REG - Gresham HouseRE VCT2 - Half Year Results
25/06/2024 10:30
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240625:nRSY7905Ta&default-theme=true
RNS Number : 7905T Gresham House Renewable EnergyVCT2 25 June 2024
25 June 2024
Gresham House Renewable Energy VCT 2 PLC
("VCT", the "Company")
Half Year Results
The Company is pleased to announce its half-year results for the period ended
31 March 2024 ("Half Year Results").
The Half Year Results are available on the Company's website at
https://greshamhouse.com/real-assets/new-energy/gresham-house-renewable-energy-vct-2-plc
(https://greshamhouse.com/real-assets/new-energy/gresham-house-renewable-energy-vct-2-plc)
.
In accordance with Listing Rule 9.6.1, copies of these documents will also be
available for viewing shortly at the National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
LEI: 213800GQ3JQE2M214C75
For further information, please contact:
Gresham House Asset Management renewablevcts@greshamhouse.com (mailto:renewablevcts@greshamhouse.com)
Investor Relations Tel: 020 3837 6270
JTC (UK) Limited GreshamVCTs@jtcgroup.com (mailto:GreshamVCTs@jtcgroup.com)
Company Secretary
Tel: 020 3846 9774
SHAREHOLDER INFORMATION
Performance summary
31 March 2024 30 September 31 March
2023 2023
Pence Pence Pence
Net asset value per Ordinary Share 45.6 55.3 87.6
Net asset value per 'A'Share 0.1 0.1 0.1
Cumulative dividends * 83.1 75.6 59.1
Total Return * 128.8 131.0 146.8
Share Price - Ordinary (GV2O) 48.0p 69.0p 85.0p
Share Price - 'A'Shares (GV2A) 5.05p 5.05p 5.05p
* for a holding of one Ordinary Share and 'A'Share
Dividends
Ordinary 'A'Shares Total
Shares
Pence Pence Pence
2011 Final 30 March 2012 3.5 - 3.5
2012 Final 28 March 2013 5.0 - 5.0
2013 Special 28 February 2014 7.3 3.7 11.0
2013 Final 28 March 2014 5.0 - 5.0
2015 Interim 18 September 2015 5.0 - 5.0
2016 Interim 16 September 2016 5.0 - 5.0
2017 Interim 15 September 2017 5.0 - 5.0
2018 Interim 14 December 2018 5.5 0.5 6.0
2019 Interim 20 December 2019 5.3 0.5 5.8
2020 Interim 31 December 2020 5.3 0.5 5.8
2022 Interim 27 January 2023 2.0 - 2.0
2023 Interim 28 July 2023 16.5 - 16.5
2023 Interim 21 December 2023 7.5 - 7.5
77.9 5.2 83.1
Dividends are paid by the registrar on behalf of the VCT. Shareholders who
wish to have dividends paid directly into their bank account and did not
complete these details on their original application form can complete a
mandate form for this purpose. Forms can be obtained from Link Group, whose
contact details are shown in the Interim Report.
Shareholder information is continued in the Interim Report.
CHAIRMAN'S STATEMENT
I am pleased to present the Half-Yearly Report of Gresham House Renewable
Energy VCT2 plc for the period ended 31 March 2024.
Following the outcome of the continuation vote in July 2021, and therefore the
decision to pursue a Managed Wind Down, the Board together with the Investment
Adviser has continued to work towards realising the remaining Company's
portfolio of assets in a manner that achieves a balance between maximising net
value received from the sale of assets and making a timely return of capital.
Following the sale of two ground-mounted solar sites and approximately 1,600
commercial and residential solar installations to Downing Renewables &
Infrastructure Trust plc in April 2023, as reported in the Annual Report for
the year end 30 September 2023, the Board has continued to seek an acquiror
for the remaining assets in the portfolio, namely the Apollo solar portfolio
and a small portfolio of micro wind assets. The Board appointed Jones Lang
LaSalle (JLL) to assist with this phase of the Managed Wind Down process. The
Apollo assets continue to be managed by the Investment Adviser with the focus
on delivering the best possible yield whilst minimising costs ahead of a sale
process. The Investment Adviser has also been diligently supporting the Boards
of the VCTs and JLL in progressing the ongoing sale process.
A number of non-binding offers were received for the Apollo assets. JLL, the
Boards of both VCTs and the Investment Adviser continue to engage with the
bidders to clarify certain aspects of the offers. It is a very challenging
market in which to sell such assets given the higher interest rate
environment, which means investors return expectations are higher, compounded
by falling power prices. The age and relatively small size of the portfolio
have proved an issue for some investors. The extant financing has also proved
unattractive for others. Limited investor liquidity and the sheer range of
investment opportunities also mean that prospective buyers with capital to
deploy are being highly selective and/or opportunistic in pricing assets for
sale. However, the Board remains determined to seek the best outcome for
Shareholders as soon as possible and is particularly mindful of the
proportionately higher costs associated with running a relatively small fund.
The technical performance of the Apollo portfolio has improved following
maintenance and repowering works carried out in previous years and is
satisfactory. However given the age of the portfolio, further technical
maintenance has been necessary during the half-year which has impacted
generation. Total revenue was also affected by poor irradiation, particularly
in December 2023 and February 2024, resulting in a shortfall of 7.0% to budget
in the six month period ended 31 March 2024. The value of the Company's assets
has also been negatively impacted by the latest independent power price
forecasts used in this half-year valuation which project both lower short term
and long-term power prices than assumed in the last year end valuation.
