VH Global Sustainable Energy Oppt. Annual Financial Report

RNS Number : 4101J

VH Global Sustainable Energy Oppt.

05 April 2024

VH Global Sustainable Energy Opportunities plc

(the "Company")

Annual results for the year ended 31 December 2023

The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO) is pleased to report its annual results for the year ended 31 December 2023.

The Annual Report and Accounts for the year ended 31 December 2023 will be made available on the Company's website at https://www.vh-gseo.com.

Company highlights as at 31 December 2023

Financial

- Net asset value: £483.8m

- Net asset value per share: 116.46p

- Total leverage of GSEO as a percentage of NAV: 1.9%

- Total annualised NAV return since IPO (Feb 2021): 10.0%

- Dividend per share declared for FY 2023: 5.56p

- Dividend target for FY 2024: 5.68 pence per share

- Dividend coverage: 1.1x

- Total annualised NAV return for FY 2023: 14.5%

- Percentage of revenues contracted and inflation linked: >90%

Sustainability

- Clean energy generated and injected into the grid: 844,434 MWh

- Approximate equivalent UK homes powered annually by clean energy: 312,750

- Tonnes of carbon dioxide equivalent avoided: 122,530t

- Tonnes of sulfur oxides displaced: 19,332t

The Company's LEI is 213800RFHAOF372UU580.

For further information:

Edelman Smithfield (PR Adviser)

Ged Brumby +44 (0)7540 412 301

Hamza Ali +44 (0)7976 308 914

Victory Hill Capital Partners LLP (Investment Manager)

Navin Chauhan info@victory-hill.com

Deutsche Numis (Corporate Broker)

David Benda +44 (0)20 7260 1000

Matt Goss

Apex Fund and Corporate Services (UK) Limited (Company Secretary)

ukfundscosec@apexgroup.com

About Victory Hill Capital Partners LLP

Victory Hill Capital Partners LLP ("Victory Hill") is authorised and regulated by the Financial Conduct Authority (FRN 961570).

Victory Hill is based in London and was founded in May 2020 by an experienced team of energy financiers that have spun-out of a large established global project finance banking group. The team has participated in more than $200bn in transaction values across 91 conventional and renewable energy-related transactions in over 30 jurisdictions worldwide. Victory Hill is the investment manager of the Company.

The Victory Hill team deploys its experience across different financial disciplines in order to assess investments holistically from multiple points of view. The firm pursues operational stability and well-designed corporate governance to generate sustainable positive returns for investors. It focuses on supporting and accelerating the energy transition and the attainment of the UN Sustainable Development Goals.

Victory Hill is a signatory of the United Nations Principles for Responsible Investing (UN PRI), the United Nations Global Compact (UN GC), Net Zero Asset Managers Initiative (NZAMI), a member of the Global Impact Investing Network (GIIN) and is a formal supporter of the Financial Stability Board's Task-Force on Climate-related Disclosures (TCFD).

Annual General Meeting

The Company's Annual General Meeting will be held at the offices of Victory Hill Capital Partners LLP at 4 Albemarle Street, London W1S 4GA on Wednesday, 22 May 2024 at 2.00pm.

The Notice of the Annual General Meeting is set out in the Annual Report and Accounts for the year ended 31 December 2023.

National Storage Mechanism

A copy of the Annual Report and Accounts will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

HIGHLIGHTS

Financial (for the full year ended 31 December 2023)

Net Asset Value as at
31 December 2023

£483.8m
31 Dec 22: £457.2m

NAV per share as at
31 December 2023*

116.46p
31 Dec 22: 108.20p

Total leverage of GSEO
as a % of NAV as at 31 December 2023

1.9%
31 Dec 22: 3.0%

Dividend per share
declared for FY 2023

5.56p
31 Dec 22: 5.13p

Dividend target
for FY 2024

5.68p
31 Dec 22: 5.52p

Dividend coverage as at
31 December 2023*

1.1x
31 Dec 22: 1.4x

Total annualised NAV
return since IPO (Feb 2021)*

10.0%
31 Dec 22: 7.8%

Total annualised NAV
return for FY 2023*

14.5%
31 Dec 22: 7.6%

% of revenues contracted
and inflation-linked

>90%
31 Dec 22: >90%

Sustainability

Clean energy generated
and injected into the grid
844,434MWh

31 Dec 22: 35,117 MWh

Approximate equivalent UK homes powered annually by clean energy
312,750
31 Dec 22: 9,000

Tonnes of carbon dioxide equivalent avoided
122,530t
31 Dec 22: 14,349t

Tonnes of sulfur oxides displaced
19,332t
31 Dec 22: 20,613t

CHAIR'S STATEMENT

"In the midst of all these challenges that 2023 has brought, the Company's unique strengths and market‑enduring features enabled its cash flow generation to remain robust"

Bernard Bulkin

On behalf of the Board, I am pleased to present the Company's Annual Report for the year ended 31 December 2023.

The year under review has been defined by macroeconomic, regulatory, and political uncertainties. Rising interest rates, persistent inflation, and conflict in the Middle East and Ukraine shaped the turbulent market backdrop in 2023.

However, this challenging market backdrop has reinforced the diversification attributes of GSEO. The Company's portfolio offers investors access to a diversity of technologies and geographies, which provide an inbuilt hedge against overreliance on single energy market declining trends or technology supply chain issues. Furthermore, over 90% of the assets in the portfolio are underpinned by inflation‑linked, private revenue contracts providing the portfolio with high visibility of returns supporting the progressive dividend for shareholders.

In the midst of all these challenges that 2023 has brought, the Company's unique strengths and market-enduring features enabled its cash flow generation to remain robust, leading to dividends being fully covered.

Financial performance

The Company has achieved robust financial performance throughout the period under review.

This has been a year of building value in the portfolio. The portfolio is now 58% operational and by early 2025, this current portfolio is expected to be fully operational. As additional assets under construction become operational, GSEO should benefit from further capital growth and cash flow generation from investments.

The Company's net asset value (NAV) per share was 116.46p as at 31 December 2023, an increase of 7.6% from the previous year. As at 31 December 2023, the Company has achieved a 10% annualised NAV total return since IPO including dividends, which is in line with the Company's target total return.

Cash received from the portfolio assets by way of distributions, which includes interest and dividends paid to VH GSEO UK Holdings Limited ("GSEO Holdings"), the Company's holding company, was £29.3m during the year (2022: £28.8m). The Company's profit before tax for the year was £55.3m (2022: £28.2m), resulting in earnings per share of 13.14p (2022: 7.67p per share). The Company generated during the period returns of 14.5% of opening NAV when taking into account dividends and capital growth.

As at 31 December 2023, the Company remains one of the lowest geared investment trusts in its sector with total leverage at 1.9% of NAV.

The Board firmly believes the discount to NAV at which GSEO's shares trade materially undervalues the Company. As part of an active capital allocation policy, buybacks represent an attractive investment opportunity and the Board announced a £10m buyback on 15 September 2023. The Board consistently considers the Company's capital allocation policy in relation to the discount that GSEO shares trade on, noting that buybacks are NAV per share accretive at wide discounts. The discount persisted post-period which we believe is largely due to investor sentiment towards the sector as a whole following the reversal of low interest rates. As such, post period end, the Board extended the programme by a further £10m to a total of £20m as it believes this to be in the best interest of shareholders whilst also balancing the need to maintain a strong balance sheet. As the interest rate environment becomes clearer and rates start to fall, we expect investor interest to return to the sector, and, specifically to GSEO, due to the strong fundamentals and compelling long-term investment strategy GSEO offers.

Dividend

The Company has a progressive dividend policy, and is proud to have increased its dividend again, while remaining fully covered. The Company announced a dividend of 1.42p per share with respect to the period from 1 October 2023 to 31 December 2023, an increase of 2.9% vs. the prior quarter. This brings the total dividend declared for the financial year ending 31 December 2023 to 5.56p per share, exceeding the dividend target of 5.52p per share.

The Company is targeting a dividend of 5.68p in total for 2024, 2.9% higher than the dividend target for FY2023.

Investment activity and portfolio performance

The Company continues to focus on taking advantage of the energy transition by investing in a diverse range of projects across the energy value chain, including energy infrastructure such as renewable energy, transmission and distribution, and energy storage.

During the year under review, the Company's investment activities and updates included:

Australian solar and battery storage programme:

• The completion of the construction of the first solar and storage hybrid system in Australia, through the addition of a two hour 4.95MW battery energy storage system ("BESS").

• The commissioning of the solar farm component of the three New South Wales sites. Installation works for the co-located BESS have commenced and the sites are expected to be hybridised within the year.

Brazilian solar PV assets:

• The completion of the tenth solar site, which brought the total operational capacity of the Brazilian sites to 27.3 MW.

• The construction of three of the remaining six sites is progressing well, with commissioning expected within H1 2024. Construction of the remaining three sites will commence upon completion of the three sites currently under construction.

Brazilian hydro facility:

• The Brazilian facility outperformed expectations in the period.

• Furthermore, SUDENE (Superintendency for Development of the Northeastern Region) tax incentives were secured for a further eight years to 2032.

United Kingdom flexible power and carbon capture and reuse programme:

• The project successfully won the UK's Capacity Market Auction T-4 at a price of £63/kW/year indexed to inflation.

• Following the issues faced by the project's incumbent EPC contractor in Q2 2023, the Company hired a new EPC contractor to complete construction, and the need to complete the civil works at the project site resulted in a payment of additional premia, leading to an overall increase in CAPEX of £16m for the project. Despite this increase, the Investment Manager still expects returns to be in line with original expectations, due to firmer expectations for additional revenue streams of the project.

• My fellow Board member Margaret and I visited the site in November 2023, and we were highly pleased with the progress. All equipment was on site and the works were advancing well towards the expected commissioning of the integrated plant with CCR slated for the summer.

United States terminal storage programme:

• The assets continued their strong performance since acquisition in April 2021, through execution of the buy, expand and optimise strategy.

Shareholder engagement and corporate governance

The Board and the Company constantly aim to improve the dialogue with shareholders and steps have been taken to enhance disclosure and detail of communication, as well as support marketability and liquidity of the shares, through active engagement with existing and prospective investors. The Board, the Investment Manager and the Company's broker remain available to engage with shareholders as appropriate.

The Board and I were delighted to welcome Daniella Carneiro to the Board of GSEO in January 2023 as an independent non-executive Director, bringing extensive experience advising governments and companies on how to integrate ESG principles into business practice.

The Board was pleased to announce the appointment of Richard Horlick as the Senior Independent Director with effect from 1 January 2024. Richard joined the Board as a non-executive Director in October 2020, and is the Chair of the Management Engagement Committee and a member of the Audit, Nomination and Remuneration Committees. Richard has had a long and distinguished career in the investment management industry holding executive roles in a number of global financial institutions as well as being a seasoned board member in the closed-end listed funds sector.

Sustainability and ESG

GSEO qualifies as an Article 9 fund under SFDR. As at 31 December 2023, 51.2% of the Company's investments were aligned with EU Taxonomy economic activities. The disclosures related to TCFD, SFDR and the EU taxonomy can be found in the full Annual Report and Accounts for the year ended 31 December 2023.

The fund is a leader in sustainable investing. It is unique in selecting investments on sustainability criteria which meet target returns, and diversification both in geography and technology. Three years following the IPO of GSEO, thanks to our shareholders, we are already making a real difference to communities in Brazil, bringing cleaner fuel for Mexico, and enhancing grid stability in Australia.

As a stronger focus is put on supply chain transparency and traceability, as well as transparent reporting, the Investment Manager has sophisticated data infrastructure tools allowing efficient monitoring of the sustainable impact of its investments and the ability to report accurately on metrics such as carbon emissions avoided, renewable energy generated and life cycle analysis.

Outlook

We are witnessing early signs that financial markets are entering a new phase with inflation cooling and an easing interest rate outlook. These macroeconomic green shoots, coupled with the underlying strengths of the Company, lead the Board to look forward to the year ahead with confidence.

GSEO is well-positioned to capitalise on these positive developments, with a strong pipeline of investment opportunities already identified by the Investment Manager.

The Investment Manager is actively pursuing activities to maximise shareholder returns, and the Board continues to monitor the share price discount to NAV.

I and my fellow Directors would like to thank all shareholders for their continued support.

Bernard Bulkin
Chair

4 April 2024

INVESTMENT MANAGER'S REPORT

"The Victory Hill approach to investing relies on the belief that the energy transition to net zero is a global phenomenon much akin to the industrial revolution in its scale, depth and wide ranging significance."

Richard Lum

Market backdrop and outlook

The outlook for sustainable energy investment remains very robust with attractive opportunities widely available, despite the challenging macro environment in 2023.

Over 2023, we have witnessed a recovery from the pandemic slump in economic activity, and constraints to energy systems caused by the global energy crisis precipitated by the invasion of Ukraine by Russia. The recovery has provided a significant boost to the ongoing electrification of our energy systems globally, and to investments in clean energy as a key subset of this shift. According to the estimates of the IEA in their World Energy Investment 2023 report, annual clean energy investment is expected to have risen much faster than investment in fossil fuels over the period since 2021.

The IEA estimates that full year investments in the energy sector will account for US$2.8 trillion in 2023, of which more than US$1.7 trillion will be invested in clean energy, including renewable power, nuclear, grids, storage, low carbon fuels, energy efficiency schemes and electrification. Such investments will be bolstered by a range of factors including the introduction of the Inflation Reduction Act in the US and improved economics for clean energy projects.

Despite benign conditions for sustainable energy, globally the wider infrastructure sector did get affected by a higher interest rate environment in 2023 which impacted reported NAVs and also added pressure on cash flows available for distribution in investment companies with high leverage in their portfolios. This has seen knock on effects on the investability of some large-scale projects in the clean energy space, particularly those backed by long term government related tariffs and subsidies.

Inflationary pressures were indeed a major factor in 2023, however it seems clear that we have now witnessed a topping out of inflation with UK inflation down to 4% in December 2023, falling from its height of 11% in October 2022. Whilst not completely out of the system, it is fair to say that there may be greater optimism that the higher-for-longer mantra may be overstating the medium-term picture. We anticipate this will likely lead to greater investor confidence in the infrastructure space during the course of 2024, with further capital able to be raised for deserving clean energy projects globally.

The Approach

The Victory Hill approach to investing relies on the belief that the energy transition to net zero is a global phenomenon much akin to the industrial revolution in its scale, depth and wide-ranging significance. Such a shift creates dislocations in each energy market throughout the world. We term this dislocation a structural demand gap in that energy market, which we aim to fill through our asset investments, consequently achieving a differentiated return and making an impact. During the course of 2023, we witnessed several energy markets in which GSEO is invested demonstrating behaviours which point to structural demand gaps. In Australia, the first of our hybridised solar plus battery storage assets came onstream in Q3 2023, and set about capturing attractive pricing in peak demand hours in the evening in South Australia.

At the heart of the Company's strategy is the motivation to provide investors with access to long term infrastructure cashflows underpinned by an array of diversified technologies and geographies. This provides shareholders with embedded downside risk protection, as well as the ability to achieve differentiated returns by targeting structural demand gaps in some of the world's most liberalised energy markets.

To enable this, the Company enters into joint-venture agreements with local energy developers or operating partners, each of whom have unique insights into local energy markets as well as proven technical and commercial experience of developing, constructing and operating sustainable energy projects. Furthermore, all operating partners dedicate their professionals, comprising a headcount of over 100 globally, to managing GSEO's projects.

GSEO's portfolio was designed to ensure minimal exposure to interest rates through involving no structural debt at fund level, and minimal gearing at the assets themselves. Currently, aggregate gearing of 1.9% at fund level (via 7.5% gearing at our US terminal storage asset) has ensured that the higher interest rate environmental has had no discernible impact on our portfolio performance. Furthermore, as all of the revenue contracts of our assets are inflation-linked, the higher inflationary environment has flowed into higher revenues for our assets, ensuring that our portfolio as a whole has not been negatively impacted.

As a result of this unique approach, the higher inflation environment was positive for the portfolio as all the long-term contracted cashflows in the portfolio are linked to local inflation, with no caps or collars. Such long-term revenues and the strong cashflow generation underpin the GSEO portfolio.

GSEO's transparent valuation methodology relies on inputs extracted from independent and publicly available sources, such as the risk-free rate, inflation assumptions and country risk premia, which ultimately result in accurately reflecting the current market environment. The Company has also not changed its asset life assumptions in its valuation of assets since IPO.

The treasury function was also effectively managed with interest on deposits helping mitigate any cash drag during the period.

Performance summary

Active asset management, robust operational performance and the persistent supply-demand imbalance in some of the key underlying geographies were key themes throughout the year which drove the upward NAV revision in 2023.

2023 has been a year of building value in the portfolio. Construction challenges in Brazilian solar PV assets and the UK flexible power plant have been overcome and despite some higher costs suffered, future returns are expected to be in line with the original target. This is a result of careful investment processes and built-in contingencies, for example, performance bonds and a well-resourced and experienced team with strong in‑house legal and financial capability. The portfolio is now 58% operational and by early 2025, this current vintage of investments will be fully operational.

