecasts are updated quarterly and the prices
used ranges from GBP68/MW to GBP94/MW over the next five years,
with an average of GBP77/MW.
An increase or decrease of 10% in the forecast merchant power
price curves would have the following impact on NAV:
Merchant power prices -10% +10%
===================================== ======= =====
Increase/(decrease) in NAV (GBP'000) (5,568) 5,502
NAV per Share 88.3p 95.7p
NAV per Share Change (3.7)p 3.7p
Change (4.0)% 4.0%
(iv) Operating Expenses
Operating expense include operations and maintenance, asset
management, leases, rates, insurance, decommissioning and other
costs. Most operating expenses are contracted with annual
escalation as per available market forecasts of the inflation
indices (RPI and CPI, where applicable) and capped where a cap
exists in the contract. As such there is typically little variation
in annual operating expenses, however inflationary pressures in the
short and long-term could affect future operating expenses.
Expenses subject to uncapped inflation has been inflated in the
short-term peaking at 6.0%, reducing to 3.4% by September 2027 and
a long-term average of 3.1%.
An increase or decrease of 10% in operating expenses would have
the following impact on NAV:
Operating expenses +10% -10%
===================================== ======= =====
Increase/(decrease) in NAV (GBP'000) (2,658) 2,261
NAV per share 90.3p 93.8p
NAV per share change (1.8)p 1.7p
Change (1.9)% 1.9%
5. Income
For the year ended For the Period ended
30 September 2023 30 September 2022
GBP'000 GBP'000
--------------------- ------------------ --------------------
Interest from Holdco 3,919 483
Deposit interest 1,366 298
--------------------- ------------------ --------------------
Total Income 5,285 781
--------------------- ------------------ --------------------
6. Investment advisory fees
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- ------- ------- ------- -------
Investment advisory
fees 1,444 - 1,444 1,285 - 1,285
-------------------- --------------- ------- ------- ------- ------- -------
The Investment Advisory Agreement ("IAA") dated 1 November 2021
between the Company and Atrato Partners Limited as the Investment
Adviser and JTC Global AIFM Solutions Limited as the AIFM,
appointed the Investment Adviser to act as the Company's investment
adviser. The AIFM has been appointed pursuant to the AIFM agreement
dated 1 November 2021 between the AIFM and the Company as the
alternative investment fund manager for the purposes of the AIFM
Directive. Accordingly, the AIFM is responsible for providing
portfolio management and risk management services to the
Company.
Under the IAA, the Investment Adviser receives a per annum
management fee of 0.7125% of the adjusted NAV up to and including
GBP500 million; and 0.5625% of the adjusted NAV above GBP500
million, invoiced monthly in arrears. The Investment Adviser also
receives a management fee of 0.2375% of the last published NAV up
to and including GBP500 million; and 0.1875% of the last published
NAV above GBP500 million, each invoiced semi-annually in arrears.
With the agreement of the Company, Holdco and the Adviser, this
semi-annual fee shall be applied by the Adviser in acquiring
ordinary shares at the absolute discretion of the Board by any
combination of methods as set out in the IAA.
The Investment Adviser receives an accounting and administration
fee of GBP50,000 per annum plus 0.02% of the adjusted NAV in excess
of GBP200 million up to and including GBP500 million plus 0.015% of
adjusted NAV in excess of GBP500 million. An accounting and
administration fee of GBP800 per Clean Energy Asset held by Holdco
up to 100 Clean Energy Assets and GBP650 per Clean Energy Asset
above 100.
No performance fee or asset level fees are payable to the IA
under the IAA.
Unless otherwise agreed by the Company and the Investment
Adviser, the IAA may be terminated by the Company or the Investment
Adviser on not less than 12 months' notice to the other parties,
not to be given prior to the fifth anniversary of initial
admission.
The Company has not issued or the Company's Broker has not
purchased the any shares to settle investment advisory fees in
respect of the Period under review.
The Company policy is not to elect to allocate a portion of the
IA fee to capital.
7. Other Expenses
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------- ------- ------- ------- ------- -------
Secretary and Administrator fees 209 - 209 111 - 111
Directors' fees 138 - 138 126 - 126
Directors' other employment costs 44 - 44 25 - 25
Brokers' retainer 101 - 101 51 - 51
Auditor's fees
- Fees payable to the Company's
auditor for audit services 185 - 185 118 - 118
- Fees payable to the Company's
auditor for non-audit related
assurance services 54 - 54 18 - 18
Regulatory and Registrar's fees 62 - 62 38 - 38
Marketing fees 146 - 146 121 - 121
Tax compliance 14 - 14 36 - 36
Other expenses 162 - 162 40 - 40
---------------------------------- ------- ------- ------- ------- ------- -------
1,115 - 1,115 684 - 684
---------------------------------- ------- ------- ------- ------- ------- -------
Expenses charged to capital
Initial listing costs - - - - 401 401
---------------------------------- ------- ------- ------- ------- ------- -------
Total expenses 1,115 - 1,115 684 401 1,085
---------------------------------- ------- ------- ------- ------- ------- -------
The Auditor's fee for the statutory audit of the year is
GBP185,340, including VAT of GBP30,890 (2022: GBP117,600, including
VAT of GBP19,600). BDO also reviewed the Company's interim accounts
as at 31 March 2023 for a fee of GBP54,000 including VAT of
GBP9,000 (2022: GBP18,000, including VAT of GBP3,000).