Moreover the reduction in inflation assumptions used in this half-year
valuation in line with the forecast long-term Bank of England (BoE) rates has
also negatively impacted the value of the assets. The discount rate used to
value the future cash flows of the Apollo assets has been left unchanged.
At 31 March 2024, the Company's NAV per 'pair' of shares (one Ordinary share
and one 'A' Share) was 45.7p compared to 55.4p at 30 September 2023. This
reduction is due to the payment of dividends totalling 7.5p per Ordinary Share
largely from the proceeds from the sale of the Surya assets in April 2023, and
also the consequence of a reduction in value of the remaining portfolio.
Investment portfolio
At 31 March 2024, the VCT held a portfolio of eleven investments, which were
valued at £16.1mn (30 September 2023: £18.0mn). Against this the VCT owes
£4.3mn of loans (30 September 2023: £3.7mn) due to the investment portfolio
companies which, including the net current assets of £0.2mn (30 September:
£0.2mn), equals net assets of £12.0mn (30 September 2023: £14.5mn) per the
VCT's balance sheet. There have been no follow-on acquisitions and no
disposals in the six month period under review.
The Board's valuation of £16.1mn is based on the continued use of a
discounted cash flow model for consistency with all the previous annual
valuation exercises. The key assumptions in this valuation model are updated
by the Investment Adviser to reflect the current challenging market conditions
and asset performance. These assumptions are reviewed and approved by the
Board. This valuation approach is consistent with the VCT's peer group of
comparable companies. However, the Board notes that this internal valuation
approach may lead to valuations which differ from offers made by prospective
buyers using different assumption sets, notably future power prices,
inflation, discount rates, interest rates, as well as the relative strength of
the competitive environment. There is no guarantee therefore that the internal
valuation will be realised in any current or future sales process.
The portfolio is analysed (by value) between the different types of assets as
follows:
Ground mounted solar 94.1%
Small wind including Tumblewind Limited 5.9%
Non-renewable assets 0.0%
The Board has reviewed the investment valuations at the half-year end and
notes that the valuation of the renewables portfolio has decreased by £1.5mn
or 8.5%, largely due to the fall in electricity prices and inflation
assumptions.
The portfolio still benefits from having locked in PPAs at higher power prices
which have generated strong returns over the first six months of this year.
There has been an ongoing issue in relation to the grid connection of the
South Marston solar park. This arose from the decision of the offtaker of the
electricity (Honda) to close its factory at the site that the solar park
supplies and to sell the site to Panattoni. Panattoni, a provider of
logistic facilities, has now completed the acquisition of Honda's site and has
confirmed that it wants to use the power from South Marston to supply its
tenants once the new logistics facilities have been constructed. The
Investment Adviser has been negotiating with both Honda and Panattoni over a
number of months to ensure that existing agreements with Honda will be novated
to Panattoni as well as securing improvements to those agreements where needed
to give South Marston better legal protection. The Board is pleased to
announce that all of the amendments and improvements to the existing
agreements which it sought have now been agreed with all parties and will be
signed shortly following consent from the VCT's lenders, whose consent is
required under the Loan Facility Agreement.
In order to maintain VCT status, the Company needs to ensure that it maintains
certain percentages of qualifying investments within its portfolio. The Board
anticipates that the Company will fall below these percentages as the asset
realisation process continues. Therefore, to avoid a possible breach of VCT
status, the Board has been advised that the Company may in due course need to
start the process of a members' voluntary liquidation which would involve
delisting the Company's shares. The Board continues to monitor those ratios to
ensure that the Company is compliant at all times with all requirements.
Venture Capital investments
The VCT holds two non-renewables investments. As previously reported, these
companies entered administration in Q2 2023 with no recovery of any value
expected.
Further detail on the investment portfolio is provided in the Investment
Adviser's Report.
Net asset value and results
At 31 March 2024, the Net Asset Value (NAV) per Ordinary Share stood at 45.6p
and the NAV per 'A'Share stood at 0.1p, producing a combined total of 45.7p
per 'pair' of shares. The movement in the NAV per share during the half-year
is detailed in the table below:
Pence per
'pair' of shares
NAV as at 1 October 2023 55.4
Less dividend payments during the half-year (7.5)
Valuation decrease on assets still held (6.5)
Income less expenses 4.3
NAV as at 31 March 2024 45.7
The NAV Total Return (NAV plus cumulative dividends) has decreased by 1.7% in
the six months and now stands at 128.8p excluding the initial 30% VCT tax
relief, compared to the cost to investors in the initial fundraising of £1.00
or 70.0p net of income tax relief.
The loss on ordinary activities after taxation for the half-year was £0.6mn
(31 March 2023: £0.4mn), comprising a revenue profit of £1.1mn (31 March
2023: £0.7mn) and a capital loss of £1.7mn (31 March 2023: capital loss of
£1.1mn) as shown in the Income Statement.
Dividends
In the half-year period, the Board was pleased to declare a 7.5p per Ordinary
Share interim dividend. The 7.5p interim dividend related to income generation
from the portfolio, but part of which was also the distribution of the
remaining proceeds arising from the sale of the Surya assets in April 2023.