In Brazil the Company's operational hydro and distributed solar sites captured a segment in the market requiring further investment to ensure that Brazil's need for flexible power and upgraded remote generation is best served. In the UK, we are making headway in the construction of our first flexible gas-fired power plant with carbon capture and reuse, ensuring that the demands for flexible power in the UK system, as well as the structural short supply for purified food grade CO₂, can be met.

Outlook

Moving forward into 2024, our outlook is shaped by the consequential abatement of the higher inflationary conditions of the last 18 months and greater policy support for clean energy investment, combined with the continuing occurrence of structural gaps we have already identified in liberalised energy markets as they undertake the transition. In the first few months of 2024, we have already witnessed greater openness in the cross-border trade between the US and Mexico, driven by the upcoming elections in both countries, which has had a positive effect on volumes received by our US terminal storage assets. We expect greater impetus to be given to opportunities for our midstream presence in the US with the Inflation Reduction Act's support for low-carbon fuels such as biofuels and sustainable aviation fuels, each of which requires the buildout and repurposing of fuels storage and transportation infrastructure.

In the UK, the 2023 winter has demonstrated the continuing requirement for flexible forms of power generation, as often renewable power supply at peak hours is hampered by lower wind and solar yields, resulting in the continuing need for the system operator to call on conventional sources of power such as gas, and indeed coal. We foresee this trend continuing well into other seasons in 2024, and being present for our UK investment to harness as it comes onstream later in the year.

We firmly believe the opportunity to create value and impact through investments in sustainable energy infrastructure globally has not diminished over time. Indeed the Company's pipeline of new opportunities remains robust and is only constrained by its ability to raise further capital to deploy into new investment programmes.

Brazilian solar PV assets:

• During the period under review, the construction of the tenth site was completed bringing the total operational capacity to 27.3MW. These ten sites supply energy to creditworthy commercial and industrial energy users and large multinational corporations with operations in Brazil. The average length of these contracts is 20 years and linked to local inflation.

• One of the project's EPC contractors faced financial difficulties during the period, which required the Company to halt delivery of two of the sites that were initially intended to be relocated. As a result of this, a provision had been recognised for these assets for £4.5m.

• Together with the operating partner, Victory Hill acted decisively in finding a replacement EPC contractor to finalise the six remaining projects in an orderly manner - three of which are expected to be completed in H1 2024, bringing the portfolio total installed capacity to 40.5MW. Construction for the last three sites will commence upon completion of the three sites that are currently under construction.

• The programme remains on track to deliver returns above the Company's target total NAV return of 10% once fully completed.

Brazilian hydro facility:

• During the period, the operating partner, Paraty, successfully completed the full transition of operations from the vendor, EDP, at a lower cost than anticipated and in a shorter than expected time frame.

• The Company successfully implemented value creation efforts and was notably able to secure tax incentives for a further eight years, as well as optimise operating costs.

• The Investment Manager continues to assess the market to implement our value-creating commercial strategy for the uncontracted volumes from 2027 onwards. The volatility of the PPA market in Brazil offers windows of opportunity to secure attractive terms in the long-run. Victory Hill is seeing positive signs with recent improvements in PPA prices that have been low due to unusual high levels of rain in the Southeast region of the country.

• On the sustainability front, community engagement initiatives were conducted in preparation to obtain the International Hydropower Association Sustainability Standard certification in 2024. Events such as fish monitoring and a transportation study were conducted, awareness workshops as well as environmental education events were held for the local community and employees. The ISO 45001 health and safety management system certification, as well as the ISO 14001 environmental management certification and ISO 9001 quality management system certification, were successfully renewed.

US terminal storage assets:

• The Company continued to perform operational optimisation initiatives during the period such as reducing overtime expenses and enhancing operational software and equipment to automate the terminals' operations:

- Temporary workers were contracted as permanent staff, resulting in lower overtime worked and better labour conditions.

- New offices were added to one of the sites to enhance management, training operations, and safety oversight.

• The programme's operating partner, Motus, has initiated the process to obtain ISO 45001 health and safety management system certification as well as ISO 14001 environmental management certification on its operations, leading to safer and improved operational practices.

Australian solar PV with battery storage assets:

• The Australian programme is comprised of five sites. In Q3 2023, the Company delivered on time and on budget one of the first hybrid solar and battery energy storage systems ("BESS") in South Australia, by adding a two hour 4.95MW BESS.

• Following the completion of this project, the solar and storage hybrid system captured attractive power prices in the intraday market. In November 2023, the average captured price for BESS was over A$200/MWh, which is 4 times higher than the average captured prices for solar during the same period.

• The programme was further expanded with three new assets in New South Wales (NSW). The solar farm component of these three sites completed commissioning post-period and became operational.

• Installation works for the co-located BESS, on the three new assets in NSW, commenced post-period and the sites are expected to be hybridised within the next 12 months. It is expected that the assets will be able to derive further value from the structural supply-demand gap Australia is facing as it transitions to a cleaner energy system.

UK flexible power with CCR asset:

• During the period under review, construction continued on this asset with all equipment already on site. Key project partners include Rolls Royce, Mitsubishi Turboden, Climeon, Asco, Axpo and Buse Group.

• As part of our commercialisation strategy of securing long-term contracted cash flows pre‑completion, the project successfully won the UK's Capacity Market Auction T-4 at a price of
£63/kW/year indexed to inflation.

• As previously highlighted, the incumbent EPC contractor faced financial difficulties last year as a result of the challenging macroeconomic conditions for the construction industry, notably high inflation, high interest rates and supply chain disruptions. Following such issues, Victory Hill alongside the operating partner acted quickly to identify and hire a new EPC contractor to complete construction. The situation with the incumbent EPC contractor has also served as a good test of Victory Hill's joint-venture model, with local operating partners on-the-ground able to proactively identify potential issues and mitigate further project delays.

• The replacement contractor needed to complete the civil works at the project site resulting in a payment of additional premia and led to an overall increase in CAPEX of £16m for the project. However, the Investment Manager still expects returns to be in line with original expectations despite this increase, due to firmer expectations for additional revenue streams of the project.

Portfolio operational and financial performance

The acquisition of the Brazilian hydro facility was completed in December 2022. The period ended 31 December 2023 has seen the first full year of operations under the Company's ownership. With the successful transition of the asset by the operating partner, financial performance in the period has exceeded expectations.

The first full year of operations of the Brazilian solar PV assets is reflected in an increased generation in the period. Energy production has however come in behind expectation as the assets ramp up to full production.

The operational performance of the two operational Australian sites has been impacted due to the implementation of the BESS on the Mobilong site and substation works on the Dunblane site which resulted in a network outage for 1 month.

The US terminal storage expansion was completed in December 2022. The period ending 31 December 2023 saw the first full year of operation at the expanded site. These assets benefit from inflation‑linked availability contracts and are situated in a key aggregation hub in South Texas for Mexico-US cross-border product movements.

Summary of operational & financial performance

	31 December 2023
Programme:	Brazilian hydro facility	Brazilian solar PV assets	Australian solar PV with battery storage assets	US terminal storage assets	UK flexible power with CCR assets
Number of operational assets	1	10	2	2	0
Number of assets under construction	0	6	3	0	1
Production/throughput	789,654 MWh	41,602 MWh	19,227 MWh	12,831,553 bbls	N/A
Revenues (GBPm)	28.59	2.07	1.46	18.64	N/A
Average revenue per production unit (expressed in GBP)	36.20	49.65	75.79	1.45	N/A

Note: The production, revenues, and average revenue per production unit reflect assets under operation as at 31 December 2023 only.

The FX rate used for revenues is as at 31 December 2023. The energy production figure for the Brazilian solar PV assets represents the total generation that was invoiced to the clients; it is directly related to the revenue generated by the assets. The energy production figure for the Brazilian hydro facility represents the total gross generation.

Portfolio outlook

Based on the underlying free cash flow generation of the portfolio programmes, dividend coverage is expected to be 1.1 to 1.2 times in 2024 rising and strengthening further in subsequent years.

Revenue contracts in the portfolio have been entered into with long tenors, often over 15 years, with creditworthy offtakers. As demonstrated in the graph below, contracted revenues account for over 90% of the total revenues in the portfolio, with uncontracted revenues relating mostly to the Australian solar and battery storage programme, where we seek to benefit from market dynamics related to a disorderly market transition to net zero.

Net Asset Value

The NAV of the Company increased from £457.2m at 31 December 2022 to £483.8m at 31 December 2023. The total NAV return including reinvestment of dividends in the financial year is 14.5%. Since IPO, the total NAV return at 31 December 2023 is 10.0%. The key NAV drivers for the period under review were:

• A net increase in the fair value of investments and distributions from investments of £64.3m.

• Discount rates dropping during the period under review, driven by lower risk-free rates, inflation outlook, and lower Brazil country risk premium.

Key sensitivities

The below chart illustrates the sensitivity of the Company's NAV per share to changes in key input assumptions for assets in operation as at the year end. In performing the sensitivity analysis, it is assumed that potential changes occur independently of each other with no effect on any other assumption, and that the number of investments in the portfolio remains static throughout the modelled life.

Discount rate

A range of discount rates are applied in calculating the fair value of the investments, considering risk free rates, country-specific and asset-specific risk premia and betas. Discount rates for operational assets at 31 December 2023 are 6.9% in the US, 7.7% in Australia, 9.5% for the Brazilian hydro facility and 9.7% for the Brazilian solar PV assets. A 1.5% increase (decrease) in discount rates across the portfolio decreases (increases) NAV by 10.42p (8.34p).

Inflation

The sensitivity assumes a 1% increase or decrease in long-term inflation relative to the base case of 1.6% for the US assets, 2.4% for the Australian assets and 3.0% for the Brazilian assets for each year of asset life. A 1.0% increase (decrease) in inflation rates across the portfolio increases (decreases) NAV by 7.31p (6.25p).

Operating expense

The sensitivity assumes a 5% increase or decrease in operating expense relative to respective contracts and budgets for each asset. A 5% increase (decrease) in operating expenses across the portfolio decreases (increases) NAV by 1.95p (1.94p).

Foreign exchange

The sensitivity assumes a 10% increase or decrease in foreign exchange movements against the sterling. The Company seeks to manage its exposure to foreign exchange movements by hedging short-term distributions from non-sterling investments to maintain a healthy dividend cover but, due to long-term inflation-linked revenues stemming from these investments, the Company does not hedge the principal value of the investments. A 10% increase (decrease) in foreign exchange rates across the portfolio decreases (increases) NAV by 7.15p (8.74p).

Asset life

The sensitivity assumes a 1 year increase or decrease in asset life relative to the base cases of 30 years for the US terminal storage assets, 25 years for the Australian solar PV with battery storage assets, Brazilian solar PV assets and Brazilian hydro facility. A 1 year increase (decrease) in asset lives across the portfolio increases (decreases) NAV by 1.18p (1.23p).

Resource sensitivity

The portfolio has little resource risk sensitivity given the availability based nature of the US terminal storage assets, the base load generation profile of the Brazilian hydro facility, the UK flexible power with CCR assets, and the addition of battery storage to the Australian solar PV assets to mitigate solar intermittency risk.

GSEO BUSINESS MODEL & STRATEGY

Business model at a glance

A unique investment model…

- We don't aim to tie investments to sustainability; rather we start with sustainability and look for investments

- Our investments always meet a structural demand gap in the local energy markets

- We create value for shareholders and a clear impact for the environment and society by targeting assets that can be optimised and/or expanded

…that supports the energy transition from all angles…

- Geography: The energy transition is a global phenomenon that needs to be tackled globally. GSEO invests across jurisdictions around the world, creating a highly diversified portfolio

- Technology: GSEO's investments go beyond just core renewables and target a diverse range of proven sustainable energy technologies in order to play a part in the global transition towards net zero

- Investment Stage: To accelerate the transition, the Company focuses on both the construction of new assets as well as the acquisition of operational assets

…creating a clear environmental and social impact…

- The UN SDGs are the blueprint for driving GSEO's sustainability-focused investment strategy, and creating a positive environmental and social impact as one of the core investment decision criteria

- Auditable monitoring framework to assess such impact

- GSEO is classified as an Article 9 fund under the EU Sustainable Finance Disclosure Regulation ("SFDR")

…while generating sustainable and attractive financial returns

- NAV target return of 10% unlevered and net of the Company's costs and expenses

- Consistent annual dividend growth since IPO, supported by a progressive dividend policy which aims at increasing dividends each year

- Portfolio revenues offer predictability, with more than 90% of revenues contracted

- Assets in the portfolio have a significantly high degree of inflation linkage, protecting real returns

GSEO joint-venture model

Joint-venture model which levers multiple local operating partners with unique insights in local energy markets

Key advantages

• Long-term alignment of incentives with the Operating Partner

• Partnership with highly skilled developers with specific insights into an energy market and institutional execution abilities

• Access to pipeline of projects developed by those partners

• Efficient deployment over a tangible pipeline reducing cash drag

• No upfront development premium but conversion of development costs in a stake in the JV

• Reduced operational risk with dedicated on-the-ground attention to the assets enabling a thorough value creation process

GSEO STRUCTURE & INVESTMENT POLICY

The Company seeks to achieve its investment objective by making sustainable energy infrastructure investments across the EU and OECD group of nations predominantly, including but not limited to OECD Key Partner countries and OECD Accession countries. The Company's investments in global sustainable energy infrastructure must be:

i. investments that support the pursuit and attainment of the United Nations Sustainable Development Goals (the "SDGs") where energy and energy infrastructure investments are a direct contributor to the acceleration of the energy transition towards a net zero carbon world; and

ii. investments that can be categorised into one or more of the four investment pathways that guide the Company's investment strategy. These investment pathways are (1) Addressing Climate Change, (2) Energy Access, (3) Energy Efficiency, and (4) Market Liberalisation,

and must also fall into one or a combination of the following categories:

i. power, heat and green gas producing assets reliant on, but not limited to, wind, solar, biomass, natural gas and hydropower technologies;

ii. production and refinement of fuels derived from biomass sources;

iii. energy storage infrastructure such as containment and non‑processing facilities for liquid and gas fuel sources, power storage utilising battery or gravity‑based technologies;

iv. energy transportation infrastructure such as pipelines, interconnectors and micro‑distribution grids;

v. distributed energy sources (heat, power, gas and steam) which are produced close to where it will be used, rather than at a large centralised plant elsewhere, delivered through a centralised grid infrastructure; and/or

vi. equipment that is installed at the premises or on site, directly connected to the premises including, but not limited to, CHP units, CCHP plant schemes, HVAC units, lighting equipment, biomass boilers and steam raising boilers (including intermediate pressure (IP) steam processors),

in each case, either already operating, in construction or ready-to-build ("Sustainable Energy Infrastructure Investments").

The Company looks to achieve NAV growth by investing in higher yielding Sustainable Energy Infrastructure Investments that are operational, in construction or "ready-to-build" but does not invest in assets that are under development (that is assets that do not have in place required grid access rights, land consents, planning and regulatory consents and commercial arrangements).

The Company acquires a mix of controlling and non-controlling interests in Sustainable Energy Infrastructure Investments that are held within SPEs which the Company invests through equity and/or shareholder loan instruments. In certain instances, the SPE may hold one or more Sustainable Energy Infrastructure Investments of a similar type.

The Company invests in SPEs structured as joint venture investments (JVs) or co-investments, including through minority stakes, where this approach is the only viable approach. Where the Company participates in a JV or a co-investment, it seeks to secure its rights through obtaining protective provisions in shareholders' agreements, joint venture agreements, co-investment agreements or other transactional documents, as well as board representation for the Investment Manager, and with the aim of trying to ensure that the investment is managed in a manner that is consistent with the Investment Policy.

Diversification

The Company aims to achieve diversification principally by making a range of Sustainable Energy Infrastructure Investments across a number of distinct geographies and a mix of proven technologies that facilitate the achievement of the SDGs.

Investment restrictions

The Company can invest (calculated at the time of investment) up to:

• 25% of Gross Asset Value in any one Sustainable Energy Infrastructure Investment;

• 40% of Gross Asset Value in a single technology;

• 35% of Gross Asset Value in assets that are in construction or "ready-to-build";

• 40% of Gross Asset Value in assets that are located in any one country;

• 30% of Gross Asset Value in assets that are owned or operated by a single developer;

• 10% of Gross Asset Value in assets that are located in countries that are not members of the EU, OECD, OECD Key Partner countries or OECD Accession countries; and

• 10% of Gross Asset Value in other closed-ended investment funds which are listed on the Official List.

No investments are made in extraction projects for fossil fuel or minerals.

Non-compliance resulting from changes in the price or value of investments following investment will not be considered as a breach of the investment restrictions.

The Company holds its investments through one or more SPEs and the investment restrictions are applied on a look-through basis.

In the event of any breach of the investment restrictions applicable to the Company, shareholders will be informed of the remedial actions to be taken by the Company through an RNS announcement.

Cash management

Whilst it is the intention of the Company to be fully or near fully invested in normal market conditions, uninvested cash or surplus capital or assets may be invested on a temporary basis in:

• cash or cash equivalents, namely money market funds (as defined in the 'Guidelines on a Common Definition of European Money Market Funds' published by the Committee of European Securities Regulators (CESR) and adopted by the European Securities and Markets Authority (ESMA)) and other money market instruments (including certificates of deposit, floating rate notes and fixed rate commercial paper of banks or other counterparties having a "single A" or higher credit rating as determined by any internationally recognised rating agency selected by the Board which, may or may not be registered in the EU); and

• any "government and public securities" as defined for the purposes of the FCA Rules,

provided that not more than 20% of the Gross Asset Value, calculated at the time of investment, may be so invested, following the deployment of the Company's net issue proceeds.