8. Earnings Per Share
Earnings per share is calculated by dividing the profit
attributable to equity shareholders of the Company by the weighted
average number of shares in issue during the year/period as
follows:
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
Profit attributable to the
equity holders of the Company
(GBP'000) 2,726 3,705 6,431 (1,188) (2,251) (3,439)
Weighted average number of
shares in issue (000) 150,000 150,000 150,000 128,750 128,750 128,750
------------------------------- ------- ------- ------- ------- ------- -------
Earnings per share (pence)-
basic and diluted 1.82p 2.47p 4.29p (0.92p) (1.75p) (2.67p)
------------------------------- ------- ------- ------- ------- ------- -------
9. Taxation
(a) Analysis of charge in the year
For the year ended For the Period ended
30 September 2023 30 September 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------- ------- ------- ------- ------- -------
Corporation tax - - - - - -
--------------- ------- ------- ------- ------- ------- -------
Taxation - - - - - -
--------------- ------- ------- ------- ------- ------- -------
The total unrecognised tax losses at 30 September 2023 available
to the Company are GBP41,000 (2022: GBP1,329,000)
(b) Factors affecting total tax charge for the year:
The effective UK corporation tax rate applicable to the Company
for the year is 22.00%. The tax charge differs from the charge
resulting from applying the standard rate of UK corporation tax for
an investment trust company.
The differences are explained below:
Year ended 30 September Period ended 30 September
2023 2022
---------------------------------- --------------------------- -----------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- ------- ----------- ------- -------
Profit / (loss) on ordinary
activities before taxation 2,726 3,705 6,431 (1,188) (2,251) (3,439)
---------------------------------- -------- -------- ------- ----------- ------- -------
Corporation tax at 22% (2022:
19%) 600 815 1,415 (226) (428) (654)
---------------------------------- -------- -------- ------- ----------- ------- -------
Effects of:
---------------------------------- -------- -------- ------- ----------- ------- -------
Profit / (loss) on investments
held at fair value not allowable - (815) (815) - 352 352
---------------------------------- -------- -------- ------- ----------- ------- -------
Expenses not deductible for
tax purposes 2 - 2 10 76 86
---------------------------------- -------- -------- ------- ----------- ------- -------
Utilised losses (283) - (283) - - -
---------------------------------- -------- -------- ------- ----------- ------- -------
Tax relief from interest
distribution (319) - (319) - - -
---------------------------------- -------- -------- ------- ----------- ------- -------
Unutilised management expenses - - - 216 - 216
---------------------------------- -------- -------- ------- ----------- ------- -------
Total tax charge - - - - - -
---------------------------------- -------- -------- ------- ----------- ------- -------
Investment companies which have been approved by the HMRC under
section 1158 of the Corporation Tax Act 2010 are exempt from tax on
UK capital gains and capital profits/losses on loan relationships.
Due to the Company's status as an Investment Trust, and the
intention to continue meeting the conditions required to retain
approv al in the foreseeable future, the Company has not provided
for deferred tax on any capital gains or losses arising on the
revaluation of investments.
The March 2021 Budget announced an increase to the main rate of
UK corporation tax to 25% effective from 1 April 2023. This
increase in the standard rate of corporation tax was enacted on 24
May 2021.
10. Fixed deposits
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
--------------- ------------------ ------------------
Fixed deposits - 20,000
Total - 20,000
---------------- ------------------ ------------------
A fixed deposit for six months was placed on 27(th) June 2022
with HSBC, at a fixed interest rate of 1.61%, matured on 28(th)
December 2022.
11. Cash and cash equivalents
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
---------------------------- ------------------ ------------------
Cash at bank 37,867 49,361
Money market fixed deposits - 20,000
Total 37,867 69,361
----------------------------- ------------------ ------------------
In the prior year, cash was placed on a money market fixed
deposit for three months on 2(nd) August 2022 with HSBC, at a fixed
interest rate of 1.48%, maturing on 1(st) November 2022.
The Company has placed surplus cash in an instant access deposit
account earning interest at a floating rate.
12. Other receivables and prepayments
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
---------------------------------- ------------------ ------------------
Amounts receivable from related
parties 20 1,493 3,049
Other receivables and prepayments 56 166
---------------------------------- ------------------ ------------------
Total 1,549 3,215
---------------------------------- ------------------ ------------------
13. Trade and other payables
As at 30 September As at 30 September
2023 2022
GBP'000 GBP'000
--------------------------- ------------------ ------------------
Accounts payable 102 59
Amounts payable to related
parties 20 299 271
Accrued expenses and other
taxes 247 225
--------------------------- ------------------ ------------------
Total 648 555
--------------------------- ------------------ ------------------
14. Share Capital
Year ended 30 September Period ended 30 September
2023 2022
------------------------------- ---------------------------- ----------------------------
Nominal value Nominal value
of shares of shares
No. of shares (GBP) No. of shares (GBP)
------------------------------- ------------- ------------- ------------- -------------
Allotted, issued and fully
paid:
Opening balance 150,000,000 1,500,000 - -
=============================== ============= ============= ============= =============
Allotted upon incorporation
Shares of GBP0.01 each
(ordinary shares) - - 1 0.01
Issue of redeemable preference
shares - - 50,000 50,000
Allotted/redeemed following
admission to LSE
Shares issued - - 149,999,999 1,500,000
Initial redeemable preference
shares redeemed - - (50,000) (50,000)
Shares issued for the
investment advisory fee
Share issued - - - -
------------------------------- ------------- ------------- ------------- -------------
Closing balance 150,000,000 1,500,000 150,000,000 1,500,000
------------------------------- ------------- ------------- ------------- -------------
On incorporation the Company issued 1 ordinary share of GBP0.01,
whi ch was fully paid up, and 50,000 redeemable preference shares
of GBP1 each, which were paid up to one quarter of their nominal
value. Both of these share classes were issued to Atrato Group
Limited. On 23 November 2021 the Board of Directors resolved to
redeem the 50,000 redeemable preference shares.