This dividend was paid on 21 December 2023 to Shareholders on the register on
1 December 2023. No amounts were payable to 'A'Shares during the six months
period.
Following the 7.5p interim dividend payment above, cumulative dividends paid
since inception for a combined holding of one Ordinary Share and one 'A'Share
increased to 83.1p (30 September 2023: 75.6p).
2024 Annual General Meeting (AGM)
The VCT's thirteenth AGM was held on 19 March 2024 at 12.00 p.m. All
resolutions were passed by way of a poll.
Acquisition of Gresham House plc, statement regarding Investment Adviser
Further to the announcement on 17 July 2023 of the acquisition of Gresham
House plc by Searchlight Capital Partners L.P., the acquisition has now
completed, and Gresham House plc delisted from the London Stock Exchange on
20 December 2023, to become a privately owned company. The acquisition is
expected to have minimal impact on the Company and business is continuing as
usual. For further information please visit the website link:
https://greshamhouse.com/about/ (https://greshamhouse.com/about/) .
Amendment to Investment Advisory Agreement
The Investment Advisory Agreement (IAA), between the Company and its
Investment Adviser, Gresham House Asset Management Limited (Gresham House),
provides that the annual running costs of the Company (including the
Investment Adviser fee) for the financial year are subject to a cap of 3.0% of
net assets. Investment Advisory fees payable to Gresham House are subject to a
claw back for costs incurred in excess of this cap. Following the part sale of
assets in April 2023 and subsequent dividend paid as a result of the 13 July
2021 shareholder vote to wind-down the Company, the Company's net assets have
reduced to a level not anticipated when the IAA agreement was agreed and
signed. Due to this significant reduction in the NAV as a result of the
Managed Wind Down process, the annual running costs (being, all costs and
expenses of a regular and anticipated nature) for the financial year ending 30
September 2024 are now expected to exceed the 3% cap, currently forecasted to
be around 4%. As many costs incurred in running a listed company are largely
fixed and with the Board noting that the annual running costs cap is not
intended to penalise the Investment Adviser for a reduction in NAV in a wind
down situation, it has been agreed between the Board and Gresham House that
the cap of net assets should be revised to the lesser of 5% of net assets and
£625,000. The basis of calculation of investment advisory fees, calculated as
1.15% of net assets, are unaffected.
Outlook
As noted in previous reports, the Board has not been able to realise the sale
of the Company's Apollo assets as quickly as Shareholders may have expected,
due to extremely challenging market conditions and issues on certain assets
(notably South Marston) which needed resolving. The Board continues to
ensure that every effort is being made to maximise Shareholder returns.
Following a change in corporate finance adviser, the Board is focused on
realising value for Shareholders through the sale process and this will remain
its priority until achieved.
In the meantime, as evidenced by the most recent dividend payment on 21
December 2023, the remaining portfolio is generating strong cash flows for the
Company. Despite this, costs throughout the remaining portfolio continue to
rise and, with only the Investment Advisers fees linked to the NAV, the
Company's costs largely remain at the level pre-sale of assets.
The strategy remains to find a motivated and willing purchaser who offers
appropriate value for the assets which the Company is seeking to sell.
Once again, I would like to thank Shareholders for their patience and
continued interest and support.
Christian Yates
Chairman
24 June 2024
INVESTMENT ADVISER'S REPORT
Portfolio highlights
Gresham House Renewable Energy VCT2 plc remains principally invested in the
renewable energy projects that the VCT and Gresham House Renewable Energy VCT1
plc (VCT1) have co-owned for between eleven and thirteen years, depending on
the asset. Following the sale of 13MWp of capacity (the Surya assets) in April
2023, the total generation capacity of assets co-owned by the VCT as 31 March
2024 was 21.3MWp.
The Investment Adviser has repeated the internal valuation exercise on the
same basis as previous valuations being a discounted cash flow model approach,
for the purpose of determining the Net Asset Value and has provided the
relevant information to the Board of the VCT, to determine the value of the
assets. For the Apollo assets, the valuation presented in this half yearly
report reflects the Directors' view of the fair value of the assets which
incorporates potential costs (such as the EGL) a future acquirer may incur
through holding the assets as well as their view on other key assumptions that
determine future operational and financial performance.
During the half year, the total revenue from renewable energy generation was
£3.6mn (31 March 2023: £5mn for the whole portfolio, £3.5mn for the
retained assets i.e. following the sale of the Surya assets). 74% of this
revenue is from Feed-in- Tariff revenues which are set by the UK Government.
The total revenue from the renewable assets was 7% below forecast budget,
primarily due to lower than forecast solar irradiation in the period.
Due to the age of the VCT's assets, additional maintenance is required to keep
them operating effectively although much of this work has been completed and
the portfolio now benefits from improved technical performance. Further
unscheduled maintenance work will be required on some of the assets that have
not been upgraded yet, to maintain good technical performance.
During the period, actual solar irradiation was 8.0% below forecast, with
December 2023 and February 2024 in particular seeing much less solar
irradiation (sun) than in previous years.
In terms of the macroeconomic environment, the effects on the portfolio are
summarised below:
§ Power prices in the market have dropped materially from the elevated levels in
2022/23 although remaining volatile. Fixed-price contract arrangements for the
sale of power protects the assets from this price volatility in the short
term. The value of these assets relative to the corresponding period has been
negatively impacted by the latest long term independent power price forecasts
which are lower than the levels assumed in the last valuation.