Borrowing policy

The Company may make use of long-term limited recourse debt for Sustainable Energy Infrastructure Investments to provide leverage for those specific investments. Such long-term limited recourse debt will not, in aggregate (calculated at the time of entering into or acquiring any new long-term limited recourse debt), exceed 60% of the prevailing Gross Asset Value.

In addition, the Company may make use of short-term debt, such as a revolving credit facility, to assist with the acquisition of suitable opportunities as and when they become available. Such short-term debt will be subject to a separate gearing limit so as not to exceed 30% of the Gross Asset Value at the time of entering into (or acquiring) any such short-term debt.

In circumstances where these aforementioned limits are exceeded as a result of gearing of one or more Sustainable Energy Infrastructure Investments in which the Company has a non-controlling interest, the borrowing restrictions will not be deemed to be breached. However, in such circumstances, the matter will be brought to the attention of the Board who will determine the appropriate course of action.

Use of derivatives

The Company may enter into hedging transactions for the purposes of efficient portfolio management, which may include (as relevant) short-term currency hedging (as described in the last published prospectus of the Company), interest rate hedging and power price hedging. The Company does not intend to use hedging or derivatives for investment purposes but may from time to time use risk management instruments such as forward contracts and swaps (collectively "Derivatives") to protect the Company from any fluctuations in the relative value of currencies against Pound Sterling, as well as to hedge against interest rates and power prices. The Derivatives must be traded by private agreements entered into with financial institutions or reputable entities specialising in this type of transaction and will be limited to maturities no longer than 12 months. The Company will target investments that provide sufficient asset-level returns to compensate for longer term fluctuations in exchange rates. Furthermore, asset level returns where possible will be linked to local inflation rates.

Derivatives may be employed either at the level of the Company, at the level of the relevant SPE or at the level of any intermediate wholly owned subsidiary of the Company.

All hedging policies of the Company will be reviewed by the Board and the Investment Manager on a regular basis to ensure that the risks associated with the Company's investments are being appropriately managed. Any derivative transactions carried out will only be for the purpose of efficient portfolio management and will not be carried out for speculative purposes.

Amendment to investment policy

As required by the Listing Rules, any material change to the investment policy of the Company will be made only with the approval of the FCA and shareholders, by ordinary resolution and will be notified to HMRC. If a change to the investment policy is material for the purposes of the AIFM Rules, the Investment Manager will need to notify the FCA prior to the implementation of such change and the change may not be implemented until the period of time prescribed in the AIFM Rules has elapsed without the FCA having objected to the change.

Status of the Company

The Company was incorporated on 30 October 2020. It is registered as a public limited company and is an investment company within the terms of section 833 of the Companies Act 2006. It has been approved by HMRC as an investment trust company in accordance with sections 1158/1159 of the Corporation Tax Act 2010. The Directors are of the opinion that the Company has conducted its affairs in compliance with sections 1158/1159 during the year ended 31 December 2023 and intends to continue to do so.

The Company's shares trade on the premium segment of the Main Market of the London Stock Exchange. It is a member of the Association of Investment Companies (the "AIC"). The Company and the Board are governed by its Articles of Association (the "Articles"). Any amendments to the Articles must be approved by shareholders by way of a special resolution.

Employees, human rights, social and community issues

The Board recognises the requirement under Companies Act 2006 to detail information about human rights, employees and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements, which may apply to the Company's investments, do not apply to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these provisions.

The Company is not within the scope of the Modern Slavery Act 2015 because it has not exceeded the turnover threshold and therefore no further disclosure is required in this regard. The Directors are satisfied that, to the best of their knowledge, the Company's principal suppliers comply with the provisions of the Modern Slavery Act 2015 and maintain adequate safeguards in keeping with the provisions of the Bribery Act 2010 and Criminal Finances Act 2017.

Details about the Company's approach to sustainability are set out in the full Annual Report and Accounts for the year ended 31 December 2023.

Diversity

As at 31 December 2023, the Board comprised three female and two male Directors.

It is the Company's aim to have an appropriate level of diversity on the Board. The Board welcomes the recommendations from the FTSE Women Leaders Review on gender diversity on boards and the Parker Review about ethnic representation on boards. The Company conformed with the gender and ethnic diversity targets during the year under review. See the full Annual Report and Accounts for the year ended 31 December 2023 for further details of the Board's diversity policy and compliance with the recommended diversity targets.

As the Company has no employees, there is nothing further to report in respect of gender representation within the Company.

GSEO INVESTMENTS

The case for sustainable liquid storage assets in the US

Programme overview

In April 2021, GSEO completed the acquisition of two operating liquid storage terminals with a total combined capacity of 525,000 barrels in the Port of Brownsville on the Texas gulf coast, for a total purchase price of US$63m. The sites have a useful life of at least 30 years, and the operating partner is Motus Energy LLC, which combines the team that built and operated the assets for the previous owner and an established cross-border fuel exporter. Since acquisition, the capacity of the terminal has been expanded to 895,000 barrels.

Operating partner overview

Motus Energy LLC is a US midstream specialist company formed by a team which combines the team that built and operated the VH liquid storage assets for the previous owner that have 25 years' average experience in investing, constructing and operating midstream infrastructure assets globally. Motus support the energy transition by participating in the decarbonising process of high sulfur fuels by facilitating its storage to be then processed into lighter and cleaner fuels by modern refineries in the US and by developing new midstream infrastructure with the intention to store and distribute transition fuels such as renewable diesel and sustainable aviation fuel.

In conversation with Richard Lum, Victory Hill Managing Partner and co-CIO

Q: Why did you decide to invest in these assets and how do they contribute to support the energy transition?

Fundamentally, this investment seeks to make a positive sustainability impact on the Mexican fuels value chain. We decided to invest in the US terminals as their location provides a fuel aggregation point that facilitates the transfer of high sulfur oil currently produced at a surplus in the Mexican fuel market. As a result of the terminals' proximity, northbound flows are destined for more abundant and technologically advanced refining capacity in the United States, which can turn the "dirty" fuels from Mexican refineries into cleaner products.

It is important to remember that Mexico still burns high sulfur content fuels in its transportation sector and for its energy generation industry, resulting in the creation of significant Particulate Matter (PM) 2.5 air pollution and causing respiratory and health problems, particularly in conurbation areas such as Mexico City. The US terminal assets aim to reduce the environmental and health threats that high sulfur fuels have on human health by reducing the availability of high sulfur fuel oil for domestic consumption in Mexico and displacing it with cleaner, less pollutive products, reducing PM2.5, SO2, and NO2 emissions.

Q: Since acquisition, what have you done to create additional value?

We have expanded the storage capacity by 370,000 bbls, increased the volume throughput by adding capabilities to offer 24/7 operations, extended existing tenants' contracts at higher rates, optimised ancillary services revenues, reduced costs by modernising the operations' hardware and software, improved internal controls and procedures, and added asset-based leverage, among other initiatives.

Q: What are the expected returns for this programme and what is this number conditional upon achieving?

Based on the current contractual arrangements, we expect the returns from this project to remain in excess of GSEO's target total NAV return. We expect to see additional uplift by culminating the terminals expansion and further optimising the commercial terms and operations of the terminals.

Q: What is the future of this asset?

First we would like to use the available land within the terminals to add more storage capacity. We would also like to improve the operation capabilities to speed up the loading and unloading operations and increase the volume throughput.

In the longer term, the tanks we hold can be retrofitted to store greener fuels such as renewable diesel, and sustainable aviation fuel (SAF).

Q: Are investors exposed to hydrocarbons by having this asset in the portfolio?

No, there is no commodity exposure. The terminal benefits from availability-based offtake agreements.

The case for flexible power with carbon capture and reuse (CCR) in the UK

Programme overview

In the UK, we have chosen to contribute to the energy transition by supplying reliable baseload power without adding to carbon emissions. In 2021, GSEO completed its acquisition of a 10MW flexible power project under construction in Nottinghamshire, uniquely combined with carbon capture and reuse ("CCR") technology. Commissioning of the integrated plant with CCR is expected over the summer. Since acquisition, a 15-year power offtake and gas supply agreement was signed with Axpo and a first batch of sparkspread hedges were secured, locking in healthy margins for the project. In addition, a 15-year offtake agreement for food-grade CO₂ was also signed on attractive terms with an industrial gas specialist group. Additional revenues can be sourced from grid ancillary services such as balancing mechanism and capacity market; and additional margin can be captured via private wire to local industrial users. This programme is being funded without public subsidy or government support.

Operating partner overview

Landmark Power Holdings (LMPH) was established in 2019 by UK power industry veterans with the purpose to help to build a circular economy, by applying new methodologies to proven technologies in energy production. LMPH supports the transition to net zero by supplying dispatchable, low carbon energy that enables more renewable energy production while contributing to a circular economy, by eliminating inefficiencies in production, ensuring that every input is used to its maximum potential and treating all production waste as a profitable resource. LMPH develops, builds and operates decarbonised flexible power plants, that helps bridge the gap between conventional and greener energy solutions by providing essential support for increasing levels of renewable power.

In conversation with Richard Lum, Victory Hill Managing Partner and co-CIO

Q: Could you explain how this program contributes to the energy transition in the UK and why such technologies instead of wind or solar?

This flexible power and carbon capture and re-use programme allows us to supply reliable flexible power into the grid, solving for intermittency issues that come with renewable power generation (such as solar and wind) in a net zero manner.

Q: What is so unique about this project?

The project is uniquely positioned to solve for two issues facing the decarbonisation of industry in the UK. Firstly, the gas fired generators are able to provide flexible power into the grid to help firm the grid in a net zero way, as its CO₂ emissions are captured and repurposed. The provision of flexible power services is important in the UK given the success of renewable power penetration in the energy mix from the rollout of wind and solar projects. This has resulted in the fact that intermittency and grid frequency stabilisation are becoming much more of an issue for the system operator. When the wind doesn't blow or the sun doesn't shine, the system's supply and demand dynamics fall out of kilter, which may result in price spikes and the potential for curtailed supply and indeed trips on the system.

Secondly, the captured CO₂ is scrubbed into purified food grade CO₂, which can then be commercialised via sales to the industrial gases market, where CO₂ is seen as a precious industrial commodity, used in the food and beverage manufacturing chain. Currently, there is a structural shortage of food grade CO₂ produced locally in the UK, as we have seen the closure of major producers of ammonia in the country. The project therefore provides a replacement supply, and one that is produced with a much smaller emissions footprint than the traditional manner of production.

Q: How could this asset be repurposed in the future if needed?

The project utilises gas fired power generation units, which can transition to utilising net zero biomethane fuel sources and potentially hydrogen fuel sources in the future.

The case for the Brazilian renewable energy market - hydropower and distributed generation (DG) solar plants

Programme overview

I - A Brazilian hydro facility

In 2022, GSEO acquired a 198MW run-of-river hydropower plant from EDP Group. The facility is located in the state of Espírito Santo, has been operational since 1974 and went through a major repowering in 2011. The plant ownership was awarded under a concession framework with four years remaining from previous cycle and renewal for another 20 years thereafter. Since it was first commissioned, the hydro facility has been maintained and managed to a very high standard. The energy regulator in Brazil ranks over 140 hydro plants across the country to assess their quality of operation and has recently ranked this facility as a top 10 hydro plant in Brazil. This facility benefits from a portfolio of over 30 long-term inflation-linked PPAs with creditworthy counterparts in the regulated utilities market. It also has the potential to commercialise power with large energy consumers in the self-consumption segment of the energy market.

II - 16 Brazilian solar PV assets

In 2021, GSEO committed $63m to fund the construction of remote distributed solar generation projects across 10 Brazilian states. The investments stem from long-term PPAs with investment grade corporates such as a large multinational telecommunication company. On average, these contracts have a maturity over 20 years, are inflation-linked, and are not dependent on any government subsidies. Three further sites are expected to become operational by H1 2024, bringing the total number of operational sites to 13. The construction of the remaining three sites are expected to be completed by the end of 2024.

Operating partners' overview

Paraty Energia, the operating partner for the Brazilian hydro facility, is an energy developer specialised in the Brazilian power market, combining years of project finance experience with strong capabilities in operations, energy trading and regulatory advisory services. They have a team of engineers, and traders that oversee the operation of GSEO's hydro facility.

Energea, the operating partner of the Brazilian solar PV assets, is a global developer of distributed solar PV assets. Its founders have accumulated years of experience in the solar segment, first by developing distributed generation sites in the US for large retail players. They have entered the Brazilian market, attracted by the unique regulatory framework enabling the construction of distributed generation solar PV assets that can commercialise the power at retail tariffs, with any offtaker connected to the local utilities' networks. Energea has a team of experienced project managers on the ground that oversee GSEO's solar PV assets and provide O&M services.

In conversation with Eduardo Monteiro, Victory Hill Managing Partner and co-CIO

Q: What are the attractions of investing in the Brazilian renewable energy market?

Brazil is a growing economy that needs energy to enable the country to fulfil its potential. Previous Brazilian administrations have successfully implemented a robust regulatory framework that attracts private investors who continue to fund the expansion of Brazil's power, which is crucial in enabling the country's economic growth. With a unique characteristic of having a very wide and diverse hydropower network, Brazil stands out as a market with great potential for renewable energy. Hydropower has natural storage properties enabling intermittent sources such as renewable energy to be efficiently added to the grid.

Q: What are the risks in Brazil and how do you mitigate them?

As an emerging market, Brazil is more exposed to volatile economic cycles, with potential for high inflation and political instability. As foreign investors, we need to also consider the volatility of the Brazilian currency versus the GBP. We believe that these risks are largely mitigated by: i) our focus on energy investments, as energy consumption tends to be robust regardless of cycles, ii) inflation linkage on all offtake contracts providing protection against high inflation and also against depreciation of the Brazilian currency, and iii) Brazil's long track record as a recognised democracy with strong independent institutions.

Q: How do you expect the share of Brazil in your total portfolio to evolve?

We are satisfied with the current share and we will seek to maintain or reduce our exposure to Brazil as we continue to pursue opportunities in other markets.

Q: What makes the Brazilian hydro market so unique?

Brazil has one of the world's largest hydrological resources and hydropower generation continues to have systemic importance in the country's energy mix. Hydropower plants provide a reliable and continuous source of clean energy for a power system with a continuously growing demand and rapid penetration of intermittent renewables. The hydropower sector in Brazil is underpinned by a unique regulatory framework which seeks to mitigate hydrological resource risk for individual hydropower generators. The framework pools hydrological resources into a nationwide consortium of eligible hydropower generators of systemic importance. Members of the hydropower consortium benefit from the output of the whole pool of eligible hydropower generation irrespective of an individual member's actual production. Therefore, the idiosyncratic risk of a single hydro plant is mitigated by the output of the pool.

Q: Can you tell us more about the programme of remote distributed power generation in Brazil?

Brazil has the largest power market in Latin America, with total installed capacity of 225 GW in 2023. The country's size, plentiful resources and conducive policies have made Brazil the region's main renewable energy market and one of the top ten in the world. Brazil's renewable energy potential is still in its infancy. With regards to distributed generation, the Brazilian government implemented a regulatory framework favouring smaller scale power generation assets by allowing them to directly contract with end users that are captive to the local utilities and pay the much higher retail tariffs. This is done via a contractual arrangement between private parties. Distributed power plants can be located remotely within an entire distribution network, and they can provide full credits to end users in their energy bills.

The case for distributed solar PV and battery energy storage systems (BESS) in Australia

Programme overview

In 2021, GSEO committed £50m in Australia to implement distributed solar PV and battery energy storage system (BESS) hybrid projects with the Company's operating partner, Birdwood Energy, a team of energy specialists with an experienced track record of delivering renewable power generation and battery projects globally. GSEO acquired two operating distributed solar PV generation assets in South Australia and Queensland, totalling 17MW, and subsequently added in Q3 2023 a 2-hour BESS to hybridise one of the assets in order to enhance its commercial potential. The Company also acquired three ready to build sites in New South Wales of 4.95MW each and reached mechanical completion of the sites' solar farm component in Q3 2023. A 2-hour BESS addition to each of the three sites is expected to be completed by Q4 2024.

Operating partner overview

Birdwood Energy is an Australian specialist developer and manager in the renewable sector which works to scale projects for investment, accelerate deployment and integrate batteries, as well as investing into businesses supporting the sector. Birdwood has developed a A$2 billion portfolio. Birdwood was founded by energy storage and renewables experts who over the last 25 years have built and led investments and energy businesses across Australia, Europe, US, Asia and Africa. Its team comprises decades of investment, technical, development, construction and operating experience in the local market. Distributed energy is difficult for investors to access, with lots of small developers and companies. This sector however requires significant investment at scale in order to achieve our net zero targets. Distributed energy should be able to fulfil 60% of the world's future energy supply. It will be the lowest cost, most secure and cleanest energy system.

In conversation with Richard Lum, Victory Hill Managing Partner and co-CIO

Q: What is so unique about the Australian energy market and how does this represent an opportunity for GSEO and its shareholders?