On 23 November 2021, the Board of Directors approved the
proposed placing and offer for subscription (to gether the
"Placing") of up to 150 million ordinary shares of GBP0.01 each in
the capital of the Company at a price of GBP1.00 per ordinary
share. It was intended that the ordinary shares of the Company
would be admitted to trade on the Main Market of the London Stock
Exchange.
The c onsideration received in excess of nominal value of the
ordinary shares issued, being GBP145,579,902, net of total
capitalised issue costs, was credited to the share premium
account.
The share issue costs incurred comprise brok erage costs,
third-party adviser fees and other costs directly attributable to
the issuance of shares.
The Company's issued share capital immediately following initial
admission comprised 150,000,000 ordinary shares, and this is the
total number of ordinary shares with voting rights in the
Company.
Following a successful application to the High Court and
lodgement of the Company's statement of capital with the Registrar
of Companies, the Company was permitted to reduce the capital of
the Company by an amount of GBP145,579,902. This was affected on 28
January 2022 by a transfer of that amount from the share premium
account to the capital reduction reserve, which can be used to fund
dividends or other distributions to the Company's shareholders.
Ordinary shareholders are entitled to all dividends declared by
the Company and to all of the Company's assets after repa yment of
its borrowings and ordinary creditors. Ordinary shareholders have
the right to vote at meetings of the Company. All ordinary shares
carry equal voting rights.
15. Dividends
(a) Dividends paid in the year
The Company paid the following dividends during the year ended
30 September 2023
Pence Capital
per reduction Revenue
share reserve reserve Total
GBP'000 GBP'000 GBP'000
-------------------------------- ----- ---------- ------- -------
Quarter ended 30 September 2022 1.26p 1,890 - 1,890
-------------------------------- ----- ---------- ------- -------
Quarter ended 31 December 2022 1.26p 1,890 - 1,890
-------------------------------- ----- ---------- ------- -------
Quarter ended 31 March 2023 1.23p 1,845 - 1,845
-------------------------------- ----- ---------- ------- -------
Quarter ended 30 June 2023 1.25p 1,749 126 1,875
-------------------------------- ----- ---------- ------- -------
Total 5.00p 7,374 126 7,500
-------------------------------- ----- ---------- ------- -------
The Company paid the following dividends during the Period ended
30 September 2022 :
Capital
Pence per Reduction Revenue
share reserve reserve Total
GBP'000 GBP'000 GBP'000
---------------------------------- --------- ---------- -------- -------
Period ended 31 March 2022 1.76p 2,640 - 2,640
---------------------------------- --------- ---------- -------- -------
Quarter ended 30 June 2022 1.25p 1,875 - 1,875
---------------------------------- --------- ---------- -------- -------
Total 3.01p 4,515 - 4,515
---------------------------------- --------- ---------- -------- -------
(b) Dividends paid and payable
The dividends paid and payable in respect of the financial year
are the basis on which the requirements of s1158-s1159 of the
Corporation Tax Act 2010 are considered.
For the year ended 30 September 2023
Capital
Pence per reduction Revenue
share reserve Reserve Total
GBP'000 GBP'000 GBP'000
------------------------------- ----------- ----------- ------- -------
Quarter ended 31 December 2022 1.26p 1,890 - 1,890
------------------------------- ----------- ----------- ------- -------
Quarter ended 31 March 2023 1.23p 1,845 - 1,845
------------------------------- ----------- ----------- ------- -------
Quarter ended 30 June 2023 1.25p 1,749 126 1,875
------------------------------- ----------- ----------- ------- -------
Quarter ended 30 September
2023 1.26p 567 1,323 1,890
------------------------------- ----------- ----------- ------- -------
Total 5.00p 6,051 1,449 7,500
------------------------------- ----------- ----------- ------- -------
After the year end, the Company declared an interim dividend of
1.26 pence per share for the period 1 July 2023 to 30 September
2023, to be paid on 16 December 2023 to Shareholders on the
register at 25 November 2023.
16. Capital Reduction Reserve
As indicated in the Prospectus, following admission of the
Company's shares to trading on the LSE, the Directors applied to
the Court and obtained a judgement on 28 January 2022 to cancel the
amount standing to the credit of the share premium account of the
Company.
During the year, GBP7.4 million (2022: GBP4.5 million) of
dividends have been paid out of the reserve, reducing the reserve
to GBP133.7 million (2022: GBP141.1 million).
17. Net Assets Per Share
As at 30 September As at 30 September
2023 2022
Total shareholders' equity
(GBP'000) 138,057 139,126
Number of shares in issue ('000) 1,500 1,500
---------------------------------- ------------------ ------------------
Net asset value per share
(pence) 92.0p 92.8p
---------------------------------- ------------------ ------------------
18. Financial instruments
Financial instruments by category
The Company held the following financial instruments at 30
September 2023. There have been no transfers of financial
instruments between levels of the fair value hierarchy. There are
no non-recurring fair value measurements.
