LEI: 213800ZPBBK8H51RX165
29 February 2024
GREENCOAT UK WIND
PLC
(the
"Company")
Greencoat UK Wind PLC
reports results for the year ended 31 December
2023
Greencoat UK Wind PLC
today announces the final results for the year to 31 December
2023.
2023
Highlights
Performance
· Net
cash generation was £405.5 million and dividend cover was
2.1x.
· The
Group's investments generated 4,743GWh of sustainable
electricity.
Dividends and balance sheet
· The
target dividend for the year was 8.76 pence per share. With the
increased dividend for the final quarter of 3.43 pence per share,
declared dividends for 2023 were 10 pence per share.
· The
target dividend with respect to 2024 is also 10 pence per share, an
increase of 14.2 per cent above the target dividend for 2023,
significantly above December's RPI of 5.2 per cent.
·
Aggregate Group Debt of £2,375 million as at 31
December 2023, equivalent to 38 per cent of GAV.
High quality NAV accretive investments
· £174.2 million of NAV accretion from investment in
Dalquhandy, London Array, South Kyle and Kype Muir Extension wind
farms, which increased the portfolio to 49 operating wind farm
investments and net generating capacity to 2,007MW as at 31
December 2023.
Key
Metrics
|
As at
31 December 2023
|
As at
31 December 2022
|
|
|
Market capitalisation
|
£3,502.9
million
|
£3,523.5 million
|
|
Share price
|
151.5
pence
|
152.0 pence
|
|
Dividends with respect to the
year
|
£231.4
million
|
£178.9 million
|
|
Dividends with respect to the year
per share
|
10
pence
|
7.72 pence
|
|
GAV
|
£6,169.0 million
|
£5,652.7 million
|
|
NAV
|
£3,794.0
million
|
£3,873.2 million
|
|
NAV per share
|
164.1
pence
|
167.1 pence
|
|
TSR
|
5.4 per
cent
|
13.5 per cent
|
|
CO2 emissions reduced
per annum
|
2.5
million tonnes
|
2.0 million tonnes
|
|
Homes powered per annum
|
2.3
million homes
|
1.8 million homes
|
|
Funds invested in community
projects in the year
|
£4.4 million
|
£4.0 million
|
|
Commenting on today's results, Lucinda Riches, Chairman of
Greencoat UK Wind, said:
"I'm pleased to present the results of another significant
year for the company. With investment of £821 million into
Dalquhandy, London Array, South Kyle and Kype Muir Extension wind
farms, our portfolio has surpassed 2GW of net generating capacity.
We remain one of the largest owners of wind farms in the
UK."
"We are proud to have generated approximately 1.5% of the
UK's electricity demand last year, and the portfolio was generating
enough electricity to power 2.3 million homes and avoid
approximately 2.5 million tonnes of CO2 emissions
through the displacement of thermal generation by the end of
2023."
"With the final dividend for the year, our investors will
have received over £1 billion of dividends since listing. With our
continuing strong cash flow and dividend cover, we can confidently
target a dividend of 10p per share with respect to 2024, extending
our track record of attractive dividends and
returns."
"We are now delivering net returns to investors of 10% on
NAV, and we remain confident in our ability to continue to meet our
objectives of dividend growth in line with RPI and capital
preservation in real terms."
Annual
report
A copy of the annual report has
been submitted to the National Storage Mechanism and will shortly
be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The annual report will also shortly be available on the Company's
website at www.greencoat-ukwind.com
where further information on the Company can also
be found.
Details of the conference
call for analysts and investors:
There will be a conference call at
9.30am today for analysts and investors. Analysts and investors can register and watch the event
at:
https://www.netroadshow.com/events/login?show=508b1486&confId=61424.
Presentation materials will be
posted on the Company's website, www.greencoat-ukwind.com,
from 7.00am.
For further information, please contact:
Greencoat UK Wind PLC 020 7832 9425
Stephen Lilley
Laurence Fumagalli
Matt Ridley
Headland Consultancy 020 3805 4822
Stephen Malthouse
Rob Walker
About Greencoat UK Wind
Greencoat UK Wind PLC is the
leading listed renewable infrastructure fund, invested in UK wind
farms. The Company's aim is to provide investors with an annual
dividend that increases in line with RPI inflation while preserving
the capital value of its investment portfolio in the long term on a
real basis through reinvestment of excess cashflow.
The Company provides investors
with the opportunity to participate directly in the ownership of UK
wind farms, so increasing the resources and capital dedicated to
the deployment of renewable energy and the reduction of greenhouse
gas emissions.
Defining Characteristics
Greencoat UK Wind PLC was designed
for investors from first principles to be simple, transparent and
low risk.
· The
Group is invested solely in UK wind farms.
· Wind
is the most mature and largest scale renewable
technology.
· The
UK has a long established regulatory regime, high wind resource and
£100 billion worth of wind farms in operation.
· The
Group is wholly independent and thus avoids conflicts of interests
in its investment decisions.
· The
independent Board is actively involved in key investment decisions
and in monitoring the efficient operation of the assets, and works
in conjunction with the most experienced investment management team
in the sector.
· Low
gearing is important to ensure a high level of cash flow stability
and higher tolerance to downside sensitivities.
· The
Group invests in sterling assets and thus does not incur material
currency risk.
Chairman's Statement
I am pleased to present the Annual
Report of Greencoat UK Wind PLC for the year ended 31 December
2023.
Performance
My first annual statement as
Chairman comes in the year of the Company's 10th anniversary as a
listed company and it is pleasing that this year has seen a further
demonstration of the Company's resilience despite rising interest
rates, volatile power prices and broader turmoil in global
financial markets.
With the final dividend for the
year, our investors will have received over £1 billion of dividends
since listing. The Company has consistently generated excess
cash flow beyond its dividend and has now reinvested £906
million. Our net generating capacity now exceeds 2GW and last
year we generated 4.7TWh of renewable electricity, approximately
1.5 per cent of the UK's electricity demand.
Net cash generated by the Group
and wind farm SPVs was £406 million, providing cover of 2.1x on
£197 million of dividends paid in the year.
By the end of 2023, the portfolio
was generating sufficient electricity to power 2.3 million homes
and avoiding CO2 emissions of approximately 2.5 million
tonnes per annum through the displacement of thermal
generation.
Dividends and Returns
The target dividend for the year
was 8.76 pence per share. With the increased dividend for the final
quarter of 3.43 pence per share, to be paid on 29 February 2024,
the declared dividends for 2023 will be 10 pence per share. With
our continuing strong cash flow and dividend cover, we can
confidently target a dividend of 10 pence per share with respect to
2024, an increase of 14.2 per cent above the target dividend for
2023, significantly above December's RPI of 5.2 per
cent.
The Total Shareholder Return for
the year was 5.4 per cent. NAV decreased by 3 pence per share to
164.1 pence per share, including the effects of a material increase
in the portfolio discount rate. Since listing, NAV per share has
increased by significantly more than RPI. The Company's aim remains
to provide investors with annual dividends that increase in line
with RPI inflation.
In line with the higher interest
rate environment, the Company has continued to increase its
discount rate and thus returns to investors. The forecast 10 per
cent return to investors on NAV (net of all costs) includes
reinvestment of excess cash generation (dividend cover) in addition
to the dividends paid. Given the nature of the Company's business,
we believe that this return compares well with the 10 year gilt
rate which was 4.1 per cent immediately prior to the date of this
report. At a share price below NAV, the return is even
higher.
Since listing, aggregate
historical dividend cover of 2.0x has enabled the Company to
reinvest £906 million of excess cash generation. Given this greater
reinvestment and higher return, the Company has been and is able to
grow NAV per share significantly more than its peers in addition to
generating a higher dividend yield.
Investment
During the year we invested £821
million into Dalquhandy, London Array, South Kyle and Kype Muir
Extension wind farms, increasing net generating capacity by
397MW.
Outlook and Strategy
Wind continues to be the most
mature and widely deployed renewable energy technology in the UK
(30 per cent of GB electricity generation in 2023) with an offshore
wind target of 50GW for 2030 being an important Government target
in the delivery of its 2050 net zero emissions commitment. The
Company supports the UK Government's commitment to achieve Net Zero
by 2050 through acquiring operational wind farms and thereby
allowing developers and utilities to recycle their capital into
further renewable energy projects, and by demonstrating the
attractive long term returns in the industry through our prudent
management of wind farms, thereby reducing the cost of
capital.
Our Investment Objective has
remained unchanged over the last 11 years since listing: to provide
shareholders with an annual dividend that increases in line with
RPI inflation while preserving the capital value of the investment
portfolio in real terms. This has been more than achieved through a
focused strategy of investing only in wind farms and only in the UK
while maintaining a balanced exposure to power prices. Our
intention remains to adhere to this core strategy.
The Company is investing in a
mature and growing market, and the Board believes that there should
continue to be further opportunities for investments that are
beneficial to shareholders.
The Company regularly reviews its
capital allocation policy by considering a range of options to
optimise returns to shareholders. In October 2023, as part of this
consideration, the Company announced an increase in its annual
dividend target for 2024 to 10 pence per share, an increase beyond
December's RPI of 5.2 per cent. The dividend with respect to the
final quarter of the year will be 3.43 pence per share, taking the
annual dividend for 2023 to 10 pence per share.
The Company also announced a £100
million share buyback programme. The Company has bought back 14
million shares to date at an average cost of 142.1 pence per
share.
The Company maintains a
disciplined approach to acquisitions, only investing when it is
considered to be in the interests of shareholders to do so. With
the Company's share price currently trading at a discount to NAV,
the alternatives for capital allocation warrant significant
consideration.
We will also continue to look at
opportunistic disposals.
Through strong cash flow and
dividend cover, coupled with our disciplined approach, we are
confident in our ability to continue to meet the objectives of
dividend growth in line with RPI and capital preservation in real
terms.
Health and Safety and the Environment
As a responsible investor in
operating wind farms, the Company takes its health and safety
responsibilities very seriously. We work with our Investment
Manager to promote the highest standard of health, safety and
environmental management practices in managing our portfolio of
investments. Detailed key performance indicators and the results of
audits are regularly reviewed by the Board and action taken where
necessary. We continue to monitor the standards maintained by the
operators of our wind farm investments, to ensure that these are at
least in line with the wider industry, while seeking continuous
improvement.
Climate Change and Sustainability
As a Company investing in wind
farms, our strategy and activities naturally make a positive
contribution towards the worldwide goal of achieving a net zero
carbon emissions economy and limiting global warming to 1.5°C. The
Company also considers the recommendations of the Taskforce for
Climate-related Financial Disclosures ("TCFD"). Detailed
disclosures can be found in the Strategic Report.
The Company qualified under
Article 9 of the EU Sustainable Financial Disclosure Regulation
("SFDR") in 2023. The Company's Investment
Policy supports the environmental objective of climate change
mitigation that helps to facilitate the transition to a low carbon
economy. The Company will continue to provide periodic reporting as
required under Article 9 of the SFDR in its Annual
Report.