§ With much of the portfolio's revenue being inflation linked, higher and more
sustained inflation increases the portfolio's value. The inflation assumptions
used in this valuation have been reduced in line with the forecast long-term
Bank of England rates, which also has a negative impact on the valuation.
Discount rates have been held at the same level as the previous valuation,
which reflects the Board's view of rates in the market at this time.
The VCT held two investments in what were expected to be growth businesses:
bio-bean Limited and Rezatec Limited. As highlighted in the last annual
report, both businesses regrettably went into administration and as such their
holding value was written down to zero.
Portfolio composition
31 March 2024 30 September 2023
Asset type kWp VCT 2 Value** % of Portfolio value Value VCT 2** % of Portfolio value
£'000
£'000
Ground mounted solar (FiT)* 20.325 £15,153 94.1% £15,395 85.7%
Wind assets (Feed In Tariff) 1.030 £951 5.9% £2,568 14.3%
TOTAL 21.355 £16,104 100.0% £17,963 100.0%
*Feed in Tariff (FiT)
** The investment values above are gross and include loans owed by the VCT
to the investment portfolio companies of £4.3mn at 31 March 2024 (30
September 2023: £3.7mn) as reflected in the net assets on the VCT's balance
sheet.
The 21.3MWp of renewable energy projects held in the portfolio of the VCT and
VCT1 as 31 March 2024 generated 5,572 MWh of electricity over the half year,
sufficient to meet the annual electricity consumption of circa 2,064 homes(1).
The Investment Adviser estimates that generating this output from renewable
energy sources such as solar and wind, rather than coal or gas-fired power
stations, saves 2,363 tonnes(2) of CO(2).
(1 ) Assuming an average annual electricity usage per household of 2.7MWh, as
quoted by Ofgem
(https://www.ofgem.gov.uk/information-consumers/energy-advice-households/average-gas-and-electricity-use-explained)
October 2023. "Homes powered" calculated using Renewable UK methodology: MWh
divided by average annual domestic electricity consumption.
(2) Based on estimated carbon dioxide emissions from electricity supplied by
the Department for Energy Security & Net Zero
(https://www.gov.uk/government/statistics/electricity-chapter-5-digest-of-united-kingdom-energy-statistics-dukes)
assuming an "all non-renewable fuels" emissions statistic of 424tCO2/GWh of
electricity supplied, DESNZ statistics July 2023, Digest of UK Energy
Statistics, Table 5.14 ("Estimated carbon dioxide emissions from electricity
supplied"). "Carbon avoided" calculated using Renewable UK methodology: Carbon
reduction is calculated by multiplying the total amount of electricity
generated by solar and wind per year by the number of tonnes of carbon which
fossil fuels would have produced to generate the same amount of electricity.
Portfolio summary:
Renewable Energy Revenue By Asset Type
Ground Mounted Solar (FIT) 93.03%
Wind Assets 6.97%
The performance against budget for the half year period is shown below:
1 October 2023 - 31 March 2024
Asset type Budgeted revenue Actual revenue Revenue performance
Ground mounted solar (FiT) 93.4%
3,544,676 3,309,659
Micro-wind assets 87.3%
284,245 248,075
Total 92.9%
3,828,921 3,557,734
The revenue is affected by:
§ renewable energy resources (solar irradiation & wind);
§ the technical performance of the assets; and
§ the revenue per unit of energy generated.
The difference between budgeted and actual revenue is due to the difference
between forecast generation and actual generation as power prices and tariff
levels were known at the time of setting the budget.
The ground mounted solar assets which make up the bulk of the portfolio,
performed 7% below budgeted output, a somewhat lower performance than the
corresponding period in the prior financial year, although this is explained
largely by the poor weather conditions.
Renewable energy resources
The portfolio is heavily weighted to solar (95.2% by capacity of the renewable
assets, and 94.3% by value of the portfolio).
Technical performance
The table below shows the technical performance, (including in the case of
solar, the impact of the lower irradiation), for each of the groups of assets.
1 October 2023 - 31 March 2024 1 October 2022 - 31 March 2023
Asset type Budgeted Actual % of Technical Actual output
output kWh
output kWh
performance**
kWh (in the
same period
last year)*
Ground mounted solar (FiT) 5,630,443 5,011,043 89.0% 5,520,452
Micro-wind assets 642,972 561,154 87.3% 479,969
TOTAL 6,273,415 5,572,197 88.8% 6,000,421
*restated
** Technical performance is a measure of the percentage of actual output over
budgeted output.
Three of the six ground-mounted solar projects have been repowered and other
repairs have been carried out following successful warranty claims. This has
led to improved performance across the portfolio. Two of the sites, Kingston
Farm and Lake Farm are experiencing faults due to the early deterioration of
solar panels which in turn leads to water ingress. The Investment Adviser has
raised warranty claims against the two manufacturers, both of which are
engaging with the process.
Two smaller sites, Wychwood and Parsonage, have some inverters that no longer
function. These inverters are now obsolete. The Investment Adviser has
received quotations to repower both these sites. The Investment Adviser is
considering repowering all Wychwood inverters which would produce enough
working spares to be used to replace failed inverters at Parsonage. This
approach is cost effective and should extend the economic life of Parsonage by
a few years as well as boosting the technical performance of Wychwood.