There is a structural supply/demand gap in Australia that needs to be addressed to solve the grid's issues of balancing supply and demand for dependable and clean power throughout the day.

The first wave of renewable power generation in Australia was focused on the need to achieve scale and reducing the cost of energy production. The extent to which these have been successfully achieved in a relatively short space of time has conversely created additional issues for the transmission network, including the fact that the grid is struggling to accommodate a large volume of intermittent generation entering the system, and consequently this has slowed the follow-on growth of renewable energy deployment at the point when the country needs it to increase in order to further displace coal.

As the country is going through a disruptive transition, there is an opportunity for GSEO to capture value by providing clean energy though distributed solar PV and BESS hybrid assets.

Q: Why invest in c.5 MW projects and not larger scale projects?

The portfolio is aggregating distribution network-connected assets which represent the best value for investment, avoiding curtailment risk from the congestion on the already stressed high voltage network and providing further relief in a system already stressed. The operating partner also implements a portfolio enhancement/commercialisation strategy to take advantage of the price volatility.

With a 2-hour BESS, the assets can take advantage of the market volatility from time shifting of the solar PV output as well as capturing upside through energy arbitrage and other grid service revenues.

Q: How is the operating partner for this asset incentivised?

For all our programmes, construction, operation and maintenance is overseen by a specialist local operating partner and the value creation incentives are aligned with them through a profit share which is paid out in the event the project meets a certain hurdle rate.

Financial KPIs

NAV per share growth

+7.6%

Definition
NAV divided by number of shares outstanding as at 31 December 2023.

Commentary
The NAV has increased to 116.46p since 31 December 2022 (31 December 2022: 108.2p). Alternative performance per share measures are defined in the full Annual Report and Accounts.

Dividend per share

5.56p

Definition
Aggregate dividends declared per share in respect of the financial year.

Commentary
The Company's target was to pay a dividend of 5.52p per share in respect of the year to 31 December 2023 (31 December 2022: 5.13p). With the declaration of the interim dividend of 1.42p per share on 22 February 2023, the total dividend for 2023 is 5.56p per ordinary share.

Total NAV return for the year

14.5%

Definition
A measure of performance that includes both income and capital returns. This takes into account capital gains and any dividends paid out by the Company during the year.

Commentary
Total return reflects continued underlying delivery to shareholders (31 December 2022: 7.60%). Alternative performance measures are defined in the full Annual Report and Accounts.

Ongoing Charges Ratio

1.4%

Definition
Annualised ongoing charges (i.e. excluding investment costs and other irregular costs) divided by the average published undiluted NAV in the period, calculated in accordance with AIC guidelines.

Commentary
The Company's ongoing charge ratio was in line with the previous year (31 December 2022: 1.30%). Alternative performance measures are defined in the full Annual Report and Accounts.

Annualised total NAV return since IPO (February 2021)

10.0%

Definition
A measure of performance that includes both income and capital returns. This takes into account capital gains and any dividends paid out by the Company since IPO in February 2021 on an annualised basis.

Commentary
Total return reflects continued underlying delivery to shareholders (31 December 2022: 7.8%). Alternative performance measures are defined in the full Annual Report and Accounts.

Operational KPIs

Largest three investment programmes as a proportion of NAV

59.8%

Definition
Value of the three largest investment programmes divided by the NAV at period end.

Commentary
The three largest investment programmes are the US terminal storage assets, Brazilian solar PV and the Brazilian hydro facility (31 December 2022: 54.50%).

Largest investment programme as a proportion of NAV

24.9%

Definition
Value of largest investment programme divided by NAV at period end.

Commentary
The largest investment programme within the Company's portfolio is the US terminal storage assets (31 December 2022: 23.20%).

Climate-related KPIs

Total renewable energy generated and injected into the grid (MWh)

844,434

Definition
Underlying portfolio energy generated from renewable assets in MWh.

Commentary
The portfolio's generation for 2023 in MWh (31 December 2022: 35,117), equivalent of the annual electricity use of approximately 312,750 (31 December 2022: 9,000) UK homes.

Total avoided carbon emissions (tonnes CO₂e)

122,530

Definition
A measure of our success in investing in projects that have a positive environmental impact and reduce energy usage.

Commentary
The portfolio's total avoided emissions in tCO₂e from displacing fossil fuel derived electricity (31 December 2022: 14,349), equivalent to removing about 63,000 (31 December 2022: 7,000) average sized cars from UK roads.

Weighted average carbon intensity per $1m invested (tonnes CO₂e / $m)

Definition
Portfolio's exposure to carbon-intensive companies, expressed in tonnes CO₂e/$m revenue.

Commentary
The calculation covers operational scope 1 and 2 emissions (31 December 2022: 65). Emissions from assets under construction are not factored into the calculations.

STAKEHOLDER ENGAGEMENT

Overview

This section of the annual report covers the Board's considerations and activities in discharging their duties under section 172 of the Companies Act 2006, in promoting the success of the Company for the benefit of the members as a whole.

Stakeholders are integral to the long-term success of the Company. The Directors recognise that, both individually and collectively as the Board, their overarching duty is to act in good faith and in a way that is most likely to promote the success of the Company. As set out in section 172 of the Companies Act 2006, the Directors act for the benefit of shareholders and in the interests of stakeholders as a whole, having regard, amongst other matters, to:

• the likely consequences of any decision in the long term;

• the need to foster the Company's business relationships with suppliers, customers and others;

• the impact of the Company's operations on the community and the environment;

• the desirability of the Company maintaining a reputation for high standards of business conduct; and

• the need to act fairly between shareholders of the Company.

All Board discussions include consideration of the longer-term consequences of any key decisions and their implications for the relevant stakeholders.

Stakeholders

A company's stakeholders are normally considered to comprise its shareholders, employees, customers, suppliers, as well as the wider community in which the company operates and impacts. The Company is different in that as an investment trust it has no employees and, in terms of suppliers, it receives professional services from a number of different providers, principal amongst them being the Investment Manager.

Through regular engagement with its stakeholders, the Board aims to gain a rounded and balanced understanding of the impact of its decisions.

The Company recognises the importance of maintaining high standards of business conduct and seeks to ensure that these are applied in all of its business dealings and in its engagement with stakeholders. These engagement mechanisms are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective. The importance of stakeholders is taken into account at every Board meeting, with discussions involving careful consideration of the longer-term consequences of any decisions and their implications for stakeholders. Details of how the Board seeks to understand the needs and priorities of the Company's stakeholders and how these are taken into account during all its discussions and as part of its decision-making are set out below.

Key decisions made during the year

Share buyback programme

The Board continually evaluates the optimum capital allocation strategy for the Company balancing the need to maintain a strong balance sheet in order to support existing portfolio assets alongside further investment opportunities and returning capital to shareholders via dividends or share buybacks. In recognition of the discount at which the Company's share price was trading relative to its NAV per share and its impact on shareholder returns, on 15 September 2023 the Company announced a share buyback programme (the "buyback programme") for up to £10m. Post period end, on 22 February 2024 the Company announced an increase in the buyback programme by an additional £10m bringing the total buyback programme to £20m. The buyback programme is expected to be accretive to NAV per share, as well as offer additional liquidity for the Company's underlying shares. Details of the shares repurchased under the buyback programme are set out below.

Board changes

Ms Carneiro was appointed as a non-executive Director of the Company on 18 January 2023. Details of her appointment were included in the Company's 2022 Annual Report.

As announced by the Company on 11 December 2023, the Board appointed Mr Horlick as the Senior Independent Director of the Company with effect from 1 January 2024. In line with the AIC Code of Corporate Governance, the Board considers that this appointment would provide a sounding board for the Chair, serve as an intermediary for the other Directors and shareholders, and also act as an alternative engagement channel to the shareholders and other key stakeholders.

Change of Alternative Investment Fund Manager

During the year under review, the Board replaced G10 Capital Limited, the AIFM of the Company since the IPO, with Victory Hill Capital Partners LLP. Further disclosures regarding the new AIFM Agreement with Victory Hill are included in the full Annual Report and Accounts for the year ended 31 December 2023.

Stakeholder	Importance	How the Company engages
Shareholders	Continued shareholder support and engagement are critical to the existence of the Company and the delivery of its long-term strategy. The Board and the Investment Manager give a high priority to ensuring that shareholders understand the Company's strategy and goals and can monitor its performance through the robust corporate governance processes established by the Company.	The Board welcomes shareholders' views and is committed to maintaining open and transparent channels of communications with them. The Board is responsible for the content of communication regarding corporate issues and for conveying its views to shareholders. It aims to ensure that shareholders are provided with sufficient information to understand the risk/reward balance to which they are exposed by investing in the Company. The methods of engaging with shareholders include: Publications The Annual and Interim Reports are made available on the Company's website. These reports provide shareholders with a clear understanding of the Company's portfolio and financial position. In addition to the Annual and Interim Reports, the investor presentations made by the Investment Manager and any prospectuses and circulars issued by the Company are also available on the Company's website. The Company provides regular updates on portfolio acquisitions, capital raises, share buybacks and any other relevant matter by way of market announcements. Annual General Meeting All shareholders are encouraged to attend and vote at the AGM and at any general meetings of the Company, during which the Board and the Investment Manager are available to discuss issues affecting the Company and answer any questions. The Company values any feedback and questions it may receive from shareholders ahead of and during the AGM and takes action, as appropriate. Shareholder meetings The Investment Manager, along with the Broker, regularly meets with the Company's shareholders to provide Company updates and to foster regular dialogue. Feedback from all shareholder meetings and investors' views are shared with the Board on a regular basis. Shareholder concerns Shareholders wishing to communicate directly with the Board or the Investment Manager to raise any issues or concerns, should contact the Company Secretary at the registered office address. The Chair, Senior Independent Director and the other Directors are available throughout the year to meet with shareholders to understand their views on the Company's performance and governance where they wish to do so. Relations with shareholders are also considered as part of the annual Board evaluation process. Investor relations updates The Board regularly monitors the shareholder profile of the Company. With the majority of shareholders being a combination of institutional investors and private client brokers, the Board receives regular updates on investors' views and attitudes from the Company's Broker and the Investment Manager. The results of these meetings are reported to the Board as part of the formal reporting undertaken by both the Investment Manager and the Broker. The details of substantial shareholdings in the Company are included in the Directors' Report in the full Annual Report and Accounts for the year ended 31 December 2023.
Investment Manager	The Investment Manager's performance is critical for the Company to achieve positive and consistent long-term returns in line with its investment objective.	The Board believes that maintaining a close and constructive working relationship with the Investment Manager is crucial to promoting the long-term success of the Company in an effective and responsible way. Representatives of the Investment Manager attend Board meetings and provide reports on the current and future activities, portfolio investments, performance, operational and administrative matters. An open discussion regarding such matters is encouraged, both at Board meetings and by way of ongoing communication between the Board and the Investment Manager, facilitating a positive environment for constructive challenge and cooperative development of solutions. Board members are encouraged to share their knowledge and experience with the Investment Manager and they recognise that the long-term health of the Investment Manager is in the interests of shareholders as a whole. The Board, through the Management Engagement Committee, keeps the ongoing performance of the Investment Manager under continual review and conducts an annual appraisal to consider its terms of engagement. Details regarding the continuing appointment of the Investment Manager are set out in the full Annual Report and Accounts for the year ended 31 December 2023.
Other key service providers	As an investment company, all services are outsourced to third party service providers. The Board is conscious that it is critical to foster good working relationships with them.	The Board believes that strong relationships with its other key service providers, namely the Company Secretary, the Administrator, the Depositary, the Broker and the Registrar, are important for the long-term success of the Company. The Board maintains regular contact with its key external providers and receives regular reporting from them, both through the Board and Committee meetings, as well as outside of the regular meeting cycle. Their advice, as well as their needs and views, are routinely taken into account. Through its Management Engagement Committee, the Board formally assesses their performance, fees and continuing appointment at least annually to ensure that the key service providers continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service. The Audit Committee also reviews and evaluates the control environment in place at each key service provider.
Lenders	Availability of funding and liquidity are crucial to the Company's ability to take advantage of investment opportunities as they arise.	The Company does not make use of structural debt in order to achieve its yield and total return targets. To date, the portfolio has been equity funded allowing for efficient asset acquisition. Once assets have been acquired and are operational, the Investment Manager, through its extensive international network of funding partners, may seek the most efficient debt funding on a non-recourse basis.
Society and the environment	It is of utmost importance to the Company that it positively impacts local communities through its sustainable environmental initiatives, investment in areas undergoing regeneration and local employment practices.	As an investor in sustainable energy, the Company's assets have an impact on the environment. The Company has a Sustainability Framework which is published on the Company's website and our approach to sustainability is set out in the Sustainability section of the report.

PRINCIPAL RISKS & UNCERTAINTIES

The Board, through delegation to the Audit Committee, has undertaken a robust assessment and review of the emerging and principal risks facing the Company, together with a review of any new risks which may have arisen during the year, including those that would threaten its business model, future performance, solvency or liquidity. These risks are formalised within the Company's risk matrix, which is regularly reviewed by the Audit Committee. As part of its risk management process, the Audit Committee seeks to identify emerging risks to ensure that they are effectively managed as they develop and recorded in the risk matrix.

The Directors are focussed on the risk presented to the Company by the discount to NAV being high for reasons not under the Company's control. Given the market conditions, the Company has been unable to raise additional funds for investments to drive further growth and diversification in the portfolio. At the same time the Directors are focussed on the Investment Manager managing the Company's liquidity. Some risks in relation to current investments have been considered by the Directors to be relatively low and well managed: demand, usage and throughput, and meteorology. These have been removed from the list below this year. A great deal of work has been completed on climate change scenarios and more detail is given on physical and transition risks below.

Information about the Company's internal control and risk management procedures are detailed in the Corporate Governance Statement in the full Annual Report and Accounts for the year ended 31 December 2023.

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 12 to the financial statements.