In 2023, the Financial Conduct
Authority published its final rules regarding Sustainability
Disclosure Requirements ("SDR"). The Company, with support from the
Investment Manager, will consider the rules and work to meet any
obligations of the SDR in the coming financial year.
The Board, Governance and Executive
Management
At the AGM on 28 April 2023,
Shonaid Jemmett-Page retired from the Board and Nick Winser assumed
the role of Senior Independent Director. On behalf of the whole
Board, I would like to thank Shonaid for her excellent
contribution, first as Chairman of the Audit Committee and then as
Chairman of the Board. With Shonaid being the last Director who was
with the Company at IPO, the succession of the whole Board has now
taken place. I am delighted to have taken over as Chairman and look
forward to the Company continuing to deliver shareholder
value.
On 1 May 2023, Jim Smith joined
the Board bringing his extensive experience from the electricity
industry including in offshore wind asset management, notably
leading SSE's renewable business. Jim will oversee the performance
of the Investment Manager's asset management activities.
On 1 March 2024, Abigail Rotheroe
will join the Board. Abigail has extensive experience in the
investment and asset management industry, with a focus on ESG.
Abigail's appointment broadens the experience of the Board at a
time when ESG considerations are becoming a major factor in the
sustainability of the investment industry.
At the forthcoming AGM, Martin
McAdam will retire from the Board and on behalf of the Board, I
would also like to thank him for his services as a non-executive
Director of the Company since his appointment in 2015 and for his
wisdom and insight.
The annual internal evaluation of
the Board raised no significant issues. The Group's governance is
further described in the Corporate Governance Report.
In December 2023, we announced
that Laurence Fumagalli will be succeeded by Matt Ridley as one of
the investment managers, partnering Stephen Lilley. The Board would
like to thank Laurence for his vision and unwavering commitment to
list, manage and grow the Company and look forward to continuing to
work alongside Stephen and Matt as the Company continues to
develop.
Annual General Meeting
Our AGM will take place at 2pm on
24 April 2024 at the office of the Investment Manager.
Details of the formal business of
the meeting are set out in a separate circular which is sent to
shareholders with the Annual Report.
Lucinda Riches C.B.E.
Chairman
28 February 2024
Investment Manager's Report
The Investment
Manager
The investment management team
covers all the skills and experience required to manage the Group:
investment, ownership, finance and operation. The Investment
Manager is authorised and regulated by the Financial Conduct
Authority and is a full scope UK AIFM.
Since the Company's IPO in March
2013, the investment management team has been led by Stephen Lilley
and Laurence Fumagalli.
In December 2023, the Company
announced Laurence Fumagalli's intention to step down from his role
and that Matt Ridley will succeed Laurence Fumagalli leading the
investment management team alongside Stephen Lilley from 1 March
2024.
Matt brings a broad range of
renewable investment experience across both public and private
investment vehicles with a primary focus on wind. Prior to his
appointment, Matt had led the private markets group of the
Investment Manager.
The other key figures in the
Investment Manager's team dedicated to managing the Company remain
unchanged, and the majority of the team have been involved in the
management of the Group for over 5 years. The investment management
team has breadth and depth, with core competencies across
investment, asset management and finance, and is supported by the
130 strong wider team within the Investment Manager.
Investment Portfolio
As at 31 December 2023, the Group
owned investments in a diversified portfolio of 49 operating UK
wind farms totalling 2,007MW.
Asset Management
The Group operates a sizeable and
diverse portfolio of 49 assets with net generating capacity in
excess of 2GW. The Investment Manager has an experienced and
specialist asset management team, which has expanded considerably
as the portfolio has grown. The team focusses on the safe and
optimal performance of the Group's assets, as well as ensuring the
delivery of the Company's long term investment case. The team
continues to move forward several key initiatives to optimise the
performance of the Group's assets, creating long term value for
shareholders. Initiatives include, for instance, lease extensions,
turbine performance upgrades, and revenue and operating cost
optimisation.
Operating and Financial Performance
Portfolio generation in the year
was 4,743GWh, 13 per
cent below budget owing to low wind.
The following table shows wind
speed and portfolio generation since IPO:
|
UK
weighted average wind speed
(variation to long term mean)
|
Generation
(variation to budget)
|
2013 (adjusted)
|
+3%
|
+8%
|
2014
|
-2%
|
-3%
|
2015
|
+5%
|
+8%
|
2016
|
-6%
|
-6%
|
2017
|
-1%
|
0%
|
2018
|
-4%
|
-6%
|
2019
|
-8%
|
-11%
|
2020
|
+2%
|
-3%
|
2021
|
-12%
|
-20%
|
2022
|
-5%
|
-5%
|
2023
|
-7%
|
-13%
|
Variation to budget lies within
reasonable statistical parameters. The annual standard deviation of
wind speed is 6 per cent and the annual standard deviation of
generation is 10 per cent (less than 2 per cent over 30
years).
Net cash generated by the Group
and wind farm SPVs was £405.5million and dividend cover for
the year was 2.1x.
Group and wind farm SPV cash flows
|
For the year ended 31
December 2023
|
|
|
|
£'000
|
|
Net cash generation
(1)
|
405,510
|
|
Dividends paid
|
(197,043)
|
|
|
|
|
Acquisitions
|
(820,925)
|
|
Acquisition costs
|
(2,742)
|
|
|
|
|
Share buybacks
|
(9,439)
|
|
Share buyback costs
|
(56)
|
|
|
|
|
Net amounts drawn under debt
facilities
|
690,000
|
|
Upfront finance costs
|
(4,939)
|
|
Movement in cash (Group and wind farm SPVs)
|
60,366
|
|
Opening cash balance (Group and
wind farm SPVs)
|
160,851
|
|
Closing cash balance (Group and wind farm SPVs)
(2)
|
221,217
|
|
|
|
|
Net cash generation
|
405,510
|
|
Dividends
|
197,043
|
|
Dividend cover
|
2.1x
|
|
(1) Alternative Performance Measure as defined below.
(2) Includes £40,119k security cash deposits recognised as a
receivable in note 11 to the financial statements.
The following tables provide
further detail in relation to net cash generation of
£405.5 million:
Net Cash Generation - Breakdown
(1)
|
For the year ended
31 December 2023
|
|
£'000
|
Revenue
|
785,608
|
Operating expenses
|
(198,611)
|
Tax
|
(62,661)
|
SPV level debt interest
|
(20,044)
|
SPV level debt
amortisation
|
(47,129)
|
Other
|
28,133
|
Wind farm cash flow
|
485,296
|
|
|
Management fee
|
(24,993)
|
Operating expenses
|
(2,564)
|
Ongoing finance costs
|
(62,834)
|
Other
|
5,013
|
Group cash flow
|
(85,378)
|
|
|
VAT (Group and wind farm
SPVs)
|
5,592
|
Net cash generation
|
405,510
|
1
Alternative Performance Measure as defined
below.
Net Cash Generation - Reconciliation to Net Cash Flows from
Operating Activities (1)
|
For the year ended
31 December 2023
|
|
£'000
|
Net cash flows from operating
activities (2)
|
359,801
|
Movement in cash balances of wind
farm SPVs
|
18,225
|
Repayment of shareholder loan
investment (2)
|
50,199
|
Finance costs
(2)
|
(67,773)
|
Upfront finance costs
(3)
|
4,939
|
Placing of security cash deposits
(4)
|
40,119
|
Net cash generation
|
405,510
|
1 Alternative Performance Measure as defined below.
2 Consolidated Statement of Cash Flows.
3 £4,350k facility arrangement fees plus £589k professional
fees per note 13 to the financial statements.
4 Note 11 to the financial statements.
Investment and
Gearing
The following table lists
investments in the year:
|
£m
|
Dalquhandy
|
51.5
|
London Array
|
443.6
|
South Kyle
|
315.9
|
Kype Muir Extension
(1)
|
9.9
|
Total
|
820.9
|
(1) In addition to £39.4 million invested as at 31 December
2022.
All of the above investments were
materially accretive to NAV (£174.2 million in total). The
Investment Manager believes that there should continue to be
further opportunities for investments that are beneficial to
shareholders. The Company also continues to review its
capital allocation, with 14 million shares having been repurchased
as of 27 February 2024 as part of its £100 million buyback
programme announced in October 2023, at an average cost of 142.1
pence per share. The Company may also use excess cash generation to
return capital to shareholders through further increased dividends,
or for the repayment of debt.
As at 31 December 2023, Aggregate
Group Debt was £2,375 million, comprising £1,390 million of term
debt at Company level, £400 million drawn under the Company's
revolving credit facility plus £585 million being the Group's share
of limited recourse debt in Hornsea 1. Cash balances (Group and
wind farm SPVs) as at 31 December 2023 were £221.2 million
(including £40.1 million of security cash deposits).
Gearing as at 31 December 2023 was
38 per cent of GAV, with a weighted cost of debt of
4.59 per cent across a
spread of maturities (October 2024 to March 2036):
Facility
|
Maturity
date
|
Loan
principal
£ 000
|
Loan
margin
%
|
Swap rate
/
SONIA
%
|
All-in
rate
%
|
RCF
|
29 Oct
24
|
400,000
|
1.75
|
5.20
(1)
|
6.95
|
NAB
|
4 Nov
24
|
50,000
|
1.15
|
1.06
|
2.21
|
CBA
|
14 Nov
24
|
50,000
|
1.35
|
0.81
|
2.16
|
CBA
|
6 Mar
25
|
50,000
|
1.55
|
1.53
|
3.08
|
CIBC
|
3 Nov
25
|
100,000
|
1.50
|
1.51
|
3.01
|
ANZ
|
3 May
26
|
75,000
|
1.45
|
5.92
|
7.37
|
NAB
|
1 Nov
26
|
75,000
|
1.50
|
1.60
|
3.10
|
NAB
|
1 Nov
26
|
25,000
|
1.50
|
0.84
|
2.34
|
CIBC
|
14 Nov
26
|
100,000
|
1.40
|
0.81
|
2.21
|
Lloyds
|
9 May
27
|
150,000
|
1.60
|
5.65
|
7.25
|
CBA
|
4 Nov
27
|
100,000
|
1.60
|
1.37
|
2.97
|
ABN AMRO
|
2 May
28
|
100,000
|
1.75
|
5.04
|
6.79
|
ANZ
|
3 May
28
|
75,000
|
1.75
|
5.38
|
7.13
|
Barclays
|
3 May
28
|
100,000
|
1.75
|
4.99
|
6.74
|
AXA
|
31 Jan
30
|
125,000
|
-
|
-
|
3.03
|
AXA
|
31 Jan
30
|
75,000
|
1.70
|
1.45
|
3.15
|
AXA
|
28 Apr
31
|
25,000
|
-
|
-
|
6.43
|
AXA
|
28 Apr
31
|
115,000
|
1.80
|
5.20
(1)
|
7.00
|
Hornsea 1
|
31 Mar
36
|
585,000
|
-
|
-
|
2.60
|
|
|
2,375,000
|
|
Weighted average
|
4.59
|
1 Facility pays SONIA as variable rate.
In June 2023, the Investment
Manager led a placing of £640 million of new term loan facilities
with 5 lenders, 2 of which were new lending relationships to the
Company. This included the refinancing of £150 million of term debt
tranches maturing in late 2023. The Company's revolving credit
facility is due to mature in October 2024 in addition to £150
million of term loan tranches by March 2025. The Investment Manager
has commenced discussions with existing and new lenders to
refinance the near-maturing revolving credit facility and term debt
and has found significant appetite.