South Marston (4.97MW) has historically sold all of its power output to the
Honda plant in Swindon. The Honda plant was closed in 2021 and the site was
sold to Panattoni , a commercial real estate/logistics developer, in February
2024. Panattoni have been granted planning permission to redevelop the site,
creating 10 buildings to be used as manufacturing sites and distribution
warehouses. This transfer of ownership and redevelopment requires changes to
the South Marston grid connection arrangements. Panattoni is keen to make
the solar power available to their future tenants and so is being supportive
of these changes. The Investment Adviser has been liaising with Honda,
Panattoni, and various advisers to ensure the viability of the solar park and
continuity of export of power. The new contracts between South Marston
Renewables Ltd, Honda and Panattoni are now in agreed form and awaiting lender
consent.
The micro-wind portfolio performed 12.7% lower than budget (23.1% lower than
budget in the corresponding period). The Investment Adviser attributes the
lower performance to a combination of inverter failures and general wear and
tear which leads to turbines being off for refurbishment, where applicable.
Micro-wind assets account for less than 5% of the portfolio in terms of
capacity, so the Investment Advisor seeks to balance performance against
considerable refurbishment costs, given the current sales process.
The entire wind portfolio is composed of R9000 turbines, which have generally
performed satisfactorily and have the support of an experienced O&M
contractor with access to spare parts and maintenance crews.
Revenue per MWh of renewable energy generated
The VCT's assets benefit from revenues linked to the Retail Price Index (RPI),
with 74% of total revenues generated in the period earned from government
backed incentives for generating renewable electricity. This income is fixed
by the government, is RPI linked and is a significant driver of value in the
portfolio.
Total revenues per MWh generated by the solar assets were just over £670 for
the year ended 30 September 2023 compared to £500 the year before. These are
projected to fall by approximately 5% in the financial years ending 30
September 2024 and 30 September 2025, as a result of the lower power prices
estimated in the industry forecasts. This modest reduction in revenues
reflects the fact that the majority of revenues come from the subsidy,
demonstrating the value of holding subsidised assets in the portfolio during
periods of volatile electricity prices.
The significance of the government backed incentives to revenues is shown by
the following chart.
VCT portfolio revenue profile
during period 1 October 2023 - 31 March 2024
Private Wire (Ground Mounted) 1%
Other (Ground Mounted) 1%
FIT (Ground Mounted) 68%
FIT (Wind Assets) 6%
Export (Ground Mounted) 23%
Deemed Export (Wind Assets) 1%
Operating costs
The majority of the cost base is fixed and/or contracted under long-term
contracts and includes rent, business rates, and regular O&M costs. Many
of these costs have also risen in line with inflation.
The most material variable cost item is for repair and maintenance. Repair and
maintenance expenditure for the remaining solar panels is largely covered by
cash held in the maintenance reserve totalling £0.7mn at the end of the half
year.
Portfolio valuation
The Investment Adviser is supporting the sales adviser (JLL) in seeking to
find a buyer for the VCT's remaining solar assets and notes that a binding
offer between a willing buyer and willing seller to acquire the assets will be
a good indication of value. No binding nor firm offer has been received to
date.
The NAV of the renewable portfolio is derived from the discounted future cash
flows generated by the renewable energy assets, over their remaining
lifetimes, as well as the cash held by the companies in the portfolio and the
cash held by the VCT.
The future cash flow projections for renewable assets are impacted by:
§ Renewable energy resource. The assumptions for solar irradiation have not
changed since the corresponding period and will be reviewed again at the time
of the full year valuation.
§ Technical performance. The repairs at Lake Farm, Kingston Farm and
Beechgrove Farm resolved their historic performance issues, and so the
technical performance assumptions used in the last valuation have been
maintained.
§ Power prices. Power price forecasts have been updated to reflect
contracted positions in the near term followed by latest independent industry
forecasts.
§ Asset Life. The assets are valued based on the duration of subsidies, the
lease terms and the length of the planning permissions, without assuming
extensions.
§ Costs. Current costs for the assets are included, reflecting all
commercial negotiations, expectations for maintenance costs after the assets
are repaired and the need to account for the costs of repairs to equipment
such as switchgear and transformers.
§ Corporation tax. The actual corporation tax paid, (corporation tax rate
increased to 25% effective from 1 April 2023), will impact on the cash
available to Shareholders.
§ Inflation. With most of the revenues being linked to RPI, any increase in
inflation projections increases the overall profitability, and therefore
valuation of the assets. This is offset, to some degree, by debt service for
the debt facility also being indexed to inflation with an increase in
inflation resulting in higher interest charges.
The discount rates used to value the future cash flows have been left
unchanged for the solar assets and increased for the micro-wind assets, to
reflect the Investment Adviser's experience in the market and evidence of
third-party transactions.
Consistent with the year end valuation, the valuation of the portfolio at 31
March 2024 also takes into account the Electricity Generator Levy (EGL). The
EGL is likely to be payable by an acquiror of these assets. As previously
reported, a portfolio value based purely on the cash flows generated by the
assets would be somewhat higher for the reason that the Company itself would
not be subject to the EGL (because the Company's generation output falls below
the threshold for the EGL and the revenues are within the £10mn allowance).
Outlook
The Investment Adviser's continued focus is to maximise generation and
therefore revenues from the remaining assets, whilst supporting the Board's
efforts to realise the maximum exit value for Shareholders.