Risk	Description of Risk	Risk Impact	Mitigation
1. Risks relating to the Company
Reliance on Investment Manager	The Company relies on the Investment Manager for the achievement of its investment objective.	The Company relies on the Investment Manager for the achievement of its investment objective. The departure of some or all of Victory Hill's investment professionals could prevent the Company from achieving its investment objective. There can be no assurance that the Directors will be able to find a replacement manager if Victory Hill resigns. If a successor cannot be found, the Company may not have the resources it considers necessary to manage the Portfolio or to make investments appropriately and, as a result there may be a material adverse effect on the performance of the Company's NAV, revenues and returns to shareholders.	The Investment Manager consists of five managing partners supported by five investment professionals. The total Investment Manager personnel is 15, which includes the Investment, Finance, Sustainability, Compliance Data Analytics and Investor Relations teams. A collegiate approach is taken to investment management activities with the team having a broad range of skills to support the pursuance of the Company's investment objective. The performance of the Company's Investment Manager is closely monitored by the Board. In addition, at least once a year the Management Engagement Committee performs a formal review process to consider the ongoing performance of the Investment Manager and makes a recommendation on the continuing appointment of the Investment Manager to the Board. The initial term of the investment management agreement is 5 years (ending in February 2026).
Reliance on third party service providers	The Company has no employees and the Directors have all been appointed on a non-executive basis. Therefore, the Company is reliant upon its third party service providers for the performance of certain functions.	Service provider control failures may result in operational and/or reputational problems and may have an adverse effect on the Company's NAV, revenues and returns to shareholders.	The Investment Manager and the Board oversees and keeps under review the provision of services by each of the Company's service providers on an ongoing basis. The Management Engagement Committee performs a formal review process to consider the ongoing performance of its service providers.
Currency risks	The Company will make investments which are based in countries whose local currency may not be Sterling and the Company may make and/or receive payments that are denominated in currencies other than Sterling.	When foreign currencies are translated into Sterling there could be a material adverse effect on the Company's profitability, the NAV and the price of the shares.	Investments are held for the long-term. The Company enters into hedging arrangements for periods up to 12 months to hedge against short-term currency movements. Currency risk is taken into consideration at time of investment. The movement in NAV attributable to currency movements is disclosed to investors each quarter with the NAV update.
Liquidity risks	Risk that sufficient cash funds are not in place in order to meet commitments for investment, dividends, buy-backs of shares and ongoing fund costs.	Risk that unexpected calls are made on investments.	The fund is investing in a mixture of operating and construction assets. Operating assets have the benefit of providing cash flows. The Investment Manager provides an annual budget to the Board for approval. Performance vs budget is monitored on a quarterly basis by the Investment Manager and the Board. The Investment Manager monitors liquidity of the Company vs forecast investment, dividend and share buy-back commitments. Liquidity is represented in cash, money market investments and fixed term deposits. The Investment Manager is exploring options for project level debt facilities and fund level debt facilities. Until the Company is fully deployed into a diversified pool of assets, fund level debt facilities are limited. At this early stage in the Company's life it has cash reserves originating from the proceeds of equity issuances. Therefore, given the investment pipeline, investment limits and dividend considerations, liquidity is not constrained. In the case of share buy-backs to manage share price discount vs. NAV, the ultimate buy-back is subject to sufficient funds to pay dividends, market conditions and Board discretion. Liquidity constraints will be considered before share buy-backs are undertaken.
2. Risks relating to the portfolio investment strategy
Illiquidity of investments	The Company's investments in Sustainable Energy Infrastructure Investments are illiquid and may be difficult to realise at a particular time and/or at the prevailing valuation.	Shareholder returns could be materially negatively impacted should the Company be required to realise them in the near term (requirement for early liquidity).	The Company is expected to hold most of its investments on a long-term basis. The Investment Manager and the Board will monitor the position on a regular basis.
Market conditions	Market conditions may delay or prevent the Company from making appropriate investments that generate attractive returns.	The actual return to shareholders may be materially lower than the target total return.	A pipeline of investments has been identified and is constantly being refreshed. The senior management team at the Investment Manager have extensive experience in executing strategies similar to that of the Company. The Company is invested across a number of investment programmes and assets that generate returns in line with the fund projected returns.
Concentration risk	Concentration risk in relation to exposure to individual sustainable energy infrastructure investments, technology and geography.	Targeted returns may be materially negatively impacted if those sustainable energy infrastructure investments, geographies and/or technologies, do not deliver the returns anticipated by Victory Hill.	Limits are set out in the Investment Policy to mitigate concentration risk. The Company has a very broad mandate. This risk should be mitigated as the Company increases in size. At the time of making investments, concentration risk is taken into consideration. The Investment Manager will monitor exposures and the position will be regularly reviewed by the Board.
3. Risks relating to investments
Construction risks	Construction project risks associated with the risk of inaccurate assessment of a construction opportunity, delays or disruptions which are outside the Company's control, changes in market conditions, and the inability of contractors to perform their contractual commitments.	Failure to complete projects in accordance with expectations could adversely impact the Company's performance and shareholder returns.	The Investment Manager undertakes extensive due diligence on construction opportunities and seeks to have appropriate insurances in place to mitigate any costs relating to delays. In addition, the Investment Manager seeks to utilise EPC contractors that can provide single point, lump sum turnkey arrangements wherever possible. The Investment Manager monitors construction carefully and reports frequently to the Board where issues with contractors arise, the Investment Manager has the experience and expertise to identify and contract with alternative contractors.
Due diligence	Due diligence may not identify all risks and liabilities in respect of an investment.	Failure to identify risks and liabilities may impact the profitability or valuation of the investment.	The senior management team at the Investment Manager have extensive experience in executing strategies similar to that of the Company. Where appropriate, due diligence conducted by the Investment Manager is supplemented, for example, by independent legal, tax, accounting, commercial and technical advisers.
Counterparty risks	Counterparties defaulting on their contractual obligations or suffering an insolvency event.	The failure by a counterparty to make contractual payments or perform other contractual obligations or the early termination of the relevant contract due to the insolvency of a counterparty may have an adverse effect on the Company's NAV, revenues and returns to shareholders.	Due diligence on counterparty risk is performed before entering into projects and counterparty risk is monitored on a regular basis.
Uninsured loss and damage	The risk that an investment may be destroyed or suffer material damage, and the existing insurances may not be sufficient to cover all the losses and damages.	The actual return to shareholders may be materially lower than the target total returns.	An independent insurance adviser is appointed for each project to review project risks in conjunction with the Investment Manager and to ensure that appropriate insurance arrangements are in place. Insurance requirements are reviewed on an ongoing basis.
Curtailment risks	Investments may be subject to the risk of interruption in grid connection or irregularities in overall power supply.	In such cases, affected investments may not receive any compensation or only limited compensation.	Extensive due diligence is performed on each project before investment. The Investment Manager constantly reviews curtailment risks.
Commodity price risks	The operation and cash flows of certain investments may depend prevailing market prices for electricity and fuel, and particularly natural gas.	The actual return to shareholders may be materially lower than the target total return.	The Company mitigates these risks by entering into (i) hedging arrangements; (ii) extendable short, medium and long-term contracts; and (iii) fixed price or availability based asset-level commercial contracts.
ESG risks	Material ESG risks may arise such as health and safety, unfair advantage, bribery, corruption and environmental damage including climate related risks.	If the Company fails to adhere to its ESG commitments this could result in shareholder dissatisfaction and adversely affect the reputation of the Company.	ESG is embedded in the investment cycle with a formal ESG matrix including a minimum target ESG score required for approval of any new investments. Ongoing operational and construction ESG risk management is reviewed periodically by the Investment Manager, who work closely with service providers on ESG and impact standards reporting.
4. Risks relating to the Company's shares
Discount to NAV	The share price may not reflect the underlying NAV. Discount management provisions being unable to be satisfied may result in a significant share price discount to NAV.	Lack of liquidity in the Company's shares could negatively impact on shareholder returns.	The Board, Broker and Investment Manager monitor the discount or premium to NAV at which the shares trade. The Board, Broker and Investment Manager actively consider whether share buybacks can assist with discount management. In addition, corporate strategies are actively considered as and when they arise.
5. Risks relating to regulation
Regulation	The Company is exposed to the risk that the competent authorities may pass legislation that might hinder or invalidate rights under existing contracts as well as hinder or impair the obtaining of the necessary permits or licences necessary for Sustainable Energy Infrastructure Investments in the construction phase.	The actual return to shareholders may be lower than the target total return.	The Company aims to hold a diversified portfolio of Sustainable Energy Infrastructure Investments and so it is unlikely that all assets will be impacted equally by a single change in legislation. The Investment Manager ensures that contracts are not exposed to government subsidies, thus mitigating exposure to policy risks linked to contract pricing. There is also strong public demand for support of the renewables market to hit 'net zero' carbon emission targets. The Investment Manager monitors the position and provides regular reports to the Board on the wider macro environment.
6. Operational risks
Operation and management risks of the portfolio assets	Poor management or operational performance of an asset by the Company's operating partners and selected operations and maintenance providers.	The actual return from single portfolio assets may be lower than the target total return for the asset.	Operating partners operate to an annual budget and a series of key performance indicators. The Investment Manager monitors the performance vs. annual budget and KPIs on a monthly and quarterly basis. On an annual basis the Operating partners are subject to an annual performance review across operational, ESG and financial KPIs. The Investment Manager provides quarterly reports to the Board on asset-level performance.
Valuation risk	Valuation of the portfolio of assets is based on financial projections and estimations of future results.	Actual results may vary significantly from the projections, which may reduce the profitability of the Company leading to reduced returns to shareholders and a fall in the Company's NAV.	The Company has adopted a valuation policy which was disclosed in the Company's prospectus. Fair value for each investment is calculated by the Investment Manager. However, if considered necessary and appropriate, the Board may appoint an independent valuer. The Investment Manager has significant experience in the valuation of energy assets. The Investment Manager has a valuation working group to perform and challenge valuations. In addition, the Investment Manager's Portfolio Risk and Valuation Committee ("PRV") reviews and challenges valuations. The PRV members are functionally independent from the team performing valuations. The Board reviews the valuations provided quarterly by the Investment Manager. As part of the annual audit, the External Auditor reviews the valuations.
7. Climate-related risks
Physical risks	Longer-term changes in climate patterns, e.g., reduction or increase in wind levels, decrease solar optimal days in impacting renewable output and associated earnings. Increased occurrence of extreme weather events such as cyclones, storms, flooding, droughts and heatwaves causing damage to assets, disruption to feedstocks, value chain, outputs and associated earnings.	These factors could result in the reduction of output from assets leading to reduced income stream. This risk may increase over the long term in the absence of climate mitigation.	The Company is investing in a diversified portfolio of energy transition infrastructure by geography, technology and capability. These investments are targeted at the energy transition to net zero. This will provide a buffer against variable weather patterns across the portfolio. The Company also mitigates risk through project revenues being contracted for the medium and long term. At the asset level, weather conditions are monitored and many of the renewable projects have battery storage capabilities to optimise energy input to the grid. Meteorology and feedback due diligence is undertaken before investment and reviewed regularly. All assets have crisis management and business continuity plans to respond to disruptions. The assets are also required to have continuous improvement management systems to build capability and capacity in the local teams and operations.
	Abrupt disruptive climate impacts such as impacts from flooding, wildfire, drought, extreme heat, or sudden regulatory actions increasing over time.	Increase operating expenditure to recover asset damage caused by natural disasters and increase insurance premium for assets in high-risk locations.	Throughout the investment decision-making process, the due diligence process accounts for climate change risk and impacts. The Investment Manager employs an insurance specialist when making investments and seeks to have appropriate contractual warranties, indemnities and insurance provisions in place to mitigate any costs relating to delays or operation disruption. Insurance requirements are reviewed on an ongoing basis.
	Uncertainty in market signals take forms in lower-than-expected power price reflected from imbalance in abundant intermittent power supply and market demand as well as lower than expected volume throughput for conventional fuel storage assets with increased demand for alternative fuels.	Increase in market volatility and abrupt and unexpected shifts in power prices make financial forecasts less reliable on intermittent renewable energy solutions. Reduced throughput for conventional fuels longer-term with expected shifts to cleaner and alternative fuels impacting existing fuel storage asset revenue flows.	The Company manages this risk through its diverse portfolio of energy transition infrastructure assets such as the battery energy storage systems and its enduring hydro facility, as well as signing fixed price offtaker agreements. The Company is assessing its longer-term strategy to adapt storage assets to accommodate alternative fuels required for hard to abate transportation including sustainable aviation fuel, renewable diesel, marine e-methanol and hydrogen as the market shifts.
Transition risks	Market shifts such as changing customer behaviour and substitution of existing products and services with lower emissions options or new technologies may dampen ability to engage investors on a broader portfolio of energy transition projects than a traditional renewable focus including different geographies. The Investment Manager monitors changes in climate change policy and assesses the potential impact and mitigation strategies.	Increase costs to adopt/deploy new practices to transition to lower emissions technologies, reduction in the availability of market capital to invest in some local energy transition projects.	There is strong public demand for support of the renewables market towards net zero carbon emission targets. The Company is expected to hold most of its investments on a long term basis and the Board and Investment Manager monitor the position on a regular basis. The senior management team at the Investment Manager has extensive experience in executing a wide range of strategies in the energy sector, the team monitors market shifts and tailor investment strategies accordingly.
	Policy shift may introduce regulation around climate change, e.g., increased disclosure, taxes etc. Stakeholders' increasing concerns on business practice (e.g., supply chain management, workforce management and planning) need to be addressed.	This could increase cost of doing business (e.g., higher compliance costs, increased insurance premiums, workforce management and planning), and result in reduction in the availability of capital to invest in energy transition projects.	The Company is supportive of the policy aims of the Disclosure Regulation and will comply and monitor changes. The Investment Manager engages with partners and stakeholders on behalf of the Company to gather data and drive action to improve ESG management and support disclosure and policy requirements. This includes monthly metric reporting on climate related KPIs, including energy used and generated, mitigation actions for risks and impacts, as well as any energy reduction projects. The Company's investment strategy targeting the energy transition is aligned with global policy movements on climate change which would limit impact.

GOING CONCERN AND VIABILITY STATEMENT

Going concern

The Directors, in their consideration of going concern, have reviewed the financial position and comprehensive future cash flow models for the Company prepared by the Company's Investment Manager, taking into consideration current and potential funding sources, investment into existing and near-term projects and the Company's working capital requirements. Furthermore, the Directors have considered a worst case scenario in which the Company is assumed to meet all of its remaining investment commitments within the next 12 months, in addition to dividend payments and ongoing operating expenses. Even in this unlikely scenario, the Company has sufficient headroom to meet all expected cash outflows with its existing cash balances. Based on these forecasts and the assessment of principal risks described in this report, that it is appropriate to prepare the financial statements of the Company on the going concern basis.

The Directors believe that there are currently no material uncertainties in relation to the Company's ability to continue for a period of at least 12 months from the date of the approval of the financial statements and, therefore, has adopted the going concern basis in the preparation of the financial statements.

Viability statement

In accordance with Principle 21 of the AIC Code, the Directors have assessed the prospects of the Company over a period longer than 12 months required by the relevant "Going Concern" provisions. The Directors have considered the nature of the Company's assets and liabilities, and associated cash flows, and have determined that five years, up to 31 December 2028, is the timescale over which the performance of the Company can be forecast with a material degree of accuracy and therefore is the appropriate period over which to consider the viability.

The Investment Manager has considered the sensitivity of the financial projections to a range of key assumptions, such as a reduction in cash flows from portfolio companies, delays in construction, cost overruns, no debt availability, and an inability for the Company to raise additional equity. The results of this stress testing showed that the Company would be able to withstand the impact of these scenarios occurring over the five-year period.

The Directors confirm they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency, liquidity, and dividend cover for a five-year period. The Directors' assessment has been made with reference to the principal risks and uncertainties and emerging risks above and how they could impact the prospects of the Company.

As an Investment Company, part of the Company's objective is to produce stable dividends while preserving the capital value of its investment portfolio. Following regular pipeline updates from the Investment Manager, the Directors believe that the Company is well placed to manage its business risks successfully over both the short and long term period, the Directors have a reasonable expectation that the Company will be able to continue in operation and to meet its liabilities as they fall due for a period of at least five years.

Approval of the Strategic Report

The Strategic Report was approved by the Board of Directors and signed on its behalf by:

Bernard Bulkin
Chair

4 April 2024

EXTRACT FROM THE DIRECTORS' REPORT

Dividends

On 25 May 2023, the Company declared an interim dividend of 1.38p per ordinary share in respect of the period from 1 January 2023 to 31 March 2023, which was paid on 30 June 2023 to shareholders on the register as at 2 June 2023.

On 2 August 2023, the Company declared an interim dividend of 1.38p per ordinary share in respect of the period from 1 April 2023 to 30 June 2023, which was paid on 14 September 2023 to shareholders on the register as at 11 August 2023.

On 1 November 2023, the Company declared an interim dividend of 1.38p per ordinary share in respect of the period from 1 July 2023 to 30 September 2023, which was paid on 8 December 2023 to shareholders on the register as at 10 November 2023. Of this amount, 1.03p per share was designated as an interest distribution.

Post year end, on 22 February 2024, the Company declared an interim dividend of 1.42p per ordinary share in respect of the period from 1 October 2023 to 31 December 2023, which will be paid on 28 March 2024 to shareholders on the register as at 29 February 2024.

Therefore, the total dividends paid by the Company in respect of the year ended 31 December 2023 were 5.56p per ordinary share, exceeding the dividend target of 5.52p per share.

Dividend policy

The Board expects that dividends will constitute the principal element of the return to the holders of ordinary shares. The Company is targeting quarterly dividend payments of at least 1.42p or 5.68p in total per ordinary share for the financial year ending 31 December 2023, in line with its progressive dividend policy.

Subject to market conditions and the level of the Company's net income, it is intended that dividends on the shares will be payable quarterly, all in the form of interim dividends (the Company does not intend to pay any final dividends). Subject to satisfying the requirements for investment trust status, the Board reserves the right to retain within a revenue reserve a proportion of the Company's net income in any financial year, such reserve then being available at the Board's absolute discretion for subsequent distribution to shareholders, subject to the requirements of the IT Regulations. The dividend policy is subject to an annual vote at each AGM. The Company may, at the discretion of the Board, and to the extent possible, pay all or part of any future dividend out of capital reserves.

The Company may offer with the prior authority of shareholders and subject to such terms and conditions as the Board may determine, shareholders (excluding any holder of treasury shares) the opportunity to elect to receive ordinary shares, credited as fully paid, instead of the whole, or some part, of any dividend. The ability to issue ordinary shares in lieu of cash would provide the Company with the flexibility to retain cash where to do so would benefit the Company.

The Board may designate part of each dividend paid by the Company insofar as it represents "qualifying interest income" received by the Company as interest distributions for UK tax purposes. It is expected that a variable proportion of the Company's distributions will take the form of interest distributions. Prospective investors should note that the UK tax treatment of the Company's distributions may vary for a shareholder depending upon the classification of such distributions. Prospective investors who are unsure about the tax treatment that will apply in respect of any distributions made by the Company should consult their own tax advisers.

Share capital structure

Issue of shares

No shares were issued during the year under review or since the year end.

Purchase of shares

At the AGM held on 25 April 2023, the Company was granted authority to purchase up to 14.99% of its ordinary share capital in issue, amounting to 63,332,583 ordinary shares. During the year ended 31 December 2023, the Company purchased in the stock market 7,027,321 ordinary shares (with a nominal value of £70,273.21) to be held in treasury, at a total cost of £5,399,770. This represented 1.66% of the issued share capital at 31 December 2022. No shares were purchased for cancellation during the year. The share purchases were made with a view to reducing discount volatility.

Shares held in treasury

Holding shares in treasury enables a company to cost-effectively issue shares that might otherwise have been cancelled. The total number of shares held in treasury as at 31 December 2023 was 7,027,321 shares (with a nominal value of £70,273). This represents 1.66% of the issued share capital as at the year end.

Current share capital

As at 31 December 2023, the Company's issued share capital comprised 422,498,890 ordinary shares, each of £0.01 nominal value, of which 7,027,321 shares were held in treasury.

At general meetings of the Company, ordinary shareholders are entitled to one vote on a show of hands and, on a poll, to one vote for every ordinary share held. Shares held in treasury do not carry voting rights.

At 4 April 2024, the total voting rights in the Company were 409,728,422.

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, they 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 Group and 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 judgements and accounting estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the 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 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 Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.