Net Asset Value
The following table sets out the
movement in NAV from 31 December 2022 to 31 December
2023:
|
£'000
|
Pence per
share
|
NAV as at 31 December 2022
|
3,873,228
|
167.1
|
Net cash generation
|
405,510
|
17.5
|
Dividend
|
(197,043)
|
(8.5)
|
Depreciation
|
(118,742)
|
(5.1)
|
Power price
|
(278,137)
|
(12.0)
|
Inflation
|
132,279
|
5.7
|
Discount rate
|
(263,252)
|
(11.4)
|
Accretive investments
|
174,228
|
7.5
|
Share buybacks
|
(9,496)
|
0.1
|
Other (1)
|
75,421
|
3.3
|
NAV as at 31 December 2023
|
3,793,997
|
164.1
|
(1) Includes REGOs and wind farm SPV
budget updates.
Reconciliation of Statutory Net
Assets to Reported NAV
|
As at
31 December 2023
|
As at
31 December 2022
|
|
|
|
|
|
£'000
|
£'000
|
|
|
Operating portfolio
|
5,964,343
|
5,458,334
|
|
|
Construction portfolio
|
-
|
39,414
|
|
|
Cash (wind farm SPVs)
|
159,293
|
141,068
|
|
|
Fair value of investments(1)
|
6,123,636
|
5,638,816
|
|
|
Cash (Group)
|
21,805
|
19,783
|
|
|
Other relevant
assets/(liabilities)
|
23,556
|
(5,867)
|
|
|
GAV
|
6,168,997
|
5,652,732
|
|
|
Aggregate Group
Debt(1)
|
(2,375,000)
|
(1,779,504)
|
|
|
NAV
|
3,793,997
|
3,873,228
|
|
|
Reconciling items
|
-
|
-
|
|
|
Statutory net assets
|
3,793,997
|
3,873,228
|
|
|
|
|
|
|
|
Shares in issue
|
2,312,131,799
|
2,318,089,989
|
|
|
NAV per share (pence)
|
164.1
|
167.1
|
|
|
(1) Includes limited recourse debt of £585 million at Hornsea 1,
not included in the Consolidated Statement of Financial
Position.
Health and Safety and the
Environment
Health and safety is of key
importance to both the Company and the Investment
Manager.
The Investment Manager is an
active member of SafetyOn, the UK's leading health and safety
focused organisation for the onshore wind industry. The Investment
Manager also has its own health and safety forum, chaired by
Stephen Lilley, where best practice is discussed and key learnings
from incidents across the industry are shared.
During the year, routine health
and safety audits were conducted across 14 sites by an independent
consultant. In addition, the Investment Manager undertook 73 safety
walks. No material areas of concern were identified from all audits
and safety walks performed in the year.
The Company has continued to
contribute to local community funds and to invest in a range of
local environmental and social projects. In addition, the Company
is funding a £250,000 programme to advance knowledge on blade
recycling and repurposing.
As at 31 December 2023, the
portfolio powers 2.3 million homes and avoids the emission of 2.5
million tonnes of CO2 per annum.
Power Price
Long term power price forecasts
are provided by a leading market consultant, updated quarterly, and
may be adjusted by the Investment Manager where more conservative
assumptions are considered appropriate. Short term power price
assumptions reflect the forward curve as at 29 December
2023.
A discount of 10-20 per cent is
applied to power price assumptions in all years to reflect the fact
that wind generation typically captures a lower price than the base
load power price. During the year, the portfolio captured an
average price of £89.03/MWh versus an average N2EX index price of £94.47/MWh (6 per
cent discount).
In addition to the above capture
discount, a further discount is applied to reflect the terms of
each PPA. The price of some PPAs is expressed as a percentage of a
given price index, whereas other PPAs include a fixed £/MWh
discount to the price index. Other PPAs pay a fixed £/MWh price for
power.
The following table shows the
assumed power price (post capture discount, pre PPA discount) and
also the price post a representative PPA discount (90 per cent x
index price).
£/MWh (real 2022)
|
|
|
|
2024
|
2025
|
2026
|
2027
|
2028
|
2029
|
2030
|
Pre PPA discount
|
|
|
|
61.34
|
60.88
|
56.37
|
63.76
|
63.28
|
60.56
|
57.36
|
Post representative PPA
discount
|
|
|
|
55.21
|
54.79
|
50.73
|
57.38
|
56.95
|
54.50
|
51.62
|
|
2031
|
2032
|
2033
|
2034
|
2035
|
2036
|
2037
|
2038
|
2039
|
2040
|
Pre PPA discount
|
57.04
|
57.20
|
58.32
|
58.32
|
56.48
|
57.60
|
57.20
|
54.00
|
53.68
|
54.00
|
Post representative PPA
discount
|
51.34
|
51.48
|
52.49
|
52.49
|
50.83
|
51.84
|
51.48
|
48.60
|
48.31
|
48.60
|
|
2041
|
2042
|
2043
|
2044
|
2045
|
2046
|
2047
|
2048
|
2049
|
2050
|
Pre PPA discount
|
51.84
|
49.84
|
48.96
|
49.12
|
49.36
|
48.88
|
48.48
|
48.80
|
49.76
|
47.20
|
Post representative PPA
discount
|
46.66
|
44.86
|
44.06
|
44.21
|
44.42
|
43.99
|
43.63
|
43.92
|
44.78
|
42.48
|
|
2051
|
2052
|
2053
|
2054
|
2055
|
2056
|
2057
|
2058
|
2059
|
2060
|
Pre PPA discount
|
47.28
|
45.68
|
46.40
|
46.40
|
43.84
|
43.60
|
42.24
|
40.88
|
41.60
|
40.80
|
Post representative PPA
discount
|
42.55
|
41.11
|
41.76
|
41.76
|
39.46
|
39.24
|
38.02
|
36.79
|
37.44
|
36.72
|
The portfolio benefits from a
substantial fixed revenue base. Furthermore, most fixed revenues
are index linked (RPI in the case of ROCs, CPI in the case of
CFDs).
The fixed revenue base means that
dividend cover is robust in the face of extreme downside power
price sensitivities:
|
2024
|
2025
|
2026
|
2027
|
2028
|
RPI increase (%)
|
|
3.5
|
3.5
|
3.5
|
3.5
|
Dividend (pence /
share)
|
10.00
|
10.35
|
10.71
|
11.09
|
11.48
|
Dividend (£ 000)
|
231,213
|
239,306
|
247,681
|
256,350
|
265,322
|
|
|
|
|
|
|
Dividend cover (x)
|
|
|
|
|
|
Base case
|
2.0
|
2.0
|
2.0
|
2.3
|
2.4
|
£50/MWh
|
1.8
|
1.8
|
1.9
|
1.9
|
2.0
|
£40/MWh
|
1.6
|
1.6
|
1.7
|
1.7
|
1.7
|
£30/MWh
|
1.5
|
1.5
|
1.5
|
1.5
|
1.5
|
£20/MWh
|
1.3
|
1.3
|
1.3
|
1.2
|
1.2
|
£10/MWh
|
1.1
|
1.1
|
1.0
|
1.0
|
0.9
|
All numbers illustrative. Power
prices real 2022, pre PPA discount.
The Group's strategy remains to
maintain an appropriate balance between fixed and merchant revenue.
To the extent that merchant revenues were to increase as a
proportion of total revenues then new fixed price PPAs would be
entered into. However, it is likely that an appropriate revenue
balance would be maintained through the acquisition of new fixed
revenue streams (for example, offshore wind CFD assets).
Inflation
Base case assumptions in relation
to inflation are:
CPI: 2.5 per cent (all
years)
RPI: 4.3 per cent (2024), 3.5 per
cent (2025-2030), 2.5 per cent (2031 onwards)
The ROC price is inflated annually
from 1 April each year based on the previous year's average RPI.
For example, on 1 April 2024, the ROC price will increase by 9.7
per cent (average RPI over 2023).
CFD prices are also inflated
annually from 1 April each year. However, in the case of CFDs, the
price is inflated based on January CPI. For example, on 1 April
2024, CFD prices will increase by 4.0 per cent (January 2024
CPI).
Given the explicit inflation
linkage of a substantial proportion of portfolio revenue (ROCs,
CFDs, certain PPAs) and the implicit inflation linkage inherent in
power prices, there is a strong link between inflation and
portfolio return.
Returns
The portfolio discount rate was
increased by 1 per cent as at 30 June 2023 (total increases of 2
per cent over 2022 and 2023). The levered portfolio IRR now stands
at 11 per cent.
Given that the Company's ongoing
charges ratio is less than 1 per cent, the net return to investors
is thus 10 per cent (assuming investment at a share price equal to
NAV - the return is greater assuming investment at a share price
below NAV).
A 10 per cent inflation linked
return should be very attractive versus other investment
opportunities. The Company's 10 year track record demonstrates
relatively low volatility and the historical and projected dividend
cover is robust. By investing in operating UK wind farms (higher
returning than European or solar generation assets, and lower risk
than batteries or development assets), the Company aims to continue
to generate consistent superior risk adjusted returns.
A total return of 10 per cent and
a dividend yield of 6 per cent would imply NAV growth of 4 per
cent. The total return is more important than the dividend yield,
which depends on the chosen dividend policy (the Company could
choose a different combination of dividend yield and NAV
growth).
Excess cash generation (dividend
cover) is reinvested to drive NAV growth. Therefore the size of
dividend cover is important; it is not just a question of "covered
or not covered". The business model is self funding and does not
rely on further equity issuance.
Since IPO, aggregate historical
dividend cover has been 2.0x and the Group has reinvested £906
million to deliver NAV growth significantly in excess of
RPI.
Outlook
There are currently approximately
30GW (£100 billion) of operating UK wind farms (15GW onshore plus
15GW offshore). The Group's market share is approximately 7 per
cent. As at 31 December 2023, the average age of the portfolio was
7.5 years (versus 5 years at IPO in March 2013).
The portfolio is robust in the
face of downside power price sensitivities and remains exposed to
significant upside (power prices, asset life extension, asset
optimisation, new revenue streams, interest rate cycle etc). The
levered portfolio IRR of 11 per cent and net return to investors of
10 per cent should be very attractive versus other investment
opportunities.
Given the leading market position
of the Group and the Investment Manager, there is no shortage of
investment opportunities, further fuelled by the challenging
fundraising environment affecting all buyers (in both public and
private markets). The Company will continue to review its capital
allocation policy and will assess new acquisitions in this
light.
In general, the outlook for the
Group is extremely encouraging.
Strategic Report
Introduction
The Directors present their
Strategic Report for the year ended 31 December 2023. Details of
the Directors who held office during the year and as at the date of
this report are given below.