Financial
assets at
fair value Financial Financial
through asset at liabilities
profit & amortised at amortised
loss cost cost Total
At 30 September 2023 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ----------- -------------- --------
Non-current assets
Investment at fair value
through profit or loss
(Level 3) 99,289 - - 99,289
Current assets
Other receivables and
prepayments - 1,549 - 1,549
Fixed deposits - - - -
Cash and cash equivalents - 37,867 - 37,867
----------------------------- ------------ ----------- -------------- --------
Total financial assets 99,289 39,416 - 138,705
----------------------------- ------------ ----------- -------------- --------
Current liabilities
Trade and other payables - - (648) (648)
----------------------------- ------------ ----------- -------------- --------
Total financial liabilities - - (648) (648)
----------------------------- ------------ ----------- -------------- --------
Net financial instruments 99,289 39,416 (648) 138,057
----------------------------- ------------ ----------- -------------- --------
Financial
assets at
fair value Financial Financial
through asset at liabilities
profit & amortised at amortised
loss cost cost Total
At 30 September 2022 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------ ----------- -------------- --------
Non-current assets
Investment at fair value
through profit or loss
(Level 3) 47,105 - - 47,105
Current assets
Other receivables and
prepayments - 3,215 - 3,215
Fixed deposits - 20,000 - 20,000
Cash and cash equivalents - 69,361 - 69,361
----------------------------- ------------ ----------- -------------- --------
Total financial assets 47,105 92,576 - 139,681
----------------------------- ------------ ----------- -------------- --------
Current liabilities
Trade and other payables - - (555) (555)
----------------------------- ------------ ----------- -------------- --------
Total financial liabilities - - (555) (555)
----------------------------- ------------ ----------- -------------- --------
Net financial instruments 47,105 92,576 (555) 139,126
----------------------------- ------------ ----------- -------------- --------
The Company's financial assets and liabilities as summarised
above are expected to be realised within 12 months of the reporting
date, excluding those held in FVTPL. The financial assets and
financial liabilities measured at amortised cost's carrying amount
is approximated to its fair value which is classified at level 3 at
the fair value hierarchy.
The Level 3 fair value measurements derive from valuation
techniques that include inputs to the asset or liability that are
not based on observable market data (unobservable inputs).
In the tables above, financial instruments are held at carrying
value as an approximation to fair value unless stated
otherwise.
Reconciliation of Level 3 fair value measurement of financial
assets and liabilities
An analysis of the movement between opening and closing balances
of the investments at fair value through profit or loss is given in
note 4.
The fair value of the investments at fair value through profit
or loss includes the use of Level 3 inputs. Please refer to note 4
for details of the valuation methodology and sensitivities.
19. Financial Risk Management
The Investment Adviser, AIFM and the Administrator report to the
Board on a quarterly basis and provide information to the Board
which allows it to monitor and manage financial risks relating to
the Company's operations. The Company's activities expose it to a
variety of financial risks: credit risk, liquidity risk, and market
risk (including price risk and interest rate risk). These risks are
monitored by the AIFM. Each risk and its management are summarised
below.
a) Credit risk
Credit risk is the risk that financial loss arises from the
failure of a customer or counterparty to meet its obligations under
a contract.
The Company's credit risk exposure in relation to cash holdings
is minimised by dealing with financial institutions with investment
grade credit ratings. Exposure in relation to clients, at the
project company level will be mitigated by a combination of due
diligence procedures performed at inception of a PPA, ability to
export to the national grid and diversity of counterparties in the
portfolio. While credit risk in relation to contractors employed is
mitigated through due diligence procedures performed at inception,
the length of contract and available alternative parties to assume
the contracts. Where the strength of an asset vendor is
insufficient, warranty and indemnity insurance are purchased.
Shareholder loans provided to Holdco and flowed down to project
companies, is secured through the procedures performed in
monitoring the credit risk of PPA counterparties. These procedures
work to mitigate the credit risk that arises due to intercompany
lending to the underlying investments.
As at 30 September 2023 (and 30 September 2022), the Company's
exposure is the cash and cash equivalents and intercompany
receivables stated on the Statement of Financial Position.
Appropriate credit checks are required to be made on all
counterparties to the Company. Cash and deposits are held in
accounts with HSBC Bank Plc, which has a credit rating as per
Moody's Investor Services of A1 . During the year ended 30
September 2023 (and 30 September 2022), there are no balances past
due or impaired. The receivables are mainly intercompany balances
receivable from Holdco and subsidiaries of Holdco.
b) Liquidity risk
The objective of liquidity management is to ensure that all
commitments which are required to be funded can be met out of
readily available and secure sources of funding.
The Company's approach to managing liquidity is to ensure, as
far as possible, that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Company's reputation.
The Company's trade and other payables with third parties at the
reporting date are considered operational in nature and are due and
payable within 12 months of the reporting date. As at 30 September
2023 (and at 30 September 2022), the Company has financial assets
of cash and cash equivalents without contractual maturity that can
meet the current expected financial liabilities. A RCF of GBP30
million was secured during the year by Holdco. As at 30 September
this facility remained undrawn. The facility is available to be
drawn for three years to 30 September 2026 and can be at the
request of the Borrower.
c) Market risk
Market risk is the risk that changes in market prices, such as
interest and foreign currency rates, will affect the Company's
financial performance or the value of its holdings of financial
instruments. The objective is to minimise market risk through
managing and controlling these risks within acceptable parameters,
whilst optimising returns.
The Company uses financial instruments in the ordinary course of
business, and also incurs financial liabilities, to manage market
risks. At the year end the Company did not have any financial
instruments which are exposed to market risk.
Interest rate risk
Interest rate risk is the risk that the value of a financial
instrument will fluctuate due to changes in market interest
rates.
The Company's interest rate risk on interest bearing financial
assets is limited to interest earned on fixed cash deposits. The
Interest Rate Benchmark Reform - Phase 2 did not have a material
impact on the Company's reported results as the exposure to
interest rates is limited to interest earned on fixed deposits.