Website publication

The Directors are responsible for ensuring the annual report and the 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 and has been delegated to the Investment Manager. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' responsibilities pursuant to DTR4

The Directors, to the best of their knowledge, confirm that:

• the financial statements 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; and

• the annual report includes a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Directors consider that the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Approval

This Directors' responsibilities statement was approved by the Board of Directors and signed on its behalf by:

Bernard Bulkin
Chair

4 April 2024

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2023 or the year ended 31 December 2022 but is derived from those accounts. Statutory accounts for the period ended 31 December 2022 have been delivered to the Registrar of Companies and those for the year ended 31 December 2023 will be delivered in due course. The Auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts for the year ended 31 December 2023 at https://www.vh-gseo.com.

STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023

		For the year ended 31 December 2023			For the year ended 31 December 2022
	Note	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Income
Gains on investments	7	-	32,517	32,517	-	4,131	4,131
Investment income	4	29,326	-	29,326	28,823	-	28,823
Total income and gains		29,326	32,517	61,843	28,823	4,131	32,954
Investment management fees	15	(4,372)	-	(4,372)	(3,810)	-	(3,810)
Other expenses	5	(2,132)	-	(2,132)	(940)	-	(940)
Profit/(loss) for the year before taxation		22,822	32,517	55,339	24,073	4,131	28,204
Taxation	6	-	-	-	-	-	-
Profit/(loss) for the year after taxation		22,822	32,517	55,339	24,073	4,131	28,204
Profit and total comprehensive income attributable to:
Equity holders of the Company		22,822	32,517	55,339	24,073	4,131	28,204
Earnings/(loss) per share - basic and diluted (p)	17	5.42	7.72	13.14	6.55	1.12	7.67

The total column of the Statement of Comprehensive Income is the profit and loss account of the Company. The supplementary revenue return and capital columns have been prepared in accordance with the Association of Investment Companies Statement of Recommended Practice (AIC SORP).

All revenue and capital items in the above statement derive from continuing operations.

The above Statement of Comprehensive Income includes all recognised gains and losses.

The notes below form part of these financial statements.

STATEMENT OF FINANCIAL POSITION
As at 31 December 2023

	Note	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Non-current assets
Investments at fair value through profit or loss	7	369,047	315,133
Total non-current assets		369,047	315,133
Current assets
Cash and cash equivalents	10	74,258	141,791
Cash receivable	9	40,367	-
Other receivables	9	441	740
Total current assets		115,066	142,531
Total assets		484,113	457,664
Current liabilities
Accounts payable and accrued expenses	11	(270)	(491)
Total current liabilities		(270)	(491)
Total liabilities		(270)	(491)
Net assets	18	483,843	457,173
Capital and reserves
Share capital	13	4,225	4,225
Share premium	13	186,368	186,368
Special distributable reserve	13	227,067	232,467
Capital reserve		58,694	26,177
Revenue reserve		7,489	7,936
Total capital and reserves attributable to equity holders of the Company		483,843	457,173
Net asset value per ordinary share (p)	18	116.46	108.21

The financial statements were approved and authorised for issue by the Board of Directors on 4 April 2024 and signed on its behalf by:

Bernard Bulkin

Chair

Company Registration Number 12986255

The notes below form part of these financial statements.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the year ended 31 December 2023

For the year ended 31 December 2023	Note	Share capital £'000	Share premium account £'000	Special distributable reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Opening balance		4,225	186,368	232,467	26,177	7,936	457,173
Shares bought back	13	-	-	(5,400)	-	-	(5,400)
Total comprehensive income for the year		-	-	-	32,517	22,822	55,339
Interim dividends paid during the year	14	-	-	-	-	(23,269)	(23,269)
Balance at 31 December 2023		4,225	186,368	227,067	58,694	7,489	483,843

For the year ended 31 December 2022	Note	Share capital £'000	Share premium account £'000	Special distributable reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Opening balance		3,116	67,949	232,467	22,046	(1,680)	323,898
Issue of share capital	13	1,109	120,891	-	-	-	122,000
Cost of issue of shares	13	-	(2,472)	-	-	-	(2,472)
Total comprehensive income for the year		-	-	-	4,131	24,073	28,204
Interim dividends paid during the year		-	-	-	-	(14,457)	(14,457)
Balance at 31 December 2022		4,225	186,368	232,467	26,177	7,936	457,173

A total of 422,498,890 ordinary shares were issued since the Company's date of incorporation to 31 December 2023.

During the year, the Company purchased for treasury a total of 7,027,321 ordinary shares.

The capital reserve represents the unrealised gains or losses on the revaluation of investments. The unrealised element of the capital reserve is not distributable.

The special distributable and revenue reserves are distributable to shareholders of the Company.

The notes below form part of these financial statements.

STATEMENT OF CASH FLOWS
For the year ended 31 December 2023

	Note	For the year ended 31 December 2023 £'000	For the year ended 31 December 2022 £'000
Cash flows from operating activities
Profit before tax		55,339	28,204
Adjustments for:
Movement in fair value of investments	7	(31,095)	(4,148)
Interest on cash deposits	4	(5,865)	(2,310)
Operating result before working capital changes		18,379	21,746
(Increase)/decrease in other receivables	9	(40,068)	71
Increase/(decrease) in accounts payable and accrued expenses	11	(221)	151
Net cash (used in)/generated from operating activities		(21,910)	21,968
Cash flows from investing activities
Purchase of investments	7	(22,819)	(151,367)
Interest on cash deposits	4	5,865	2,310
Net cash used in investing activities		(16,954)	(149,057)
Cash flows from financing activities
Proceeds from issue of shares		-	122,000
Share buybacks	13	(5,400)	-
Payment of share issue costs		-	(2,472)
Dividends paid in the year	14	(23,269)	(14,457)
Net cash (used in)/generated from financing activities		(28,669)	105,071
Net decrease in cash and cash equivalents		(67,533)	(22,019)
Cash and cash equivalents at beginning of the year		141,791	163,810
Cash and cash equivalents at end of the year	10	74,258	141,791

The notes below form part of these financial statements.

Notes to the financial statements

1. General information

VH Global Sustainable Energy Opportunities plc (the "Company") is a closed-ended investment company, incorporated in England and Wales on 30 October 2020 as a public limited company under the Companies Act 2006 with registered number 12986255. The Company commenced operations on 2 February 2021 when its shares commenced trading on the London Stock Exchange.

The Company has appointed Victory Hill Capital Partners LLP as the Investment Manager & AIFM pursuant to the Investment Management Agreement dated 3 May 2023.

The Company has registered, and intends to carry on business, as an investment trust with an investment objective to generate stable returns, principally in the form of income distributions, by investing in a diversified portfolio of global sustainable energy infrastructure assets, predominantly in countries that are members of the EU, OECD, OECD Key Partner and OECD Accession Countries.

The financial statements comprise only the results of the Company, as its investment in VH GSEO UK Holdings Limited is measured at fair value through profit or loss in line with IFRS 10 as explained in note 2.

2. Material accounting policy information

2.1 Basis of preparation

The financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.

The financial statements are prepared on the historical cost basis, except for revaluation of certain financial investments at fair value through profit or loss. The principal accounting policies adopted are set out below and consistently applied, subject to changes in accordance with any amendments in IFRS.

The financial statements have also been prepared, as far as is consistent with adopted IFRS and relevant and applicable to the Company in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (SORP) issued in April 2021 by the Association of Investment Companies (AIC).

The financial statements incorporate the financial statements of the Company only. The primary objective of the Company is to generate returns in Sterling. The Company's performance is measured in Sterling terms and its ordinary shares are issued in Sterling. Therefore, the Company has adopted Sterling as the presentation and functional currency for its financial statements. These financial statements are presented in pounds sterling and are rounded to the nearest thousand, unless otherwise stated.

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates it also requires the Company's management to exercise judgment in applying the Company's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 3.

2.2 Investment entity and basis of non-consolidation of subsidiaries

The sole objective of the Company, through its subsidiary GSEO Holdings, is to make investments, via individual corporate entities. The Company typically will subscribe for equity in or issue loans to GSEO Holdings in order for it to finance its investments.

The Directors have concluded that the Company has all the elements of control as prescribed by IFRS 10 "Consolidated Financial Statements" in relation to all its subsidiaries and that the Company satisfies the three essential criteria to be regarded as an investment entity as defined in IFRS 10.

There are three key conditions to be met by the Company for it to meet the definition of an investment entity. The three essential criteria are that the entity must:

1. Obtain funds from one or more investors for the purpose of providing these investors with professional investment management services;

2. Commit to its investors that its business purpose is to invest its funds solely for returns from capital appreciation, investment income or both; and

3. Measure and evaluate the performance of substantially all of its investments on a fair value basis.

In satisfying the second criteria, the notion of an investment time frame is critical. An investment entity should not hold its investments indefinitely but should have an exit strategy for their realisation.

In this regard, GSEO Holdings is itself an investment entity. Consequently, the Company need not have an exit strategy for its investment in GSEO Holdings.

As for investments in subsidiaries, the Company intends to hold each investment until the end of its life, at which point the assets are expected to have no residual value. The Directors consider that this demonstrates a clear exit strategy from these investments. The Company may choose to sell its interest in an investment before the end of its project life if an attractive offer is received from a potential purchaser and the Directors consider that this demonstrates a clear exit strategy from these investments.

Subsidiaries are therefore measured at fair value through profit or loss, in accordance with IFRS 13 "Fair Value Measurement", IFRS 10 "Consolidated Financial Statements" and IFRS 9 "Financial Instruments".

Further detail on the significant judgements in the basis of non-consolidation of the subsidiaries of the Company is disclosed in note 3.

2.3 Going concern

The Directors have reviewed the financial position of the Company and its future cash flow requirements, taking into consideration current and potential funding sources, investment into existing and near-term projects and the Company's working capital requirements.

The Company faces a number of risks and uncertainties, as set out in the Strategic Report above. The financial risk management objectives and policies of the Company, including exposure to price risk, interest rate risk, credit risk and liquidity risk are discussed in note 12 to the financial statements.

The Company continues to meet day-to-day liquidity needs through its cash resources. As at 31 December 2023, the Company had net current assets of £114.8m (2022: £142m) and cash balances of £74.3m (2022: £141.8m) and cash receivables of £40.4m (2022: £0), which are sufficient to meet current obligations as they fall due. There is no external debt at the Company as at year end.

The major cash outflows of the Company are the payment of dividends and costs relating to the acquisition of new assets, both of which are discretionary.

The Directors have reviewed Company forecasts and pipeline projections which cover a period of at least 12 months from the date of approval of this report, considering foreseeable changes in investment and the wider pipeline, which show that the Company has sufficient financial resources to continue in operation for at least the next 12 months from the date of approval of this report. Furthermore, the Directors have considered a worst case scenario in which the Company is assumed to meet all of its remaining investment commitments within the next 12 months, in addition to dividend payments and ongoing operating expenses. Even in this unlikely scenario, the Company has sufficient headroom to meet all expected cash outflows with its existing cash balances.

The Directors have considered factors relating to the wider global macroeconomic environment in 2023, in particular changes in inflation and interest rates. As the Company's income is primarily inflation-linked, a rise in inflation would have a positive impact on cashflows from operating assets and an uplift in valuation of the investment portfolio. An increase in interest rates may result in an increase in risk-free rates, therefore negatively impacting valuation of investments. Furthermore, the Company has no physical assets in Ukraine, Russia, the Middle East or Eastern Europe and therefore, regional geopolitical factors have an immaterial impact on the Company.

Based on its assessment above, the Directors have a reasonable expectation that the Company has sufficient resources to continue in operational existence for at least 12 months from the date of the approval of these financial statements. The Directors are not aware of any material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

2.4 Financial Instruments

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

The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics.

All financial assets are initially recognised at fair value plus transaction cost except for those designated as fair value through profit or loss, which are recognised at fair value only. All purchases of financial assets are recorded at the date on which the Company became party to the contractual requirements of the financial asset.

The Company's financial assets principally comprise of investments held at fair value through profit or loss and at amortised cost.

Investments held at fair value through profit or loss

The Company accounts for its investment in its wholly owned direct subsidiary GSEO Holdings at fair value through profit and loss in accordance with IFRS 9. At initial recognition, investments in sustainable energy infrastructure projects in GSEO Holdings are measured at fair value through profit or loss. Subsequently, gains or losses resulting from the movement in fair value are recognised in the Statement of Comprehensive Income at each valuation point. As both the Company and GSEO Holdings are investment entities under IFRS, the Company includes its investment in GSEO Holdings at fair value through profit or loss.

As shareholder loan investments form part of a managed portfolio of assets whose performance is evaluated on a fair value basis, loan investments are designated at fair value in line with equity investments. The Company measures its investment as a single class of financial asset at fair value in accordance with IFRS 13 Fair Value Measurement.

Gains or losses resulting from the movement in fair value are recognised in the statement of comprehensive income at each valuation point and are allocated to the capital column of the statement of comprehensive income.

Refer to note 7 for details regarding the valuation methodology of investments.

Financial assets are recognised/derecognised at the date of the purchase/disposal. Investments are initially recognised at cost, being the fair value of consideration given.

Transaction costs are recognised as incurred and allocated to the capital column of the statement of comprehensive income.

Fair value is defined as the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. The Board will consider any observable market transactions and will measure fair value using assumptions that market participants would use when pricing the asset, including any assumptions regarding risk surrounding the transaction.

A financial asset (in whole or in part) is derecognised either:

• when the Company has transferred substantially all the risks and rewards of ownership; or

• when it has neither transferred or retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or

• when the contractual right to receive cashflow has expired.

2.5 Cash and cash equivalents

Cash and cash equivalents comprise cash balances, deposits held on call with banks and other short-term highly liquid deposits with original maturities of 3 months or less, that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

2.6 Foreign currencies

Transactions entered into by the Company in a currency other than its functional currency are recorded at the rates ruling when the transactions occur.

Foreign currency monetary assets and liabilities are translated to the functional currency at the exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation to the functional currency are recognised in the Statement of Comprehensive Income, within other expenses or other income. Foreign exchange differences relating to investments held at fair value through profit or loss are shown within gains/losses on investments within the Statement of Financial Position.

2.7 Dividends

Dividends payable to the Company's shareholders are recognised as distributions in the financial statements when the Company's obligation to make payment has been established.

2.8 Income recognition

Investment income comprises interest income on shareholder loan investments and dividend income from GSEO Holdings, which are recognised when the Company's entitlement to receive payment is established. Interest income from cash deposits is recognised in the statement of comprehensive income using the effective interest method. Investment income and interest income are allocated to the revenue column of the Company's statement of comprehensive income unless such income is of a capital nature.

Gains and losses on fair value of investments in the income statement represent gains or losses that arise from the movement in the fair value of the Company's investment in GSEO Holdings. Movements in relation to the fair value of investments are allocated to the capital column of the Company's statement of comprehensive income at each valuation point.

2.9 Expenses

Expenses are accounted for on an accruals basis. Expenses include AIFM, investment management fees and other expenses which are allocated to the revenue column of the Statement of Comprehensive Income. 100% of the investment management fees are charged as an expense item within the Statement of Comprehensive Income. Fees relating to the AIFM and Investment Manager are detailed in note 15.

Share issue expenses of the Company directly attributable to the issue and listing of shares are charged to the share premium account.

2.10 Share capital and share premium

Financial instruments issued by the Company are treated as equity if the holder has only a residual interest in the assets of the Company after the deduction of all liabilities. The Company's ordinary shares are classified as equity instruments.

Costs associated or directly attributable to the issue of new equity shares are recognised as a deduction in equity and are charged from the share premium account. Incremental costs include those incurred in connection with the placing and admission which include fees payable under a placing agreement, legal costs, and any other applicable expenses.

2.11 Taxation

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. The Company has successfully applied and has been granted approval as an Investment Trust by HMRC.

The underlying intermediate holding companies and project companies in which the Company invests provide for and pay taxation at the appropriate rates in the countries in which they operate. This is taken into account when assessing the value of the subsidiaries.

2.12 Segmental reporting

The Board of Directors, being the Chief Operating Decision Maker (the "CODM"), is of the opinion that the Company is engaged in a single segment of business, being investment in Global Sustainable Energy Opportunities.

The Company has no single major customer. The internal financial information to be used by the CODM on a quarterly basis to allocate resources, assess performance and manage the Company will present the business as a single segment comprising the portfolio of investments in energy efficiency assets.

The financial information used by the Board to manage the Company presents the business as a single segment.

2.13 Changes to accounting standards and interpretations

In the current year, the Company has applied a number of amendments to IFRS Accounting Standards issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2023.

The impact of these standards is not expected to be material to the reported results and financial position of the Company.

• IFRS 17 Insurance Contracts (including the June 2020 and December 2021 Amendments to IFRS 17).

The Company does not have any contracts that meet the definition of an insurance contract under IFRS 17.

• Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements- Disclosure of Accounting Policies

• Amendments to IAS 12 Income Taxes-Deferred Tax related to Assets and Liabilities arising from a Single Transaction

• Amendments to IAS 12 Income Taxes- International Tax Reform-Pillar Two Model Rules

• Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors-Definition of Accounting Estimates

The table below shows a number of standards and interpretations which had been published but not yet effective.