Investment Objective
The Company's aim is to provide
investors with an annual dividend that increases in line with RPI
inflation while preserving the capital value of its investment
portfolio in the long term on a real basis through reinvestment of
excess cash flow.
The Company provides investors
with the opportunity to participate directly in the ownership of UK
wind farms, so increasing the resources and capital dedicated to
the deployment of renewable energy and the reduction of greenhouse
gas emissions.
The target return to investors is
an IRR net of fees and expenses of 10 per cent. As a result of the
Company's prospects, strong balance sheet and cash flow generation,
the Board decided to increase the 2024 target dividend to 10 pence
per share which represents a 14.2 per cent increase above the
target dividend for 2023 and is significantly higher than December
2023 RPI. The Board also decided to pay a 3.43 pence per share
dividend for Q4 2023, increasing the 2023 full year dividend to 10
pence per share.
Progress on the objectives is
measured by reference to the key metrics as provided
above.
Investment Policy
The Group invests in UK wind farms
predominantly with a capacity of over 10MW.
Low gearing ensures that the
annual dividend is sufficiently protected against lower power
prices. This means that the Group also has the ability to benefit
from higher power prices as it is not required to enter into long
term fixed price contracts.
The Group used debt facilities to
make additional investments in the year and intends to continue to
use short term debt facilities to make further investments, where
appropriate. The Group will look to repay its short term debt
facilities by refinancing them with longer term debt facilities or
in the equity markets in order to refresh its debt capacity. While
debt facilities are drawn, the Group benefits from an increase in
investor returns because borrowing costs are below the underlying
return on investments.
The Board believes that there is a
significant market in which the Group can continue to grow over the
next few years.
Capital Allocation
The Company regularly reviews its
capital allocation policy by considering a range of options to
optimise returns to shareholders. In October 2023, as part of this
consideration, the Company announced an increase in its annual
dividend target for 2024 at 10 pence per share, an increase beyond
December's RPI of 5.2 per cent. The dividend with respect to the
final quarter of the year will be 3.43 pence per share, taking the
annual dividend for 2023 to 10 pence per share.
The Company also announced a £100
million share buyback programme and bought back 6.6 million shares
in the final 2 months of the year at an average cost of 144.4 pence
per share.
The Company maintains a
disciplined approach to acquisitions, only investing when it is
considered to be in the interests of shareholders to do so. With
the Company's share price currently trading at a discount to NAV,
the alternatives for capital allocation warrant significant
consideration.
Structure
The Company is a UK registered
investment company with a premium listing on the London Stock
Exchange. The Group comprises the Company and Holdco. Holdco
invests in SPVs which hold the underlying wind farm assets. The
Group employs Schroders Greencoat LLP as its Investment
Manager.
Discount Control
The Articles of Association
require a continuation vote by shareholders if the share price were
to trade at an average discount to NAV of 10 per cent or more over
a 12 month period.
During the year, the Company's
shares have traded at an average discount to NAV of 10.5 per cent.
In accordance with the Company's Articles of Association, a
continuation vote will be proposed at the 2024
AGM.
Notwithstanding this, it is the
intention of the Board for the Company to buy back its own shares
in the market if the share price is trading at a material discount
to NAV, providing that it is in the interests of shareholders to do
so. Given that the share price had continued to trade at a material
discount to NAV, on 26 October 2023 the Company announced the
commencement of a share buyback programme of up to £100 million
executed under the authority granted by shareholders at the 2023
AGM.
Review of Business and Future
Outlook
A detailed discussion of
individual asset performance and a review of the business in the
year together with future outlook are covered in the Investment
Manager's Report.
Key Performance
Indicators
The Board believes that the key
metrics detailed above, which are typical for investment entities,
will provide shareholders with sufficient information to assess how
effectively the Group is meeting its objectives.
Ongoing Charges
The ongoing charges ratio of the
Company is 0.92 per cent of the weighted
average NAV for the year to 31 December 2023. This is made up as
follows and has been calculated using the AIC recommended
methodology.
|
31 December
2023
|
31 December
2022
|
£'000
|
%
|
£'000
|
%
|
|
|
|
|
|
Total management fee
|
32,844
|
0.86%
|
31,348
|
0.87%
|
Directors' fees
|
385
|
0.01%
|
338
|
0.01%
|
Other ongoing expenses
(1)
|
2,058
|
0.05%
|
1,970
|
0.05%
|
Total
|
35,287
|
0.92%
|
33,656
|
0.93%
|
Weighted average NAV
|
3,834,654
|
|
3,622,216
|
(1) Other ongoing expenses do not include £1,772k of management
and administration fees relating to the wind farm SPVs that is
recharged to them and £549k of broken deal and project
costs.
Assuming no further changes in
NAV, the 2024 ongoing charges ratio is expected to be
0.92 per
cent.
The Investment Manager is not paid
any performance or acquisition fees.
Employees and Officers of the Company
The Company does not have any
employees and therefore employee policies are not required. The
Directors of the Company are listed below.
Principal Risks and
Uncertainties
In the normal course of business,
each investee company has a rigorous risk management framework with
a comprehensive risk register that is reviewed and updated
regularly and approved by its board. The principal risks identified
by the Board to the performance of the Group are detailed
below.
The Board maintains a risk matrix
setting out the risks affecting both the Group and the investee
companies. This risk matrix is reviewed and updated at least
annually to ensure that procedures are in place to identify
principal risks and to mitigate and minimise the impact of those
risks should they crystallise. This risk matrix is also reviewed
and updated to identify emerging risks, such as climate related
risks, and to determine whether any actions are required. This
enables the Board to carry out a robust assessment of the risks
facing the Group, including those risks that would threaten its
business model, future performance, solvency or
liquidity.
The risk appetite of the Group is
considered in light of the principal risks and their alignment with
the Company's Investment Objective. The Board considers the risk
appetite of the Group and the Company's adherence to the Investment
Policy in the context of the regulatory environment taking into
account, inter alia, gearing and financing risk, wind resource
risk, the level of exposure to power prices and environmental and
health and safety risks.
As it is not possible to eliminate
risks completely, the purpose of the Group's risk management
policies and procedures is to reduce risks and to ensure the Group
is adequately prepared to respond to such risks and minimise any
impact should they materialise.
The spread of assets within the
portfolio ensures that the portfolio benefits from a diversified
wind resource and spreads the exposure to a number of potential
technical risks associated with grid connections and with local
distribution and national transmission networks. In addition, the
portfolio includes 6 different turbine manufacturers, which
diversifies technology and maintenance risks. Finally, each site
contains a number of individual turbines, the performance of which
is largely independent of other turbines.
Risks Affecting the
Group
Investment Manager
The ability of the Group to
achieve the Company's Investment Objective depends heavily on the
experience of the management team within the Investment Manager and
more generally on the Investment Manager's ability to attract and
retain suitable staff. The sustained growth of the Group depends
upon the ability of the Investment Manager to identify, select and
execute further investments which offer the potential for
satisfactory returns.
The Investment Management
Agreement includes key man provisions which would require the
Investment Manager to employ alternative staff with similar
experience relating to investment, ownership, financing and
management of wind farms should any key man cease to be employed by
the Investment Manager. The Investment Management Agreement ensures
that no investments are made following the loss of key men until
suitable replacements are found and there are provisions for a
reduction in the investment management fee during the loss period.
It also outlines the process for key man replacement with the
Board's approval. In addition, the key men are shareholders in the
Company.
On 7 December 2023, the Company
announced that Laurence Fumagalli would be stepping down from his
role leading the investment management team alongside Stephen Lilley with effect from 1 March 2024,
with Matt Ridley replacing him. Matt has 16 years' renewable energy
investment management experience, spanning the development,
construction and operational phases across a range of technologies,
with a focus on wind, and previously was the Head of Private
Markets at the Investment Manager. Stephen and Matt will lead the
broad and experienced team focused on the management of the Group
and its wind farm portfolio. The majority of the team have been
involved in the management of the Group for over 5
years.
The Investment Manager is one of
Europe's leading renewable investment managers, which employs over
130 professionals and has over £10 billion of assets under
management. The Investment Manager is 75 per cent owned by
Schroders Group PLC, founded over 200 years ago, and managing over
£726 billion of assets (as of 30 June 2023) with over 6,000 staff
globally.
Financing Risk
The Group will finance further
investments either by borrowing or by issuing further shares in
addition to its cash resources. The ability of the Group to deliver
expected real NAV growth is dependent on access to debt facilities
and equity capital markets. There can be no assurance that the
Group will be able to borrow additional amounts or refinance on
reasonable terms or that there will be a market for further raising
of equity.
Investment Returns Become
Unattractive
Higher interest rates could
persist, making the listed infrastructure asset class relatively
less attractive to investors. In such circumstances, it is likely
that discount rates would be adjusted to maintain a suitable
premium over increased risk free rates.
Risks Affecting Investee
Companies
Regulation
If a change in Government
renewable energy policy were applied retrospectively to current
operating projects including those in the Group's portfolio, this
could adversely impact the market price for renewable energy or the
value of the green benefits earned from generating renewable
energy. The Government has evolved the regulatory framework for new
projects being developed but has consistently stood behind the
framework that supports operating projects as it understands the
need to ensure investors can trust regulation.
Electricity Prices
Other things being equal, a
decline in the market price of electricity would reduce the
investee companies' revenues.
The Group's dividend policy has
been designed to withstand significant short term variability in
power prices. A longer period of power price decline would
materially affect the revenues of investee companies.
Wind
Resource
The investee companies' revenues
are dependent upon wind conditions, which will vary across seasons
and years within statistical parameters. The standard deviation of
energy production is 10 per cent over a 12 month period (less than
2 per cent over 30 years). Since long term variability is low,
there is no significant diversification benefit to be gained from
geographical diversification across weather systems.
The Group does not have any
control over the wind resource but has designed its dividend policy
such that it can withstand significant short term variability in
production relating to wind. Before investment, the Group carries
out extensive due diligence and relevant historical wind data is
available over a substantial period of time. The other component of
wind energy generation, a wind farm's ability to turn wind into
electricity, is mitigated by purchasing wind farms, where possible,
with a proven operating track record.
When acquiring wind farms that
have only recently entered into operation, only limited operational
data is available. In these instances, the acquisition agreements
with the vendors of these wind farms will include a ''wind energy
true-up'' or an appropriate discount to the purchase
price.
Asset Life
In the event that the wind
turbines do not operate for the period of time assumed by the Group
or require higher than expected maintenance expenditure to do so,
it could have a material adverse effect on investment
returns.
The Group performs regular reviews
and ensures that maintenance is performed on all wind turbines
across the wind farm portfolio. Regular maintenance ensures the
wind turbines are in good working order, consistent with their
expected life-spans.
Health and Safety and the
Environment
The physical location, operation
and maintenance of wind farms may, if inadequately assessed and
managed, pose health and safety risks to those involved.