The Company's interest and non-interest bearing assets and
liabilities as at 30 September 2023 are summarised below:
Year ended 30 September Period ended 30 September
2023 2022
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ------------ ------- -------- ------------ -------
Assets
Cash and cash equivalents 37,573 294 37,867 40,002 29,359 69,361
Fixed deposits - - - 20,000 - 20,000
Other receivables and prepayments - 1,549 1,549 - 3,215 3,215
Investment at fair value through
profit or loss - debt 61,142 - 61,142 47,105 - 47,105
Total assets 98,715 1,843 100,558 107,107 32,574 139,681
Liabilities
Trade and other payables - (648) (648) - (555) (555)
---------------------------------- -------- ------------ ------- -------- ------------ -------
Total liabilities - (648) (648) - (555) (555)
---------------------------------- -------- ------------ ------- -------- ------------ -------
The short-term money market deposits and bank accounts included
within cash and cash equivalents bear interest at low or zero
interest rates and therefore movements in interest rates will not
materially affect the Company's income and as such a sensitivity
analysis is not necessary.
Price risk
Price risk is defined as the risk that the fair value of a
financial instrument held by the Company will fluctuate. As of 30
September 2023, the Company held one investment, being its
shareholding in and loans provided to Holdco, which is measured at
fair value. The repayment is dependent on the performance of the
underlying renewable energy investments that Holdco holds. This
value varies according to a number of factors, including discount
rate, asset performance, solar irradiation, operating expenses and
to a limited extent forecast power prices. The sensitivity of the
investment valuation due to price risk is shown in note 4.
Currency risk
Currency risk is the risk that the value of a financial
instrument will fluctuate due to changes in foreign exchange rates.
All transactions during the current year were denominated in GBP,
thus no foreign exchange differences arose.
Capital management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to its
shareholders through the optimisation of the debt and equity
balances. The Company is not subject to any externally imposed
capital requirements.
Equity includes all capital and reserves of the Company that are
managed as capital.
20. Related Party Transactions with the Investment Adviser and
Directors
Following admission of the ordinary shares (refer to note 14 ),
the Company and the Directors are not aware of any person who,
directly or indirectly, jointly or severally, exercises or could
exercise control over the Company. The Company does not have an
ultimate controlling party.
Details of related parties are set out below.
a) Accounting, secretarial and directors
Atrato Partners Limited has been appointed to act as an
administrator for the Company under the terms of the IAA; more
details are set out below under b).
Apex Secretaries LLP is currently the secretary of the
Company.
Juliet Davenport, Chair of the Board of Directors of the
Company, is paid director's remuneration of GBP50,000 per annum
(2022: GBP50,000), Faye Goss is paid director's remuneration of
GBP37,500 per annum (2022: GBP37,500) and Duncan Neale is paid
director's remuneration of GBP37,500 per annum (2022: GBPnil) with
an additional GBP5,000 per annum for responsibilities as Audit
Committee Chair. Prior to stepping down from the board, Marlene
Wood was paid director's remuneration of GBP37,500 (2022:
GBP37,500) with an additional GBP5,000 per annum for
responsibilities as Audit Committee Chair. Total directors'
remuneration of GBP 137,833 (2022: GBP125,667) was incurred in
respect to the year. Any expenses incurred by Directors which are
related to business are also reimbursed.
The interests (all of which are or will be beneficial unless
otherwise stated) of the current Directors in the ordinary share
capital of the Company as at 30 September 2023 were as follows:
Shares held Shares held
at 30 September at 30 September
Director 2023 2022
------------------------------------- ---------------- ----------------
Juliet Davenport 33,000 20,000
Faye Goss 20,000 20,000
Duncan Neale 2,980 -
Marlene Wood (resigned 23 June 2023) - 20,000
------------------------------------- ---------------- ----------------
There have been no changes to the above holdings since the year
end.
b) Investment Adviser
Fees payable to the Investment Adviser by the Company under the
IAA are shown in the Statement of Comprehensive Income and detailed
in note 6 .
During the year, investment advisory fees amounted to GBP
1,351,156 (2022: GBP1,284,824) with the GBP253,312 (2022:
GBP257,910) outstanding and payable as at 30 September 2023.
Details of the direct and indirect interests of the Directors of
the Investment Adviser and their close families in the ordinary
shares of one pence each in the Company at 30 September 2023 were
as follows:
-- Benedict Luke Green, a director of the Investment Adviser:
694,510 shares (0.46% of issued share capital).
-- Steve Peter Windsor, a director of the Investment Adviser:
1,496,381 shares (1.00% of issued share capital).
-- Gurpreet Gujral, Fund manager of the Investment Adviser:
92,862 shares (0.06% of issued share capital).
-- Natalie Markham, a director of Holdco and SPVs: 18,250 shares (0.01% of issued share capital)
-- Lara Townsend, a director of Holdco and SPVs: 8,664 shares (0.01% of issued share capital)
c) Acquisitions from related parties
In the prior period, the Company acquired an 100% investment in
Atrato Rooftop Solar 1 Limited directly from Atrato Group Limited
for GBP1. At the time of acquisition, Atrato Rooftop Solar 1
Limited had entered into one investment, Vale of Mowbray, a
development site. Development of the site commenced prior to the
acquisition and commissioning occurred soon after completion of the
acquisition. Post year-end the client, entered administration
resulting in lower consumption from October by the client and
higher export to the national grid.
d) Amounts receivable from related parties
In the prior year, the Company entered into a loan agreement
with Holdco for GBP125 million at 7% interest, of which GBP15.1
million (2022: GBP48.9 million) was drawn during the year and the
outstanding balance as at year end was GBP64 million (2022: GBP48.9
million). Interest outstanding and included in amounts receivable
from related parties at year end was GBP487,112 (2022: GBP483,232)
and was received during November 2023. The loan is a repayable on
31 December 2028 and available for drawdown until 31 December 2023.
The Company additionally provided funding to Holdco for working
capital and VAT. The balance outstanding at year end was
GBP1,492,715 (2022: GBP2,565,305), which was repaid in November
2023.