Description	Effective Date
• IFRS 10 and IAS 28 Leases (Sale or Contribution of Assets between an Investor and its Associate or Joint Venture) • IAS 1 Presentation of Financial Statements (Classification of Liabilities as Current or Non-Current) • IAS 1 Presentation of Financial Statements (Non-current Liabilities with Covenants) • IAS 7 and IFRS 7 (Supplier Finance Arrangements) • IAS 16 (Lease Liability in a Sale and Leaseback)

Description

Effective Date

Amendments to the following standards:

Periods beginning on or after 1 January 2024

• IFRS 10 and IAS 28 Leases (Sale or Contribution of Assets between an Investor and its Associate or Joint Venture)

• IAS 1 Presentation of Financial Statements (Classification of Liabilities as Current or Non-Current)

• IAS 1 Presentation of Financial Statements (Non-current Liabilities with Covenants)

• IAS 7 and IFRS 7 (Supplier Finance Arrangements)

• IAS 16 (Lease Liability in a Sale and Leaseback)

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Company in future periods.

3. Critical accounting estimates, judgements, and assumptions

The preparation of financial statements requires the Directors of the Company to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability in the future.

The estimates and underlying assumptions underpinning our investments are reviewed on an ongoing basis by both the Directors and the Investment Manager. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Significant estimates, judgements and assumptions for the year are set out as follows:

Key judgement: Investment entity and basis of non-consolidation

As detailed in note 2.2, the Directors have concluded that the Company and its wholly owned direct subsidiary, GSEO Holdings, meet the definition of an investment entity by satisfying the three key conditions as set out in IFRS 10. This assessment involves an element of judgement as to whether the company continues to meet the criteria outlined in the accounting standards.

Being investment entities, the Company's investment in GSEO Holdings is measured at fair value as opposed to being consolidated on a line-by-line basis, meaning their balance sheet is included in the fair value of investments rather than in the Company's balance sheet.

The Directors believe the treatment outlined above provides the most relevant information to investors.

Key estimation and uncertainty: Fair value estimation for investments at fair value

Fair value for each investment held through GSEO Holdings is calculated by the Investment Manager as investments are not traded in active markets. Fair value for operational sustainable energy infrastructure investments will typically be derived from a discounted cash flow (DCF) methodology and the results will be benchmarked against appropriate multiples and key performance indicators, where available for the relevant sector/industry. The fair value of investments that are in construction as at year end are measured on a cost basis, as the most appropriate proxy of their fair value.

In a DCF analysis the fair value is derived from the present value of the investment's expected future cash flows to the Company's intermediate holdings i.e. GSEO Holdings, from investments in both equity (dividends) and shareholder loans (interest and repayments). The DCF models use observable data, to the extent practicable, and apply reasonable assumptions and forecasts for revenues, operating costs, macro-level factors, project specific factors and an appropriate discount rate. Changes in assumptions about these factors could affect the reported fair value of investments, which is detailed in note 7 which considers the sensitivity of key modelling assumptions on the Company's net asset value.

The Investment Manager exercises their judgement in assessing the discount rate applied in the valuation of each investment. This is based on knowledge of the market, taking into account market intelligence gained from publicly available information, bidding activities, discussions with financial advisers, consultants, accountants and lawyers. The discount rates are reviewed quarterly and updated, where appropriate, to reflect changes in the market and in the project risk characteristics.

The risk of climate change has been considered in the valuation of investments, where applicable. Future power prices are estimated using forecast data from third-party specialist consultancy reports, which reflect various factors including gas prices, carbon prices and renewables deployment.

Short to medium term inflation assumptions used in the valuations are based on third party forecasts. In the longer term, an assumption is made that inflation will increase at a long-term rate.

The estimates and assumptions that are used in the calculation of the fair value of investments is disclosed in note 7.

Key judgement: Equity and debt investment in GSEO Holdings

The Company classifies its investments based on its business model for managing those financial assets and the contractual cash flow characteristics of the financial assets. The portfolio of investments is managed, and performance is evaluated on a fair value basis.

The contractual cash flows of the Company's shareholder loans (debt investments) are solely principal and interest, however, these are not held for the purpose of collecting contractual cash flows. The collection of contractual cash flows is only incidental to achieving the Company's business model's objective.

Consequently, in applying their judgement, the Directors have satisfied themselves that the equity and debt investments into its direct wholly owned subsidiary, GSEO Holdings, share the same investment characteristics and, as such, constitute a single asset class for IFRS 7 disclosure purposes.

4. Investment income

	For the year ended 31 December 2023			For the year ended 31 December 2022
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Interest on cash deposits	5,865	-	5,865	2,310	-	2,310
Interest income from investments	6,260	-	6,260	4,906	-	4,906
Dividend income	17,200	-	17,200	21,607	-	21,607
Investment income	29,325	-	29,325	28,823	-	28,823

5. Operating expenses

	For the year ended 31 December 2023 £'000	For the year ended 31 December 2022 £'000
Fees to the Company's Auditor:
Statutory audit of the year-end financial statements	223	170
Assurance related services for the interim report	70	50
Other non-audit services	84	48
Tax advisory fees	14	10
AIFM fees	66	74
Directors' fees	345	220
Due diligence fees	349	2
Administration and depositary fees	227	188
Professional fees	70	104
Other expenses	684	74
Total operating expenses	2,132	940

Fees with respect to the Investment Management and AIFM services are set out in note 15.

The Company had no employees during the year. Full detail on Directors' fees is provided in the Directors' Remuneration Report. There were no other emoluments during the year.

6. Taxation

a. Analysis of charge in the year

	For the year ended 31 December 2023			For the year ended 31 December 2022
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Corporation tax	-	-	-	-	-	-

b. Factors affecting total tax charge for the year

The effective UK corporation tax rate applicable to the Company for the year is 23.52% (2022: 19%). The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company.

	For the year ended 31 December 2023			For the year ended 31 December 2022
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Profit for the year before taxation	22,822	32,517	55,339	24,073	4,131	28,204
Corporation tax at 23.52%	5,368	7,648	13,016	4,574	785	5,359
Effect of:
Capital (gains) / losses not taxable	-	(7,648)	(7,648)	-	(785)	(785)
Expenditure not deductible	1	-	1	(96)	-	(96)
Non-taxable UK dividends	(4,046)	-	(4,046)	(4,105)	-	(4,105)
Management expenses not utilised/recognised	161	-	161	(180)	-	(180)
Interest distributions	(1,014)	-	(1,014)
Proposed Interest distributions	(470)	-	(470)	(193)	-	(193)
Total tax charge for the year	-	-	-	-	-	-

Investment companies which have been approved by HM Revenue & Customs under section 1158 of the Corporation Tax Act 2010 are exempt from tax on capital gains. The Directors are of the opinion that the Company has complied with the requirements for maintaining investment trust status for the purposes of section 1158 of the Corporation Tax Act 2010.

Additionally, the Company may utilise the interest streaming election which allows the Company to designate dividends wholly or partly as interest distributions for UK tax purposes. Interest distributions are treated as tax deductions against taxable income of the Company so that investors do not suffer double taxation on their returns.

The financial statements do not directly include the tax charges for the Company's intermediate holding company, as GSEO Holdings is held at fair value. GSEO Holdings is subject to taxation in the United Kingdom.

c. Deferred taxation

The Company has excess management expenses of £945,780 (2021: £262,400) that are available for offset against future profits. A deferred tax asset of £236,445 (2021: £65,600) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.

The Company has not provided for deferred tax on any capital gains or losses arising on the revaluation of investments.

7. Investments at fair value through profit or loss

As set out in note 2.2, the Company designates its interest in its wholly owned direct subsidiary GSEO Holdings as an investment at fair value through profit or loss at each balance sheet date in accordance with IFRS 13, which recognises a variety of fair value inputs depending upon the nature of the investment. Specifically:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.

The Company classifies all assets measured at fair value as below:

Fair value hierarchy

As at 31 December 2023	Total £'000	Quoted prices in active markets (level 1) £'000	Significant Observable inputs (level 2) £'000	Significant unobservable inputs (level 3) £'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss	369,047	-	-	369,047

As at 31 December 2022	Total £'000	Quoted prices in active markets (level 1) £'000	Significant observable inputs (level 2) £'000	Significant unobservable inputs (level 3) £'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss	315,133	-	-	315,133

All of the Company's investments have been classified as Level 3 and there have been no transfers between levels during the year ended 31 December 2023.

The movement on the level 3 unquoted investment during the year is shown below:

	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Opening balance at beginning of the year	315,133	159,618
Additions during the year at cost	22,819	151,367
	337,952	310,985
Fair value movement on investments:
Change in fair value of equity investments¹	32,649	4,144
Interest on loan investments²	(1,554)	4
Total fair value movement on investments	31,095	4,148
Closing balance	369,047	315,133

¹ The £32,517k in the Statement of Comprehensive Income within other expenses/income and Statement of Changes in Equity is made up of unrealised gains of £32,649k per this note and a realised foreign exchange loss of £132k during the year.

² This is the amount related to the movement in accrued interest on shareholder loans.

Further information on the basis of valuation is detailed in note 3 to the financial statements.

Valuation methodology

As set out in note 2.2, the Company meets the definition of an investment entity as described by IFRS 10, as such the Company's investment in the GSEO Holdings is valued at fair value.

The Company holds underlying investments in special purpose entities (SPEs) through its equity and debt investments in GSEO Holdings, as detailed in note 8. The Investment Manager has carried out fair market valuations of the SPE investments as at 31 December 2023.

IFRS 13 requires the Company to classify its investments in a fair value hierarchy that reflects the significance of the inputs used in making the measurements. IFRS 13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The three levels of fair value hierarchy under IFRS 13 are as follows:

Level 1: fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2: fair value measurements are those derived from inputs other than quoted prices included within Level 1 that ore observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

Level 3: fair value measurements are those derived from valuation techniques that include inputs to the asset or liability that ore not based on observable market data (unobservable inputs)

There were no Level 1 or Level 2 assets or liabilities during the year. There were no transfers between Level 1 and 2, Level 1 and 3 or Level 2 and 3 during the year.

The Company records the net asset value of GSEO Holdings by calculating and aggregating the fair value of each of the individual investments in which the Company holds an indirect investment. Due to their nature, such investments are expected to be classified as level 3 as they are not traded and contain unobservable inputs. The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation.

The fair value of investments that are operational as at year end are measured at fair value through profit or loss using the DCF methodology in line with the IFRS 13 framework for fair value measurement. As at 31 December 2023, the US terminal storage assets, two of the five Australian solar PV with battery storage assets, the Brazilian hydro facility and 10 of the 16 Brazilian solar PV assets are being measured at fair value, using the DCF valuation.

Fair value of investments that are in construction as at year end is measured on a cost basis, as the most appropriate proxy of their fair value. At year end, the remaining Australian solar PV with battery storage assets, remaining Brazilian solar PV assets, and the UK flexible power with CCR assets are in construction. The cost basis of those assets under construction is regularly reviewed to determine if the cost basis is the most appropriate basis of valuation as assets approach their operational phase.

The total movement in the value of the investments in GSEO Holdings is recorded through profit and loss in the Statement of Comprehensive Income Statement of the Company.

Valuation assumptions

The following economic assumptions were used in the valuation of operating assets.

Discount rates	The discount rate used in the valuations is derived according to internationally recognised methods.
	Typical components of the discount rate are risk free rates, country-specific and asset-specific risk premia. The latter comprise the risks inherent to the respective asset class as well as specific premia for other risks such as construction.
Power price	Power prices are based on power price forecasts from leading market consultants adjusted for expected deployment of energy transition assets.
Energy yield	Estimated based on energy yield assessments from leading technical consultants as well as operational performance data (where applicable).
Inflation rates	Long-term inflation is based on International Monetary Fund (IMF) forecasts for the respective jurisdiction.
Asset life	Refer to the table below for details. In individual cases a longer operating life may be assumed where the contractual set-up supports such assumption.
Operating expenses	The operating expenses are primarily based on the respective contracts and budgets.
Taxation rates	The underlying country-specific tax rates are derived from leading tax consulting firms.
Capital expenditure	Based on the contractual arrangements (e.g. EPC agreement), where applicable.

Key assumptions

			31 December 2023	31 December 2022
Discount rate	Weighted Average	US terminal storage assets	6.91%	8.43%
	Weighted Average	Australian solar PV with battery storage assets	7.74%	8.55%
	Weighted Average	Brazilian solar PV assets	9.67%	13.09%
	Weighted Average	Brazilian hydro facility	9.54%	10.48%
Long-term inflation¹	United States	US terminal storage assets	1.62%	2.0%
	Australia	Australian solar PV with battery storage assets	2.42%	2.5%
	Brazil	Brazilian solar PV assets & Brazilian hydro facility	3.03%	3.0%
Total asset life	Years	US terminal storage assets	30 years	30 years
	Years	Australian solar PV with battery storage assets	25 years	25 years
	Years	Brazilian solar PV assets	25 years	25 years
	Years	Brazilian hydro facility	25 years	25 years
Exchange rate	GBP:USD	US terminal storage assets	1:1.2732	1:1.210
	GBP:BRL	Brazilian solar PV assets & Brazilian hydro facility	1:6.1771	1:6.386
	GBP:AUD	Australian solar PV with battery storage assets	1:1.8689	1:1.775

¹ Source: IMF. Inflation rates have been taken from IMF published on 14 Oct 2023 (data is published biannually), which provides yearly forecasted inflation up to 2028. Long-term inflation rate refers to the 2028 projected rate. Short-term inflation volatility of up to 2028 has been accounted for in the valuation of operating assets.

Valuation sensitivity

The key sensitivities in the DCF valuation are considered to be the discount rate used in the DCF valuation and long-term assumptions in relation to inflation, operating expenses and asset life.

The discount rate applied in the valuation of the operating assets are as per the table above, which is considered to be an appropriate base case for sensitivity analysis. A variance of +/-1.5% is considered to be a reasonable range of alternative assumptions for discount rate given the volatility of discount rates used during the year.

The base case long term inflation rate assumption depends on the geographical location for assets in operation. These are disclosed in the table above. A variance of +/-1% is considered to be a reasonable range of alternative assumptions for inflation.

For assets in construction, the Company has only sensitised the impact of foreign exchange fluctuations. A variance of +/- 10% is considered to be a reasonable range of alternative assumptions for foreign exchange.

The analysis below shows the sensitivity of the investments value (and impact on NAV) to changes in key assumptions. All sensitivity calculations have been performed on the basis that each of the other assumptions remains constant and unchanged.

For the annual report

As at 31 December 2023	Change in input	Changes in fair value of investments (£'000)	Change in NAV per share (p)
Discount rate - US terminal storage assets	-1.50%	22,034	5.30
	1.50%	(17,339)	-4.17
Discount rate - Australian solar PV with battery storage assets	-1.50%	1,973	0.47
	1.50%	(1,616)	-0.39
Discount rate - Brazilian solar PV assets	-1.50%	3,327	0.80
	1.50%	(2,734)	-0.66
Discount rate - Brazilian hydro facility	-1.50%	15,976	3.85
	1.50%	(12,981)	-3.12
Discount rate - All	-1.50%	43,310	10.42
	1.50%	(34,670)	-8.34

As at 31 December 2023	Change in input	Changes in fair value of investments (£'000)	Change in NAV per share (p)
Inflation - US terminal storage assets	-1.00%	(10,833)	-2.61
	1.00%	12,451	3.00
Inflation - Australian solar PV with battery storage assets	-1.00%	(1,144)	-0.28
	1.00%	1,458	0.35
Inflation - Brazilian solar PV assets	-1.00%	(2,011)	-0.48
	1.00%	2,295	0.55
Inflation - Brazilian hydro facility	-1.00%	(11,997)	-2.89
	1.00%	14,176	3.41
Long-term Inflation - All	-1.00%	(25,984)	-6.25
	1.00%	30,380	7.31

As at 31 December 2023	Change in input	Changes in fair value of investments (£'000)	Change in NAV per share (p)
Asset life - US terminal storage assets	-1 year	(1,888)	-0.45
	+1 year	1,782	0.43
Asset life - Australian solar PV with battery storage assets	-1 year	(333)	-0.08
	+1 year	306	0.07
Asset life - Brazilian solar PV assets	-1 year	(395)	-0.10
	+1 year	370	0.09
Asset life - Brazilian hydro facility	-1 year	(2,496)	-0.60
	+1 year	2,426	0.58
Asset life - All	-1 year	(5,112)	-1.23
	+1 year	4,883	1.18
As at 31 December 2023	Change in input	Changes in fair value of investments (£'000)	Change in NAV per share (p)
Operating expenses - US terminal storage assets	-5.00%	4,224	1.02
	5.00%	(4,224)	-1.02
Operating expenses - Australian solar PV with battery storage assets	-5.00%	275	0.07
	5.00%	(266)	-0.06
Operating expenses - Brazilian solar PV assets	-5.00%	828	0.20
	5.00%	(816)	-0.20
Operating expenses - Brazilian hydro facility	-5.00%	2,771	0.67
	5.00%	(2,772)	-0.67
Operating expenses - All	-5.00%	8,097	1.95
	5.00%	(8,079)	-1.95

As at 31 December 2023	Change in input	Changes in fair value of investments (£'000)	Change in NAV per share (p)
FX (GBP:USD)	-10.00%	13,366	3.22
	10.00%	(10,936)	-2.63
FX (GBP:BRL)	-10.00%	18,787	4.73
	10.00%	(15,372)	-3.70
FX (GBP:AUD)	-10.00%	4,140	1.00
	10.00%	(3,387)	-0.82
FX - All	-10.00%	36,293	8.74
	10.00%	(29,694)	-7.15

The sensitivities above are assumed to be independent of each other. Combined sensitivities are not presented.