Inappropriate wind farm operation and maintenance may result in
bodily injury, particularly if an individual were to fall from
height, fall or be crushed in transit from a vessel to an offshore
installation or be electrocuted. If an accident were to occur in
relation to one or more of the Group's investments and if the Group
were deemed to be at fault, the Group could be liable for damages
or compensation to the extent such loss is not covered by insurance
policies. In addition, adverse publicity or reputational damage
could follow.
The Board reviews health and
safety at each of its scheduled Board meetings and Martin McAdam
serves as the appointed Health and Safety Director. After Martin's
retirement at the AGM in April 2024, Jim Smith will assume this
responsibility. The Group also engages an independent health and
safety consultant to ensure the ongoing appropriateness of its
health and safety policies.
The investee companies comply with
all regulatory and planning conditions relating to the environment,
including in relation to noise emissions, habitat management and
waste disposal.
Going Concern
As further detailed in note 1 to
the financial statements, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence from the date of approval of
this report to at least February 2025. Accordingly, they continue
to adopt the going concern basis in preparing the financial
statements.
Longer Term Viability
As further disclosed below, the
Company is a member of the AIC and complies with the AIC Code. In
accordance with the AIC Code, the Directors are required to assess
the prospects of the Group over a period longer than the 12 months
associated with going concern. The Directors conducted this review
for a period of 10 years, which is deemed appropriate, given the
long term nature of the Group's investments which are modelled over
30 years, coupled with its long term strategic planning
horizon.
In considering the prospects of
the Group, the Directors looked at the key risks facing both the
Group and the investee companies, focusing on the likelihood and
impact of each risk as well as any key contracts, future events or
timescales that may be assigned to each key risk. The Directors
also tested and are comfortable that the Company would continue to
remain viable under several robust downside scenarios, including
loss of government subsidies and a significant decline in long term
power price forecasts, both considered principal risks and
uncertainties affecting investee companies.
As a sector-focused infrastructure
fund, the Group aims to produce stable and inflating dividends
while preserving the capital value of its investment portfolio on a
real basis. The Directors believe that the Group is well placed to
manage its business risks successfully over both the short and long
term and accordingly, the Board has a reasonable expectation that
the Group will be able to continue in operation and to meet its
liabilities as they fall due for a period of at least 10
years.
The Board does not believe that
the lower power prices projected in the high transition risk
scenario, will diminish the longer term viability of the
Company.
The Directors have also considered
the continuation vote to be proposed at the Company's AGM in April
2024, caused by the Company's shares trading at 10.5 per cent
average discount to NAV in line with its Articles of Association.
The Directors believe that the outcome of the shareholder
continuation vote will not impact their opinion of the Company's
longer term viability.
While the Directors have no reason
to believe that the Group will not be viable over a longer period,
they are of the opinion that it would be difficult to foresee the
economic viability of any company with any degree of certainty for
a period of time greater than 10 years.
Directors' Responsibilities
Pursuant to Section 172 of the Companies Act 2006
The Directors are responsible for
acting in a way that they consider, in good faith, is the most
likely to promote the success of the Company for the benefit of its
members. In doing so, they should have regard for the needs of
stakeholders and the wider society. The Company's objective is to
provide investors with an annual dividend that increases in line
with RPI inflation while preserving the capital value of its
investment portfolio in the long term on a real basis through
reinvestment of excess cash flow.
The Company provides investors
with the opportunity to participate directly in the ownership of UK
wind farms, so increasing the resources and capital dedicated to
the deployment of renewable energy and the reduction of greenhouse
gas emissions. The Board is also aware of its responsibility for
the risk management of the Group's climate related risks and for
transparent disclosure of these risks, appreciating how this is
integral to the success of the Company.
Key decisions are those that are
either material to the Company or are significant to any of the
Company's key stakeholders, as defined in the Corporate Governance
Report. The Company's engagement with its key stakeholders,
including the Investment Manager, is discussed further in the
Corporate Governance Report. The key decisions and discussions
detailed in the table below were made or approved by the Directors
during the year, with the overall aim of promoting the success of
the Company while considering the impact on its members and wider
stakeholders.
Topic
|
Stakeholder considerations and
outcome
|
Dividends
|
Shareholders voted 99.99 per cent
in favour to approve the Company's dividend policy at the AGM on 28
April 2023. In recognition of the very
strong cash flow delivered by the business during the year,
the Board approved a special dividend payment of
3.43 pence per share for Q4 2023 which brought total dividends to
10 pence per share with respect to the year.
The Board has also announced a
target dividend of 10 pence per share for 2024, an increase of 14.2 per cent from
2023's target dividend of 8.76 pence per share.
Stakeholders influencing
and/or impacting considerations:
Shareholders and potential
investors
|
Investments
|
During the year, the Company
invested in two wind farms and completed the acquisition of two
further wind farms which it committed to acquire in 2020, bringing
the Company's net generating capacity to over 2GW. Following
recommendation from the Investment Manager, the Directors
considered each of the Company's investments in the context of the
Company's Investment Policy, availability of financing and the
potential returns to investors. They also considered each
investment in the context of sustainability and its impact on the
surrounding community.
Stakeholders influencing
and/or impacting considerations:
Shareholders, potential investors,
local communities and Investment Manager.
|
Share Capital
|
On 26 October 2023, the Company
announced the commencement of a share buyback programme of up to
£100 million executed under the authority granted by shareholders
at the 2023 AGM. The Board determined that buying back shares was
in the best interests of shareholders. As at 31 December 2023, 6.6
million shares were purchased under the above authority at a total
cost of £9.5 million.
During the year, the Company
issued 619,546 Ordinary Shares to satisfy the Equity Element of the
Investment Management Fee, in accordance with the Investment
Management Agreement. No shares were issued through equity raisings
during the year.
Stakeholders influencing
and/or impacting considerations:
Shareholders, potential investors
and Investment Manager.
|
Annual review of service
providers
|
The Board annually reviews the
Company's external service providers and, in particular, the
quality and costs of the services provided and organisational
strength where appropriate. It has concluded that the interests of
the Company's shareholders would be best served by the ongoing
appointments of the Investment Manager, the Administrator and the
Company's other key service providers on the existing
terms.
Stakeholders influencing
and/or impacting considerations:
Investment Manager, Administrator
and other key service providers.
|
Strategy session
|
The Board holds an annual strategy
session with the Investment Manager, outside of the scheduled
quarterly Board meetings, to consider the Company's strategic
objectives. The Board believes that the strategy session helped to
strengthen a clear and collaborative vision for the strategic
direction of the Company, while taking into account the views and
needs of stakeholders.
Stakeholders influencing
and/or impacting considerations:
Shareholders, potential investors
and Investment Manager.
|
Board Composition and
Internal Evaluation
During the year, Jim Smith was
appointed as a non-executive Director of the Company with effect
from 1 May 2023. With effect from 28 April 2023, Lucinda Riches
C.B.E. succeeded Shonaid Jemmett-Page as Chairman, following her
retirement from the Board, with Nick Winser C.B.E. succeeding
Lucinda Riches as Senior Independent Director.
On 1 March 2024, Abigail Rotheroe
will join the Board. At the forthcoming AGM, Martin McAdam will not
seek re-election and will retire from the Board.
As disclosed in the Corporate
Governance Report, the Board undertakes a formal and rigorous
internal evaluation of its performance each financial year to
determine effectiveness and performance in various areas, as well
as the Directors' continued independence and tenure. The reviews
concluded that the overall performance of the Board and Audit
Committee was satisfactory and the Board was confident in its
ability to continue to govern the Company well.
Environmental, Social and
Governance
The Group's
approach
The Group invests in wind farms
and the environmental benefits of renewable energy are proven and
key to delivering the Government's and society's climate change
objectives. As the largest renewable infrastructure fund and one of
the largest owners of wind farms in the UK, the Company continues
to prove the viability of clean energy as a robust sector for
investment.
The Group now owns over 2GW of
installed capacity across 49 onshore and offshore operating wind
farms. By dedicating resources to the deployment of renewable
energy, the Group is playing an active role in reducing the UK's
greenhouse gas emissions and accelerating a move towards Net Zero
for the whole economy. Since listing, the Group's operating wind
farms have produced 23.5TWh of clean energy, avoiding 9.4 million
tonnes of CO2.
During the year, the Group's wind
farms generated 4,743GWh of renewable electricity. By the end of
2023, the portfolio was generating sufficient electricity to power
2.3 million homes1 and avoiding approximately 2.5
million tonnes of CO2 emissions per annum through the
displacement of thermal generation2.
Through acquiring operational wind
farms from third parties, this allows capital to be recycled into
further renewable energy projects.
Both generating renewable
electricity and enabling capital recycling contribute to SDG 7
(ensure access to affordable, reliable, sustainable and modern
energy for all) and SDG 13 (take urgent action to combat climate
change and its impacts).
Responsible
Investment
To sustain the long term success
of the business, the Company acknowledges and understands the
importance of effective management of ESG matters for all
stakeholders.
The Company continues to have an
important role to play in championing both responsible investment
and the development of the renewable energy sector. This is
achieved through continuous engagement with all industry
stakeholders, including suppliers, O&M partners, industry
associations, policy makers, peers and communities. The Company
transparently shares its ESG approach and results with
investors.
Responsible investing principles
have been applied to each of the investments made, which require
the Group to make reasonable endeavours to ensure the ongoing
compliance of its investee companies with its policies on
responsible investment and ESG matters.
Although the non-executive Board
has overall responsibility for the activities of the Company and
its investments, the day-to-day management of the business is
delegated to the Investment Manager. This includes responsibility
for ESG matters and applies as investments are being made and
continuously during the life of each wind farm. The Investment
Manager assesses how ESG should be managed and the Company has
developed its ESG policy in accordance with the Investment
Manager's ESG Policy. The ESG Policy of the Company is approved and
overseen by the Company's Board.
1 The number of homes powered is based on the average annual
household energy consumption (2.7MWh/annum (Ofgem)), using the
latest reported figures, and reflects the portfolio's annual
electricity generation as at the relevant reporting
date.
2 The portfolio's annual CO2 emissions avoided
through the displacement of thermal generation, based on the
portfolio's annual generation as at the relevant reporting date.
The Group assumes that wind generation replaces CCGT in the UK and
applies a carbon factor of 0.4tCO2/MWh
(Ofgem).
The Group will continue to lead
the way in encouraging responsible investment to accelerate the
development of the UK's wind energy sector further and will do this
in a way that maximises returns for our shareholders and creates
benefits for the communities and the natural environment in which
its wind farms operate.
The Investment Manager has
representation on the boards of the operating wind farm companies
which oversee performance, including on ESG matters, and meet
quarterly. From these ongoing reviews, the Investment Manager
reports quarterly to the Company's Board, with data on production,
wind farm availability, key events and health and safety
performance.
This robust management structure
enables the Investment Manager to oversee ESG issues effectively
throughout the lifecycle of the Group's wind farms:
Screening
· screening the investment against investment mandate and
restrictions; and
· assessing the ability of the investment to comply with ESG
standards.
Due
Diligence
· rigorously assessing ESG risks and opportunities of the
investment based on commitment, capacity, track record and features
of the wind farm; and
· identifying mitigation plans for ESG risks, where
identified.