21. Unconsolidated Subsidiaries, Associates and Other Entity
The following table shows subsidiaries of the Company. As the
Company is regarded as an Investment Entity as referred to in note
2, these subsidiaries have not been consolidated in the preparation
of the financial statements. The Company is the ultimate parent
undertaking of these entities.
Ownership Country
of
Name Interest Investment Category incorporation Registered address
----------------- --------- -------------------- ------------- ---------------------
Atrato Onsite 100% Holdco subsidiary UK 6(th) Floor, 125
Energy Holdco entity London Wall, London,
Ltd EC2Y 5AS
Atrato Rooftop 100% Operating subsidiary UK 6(th) Floor, 125
Solar 1 Ltd entity, owned by London Wall, London,
Holdco EC2Y 5AS
EMDC Solar 100% Operating subsidiary UK 6(th) Floor, 125
Ltd entity, owned by London Wall, London,
Holdco EC2Y 5AS
Hylton Plantation 100% Operating subsidiary UK 6(th) Floor, 125
Solar Farm entity, owned by London Wall, London,
Ltd Holdco EC2Y 5AS
London Road 100% Operating subsidiary UK 6(th) Floor, 125
Energy Centre entity, owned by London Wall, London,
Ltd Holdco EC2Y 5AS
Rooftop Solar 100% Holding subsidiary UK 6(th) Floor, 125
2 Ltd entity, owned by London Wall, London,
Holdco EC2Y 5AS
Sonne Solar 100% Operating subsidiary UK 6(th) Floor, 125
Ltd entity, owned by London Wall, London,
Holdco EC2Y 5AS
Skeeby Solar 100% Operating subsidiary UK 6(th) Floor, 125
Ltd entity, owned by London Wall, London,
Holdco EC2Y 5AS
Guarantees provided by the Company in relation to liabilities
that may arise in Hylton Plantation Solar Farm Ltd or Sonne Solar
Ltd have been provided in the table below. The expected economic or
cash outflow from the Company is expected to be nil.
Provider Investment Beneficiary Nature Purpose Amount
GBP'000
------------ ------------- ------------ ---------- --------------- ---------------
The Company Hylton Nissan Guarantee PPA 10,000
The Company Sonne Solar Tesco Guarantee Framework PPAs 10,000
The Company Sonne Solar Tesco Guarantee PPA 6,000 to 10,000
The Company Sonne - LCY2 Amazon Guarantee PPA 30,000
The Company Sonne - LTN4 Amazon Guarantee PPA 30,000
The Company Sonne - EDI1 Amazon Guarantee PPA 30,000
The Company Sonne -MAN2 Amazon Guarantee PPA 30,000
The Company Sonne -BHX2 Amazon Guarantee PPA 30,000
The Company Sonne -BHX3 Amazon Guarantee PPA 30,000
The Company Sonne -BHX4 Amazon Guarantee PPA 30,000
22. Commitments and Contingencies
As at 30 September 2023 the Company had the following future
investment obligations:
GBP0.4 million Hylton Plantation Solar Farm Limited, in relation
to the Nissan project in Sunderland. These amounts are capital
commitments within the portfolio to be funded by fund flows from
the Company, at the time of the final milestone payments expected
to be by Q2 2024.
GBP3.8 million London Road Energy Centre Limited, in relation to
the London Road project in Northamptonshire. These amounts are
capital commitments within the portfolio to be funded by fund flows
from the Company, at the time of the final milestone payments
expected to be by Q1 2024.
GBP22.1 million Skeeby Solar Limited, in relation to the Skeeby
project in North Yorkshire. These amounts are capital commitments
within the portfolio to be funded by fund flows from the Company,
at the time of the final milestone payments expected to be by Q2
2024.
On the 24(th) October 2023, the Company completed on the
acquisition of a portfolio of operation assets with a total value
of GBP77.3 million, following the exchange of contract on 12
September 2023 . The portfolio includes over 9,400 residential
sites benefiting from the Feed-in-Tariff scheme, which has 11 years
remaining. The IA report provides further detail on the transaction
on page 18.
23. Post Balance Sheet Events
On 1(st) September 2023, Holdco secured an RCF of GBP30 million,
which was undrawn at 30 September 2023. Since then GBP17 million
has been drawn on the RCF to fund acquisitions.
No other significant events have occurred between 30 September
2023 and the date when the financial statements were authorised by
Board of Directors, which would require adjustments to, or
disclosure in, the Company's accounts.
Alternative Performance Measures
In reporting financial information, the Company presents
alternative performance measures ("APMs") which are not defined or
specified under the requirements of IFRS. The Company believes that
these APMs, which are not considered to be a substitute for or
superior to IFRS measures, provide stakeholders with additional
helpful information on the performance of the Company. The APMs
presented in this report are shown below:
Dividend cover
Cash flow generated by the Company includes net cash flow used
in operating activities, interest on investments and repayments of
shareholder loans; divided by dividend paid within the reporting
period.