8. Unconsolidated subsidiaries

The following table shows subsidiaries of the Company. As the Company is regarded as an investment entity, these subsidiaries have not been consolidated in the preparation of the financial statements.

Investments	Place of Business	Ownership interests as at 31 December 2023
VH GSEO UK Holdings Limited	United Kingdom	100%
Victory Hill Distributed Energy Investments Limited	United Kingdom	100%
Victory Hill Flexible Power Limited	United Kingdom	100%
Rhodesia Power Limited	United Kingdom	100%
Victory Hill USA Holdings LLC	United States	100%
Victory Hill Midstream Investments LLC	United States	100%
Victory Hill Midstream Energy LLC	United States	100%
Motus T1 LLC	United States	100%
Motus T2 LLC	United States	100%
Victory Hill Australia Investments Pty Ltd	Australia	100%
Victory Hill Distributed Power Pty Ltd	Australia	100%
Mobilong Solar Farm Pty Ltd	Australia	100%
Dunblane Solar Pty Ltd	Australia	100%
Dubbo Solar Project Pty Ltd	Australia	100%
Narrandera Solar Project Pty Ltd	Australia	100%
Coleambally East Solar Farm Pty Ltd	Australia	100%
VH Participacoes Hidreletricas do Brasil LTDA	Brazil	98.25%
VH Hydro Brasil Holding S.A.	Brazil	100%
Energest S.A.	Brazil	100%
Victory Hill Holdings Brasil S.A.	Brazil	99.99%
Energea Itaguaí I Ltda. *	Brazil	100%
Energea Itaguaí II Ltda. *	Brazil	100%
Energea Itaguaí III Ltda. *	Brazil	100%
Energea Nova Friburgo Ltda. *	Brazil	100%
Energea Itabaiana Ltda. *	Brazil	100%
Energea Redenção Ltda. *	Brazil	100%
Energea Itaporanga Ltda. *	Brazil	100%
Energea Bataguassu Ltda. *	Brazil	100%
Energea Palmas S.A. *	Brazil	100%
Energea Itacarambi Ltda. *	Brazil	100%
Energea Vassouras I Ltda. *	Brazil	100%
Energea Seropédica Ltda. *	Brazil	100%
Energea Paraíba do Sul Ltda. *	Brazil	100%
Energea Taquaritinga Ltda. *	Brazil	100%
Energea Nova Cruz Ltda. *	Brazil	100%

At 31 December 2023, the Company has one direct subsidiary and owns 100% of GSEO Holdings. The Company owns investments in the other entities per the table above through its ownership of GSEO Holdings. GSEO Holdings owns 100% of Victory Hill USA Holdings LLC, Victory Hill Australia Investments Pty Ltd, Victory Hill Distributed Energy Investments Limited and Victory Hill Flexible Power Limited and 98.25% of VH Participacoes Hidreletricas do Brasil Ltda.

The Company's investments in Victory Hill Midstream Investments LLC, Victory Hill Midstream Energy LLC, Motus T1 LLC and Motus T2 LLC are held through Victory Hill USA Holdings LLC. These relate to the US terminal storage assets.

The Company's investments in Brazilian solar PV assets are held through Victory Hill Distributed Energy Investments Limited, which holds 99.99% of Victory Hill Holdings Brasil S.A. The holdings of Victory Hill Holdings Brasil S.A. are indicated by an asterisk in the list of unconsolidated subsidiaries above.

The Company's investments in VH Hydro Brasil Holding S.A. and Energest S.A. are held through VH Participacoes Hidreletricas do Brasil LTDA. These relate to the Brazilian hydro facility.

The Company's investments in Victory Hill Distributed Power Pty Ltd, Mobilong Solar Farm Pty Ltd, Dubbo Solar Project Pty Ltd, Narrandera Solar Project Pty Ltd, Coleambally East Solar Farm Pty Ltd and Dunblane Solar Pty Ltd are held through Victory Hill Australia Investments Pty Ltd. These relate to the Australian solar PV with battery storage assets.

The Company's investments in Rhodesia Power Limited is held through Victory Hill Flexible Power Limited. These relate to the UK flexible power with CCR assets.

9. Receivables

	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Other receivables	93	96
Interest receivable on cash and cash equivalents	317	270
Receivable from affiliates	-	355
Prepayments	31	19
Total other receivables	441	740

The Directors have analysed the expected credit loss in respect of receivables and concluded there was no material exposure for the year ended 31 December 2023 and 31 December 2022.

Cash of £40,367k is held on behalf of the Company by VH GSEO UK Holdings Limited.

10. Cash and cash equivalents

	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Cash at bank	30,542	48,075
Cash on deposit	43,716	93,716
Total cash at bank¹	74,258	141,791

¹ Cash at bank includes money market investments of £26.4m (31 December 2022: £93.7m)

11. Accounts payable and accrued expenses

	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Accrued expenses	270	491
Accounts payable	-	-
Accounts payable and accrued expenses	270	491

The Directors consider that the carrying amount of other payables and accrued expenses matches their fair value.

12. Financial risk management

The Company's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.

The Investment Manager has risk management procedures and processes in place which enable them to monitor the risks of the Company. The objective in managing risk is the creation and protection of shareholder income and value. Risk is inherent in the Company's activities, but it is managed through a process of ongoing identification, impact assessment, and monitoring and subject to risk limits and other controls.

The principal financial risks facing the Company in the management of its portfolio are as follows:

Currency risk

The Company make investments which are based in countries whose local currency may not be Sterling and the Company and its investments may make and/or receive payments that are denominated in currencies other than Sterling. Therefore, when foreign currencies are translated into Sterling there could be a material adverse effect on the Company's profitability and its net asset value.

The Company's investments are held for the long-term and the Company may enter into hedging arrangements for periods less than 12 months to hedge against short-term currency movements. Currency risk is taken into consideration at time of investment and included in the Investment Manager's assessment of minimum hurdle rate from investments. Hedging policies of the Company will be reviewed on a regular basis to ensure that the risks associated with the Company's investments are being appropriately managed.

The Company invests in a portfolio of assets through GSEO Holdings, which pays dividends in sterling to the Company. Shareholder loan investments and interest are held and paid in local currencies at the Company, including US$64,686,291 and A$40,290,000, representing a total of 15.0% of the Company's NAV at year end.

Note 7 details sensitivity analysis on the impact of changes to the inputs on the fair value of the Company's investments.

Interest rate risk

The Company's interest rate risk on its financial assets is limited to interest earned on cash or cash equivalents. The Board considers that, because shareholder loan investments bear interest at a fixed rate, they do not carry any interest rate risk.

The Company may use borrowings for multiple purposes, including for investment purposes. At the year end the Company held no borrowings. Interest rate risk will be taken into consideration when taking out any such borrowings.

The Company's interest and non-interest bearing assets and liabilities as at 31 December 2023 and 31 December 2022 are summarised as below:

	For the year ended 31 December 2023			For the year ended 31 December 2022
	Interest bearing £'000	Non-interest bearing £'000	Total £'000	Interest bearing £'000	Non-interest bearing £'000	Total £'000
Cash and cash equivalents	114,625	-	114,625	141,791	-	141,791
Prepayments and other receivables	-	124	124	-	470	470
Interest receivable	317	-	317	270	-	270
Investments at fair value through profit or loss	93,347	275,700	369,047	89,047	226,086	315,133
Total assets	208,289	275,824	484,113	231,108	226,556	457,664
Liabilities
Accounts payable and accrued expenses	-	(270)	(270)	-	(491)	(491)
Total liabilities	-	(270)	(270)	-	(491)	(491)

Price risk

The operation and cash flows of certain investments will depend, in substantial part, upon prevailing market prices for electricity and fuel, and particularly natural gas. The Company intends to mitigate these risks by entering into (i) hedging arrangements; (ii) extendable short, medium and long-term contracts; and (iii) fixed price or availability based asset-level commercial contracts, and ensuring that market risk is combined with non-market risk exposures.

Price risk is limited to the fair value of investments. Note 7 details sensitivity analysis on the impact of changes to the inputs on the fair value of the Company's investments and profits.

Credit risk

Credit risk is the risk that a counterparty will cause financial loss to the Company by failing to meet a commitment it has entered into with the Company. The Company's credit risk exposure is minimised with its policy to enter into banking arrangements with reputable financial institutions with a credit rating of at least 'A/Positive' from Standard and Poor's and making loan investments which are equity in nature. The Investment Manager monitors the credit ratings of banks used by the Company on a regular basis.

The table below shows the Company's maximum exposure to credit risk:

	As at 31 December 2023 £'000	As at 31 December 2022 £'000
Cash and cash equivalents	114,625	141,791
Investments at fair value through profit or loss	93,347	89,047
Other receivables (Note 9)	441	740
	208,413	231,578

Liquidity risk

The Company manages its liquidity and funding risks by considering cash flow forecasts and ensuring sufficient cash balances are held within the Company to meet future needs. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of financing through appropriate and adequate credit lines, and the ability of counterparties to settle obligations. The Company ensures, through forecasting of capital requirements, that adequate cash is available.

The following table details the Company's liquidity analysis in respect of its financial liabilities on contractual undiscounted payments:

As at 31 December 2023	<3 Months £'000	3-12 Months £'000	1-5 Years £'000	>5 Years £'000	Total £'000
Accounts payable and accrued expenses	270	-	-	-	270
	270	-	-	-	270

As at 31 December 2022	<3 Months £'000	3-12 Months £'000	1-5 Years £'000	>5 Years £'000	Total £'000
Accounts payable and accrued expenses	491	-	-	-	491
	491	-	-	-	491

The Board of Directors monitors key risks faced by the Company and has agreed policies for managing the above risks with the Investment Manager.

Capital management

The Company considers its capital to comprise ordinary share capital, distributable reserves and retained earnings.

The Company's primary capital management objectives are to ensure the sustainability of its capital to support continuing operations, meet its financial obligations and allow for growth opportunities. Generally, acquisitions are anticipated to be funded with a combination of cash, debt and equity.

13. Share capital

Date	Issued and fully paid	Number of shares	Share Capital (A) £'000	Share premium (B) £'000	Special Distributable Reserve (C) £'000	Total (A+B+C) £'000
Opening balance		311,589,799	3,116	67,949	232,467	303,532
Ordinary shares		110,909,091	1,109	120,891	-	122,000
Share issue costs		-	-	(2,472)	-	(2,472)
At 31 December 2022		422,498,890	4,225	186,368	232,467	423,060
Opening balance		422,498,890	4,225	186,368	232,467	423,060
Buyback of ordinary shares		-	-	-	(5,400)	(5,400)
At 31 December 2023		422,498,890	4,225	186,368	227,067	417,660

During the period under review, the Company purchased for treasury a total of 7,027,321 ordinary shares at an aggregate cost of £5,399,769 (including stamp duty and other fees) at an average price per ordinary share of 76.3p.

14. Dividends

The Company paid the below dividends during the year.

Period	Pence per ordinary share	Total dividend	Date paid
1 October 2022 - 31 December 2022	1.38p	£5.8m	31 March 2023
1 January 2023 - 31 March 2023	1.38p	£5.8m	30 June 2023
1 April 2023 to 30 June 2023	1.38p	£5.8m	14 September 2023
1 July 2023 to 30 September 2023	1.38p	£5.8m	8 December 2023

15. Transactions with AIFM, Investment Manager and related parties

AIFM

On 3 May 2023 the Company entered into an Alternative Investment Fund Management Agreement ("AIFM Agreement") with Victory Hill Capital Partners LLP (the "AIFM") replacing G10 Capital Limited. Victory Hill Capital Partners LLP is acting as the Company's AIFM with overall responsibility for the risk management and portfolio management of the Company, providing alternative investment fund management services and ensuring compliance with the requirements of the AIFM Rules, subject to the overall supervision of the Board of Directors in accordance with the policies set by the Directors from time to time and the investment restrictions as set out in the AIFM Agreement.

The AIFM Agreement provides that the Company will pay to the AIFM a fixed monthly fee of £5,833, exclusive of VAT. The Company will also reimburse the AIFM for reasonable expenses properly incurred by the AIFM in the performance of its obligations under the AIFM Agreement.

The AIFM Agreement may be terminated by the Company or the AIFM giving not less than twelve months' written notice. The AIFM Agreement may be terminated with immediate effect on the occurrence of certain events, including insolvency or in the event of a material and continuing breach.

Investment Manager

The Investment Manager is entitled to receive from the Company an annual fee to be calculated as percentages of the Company's net assets, 1% on the first £250m of NAV, 0.9% on NAV in excess of £250m and up to and including £500m and 0.8% on NAV in excess of £500m exclusive of VAT.

Furthermore, if in any fee period, the annual fee paid to the Investment Manager exceeds:

a) £3.5m, the Investment Manager shall apply 8% of the annual fee, subject to a maximum amount of £400,000, to subscribe for or acquire ordinary shares of £0.01 each in the capital of the Company.

b) £2.5m, the Investment Manager shall apply 2% of the annual fee to be paid as a charitable donation to O&C Limited, or other suitable registered charity aimed at promoting sustainable energy, as selected by the Investment Manager, provided that if, following the Investment Manager's reasonable endeavours, a suitable charity cannot be found, this 2% portion of the annual fee (net of any applicable taxes) will be applied to the subscription for or acquisition of ordinary shares.

The Investment Management Agreement may be terminated on 12 months' written notice, provided that such notice may not be served before 2 February 2025. The Investment Management Agreement may be terminated with immediate effect on the occurrence of certain events, including insolvency or in the event of a material and continuing breach.

The investment management fees for the year ended 31 December 2023 amounted to £4,371,947 (2022: £3,809,615) (including VAT) of which £0 (2022: £167,623) was outstanding and included in accounts payable and accrued expenses at the end of the year.

No performance fee is payable to the Investment Manager.

Directors

The Directors have been entitled to aggregate annual remuneration (excluding expenses payable) as follows:

	For the year ended 31 December 2023 £'000	For the year ended 31 December 2022 £'000
Bernard Bulkin OBE	81.5	70
Margaret Stephens	58.5	50
Richard Horlick	58.5	50
Louise Kingham CBE	58.5	50
Daniella Carneiro¹	55.9	-
	312.9	220

¹ Daniella Carneiro joined the Board of Directors on 18 January 2023.

The Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. There is no amount set aside or accrued by the Company in respect of contingent or deferred compensation payments or any benefits in kind payable to the Directors. During the year ended 31 December 2023, Directors' fees of £313,000 (2022: £220,000) were paid of which none was payable at the year end.

The Directors held the following beneficial interests in the ordinary shares of the Company as at 31 December 2023.

	As at 31 December 2023
	Number of ordinary shares held	% of ordinary shares in issue
Bernard Bulkin OBE	46,362	0.009
Margaret Stephens	28,181	0.007
Richard Horlick	300,000	0.071
Louise Kingham CBE	20,000	0.005
Daniella Carneiro	-	-

Other balances with related parties

The Company entered into intercompany loan agreements with GSEO Holdings, which entered into further intercompany loan agreements with the following subsidiary companies:

• Victory Hill Flexible Power Ltd (£6,060,000) (31 December 2022: £14,924,400)

• Victory Hill Australia Investments Pty Ltd A$4,890,000 (31 December 2022: A$35,400,000)

• Victory Hill USA Holdings LLC US$1,021,290.60 (31 December 2022: 63,665,000)

As at the year-end, the Company held a receivable from VH GSEO UK Holdings Limited of £40,366,849.32 (31 December 2022: Nil).

16. Contingent liabilities and commitments

As at 31 December 2023, the Company had no contingencies or commitments.

17. Earnings per share

Earnings per share (EPS) is calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue on 1 January 2021 to 31 December 2023. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current year.

	For the year ended 31 December 2023			For the year ended 31 December 2022
	Revenue	Capital	Total	Revenue	Capital	Total
Earnings (£'000)	22,822	32,517	55,339	24,073	4,131	28,204
Weighted average number of ordinary shares	421,086,053	421,086,053	421,086,053	367,500,135	367,500,135	367,500,135
EPS (p)	5.42	7.72	13.14	6.55	1.12	7.67

18. Net asset value per share

Net asset value per share is calculated by dividing the net assets attributable to ordinary equity holders of the Company by the number of ordinary shares outstanding at the reporting date. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current year.

	Year ended 31 December 2023	Year ended 31 December 2022
NAV (£'000)	483,843	457,173
Number of ordinary shares	415,471,569*	422,498,890
NAV per share (p)	116.46	108.21

* excluding the shares held in treasury.

19. Post balance sheet events

On 22 February 2024, the Board of Directors announced an interim dividend of £5.8m equivalent to 1.42p per ordinary share with respect to the period 1 October 2023 to 31 December 2023 which will be paid on 28 March 2024.

Post year end, the Company had announced cumulative buybacks of 5,743,147 shares between 1 January 2024 and 4 April 2024.

20. Controlling parties

There is no ultimate controlling party of the Company.

ENDS

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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