Investment
decision
· identifying and addressing ESG issues in extracts of the
Investment Manager's Investment Committee papers that inform
investment decisions; and
· determining and costing plans to address ESG issues, and
price into the investment decision process.
Asset
Management
· establishing appropriate governance structures;
· complying with all relevant laws and regulations;
· ensuring ongoing monitoring and management of ESG
issues;
· managing impacts on the natural habitat surrounding the wind
farms under management;
· engaging with and supporting the local
communities;
· performing due diligence on third parties and ensuring
compliance with the Company's ESG policy; and
· ensuring business integrity with a focus on avoiding money
laundering, negligent or corrupt practices.
Environment
As one of the largest owners of
wind farms in the UK, the Group is focused on taking actions to
support climate change mitigation through the generation of
renewable energy, whilst minimising the potential impacts that the
operation of wind farms may have on local habitats and the
environment.
The world continues to face a
serious climate challenge, and the UK is taking an active role as a
global leader in greenhouse gas emissions reduction. The Company
supports the UK Government's commitment to achieve Net Zero by 2050
through acquiring operational wind farms and thereby allowing
developers and utilities to recycle their capital into further
renewable energy projects, and by demonstrating the attractive long
term returns in the industry through our prudent management of wind
farms, thereby reducing the cost of capital.
The Group is committed to
protecting the local environment around its wind farms, recognising
the potential impact that wind farms can have on local terrestrial
and aquatic wildlife and landscape.
As such, the Group seeks to
protect the local environment around its wind farms by using robust
environmental management systems. These include policies, periodic
risk assessments, monitoring and regular reporting to the Board and
the boards of each of the wind farm companies. Through these
measures, the Group also ensures compliance with all applicable
laws, regulations and planning permissions as administered by the
Environment Agency, Health Protection Agency, local authorities,
Ofgem, UREGNI or any other relevant regulatory body, including the
data reporting obligations under Renewable Obligation Order
2009.
The Group's core activities
include:
· maintaining management systems to evaluate the potential
risks and impacts of its activities and avoiding or mitigating
environmental impacts on biodiversity, air quality, noise and waste
management where relevant;
· running habitat management plans at its wind
farms;
· undertaking additional environmental impact assessments or
undergoing regular monitoring as required;
· seeking to work with partners who uphold good industry
standards - from operational managers whose management systems
comply with the requirements of ISO 14001:2015 (environmental
management systems) to the material contractors used;
and
· reporting regularly to the Board and the boards of each of
the wind farm companies.
The Company also recognises the
importance of a circular economy in achieving Net Zero targets and
in reducing the environmental impact associated with renewable
energy generation. After setting up a grant-making programme to
fund and support academic research and non-profit projects last
year, the first 2 projects are underway. The 'Added-value Coatings'
research project, led by The University of Edinburgh, aims to turn
decommissioned wind turbine blade materials into powders that can
be used in surface coatings to protect engineering and structural
components from corrosion. The second project is led by Imperial
College, London and aims to develop an end-of-life decision-making
tool to predict how much damage a wind turbine blade has
accumulated in its lifetime. The tool aims to support the industry
in making informed and sustainable decisions about the optimal
end-of-life route for turbine blades.
CASE STUDY
Seal rescue and rehabilitation in Caithness
Caithness Seal Rehab and Rescue
was set up to protect, rescue, treat and release Common, Harbour
and Grey seals along the Caithness coastline. A barn near the
harbour in Brough has been repurposed to establish a seal hospital
and can house up to four seals in purpose built pens, a nursery
area that can accommodate a further two seal pups, and three mobile
pens. Seals are picked up, checked by vets, fed and rehabilitated
until they are healthy and at a suitable weight to be released.
Local volunteers help to run the centre and provide local
educational talks about seals.
During the year, Stroupster
contributed £15,000 to a project to improve facilities within the
barn such as: a new insulated food preparation room with increased
hygiene standards; a small laboratory station; and the creation of
four new large seal pens with concrete floors, insulation, tiling
and drainage. The project facilitates better working conditions for
the volunteers at the centre, better storage of equipment, and an
opportunity to accommodate more visitors to the sanctuary to enable
it to become a popular tourist attraction. The funding of such
projects remains a key aspect of the Company's approach to
community engagement and the environment.
Social
Supporting worker safety and
fair employment on our sites
Worker safety is a top priority
for the Group. The Group also recognises the need for people to be
paid fairly for the work they do and to have appropriate working
conditions. In prioritising these elements, it supports the local
communities in which its wind farms operate, ensuring the long term
viability of its operations.
The Group achieves this through a
range of activities, including:
· complying with all applicable laws relating to employment,
occupational health and safety, human rights, prevention of human
trafficking and modern slavery, public safety and security and
community matters, including the Wind Turbine Safety
Rules;
· implementing health and safety best practices through wind
farm specific health and safety policies, project management,
contractual arrangements, staff training and stakeholder
education;
· assessing and monitoring health and safety practices through
wind farm specific risk identification and prevention activities;
and
· reporting on key health and safety data regularly, with
escalation and rapid response procedures in place in case of
emergency.
During the year, these activities
included:
· 530
regular safety checks carried out by the operations and maintenance
service providers at all wind farms;
· safety walks by the Investment Manager's team at 43 wind
farms;
· independent health and safety audits by accredited
professionals at 14 wind farms and 16 O&M partners;
and
· HV
audits at 10 wind farms.
The Group's focus on prevention
arises out of a culture of transparent reporting, collaboration,
and best practice. Identifying both hazards and analysing the
causes of incidents is a key risk mitigant.
As a member of Renewable UK, the
UK's leading wind energy trade association, the Company is keen to
work with other stakeholders to develop the industry further
including on health and safety. In addition, the Investment Manager is an active member of SafetyOn, the
UK's leading health and safety focused organisation for the onshore
wind industry. With the increase in offshore wind capacity in the
Company's portfolio, the Investment Manager also became a member of
G+, to help ensure industry best practice for offshore wind
assets.
Supporting the communities
around our wind farms
It is important that the wind
farms are truly part of the community. The Group's approach aids
long term support by local communities for wind farms in the UK,
which ultimately enables the continued growth of the
industry.
The Group cares about the
communities around its wind farms and engages with local
communities to ensure respect for land and access rights and that
its wind farms are managed in accordance with planning
permissions.
The Group holds regular dialogue
with community funds and provides financial support to local groups
through community benefit schemes that fund local
projects.
These funds help deliver a range
of services, from improving local amenities and infrastructure to
aiding educational projects for local schools.
In 2023, the Group provided £4.4
million to community funds.
Diversity
The Board has a policy to base
appointments on merit and against objective criteria, with due
regard for the benefits of diversity, including both gender and
ethnic diversity. Its objective is to attract and maintain a Board
that, as a whole, comprises an appropriate balance of skills and
experience.
The Board consists of individuals
from relevant and complementary backgrounds offering experience in
the investment management of listed funds, as well as in the energy
sector from both a public policy and a commercial perspective. As
at the date of this report, the Board comprised 3 men and 2 women,
all non-executive Directors who are considered to be independent of
the Investment Manager and free from any business or other
relationship that could materially interfere with the exercise of
their independent judgement. Currently, the Chairman and Audit
Committee Chairman positions are both held by women who represent
40 per cent of Directors on the Board. After the Company's AGM on
24 April 2024, the Board will comprise of 3 women and 2
men.
The Board is cognisant that it
does not currently have ethnic minority representation, contrary to
the FCA diversity guidelines. The size of the Board is relatively
small in comparison to the wider FTSE 250 and FTSE 100 constituents
and therefore provides a greater challenge in complying with
diversity guidelines. In the recruitment processes conducted during
the year, enhancing the Board's ethnic diversity was a key focus.
Whilst the Board has not become more ethnically diverse as a result
of the recruitment in 2023, this will continue to be an important
objective during future succession planning, whilst ensuring an
appropriate balance of skills and experience in the
Board.
The Board recognises the
importance of an inclusive and diverse Board in facilitating a
collaborative culture and enhancing the delivery of the Company's
strategic objectives.
In accordance with Listing Rule
9.8.6R(10), as at the date of this report and as described above,
the composition of the Board is as follows:
|
Number
of Board members in scope
|
Percentage of the Board
|
Number
of senior positions on the Board (CEO, CFO,
SID and
Chair) 1
|
Men
|
3
|
60%
|
1
|
Women
|
2
|
40%
|
2
|
Not specified/prefer not to
say
|
-
|
-
|
-
|
1 The positions of CEO and CFO are not applicable to the
Company as an externally managed investment fund. Senior Board
positions will continue to be reviewed.
|
Number
of Board members in scope
|
Percentage of the Board
|
Number
of senior positions on the Board (CEO, CFO,
SID and Chair)1
|
White British or other White
(including minority-white groups)
|
5
|
100%
|
3
|
Mixed/Multiple Ethnic
Groups
|
-
|
-
|
-
|
Asian/Asian British
|
-
|
-
|
-
|
Black/African/Caribbean/
Black British
|
-
|
-
|
-
|
Other ethnic group, including
Arab
|
-
|
-
|
-
|
Not specified/prefer not to
say
|
-
|
-
|
-
|
1 The positions of CEO and CFO are not applicable to the
Company as an externally managed investment fund. Senior Board
positions will continue to be reviewed.
The above information is based on
voluntary self-declaration from the Directors.
The Investment Manager operates an
equal opportunities policy and its partners and employees comprise
92 men and 35 women.
CASE STUDY
Errogie Church - Driving positive social impact in the local
community
The Group is committed to
investing in projects that benefit communities in the long term:
the Errogie Church project is a great example of this approach.
Co-funded by Corriegarth, the Stratherrick & Foyers Community
Trust (SFCT) looks to encourage positive community development near
the wind farm. Specifically, the project aims to repurpose Errogie
Church into a community hub.
Following the acquisition of
Errogie Church 4 years ago, the project followed an inclusive
approach to decision making with extensive consultations being held
with local residents to gauge the community's needs and support for
a communal space. This fostered a sense of ownership and pride in
local heritage. Over the lifetime of the project, the building will
be restored, local talent showcased and community cohesion
enhanced. Additionally, opportunities for economic growth have
emerged with craft markets, exhibitions, and other activities which
have supported local businesses taking place.
In 2023, we celebrated the
completion of the first phase of the project, as extensive works
have been completed to ensure that the building was fit for basic
use. The Errogie Doors Open Day and the large turnout are evidence
of the consensus around the initiative and testimony of the
positive impact it will have in the future.
Through ongoing partnerships and
community-led initiatives, the project is on track to leave a
lasting legacy of positive social impact for generations to
come.
Governance
Detailed disclosure on the
Company's governance structure and activities can be found in the
Corporate Governance Report and in the TCFD Governance
section.
Task Force on Climate Related
Financial Disclosures (TCFD)
The Company strives to maintain
the highest standards of corporate governance and effective risk
identification and management at both Group and wind farm level.
The Company supports the recommendations of the TCFD and refers to
them for guidance on addressing climate related risks and
opportunities across the Group and enhancing our
disclosure.