The assets that were enhanced through inverter and transformer replacements
demonstrate a sustained improvement in performance. The generation outlook is
therefore improved. The Investment Adviser remains vigilant for signs of
further degradation so that the impact on availability can be managed and
reduced.
The effect of power prices locked in at high levels should translate into
improved revenue and cash flow for the remaining assets over the next few
years.
Gresham House Asset Management Limited
24 June 2024
UNAUDITED INCOME STATEMENT
for the six months ended 31 March 2024
Year
Six months ended Six months ended ended
31 March 2024 31 March 2023 30 September
2023
Revenue Capital Total Revenue Capital Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Income 1,445 - 1,445 1,024 - 1,024 1,055
Losses on investments - (1,596) (1,596) - (1,103) (1,103) (4,892)
1,445 (1,596) (151) 1,024 (1,103) (79) (3,837)
Investment advisory fees (73) (24) (97) (103) (34) (137) (314)
Other expenses (214) (98) (312) (219) - (219) (409)
Loss on ordinary 1,158 (1,718) (560) 702 (1,137) (435) (4,560)
activities before taxation
Tax on total comprehensive income and ordinary activities - - - - - - -
Loss attributable to 1,158 (1,718) (560) 702 (1,137) (435) (4,560)
equity Shareholders
Earnings per Ordinary Share 4.4p (6.5)p 2.1p 2.7p (4.3)p (1.6)p (17.4p)
Earnings per 'A'Share - - - - - - -
The total column within the Income Statement represents the Statement of Total
Comprehensive Income of the VCT prepared in accordance with Financial
Reporting Standards (FRS 102). The supplementary revenue and capital return
columns are prepared in accordance with the Statement of Recommended Practice
issued in November 2014 (updated in July 2022) by the Association of
Investment Companies (AIC SORP).
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement as noted above.
UNAUDITED BALANCE SHEET
as at 31 March 2024
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Current assets
Investments (note 9) 16,104 26,877 17,963
Costs incurred on sale of VCT's assets 237 542 252
Debtors 47 114 80
Cash at bank and in hand 2 24 4
16,390 27,557 18,299
Creditors: amounts falling due within one year (4,424) (2,472) (1,926)
Net current assets 11,966 25,085 16,373
Creditors: amounts falling due after more than one year - (2,162) (1,887)
Net assets 11,966 22,923 14,486
Capital and reserves
Called up share capital 71 71 71
Share premium account (note 8) - 9,734 -
Treasury shares (note 8) (3,403) (3,403) (3,403)
Capital redemption reserve (note 8) - 1 -
Special reserve (note 8) 8,733 4,290 9,713
Revaluation reserve (note 8) 10,025 16,158 11,546
Capital reserve - realised (note 8) (3,462) (4,043) (3,265)
Revenue reserve (note 8) 2 115 (176)
Equity Shareholders' funds 11,966 22,923 14,486
Net asset value per Ordinary Share 45.6p 87.6p 55.3p
Net asset value per 'A'Share 0.1p 0.1p 0.1p
45.7p 87.7p 55.4p
The financial statements of Gresham House Renewable Energy VCT2 plc were
approved and authorised for issue by the Board of Directors and were signed on
its behalf by:
Christian Yates
Chairman
Company number: 07378395
Date: 24 June 2024
UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2024
Called up Share Premium Capital redemption reserve Treasury Special Revaluation Capital Reserve -realised Revenue Total
share capital account shares reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 30 September 2022 71 9,734 1 (3,403) 4,813 16,869 (3,617) (587) 23,881
Cancellation of Share Premium and Capital redemption reserve - (9,734) (1) - 9,735 - - - -
Dividend paid - - - - (4,835) - - - (4,835)
Total comprehensive loss - (5,323) 352 411 (4,560)
- - - -
As at 30 September 2023 71 - - (3,403) 9,713 11,546 (3,265) (176) 14,486
Total comprehensive loss - - - - - (1,521) (197) 1,158 (560)
Dividend paid - - - - (980) - - (980) (1,960)
As at 31 March 2024 71 - - (3,403) 8,733 10,025 (3,462) 2 11,966
UNAUDITED STATEMENT OF CASH FLOWS
for the six months ended 31 March 2024
31 March 31 March 30 September
2024 2023 2023
£'000 £'000 £'000
Cash flows from operating activities
Loss on ordinary activities before taxation (560) (435) (4,560)
Losses on investments 1,596 1,103 4,892
Dividend income (1,425) (998) (998)
Interest income (20) (26) (53)
Increase/(decrease) in other creditors 608 89 (130)
Increase/(decrease) in other debtors 9 (2) -
Net cash inflow/(outflow) from operating activities 208 (269) (849)
Cash flows from investing activities
Net proceeds from sale of investments (75) - 4,453
Costs incurred on sale of VCT's assets 22 (221) (124)
Interest received 40 38 97
Dividend income received 1,425 998 998
Net cash inflow from investing activities 1,412 815 5,424
Net cash inflow before financing activities 1,620 546 4,575
Cash flows from financing activities
Equity dividends paid (1,960) (523) (4,835)
Proceeds from loans - - 263
Redemption of loan notes 338 - -
Net cash outflow from financing activities (1,622) (523) (4,572)
Net (increase)/decrease in cash (2) 23 3
Cash and cash equivalents at start of period 4 1 1
Cash and cash equivalents at end of period 2 24 4
Cash and cash equivalents comprise:
Cash at bank and in hand 2 24 4