As at 30
September As at 30 September
2023 2022
-------------------------------- ---------- ---------- ------------------
Net cash flow used in operating
activities a (2,356) (4,863)
Interest income received b 3,506 167
Dividend paid c 7,500 4,515
-------------------------------- ---------- ---------- ------------------
((a+b)
Dividend cover ÷c) 0.15x (1.04x)
-------------------------------- ---------- ---------- ------------------
Premium/Discount
The amount, expressed as a percentage, by which the share price
at 30 September 2023, is greater or less the NAV per share.
As at 30 September As at 30 September
2023 2022
---------------------- -------------- ------------------ ------------------
NAV per share (pence) a 92.0 92.8
Share price (pence) b 71.4 99.5
---------------------- -------------- ------------------ ------------------
(Discount) / Premium (b ÷a)-1 (22.9%) 7.2%
---------------------- -------------- ------------------ ------------------
Total return
Total return is a measure of performance that includes both
income and capital returns. It considers capital gains and the
assumed reinvestment of dividends paid out by the Company into its
shares on the ex-dividend date. The total return is shown below,
calculated on both a share price and NAV basis.
Year ended 30 September Period ended 30 September
2023 2022
------------------------ ------------- ------------------------- ---------------------------
Share price Share price
(pence) NAV (pence) (pence) NAV (pence)
------------------------ ------------- ------------ ----------- ------------- ------------
Opening balance A 99.5 92.8 100.0 98.1
Closing at 30 September b 71.4 92.0 99.5 92.8
Dividends paid during
the year c 5.0 5.0 3.0 3.0
Adjusted closing
(d=b + c) d 76.4 97.0 102.5 95.8
------------------------ -------------- ------------ ----------- ------------- ------------
Total return (d÷a)-1 (23.2) % 5.17% 2.5% (2.3) %
------------------------ -------------- ------------ ----------- ------------- ------------
Ongoing charges ratio
A measure, expressed as a percentage of average NAV, of the
regular, recurring annual costs of running an investment
company.
For the period from
For the year ended IPO to
30 September 2023 30 September 2022
Average NAV (GBP'000) a 138,591 143,037
Ongoing fees* (GBP'000) b 2,459 1,969
------------------------ ----------- ------------------ -------------------
Ongoing charges ratio (b÷a) 1.77% 1.38%
------------------------ ----------- ------------------ -------------------
*Ongoing fees from IPO on 23 November 2021 to 30 September 2022.
Consisting of investment management fees and other recurring
expenses.
Glossary
Act The Companies Act 2006
AGM or Annual A meeting held once a year which shareholders
General Meeting 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.
-----------------------------------------------------
AIC The Association of Investment Companies
-----------------------------------------------------
AIC Code The AIC Code of Corporate Governance
-----------------------------------------------------
AIFM Alternative Investment Fund Manager
-----------------------------------------------------
AIFMD Alternative Investment Fund Managers Directive
-----------------------------------------------------
BTM Behind the Meter energy generation fed directly
to the off-taker and not via the national grid
-----------------------------------------------------
COD Commercial Operation Date
-----------------------------------------------------
Construction In relation to projects, means those projects
phase, in construction which are in, or about to commence the installation.
or implementation
phase
-----------------------------------------------------
Company Atrato Onsite Energy Plc
-----------------------------------------------------
DCF Discounted cash flow
-----------------------------------------------------
DTR Disclosure Guidance and Transparency Rules
-----------------------------------------------------
EPC Engineering, procurement and construction obligations
in respect of the asset
-----------------------------------------------------
EPS Earnings per share, calculated as the profit
for the period after tax attributable to members
of the parent company divided by the weighted
average number of shares in issue in the period
-----------------------------------------------------
ESG Environmental, Social and Governance
-----------------------------------------------------
ESG Risk Assessment Investment Advisers proprietary ESG due diligence
risk assessment framework
-----------------------------------------------------
FCA Financial Conduct Authority
-----------------------------------------------------
FMV Fair market value
-----------------------------------------------------
FRC Financial Reporting Council
-----------------------------------------------------
GHG Greenhouse Gas
-----------------------------------------------------
GW Unit of power abbreviation for Gigawatt
-----------------------------------------------------
GWh Unit of energy usage abbreviation for Gigawatt-hour
-----------------------------------------------------
HMRC His Majesty's Revenue and Customs
-----------------------------------------------------
Holdco Atrato Onsite Energy Holdco Limited
-----------------------------------------------------
IAA Investment Advisory Agreement
-----------------------------------------------------
Investment Adviser The appointed Investment Adviser as per the
Investment Advisory Agreement
-----------------------------------------------------
Portfolio The portfolio of assets in which the Company
through Holdco and the underlying SPVs have
invested in solar generation assets.
-----------------------------------------------------
IPO An initial public offering (IPO) refers to the
process of offering shares of a corporation
to the public in a new stock issuance
-----------------------------------------------------
IFRS International accounting standards in conformity
with the requirements of the Companies Act 2006
-----------------------------------------------------
ITC Investment Trust Company is a company that obtained
HMRC clearance as an Investment Trust.