These disclosures are categorised
between the 4 thematic areas as recommended by the TCFD.
Governance
Board oversight and the
role of the Investment Manager
The Board is responsible for the
determination of the Company's Investment Objective and Investment
Policy. It also oversees the management of the Company and its
investments, including ESG and climate related risks and
opportunities. The Board also delegates the day-to-day management
of the business, including management of ESG matters, to the
Investment Manager.
The Audit Committee also considers
the Company's climate related disclosures in its Annual Report and
Financial Statements.
As discussed in the Corporate
Governance Report, the Board and the Investment Manager meet
regularly and discuss risk management. Climate related risks are
covered during these discussions, as they naturally arise from the
Group's underlying investments and the Company's significant role
in the decarbonisation of the UK economy. A formal risk matrix is
maintained by the Investment Manager and reviewed and approved by
the Board on an annual basis.
In addition, the Investment
Manager has its own ESG Committee that meets regularly to discuss
ESG and climate related risks relating to the Group and other funds
it manages. This committee has implemented an ESG Policy that looks
to establish best practice in climate related risk management,
reporting and transparency. Stephen Lilley is on this ESG Committee
and therefore remains well informed and involved with ESG and
climate related discussions, which may impact the Company.
Representatives from the Investment Manager also sit on all of the
boards of the wind farm companies, which meet quarterly and discuss
ESG and climate related risk management.
Strategy
The Board understands that climate
change poses risks and opportunities to the Company.
As the leading listed renewable
infrastructure fund, invested in UK wind farms, the Company plays a
significant role in the UK renewables industry. Overall, the Board
believes that the decarbonisation of the UK economy will continue
to present a significant investment opportunity and the size of the
Company's growth will be related to the success of the sector and
the engagement of its stakeholders. The Company is committed to its
strategy and Investment Policy of investing in operating wind
assets to benefit from this opportunity. The Company also
recognises, however, that there are short term and medium to long
term transition risks that could impact its future financial
performance. The Company seeks to manage these risks to mitigate
potential impact.
The tables below summarise the
principal opportunities and risks identified by the Company and
details, where relevant, how it manages the risks or
opportunities.
Opportunities
Category
|
Climate issue
|
Opportunities
|
Company consideration
|
Transition
|
Increased demand for renewable
energy generation
|
Increasing ambition of corporate
and Government Net Zero targets could lead to a material increase
in the procurement of renewable energy by businesses and consumers.
Moreover, companies are increasingly required to demonstrate their
commitment to reducing their carbon footprints, which may increase
the demand for corporate PPAs.
|
The Board considers that the
decarbonisation of the UK economy will continue to present a
significant investment opportunity in the short and medium term
(0-15 years) and the size of the Company's growth will be related
to the success of the sector and the engagement of its
stakeholders.
|
Transition
|
Increased investor interest in
renewable energy funds
|
Institutional investors are
increasingly expected by regulators and clients to disclose their
strategies to mitigate climate change. This includes the setting of
Net Zero targets and investing in assets that contribute to climate
change mitigation such as renewable energy assets to meet these
targets. Increased investor interest in renewable energy funds
could lead to a lower cost of capital and enable greater capital
raises to support the long term growth and investment activities of
the Company.
|
The Board believes that providing
investors with a vehicle that supports their Net Zero ambitions is
an opportunity to the Company in the short term (<5 years). The
Company continues to evolve its engagement with the market and its
disclosures to better explain the positive role that wind energy
generation plays in the energy transition.
|
Risks
Category
|
Climate issue
|
Risk
|
Company consideration
|
Transition
|
Retrospective changes to policies
providing financial support to renewable energy
|
There is a risk that the UK
Government retrospectively changes its financial support for the
renewable energy sector such as ROCs, network charges and carbon
price floors. Retrospective changes to such financial support could
decrease portfolio revenues and increase operating costs making the
technology less commercially viable.
|
The Board considers the likelihood
of any retrospective policy change to be low in the short term
(less than 5 years). To manage any such risk, the Board and
Investment Manager keep themselves abreast of developments in
international support for renewable energy as well as their impact
and, where possible, respond to changes when and if they happen.
The Investment Manager is also actively engaged in discussion with
both industry and the Government on the ongoing REMA
consultation.
|
Transition
|
Increased renewable generation
capacity reduces power prices
|
It is possible that the deployment
of new renewable energy generation capacity, required to meet
future UK and global emission reduction targets, could reduce the
power prices captured by the Group's portfolio investments
resulting in reduced revenues.
|
The Board considers there to be
limited potential impact on the Company from fluctuating power
prices due to the nature of the portfolio's cashflows, which are
both fixed and merchant. The Group's dividend policy has also been
designed to withstand significant short term variability in
generation or power price capture.
|
Transition
|
Increased reputational risks
associated with climate-related disclosures and reporting
obligations
|
There is also an increase in
reputational risk should incorrect or unclear statements be made in
climate related disclosures that could result in investor
dissatisfaction, fines linked to greenwashing or broader
reputational damage to the Company and the Investment
Manager.
|
The Company considers the
potential impact of this risk to the Company to be low in the short
and medium term. To manage this risk, the Investment Manager
engages specialist consultants to measure and report on the
Company's carbon emissions. The Investment Manager also uses
internal processes to monitor emerging climate-related disclosure
regulations and disclosures that are made by the Company are
reviewed by the Audit Committee as well as the Investment Manager's
compliance and ESG teams.
|
Physical
|
Increase in extreme weather
events
|
The UK has witnessed an increase
in extreme weather events including flooding, heatwaves and storms
including high wind speeds in recent years. Extreme weather events
have the potential to disrupt portfolio operations impacting cash
flows, and to damage assets resulting in increased operating costs
or insurance premiums.
|
The Company considers the impact
of such risks to its portfolio to be low. The current portfolio of
wind farms is designed to withstand extreme weather conditions and
to take advantage of weather systems such as increased wind speeds.
In addition, wind turbines are designed to shut down in the event
that wind speeds exceed very high speeds to protect them from
damage.
The Investment Manager does not
consider an increase in flooding to pose significant issues to the
Company's portfolio as onshore wind turbines are not typically
located in areas prone to flooding. To mitigate risk of damage from
extreme weather events, the Company procures property damage and
business interruption insurance should operations be disrupted, or
assets be damaged.
|
Climate
scenarios
The Company recognises the
requirement under the TCFD for considering the resilience of its
strategy under different climate related scenarios, including a 2°C
or lower increase scenario. The Board has also considered the
potential impact of a high transition risk scenario on its strategy
and sets out high level conclusions below. The scenarios were
developed by a market leading consultant.
To meet the FCA's product level
TCFD disclosure requirements, the Company will publish a separate
report on its website before 30 June 2024. This will include
information relating to an assessment of the potential impacts of
specific transition scenarios as listed in the FCA
Handbook.
High transition risk scenario
Transition risks are those
associated with the pace and extent at which society adapts and
mitigates the risk of climate change. Transition risks can occur
when moving to a greener economy has adverse impacts on certain
sectors, due to policy, legal, market or technological shifts. The
Board and the Investment Manager continue to believe that the key
factor that could impact the Company in the transition to a lower
carbon economy is the variability of long term prices for wholesale
electricity. In a lower carbon economy, where considerable
build-out of renewable generation capacity will be required, there
is a risk that the power price received by the Group's portfolio
could be negatively impacted, depending on how successful the
Government is in implementing its plan and depending on future
electricity market design including the ongoing REMA
consultation.
The Investment Manager has
assessed the potential impact of a high transition risk scenario
using a third party Net Zero model built by leading power market
experts. The model sets out how electricity prices and the market
may develop in line with meeting the legislated target of Net Zero
emissions by 2050, including current and future policy
implementation to achieve carbon neutrality, technological
developments and commodity price forecasts for a global
outlook.
In this high transition risk
scenario where global temperature increases are limited to only
1.5oC to 2oC (most typically associated with Net Zero), it is assumed that
the UK Government is successful in implementing its plan in its
entirety and the REMA consultation does not conclude in
significantly different market design. In this scenario, the long
term power price is lower than the base case used to calculate the
Company's NAV. The lower long term power price, provided by a
leading market consultant, reflects the wider deployment of low
marginal cost renewable generation capacity, partially offset by
the expected deployment of electrolysers as part of a growing
hydrogen economy, increased electrification of transport and heat
and the build-out of data centres. Modelling the lower long term
power price would equate to approximately a 17 pence reduction in
NAV per share.
The base case long term power
price assumes significant renewable generation and other measures
to reduce carbon emissions and represents the independent
consultant's best estimate of likely outturn. The high
transition risk scenario assumes further measures. The precise
effect on power price of any measures (in the base case and in the
high transition risk scenario) is highly uncertain and is highly
dependent on future electricity market design. The high
transition risk scenario also assumes no other offsetting
factors.
High physical risk scenario
Physical risks may consist of
acute physical risk, which can refer to event driven perils
including increased severity and frequency of extreme weather
events, and chronic physical risk, which can refer to longer term
shifts in climate patterns that cause sea level rises, heat waves,
droughts and desertification.
The Board and the Investment
Manager continue to believe that a scenario where global
temperature increases are significantly higher than 2oC
(a high physical risk scenario) would not lead to any significant
physical risk to the Group's wind farms, which are designed to
operate in extreme weather conditions and are typically not located
in areas prone to flooding.
The Board recognises that climate
change could lead to more extreme weather events including extreme
temperature changes, increased electrical storms, increased
rainfall levels and changes in wind speed and direction. The Board
does not consider these potential changes to be a material risk to
the Group because the wind farms are designed to operate in extreme
weather conditions, are typically not located in areas prone to
flooding, and insurance and business continuity plans are in place
to manage such an event, should it occur.
In the medium to long term, the
Board and the Investment Manager recognise that there is a risk
that weather systems may change as a result of higher temperature
change scenarios, but do not believe it is possible, at this time,
to determine whether this would impact the Group positively or
negatively. The Board and the Investment Manager will continue to
investigate options for physical climate risk models and tools to
support further assessment of the potential physical risks
associated with the Group and wind farm portfolio.
In 2022, the Investment Manager,
with the assistance of an independent consultant, completed a risk
modelling exercise for a representative sample of the wind farm
SPVs reflecting climate related hazard exposure over a future
period of time. The outcomes of the risk modelling exercise were
reviewed by the Investment Manager but not considered a credible
basis from which to assess forward looking climate risks. The
Investment Manager will continue to explore appropriate climate
physical risk analysis tools.
Risk
Management
As a full scope UK AIFM, the
Investment Manager has established a Risk Management Committee that
meets on a quarterly basis to discuss, amongst other matters, the
risk framework of the Group and investee companies including
processes for identifying, assessing and managing climate related
risks. The Company's risk matrix, reviewed and approved by the
Board, includes climate related risks.
All risks identified, including
climate related risks are assessed based on likelihood, impact and
mitigation. The risk assessment is carried out on a qualitative
basis by the Investment Manager, although consideration is given to
how quantitative measures can be used to support climate related
risk assessment. The risk matrix is then presented to the Board for
discussion and approval on an annual basis.