Total cash and cash equivalents 2 24 4
SUMMARY OF INVESTMENT PORTFOLIO AND MOVEMENTS
for the six months ended 31 March 2024
Investment Portfolio as at 31 March 2024 Operating sites Sector Cost Valuation Valuation movement % of portfolio
in period by value
Qualifying and part-qualifying investments
£'000 £'000 £'000
Lunar 2 Limited ¹ South Marston, Beechgrove Ground solar 1,330 11,193 92 69.5%
Lunar 1 Limited ¹ Kingston Farm, Lake Farm Ground solar 124 1,855 (70) 11.5%
New Energy Era Limited Wychwood Solar Farm Ground solar 884 1,256 (63) 7.8%
Vicarage Solar Limited Parsonage Farm Ground solar 871 849 (200) 5.3%
HRE Willow Limited HRE Willow Small wind 875 564 (58) 3.5%
Minsmere Power Limited Minsmere Small wind 975 202 (78) 1.3%
Tumblewind Limited Tumblewind Small wind 850 131 (1,089) 0.8%
Small Wind Generation Limited Small Wind Generation Small wind 975 54 (55) 0.3%
bio-bean Limited ² Cambridgeshire Clean energy 695 - - 0.0%
Rezatec Limited ² United Kingdom Clean energy 1,000 - - 0.0%
Lunar 3 Limited ¹ Ground solar 1 - - 0.0%
8,580 16,104 (1,521) 100%
Cash at bank and in hand 2 0.0%
Total investments 16,106 100.0%
¹ Partially qualifying-investment
² These investments are permanently impaired as at 31 March 2024.
All venture capital investments are incorporated in England and Wales.
Gresham House Renewable Energy VCT1 plc, of which Gresham House Asset
Management Limited (GHAM) is the Investment Adviser, holds the same
investments as above.
Investment Disposals
Qualifying and partially qualifying investments Cost at 30 September 2023 £'000 Valuation at 30 September 2023 £'000 Redemption of loan notes in period £'000 Profit vs costs in period £'000 Realised Gain in period £'000
Tumblewind Limited 338 338 338 - -
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. General information
The VCT is a Venture Capital Trust established under the legislation
introduced in the Finance Act 1995 and is domiciled in the United Kingdom and
incorporated in England and Wales.
At the General Meeting on 13 July 2021 a formal decision was made to wind the
VCT up, therefore the VCT financial statements have since been prepared on a
non-going concern basis. As a result, the investments held at fair value
through profit or loss were transferred from fixed assets to current assets in
the 30 September 2021 annual financial statements. No further adjustments were
made in the VCT's financial statements relating to the non-going concern
basis.
2. Accounting policies - Basis of accounting
The unaudited half-yearly results cover the six months to 31 March 2024 and
have been prepared in accordance with the accounting policies set out in the
annual accounts for the year ended 30 September 2023 which were prepared under
FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of
Ireland" and 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 (AIC) in November
2014 and revised in July 2022 (SORP) as well the Companies Act 2006.
3. All revenue and capital items in the Income Statement
derive from continuing operations.
4. The VCT has only one class of business and derives its
income from investments made in shares, securities and bank deposits.
5. Net asset value per share at the period end has been
calculated on 26,133,036 Ordinary Shares and 39,463,845 'A'Shares, being the
number of shares in issue at the period end, excluding Treasury Shares.
6. Return per share for the period has been calculated on
26,133,036 Ordinary Shares and 39,463,845 'A'Shares, being the weighted
average number of shares in issue during the period, excluding Treasury
Shares.
7. Dividends
Period ended Year ended
31 March 2024 30 September 2023
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Dividends paid
2022 Interim Ordinary - 2.0p - - - 523
2023 Interim Ordinary - 16.5p - - - 4,312
2023 Interim Ordinary - 7.5p 980 980 1,960 -
980 980 1,960 4,835
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (continued)
8. Reserves
Period ended Year ended
31 Mar 2024 30 Sept 2023
£'000 £'000
Treasury shares (3,403) (3,403)
Special reserve 8,733 9,713
Revaluation reserve 10,025 11,546
Capital reserve-realised (3,462) (3,265)
Revenue reserve 2 (176)
11,897 14,486
The Special reserve is available to the VCT to enable the purchase of its own
shares in the market. 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 cancel its Share premium account as
well as its Capital redemption reserve. This was effected on 25 May 2023 by a
transfer of the balance of £9.7mn from the Share premium account and £1,000
from its Capital redemption reserve, to the Special reserve. The Special
reserve, Capital reserve - realised and Revenue reserve are all distributable
reserves for the purposes of dividend payments to Shareholders. At 31 March
2024, distributable reserves were £5.3mn (30 September 2023: £6.3mn).
9. Investments
The fair value of investments is determined using the detailed accounting
policies as referred to in note 2.
The VCT has categorised its financial instruments using the fair value
hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation techniques
that are not based on observable market data (unquoted equity
investments and loan note investments).