-----------------------------------------------------
MW Unit of power abbreviation for Megawatt
-----------------------------------------------------
MWh Unit of energy usage abbreviation for Megawatt-hour
-----------------------------------------------------
NAV Net Asset Value
-----------------------------------------------------
O&M Operations and Maintenance
-----------------------------------------------------
OCR Ongoing charges ratio
-----------------------------------------------------
P10 Annual power production level that is predicted
to be exceeded 10% of the time
-----------------------------------------------------
P50 Annual power production level that is predicted
to be exceeded 50% of the time
-----------------------------------------------------
P75 Annual power production level that is predicted
to be exceeded 75% of the time
-----------------------------------------------------
P90 Annual power production level that is predicted
to be exceeded 90% of the time
-----------------------------------------------------
PPA Power purchase agreement
-----------------------------------------------------
Shares Ordinary shares of the Company
-----------------------------------------------------
Solar assets Solar energy assets
-----------------------------------------------------
Solar PV Solar photovoltaic
-----------------------------------------------------
SPV Special Purpose Vehicle
-----------------------------------------------------
TCFD Task Force on Climate-Related Financial Disclosures
-----------------------------------------------------
UK Code UK Corporation Governance Code
-----------------------------------------------------
Total Shareholder The movement in share price over a period plus
Return dividends declared for the same period expressed
as a percentage of the share price at the start
of the Period
-----------------------------------------------------
Directors, advisers and Company details
Directors Juliet Davenport (Chair)
Faye Goss (Chair of Management Engagement
Committee)
Duncan Neale (Chair of Audit Committee)
Company Secretary Apex Secretaries LLP
6th Floor, 125 London Wall, London, EC2Y
5AS
Registrar Link Market Services Limited
10th Floor, Central Square, 29 Wellington
Street, Leeds, LS1 4DL
AIFM JTC Global AIFM Solutions Limited
Ground floor, Dorey Court, Admiral Park,
St Peter Port, Guernsey, Channel Islands,
GY1 2HT
Investment Adviser Atrato Partners Limited
36 Queen Street, London, EC4R 1BN
Corporate Broker Stifel Nicolaus Europe
150 Cheapside, London, EC2V 6ET
Auditors BDO LLP
55 Baker Street, London, W1U 7EU
Financial PR Advisers KL Communications
40 Queen Street, London, EC4R 1DD
Website www.atratorenewables.com
Registered Office 6(th) Floor, 125 London Wall, London, EC2Y
5AS
Stock exchange ticker ROOF
and ISIN GB00BN497V39
This report will be available on the Company's website.
END
[1] The Net Asset Value per ordinary share, ordinary share price
premium to NAV and ongoing charges ratio as alternative performance
measure ("APMs"). The APMs within the accounts are defined on pages
111 to 112
[2] Gross investment including existing project finance
[3] A sleeved PPA is an agreement to buy electricity directly
from a generator via a grid connected intermediary
[4] Expected dividend cover once portfolio fully operational
[5] Including post balance sheet events
[6] Gearing expressed as drawn debt to gross assets
[7] Subject to lender's approvals
[8] Including post balance sheet events
[9] Once fully operational
[10] Based on GOV UK publications for scope 1 and 2 emission
conversion factors
[11] Based on Ofgem average UK annual household energy
consumption of 2,700kWh
[12] Including post balance sheet activity and excludes Vale of
Mowbray investment
[13] Including post balance sheet events
[14] Weighted average unexpired contracted term; weighted on
invested capital
[15] The Green Economy Mark recognises London-listed companies
and funds that derive more than 50% of their revenues from products
and services that are contributing the environmental objectives
such as climate change mitigation and adaptation, waste and
pollution reduction, and the circular economy.
[16] The Companies (Directors' Report) and Limited Liability
Partnerships (Energy and Carbon Report) Regulations 2018 implement
the government's policy on Streamlined Energy and Carbon Reporting
(SECR).
[17] This target follows best practice and is in alignment with
the latest SBTi guidance for financial institutions.
[18] As the Company does not have an office space or employees
to make waste.
[19] Based on 0.2MW per acre
[20] Solar Energy UK Briefing, Everything under the Sun, The
Facts About Solar Energy (Mar 2022): Briefing-Fact-Checker-1.pdf
(solarenergyuk.org)
[21] Based on 0.2MW per acre
[22] British Energy Security Strategy 2022:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1069969/british-energy-security-strategy-web-accessible.pdf
[23] Review of Electricity Market Arrangements:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1098100/review-electricity-market-arrangements.pdf
[24] Pablo Ballesteros-Perez (2018). Incorporating the effect of
weather in construction scheduling and management with sine wave
curves, application in the UK
[25] Gov.uk: Counting the cost of flooding. 2021
[26] COP28 UAE, COP28 delivers historic consensus in Dubai to
accelerate climate action (13 December, 2023).
https://www.cop28.com/en/news/2023/12/COP28-delivers-historic-consensus-in-Dubai-to-accelerate-climate-action.
[27] COP28 UAE, COP28 Global Renewables and Energy Efficiency
Pledge,
https://www.cop28.com/en/global-renewables-and-energy-efficiency-pledge
.
[28] Further details of the data sources and methodology used
for the scenario analysis can be found in Appendix A.
[29] Avoided emissions compared to UK-specific electricity grid
average. As at 30 September 2023, GBP121 million had been committed
or deployed into UK solar technology across 40 projects with a
combined capacity of 147MW. Post balance sheet, this has increased
to 41 projects with a capacity of 182MW, across 11 off-takers. Once
operational, these assets are anticipated to generate 173GWh clean
energy per annum, avoiding the equivalent of 37,000 tonnes of
carbon emissions or powering 64,000 homes. This is calculated using
the GOV UK conversion factors 2023: UK electricity grid average
factor (Scope 2) and transmission and distribution UK electricity
factor (Scope 3).
[30] The GHG inventory emissions have not been independently
verified or assured.
[31] Includes the embodied emissions of the solar panels
purchased in the reporting period only.
[32] 2023 is the first year of reporting for most metrics, so no
prior year comparisons have been included in this table. The 2024
Annual Report will allow for trend analysis and will compare
metrics disclosed in 2023.
[33] This target follows best practice and is in alignment with
the latest SBTi guidance for financial institutions.
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END
FR GLGDBXSBDGSB
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