Level 1 Level 2 Level 3 31 March 2024 Level 1 Level 2 Level 3 30 September 2023
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Unquoted loan notes - - 330 330 - - 668 668
Unquoted equity - - 15,774 15,774 - - 17,295 17,295
- - 16,104 16,104 - - 17,963 17,963
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (continued)
Reconciliation of fair value for Level 3 financial instruments held at the
period end:
Unquoted loan notes Unquoted equity Total
£'000 £'000 £'000
Balance at 30 September 2023 668 17,295 17,963
Movements:
Unrealised losses in the income statement - (1,521) (1,521)
Redemption of loan notes (338) - (338)
Balance at 31 March 2024 330 15,774 16,104
10. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the
VCT's half-year results to report on principal risks and uncertainties facing
the VCT over the remainder of the financial year.
The Board has concluded that the key risks facing the VCT over the remainder
of the financial period are as follows:
(i) Asset diversification risk associated with a Managed Wind Down, the value of
the portfolio will be reduced as investments are realised and concentrated in
fewer holdings, and the mix of assets exposure will be affected accordingly;
(ii) market risk in respect of the various assets held by the investee companies;
(iii) failure to maintain approval as a VCT;
(iv) risk surrounding the sale of the VCT's solar assets; and
(v) economic risk due to several factors including the Russian Federation's
invasion of Ukraine and conflict in the Middle East.
The VCT's compliance with the VCT regulations is continually monitored by the
VCT Status Adviser, who reports regularly to the Board on the current
position. The VCT has appointed Philip Hare & Associates LLP as VCT Status
Adviser, who will work closely with the Investment Adviser and provide regular
reviews and advice in this area. The Board considers that this approach
reduces the risk of a breach of the VCT regulations to a minimal level. In
order to maintain VCT status, the Company needs to ensure that it maintains an
excess over a % threshold of qualifying investments within its portfolio. The
Board anticipates that the Company may fall below these percentages as the
asset realisation process continues. Therefore, to avoid a breach of VCT
status, the Board has been advised that the Company may in due course need to
start the process of a members' voluntary liquidation which would involve
delisting of the Company's shares.
There is a risk that the VCT's solar assets may not be realised at their
carrying value, and the sale commissions, such as liquidation costs and other
costs associated with the realisation of the VCT's assets, may reduce cash
available for distribution to Shareholders. Furthermore, there is a risk that
the sale of the VCT's assets may prove materially more complex than
anticipated which may delay distribution of proceeds to Shareholders. To
mitigate these risks, the VCT's Board has engaged several experts in this
field to ensure an appropriate sale price is reached. The Directors will
ensure that the sale price reflects the best available offer for the Company's
assets taking into account future income generation by the portfolio and the
age and condition of the assets. In addition, the Board reviews quarterly cash
flow forecasts, prepared by the Investment Adviser, and has considered the
impact of additional costs likely to be incurred during the Managed Wind Down
of the VCT.
The Board has considered the Russian Federation's invasion of Ukraine, the
conflict in the Middle East and the impact of the higher interest rates on the
VCT. Where investments in loan stock attract interest, this is predominately
charged at fixed rates.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS (continued)
11. Going concern
At the General Meeting on 13 July 2021 a formal decision was made to wind the
VCT up.
In assessing the VCT as a going concern, the Directors have considered the
forecasts which reflect the proposed strategy for portfolio investments and
the results of the continuation votes at the AGM and General Meeting held on
22 March 2021 and 13 July 2021 respectively.
Although the continuation vote was passed by VCT 1 at the AGM, there were a
significant number of votes against this resolution and the Shareholders of
this VCT voted against continuation. This required the VCTs to draw up
proposals for voluntary liquidation, reconstruction or other re-organisation
for consideration by the members at the General Meeting held on 13 July 2021.
At this meeting the proposed special resolution was approved by Shareholders,
resulting in the VCTs entering a Managed Wind Down and a new investment policy
replacing the existing investment policy. The Board agreed to realise the
VCT's investments in a manner that achieves balance between maximising the net
value received from those investments and making timely returns to
Shareholders.
Given a formal decision has been made to wind the VCT up, the financial
statements have been prepared on a basis other than going concern. The Board
notes that the VCT has sufficient liquidity to pay its liabilities as and when
they fall due, during the Managed Wind Down, and that the VCT has adequate
resources to continue in business until the formal liquidation and wind-up
commences.
12. The unaudited financial statements set out herein do not
constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006 and have not been delivered to the Registrar of Companies.
13. The Directors confirm that, to the best of their knowledge,
the half-yearly financial statements have been prepared in accordance with the
"Statement: Half-Yearly Financial Reports" issued by the UK Accounting
Standards Board and the Half-Yearly Report includes a fair review of the
information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period, and any changes in
the related party transactions described in the last annual report that could
do so.
Copies of the Half-Yearly Report can be obtained from the VCT's registered
office or can be downloaded from
www.greshamhouse.com/real-assets (http://www.greshamhouse.com/real-assets)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR ZZGZVLKVGDZGRecent news on Gresham House Renewable Energy VCT 2
See all newsREG - Gresham HouseRE VCT2 - Amendment to Investment Advisory Agreement
AnnouncementREG - Gresham HouseRE VCT2 - Half Year Results
AnnouncementREG - Gresham HouseRE VCT2 - Result of AGM and Update on Sale Process
AnnouncementREG - Gresham HouseRE VCT2 - Notice of AGM
AnnouncementREG - Gresham HouseRE VCT2 - Full Year Results
Announcement