As mentioned above, climate
related risks can be classified into two broad categories: (i)
risks associated with the transition to a decarbonised economy; and
(ii) risks associated with the physical impacts of climate change.
The table below aims to summarise the most material transition and
physical risks associated with climate change and the extent to
which the Board considers the impact high or low, based on exposure
and mitigation actions.
To ensure strong performance and
risk mitigation, the Group has specific oversight on environmental
and social issues including climate change. It reinforces this
oversight with a range of activities, including:
· appointing at least one senior representative from the
Investment Manager to the boards of the wind farm companies to
ensure monitoring and influence of both financial and ESG
performance, including climate related risks and opportunities;
and
· carrying out due diligence during the acquisition of new wind
farms in accordance with the Investment Manager's established
procedures and ESG Policy, which requires an analysis of climate
issues.
The Investment Manager's
Investment Committee comprises experienced senior managers. Whilst
making investment decisions, due consideration is given to climate
related risks as well as to opportunities identified during due
diligence.
Metrics and
Targets
The world continues to face a
serious climate challenge, and the UK is taking an active role as a
global leader in greenhouse gas emissions reduction.
The Government's Net Zero strategy
includes:
• complete decarbonisation of the
electricity sector by 2035;
• 50GW of offshore wind capacity
by 2030;
• 70GW of solar PV capacity by
2035;
• 10GW of low carbon hydrogen
production capacity by 2030;
• 24GW of nuclear capacity by
2050;
• capture and store 20-30
MtCO2 per year by 2030; and
• electrification of
transportation (thus increasing demand for electricity).
The Group supports this strategy
by allowing developers and utilities to recycle their capital, and
by demonstrating the attractive long term returns in the industry
through its prudent management of wind farms, thereby reducing the
cost of capital and increasing the potential for further
construction of renewable energy capacity and the decarbonisation
of the economy.
Renewable energy generators avoid
CO2 emissions on a net basis at a rate of approximately
0.4t CO2 per MWh. Given the size of the Group's
investment portfolio on 31 December 2023, the portfolio's
contribution to reducing CO2 emissions is approximately
2.5 million tonnes per annum. The portfolio is also generating
sufficient electricity to power 2.3 million homes per annum, at 2.7
MWh per home.
The portfolio's Scope 1, Scope 2
and Scope 3 greenhouse gas emissions are disclosed
below.
|
Year ended
31 December
2023
|
Year ended
31 December
2022
|
Disclosure
|
|
|
|
Scope 1 - direct emissions (tonnes
CO2)
|
13
|
149
|
Scope 2 - indirect emissions,
location based (tonnes CO2)
|
2,162
|
1,731
|
Scope 3 - indirect emissions
(tonnes CO2) (1)
|
261,138
|
136,161
|
Total Scope 1, 2 and 3 emissions (tonnes
CO2)
|
263,313
|
138,041
|
Scope 2 - indirect emissions,
market based (tonnes CO2)
|
1,485
|
1,422
|
Carbon Footprint - scope 1,2 and 3
emissions normalised by value of the Company (tonnes
CO2e/£ million invested) (2)
|
42.9
|
24.6
|
Weighted Average Carbon Intensity
(revenue) - weighted exposure to investee scope 1,2 & 3
emissions per revenue generation (tonnes CO2e/£ million)
(2)
|
1,193.1
|
535.1
|
Carbon Intensity - Scope 1,2 and 3
emissions per MWh renewable generation (tonnes CO2e/MWh
renewable energy generation) (2)
|
0.00038
|
0.00035
|
(1) Scope 3 emissions are the result of activities from assets
not owned or controlled by the Group, but that the Group indirectly
impacts in its value chain. Scope 3 emissions include all sources
not within the Group's Scope 1 and 2 boundary and include, inter
alia, emissions arising from the construction of each wind farm
acquired in the year, including those emissions associated with the
manufacturing and transport of all equipment and material, before
the wind farm was commissioned, as well as the expected spare part
provision throughout its lifetime.
(2) Calculations for metrics can be found in the EU SFDR
disclosures.
It is the Investment Manager's
view that Scope 3 emissions are less meaningful given the Company's
strategy of investing in UK wind farms for the duration of their
asset lives. Furthermore, recognising a wind farm's construction
and whole life operating emissions in the year the Group acquires
it is potentially misleading as it both overestimates carbon
emissions in the year of acquisition and underestimates carbon
emissions generated in every other year.
The carbon payback of a wind
turbine, how quickly it offsets the emissions generated during its
manufacture, transportation and on-site construction, is an
indicator of its contribution to accelerating energy transition. At
current rates, carbon payback is typically around 5-6 months for
onshore and 8 months for offshore wind farms, which is
approximately 3 per cent of the assumed asset life. Carbon
footprint indicators are measured in line with the industry
standard Greenhouse Gas Protocol based on an equity control
approach, meaning emissions from the Group's operations are
weighted according to the Group's proportionate ownership of its
SPV investments.
Targets
The Company has not set a carbon
emissions reduction target. It commits to continuing to invest
solely in operating wind power generation assets and to continue
growing its renewable energy generation and generating capacity to
support the transition to a Net Zero economy. The Investment
Manager has been a signatory to the Net Zero Asset Managers
initiative ('NZAM') since 2021. NZAM is an international group of
asset managers committed to supporting the goal of net zero
greenhouse gas emissions by 2050 or sooner. In 2022, the Investment
Manager established a Net Zero Policy, formalising a commitment to
cut the intensity of its Scope 1 and 2 emissions by 50 per cent by
2030. With support from the Investment Manager, the Company will
work to develop a plan in line with evolving UK requirements in
this regard, including how it intends to reduce its carbon
footprint to support the Investment Manager's commitment whilst
continuing to grow its portfolio and avoid carbon emissions as a
result of its generation activities.
UK Sustainability Disclosure Requirements
(SDR)
In 2023, the FCA published its
final rules regarding Sustainability Disclosure Requirements (SDR).
The Investment Manager has a working group in place, reporting to
its ESG Committee, to understand and implement requirements of the
SDR for funds in scope. The Company, with support from the
Investment Manager, will consider the rules and work to meet any
obligations of the SDR in the coming financial year.
EU Sustainable Financial Disclosure Regulation
(SFDR)
The Company became Article 9
qualified under EU SFDR in 2022 and makes sustainability related
disclosures in the financial services sector. Through its
Investment Policy of investing in UK wind farms predominately with
a capacity over 10MW, the Company contributes to the environmental
objective of climate change mitigation that helps to facilitate the
transition to a low carbon economy.
ESG
Report
The Company publishes an annual standalone ESG
Report. This provides further information on how the Group
approaches responsible investment and ESG matters in addition to
further case studies and ESG performance. The Company's ESG Report
for 2023 will be published on its website in April 2024.
Detailed Annex V disclosures and the
Company's principal adverse impacts statement can be found in
the EU SFDR Disclosures
below.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Board of Directors
As at the date of this report, the
Board comprises 5 individuals from relevant and complementary
backgrounds.
During the year and with effect
from the conclusion of the 2023 AGM on 28 April 2023, Shonaid
Jemmett-Page retired from the Board and Lucinda Riches C.B.E. was
appointed as Chairman with Nick Winser C.B.E. succeeding her as
Senior Independent Director.
The Directors are of the opinion
that the Board as a whole comprises an appropriate balance of
skills, experience and diversity. The Directors of the Company who
were in office during the year and up to the date of signing the
financial statements are listed below.
Lucinda Riches C.B.E., Chairman of the Board (appointed 1 May
2019)
Lucinda Riches C.B.E. (Chairman),
aged 62, brings significant capital markets experience, having
advised public companies on strategy, fundraising and investor
relations for many years. She also brings extensive experience as a
public company non-executive director across a variety of
businesses, including two FTSE 100 companies.
Lucinda worked at UBS and its
predecessor firms for 21 years until 2007 where she was a managing
director, global head of Equity Capital Markets and a member of the
board of the investment bank. She is Chairman of Peel Hunt Limited
and a non-executive Director of Ashtead Group plc. Previously she
was a non-executive Director of UK Financial Investments, a
non-executive Director of The Diverse Income Trust plc, Senior
Independent Director of The British Standards Institution and until
2021 she was a non-executive Director of CRH plc and Senior
Independent Director of ICG Enterprise Trust plc. She was awarded a
C.B.E. in 2017 for her services to financial services, British
industry and to charity.
Caoimhe Giblin, Chairman of the Audit Committee (appointed 1
September 2019)
Caoimhe Giblin (Director and Audit
Committee Chairman), aged 47, has extensive experience in the
electricity industry sector and is currently Commercial Director at
ElectroRoute, an energy trading company which is part of the
Mitsubishi Corporation group of companies.
Prior to that, Caoimhe was
Director of Finance for SSE Renewables where she had responsibility
for the financial activities of SSE's significant on and offshore
wind development and construction portfolio. Prior to this, Caoimhe
held various roles in the Corporate Finance department at
Airtricity where she gained significant experience of corporate
acquisitions and disposals, equity fundraising, project finance,
debt financing and managed the company's corporate valuation
process. Caoimhe was appointed Head of Corporate Finance of SSE
Renewables in 2008 following the acquisition of Airtricity by SSE
plc.
Caoimhe qualified as a Chartered
Accountant with KPMG and spent the early part of her career
focusing on providing corporate finance due diligence, internal
audit and risk management services in both Dublin and New Zealand.
Caoimhe is a Fellow of Chartered Accountants of Ireland and has a
BA in Accounting & Finance and an MBS in Accounting from Dublin
City University. Caoimhe also holds a Diploma in Company Direction
from the Institute of Directors, of which she is a member. In 2018,
Caoimhe was elected to sit on the Wind Energy Ireland
Council.
Nick Winser C.B.E. Senior Independent Director (appointed 1
January 2022)
Nick Winser C.B.E. (Senior
Independent Director), aged 63, has a 30 year career in the energy
sector which included being CEO of National Grid across UK and
Europe, President of the European Network of Transmission System
Operators for Electricity and CIGRE UK Chairman. Nick has been the
Chairman of Energy Systems Catapult since 2015 and was appointed
Chairman of the Advisory Board for the Energy Revolution ISCF
programme in 2018. He was appointed Electricity Network
Commissioner by the Government in summer 2022 and is Energy
Commissioner at the National Infrastructure Commission.
Nick is a Fellow of the Institute
of Engineering and Technology, serving as its President in 2017/18
and is a Fellow of the Royal Academy of Engineering. Nick is also
former Chairman of the MS Society and a former member of the Board
of the Kier Group.
Martin McAdam (appointed 1 March 2015)
Martin McAdam (Director), aged 62,
is an accomplished executive with significant experience in the
energy and renewables sector. He was formerly Chief Executive
Officer of Aquamarine Power. Prior to that, Martin was President
and Chief Executive Officer of the US subsidiary of Airtricity, a
role in which he constructed over 400MW of wind farm
capacity.
Martin spent his early career at
ESB, the Irish utility, involved in a number of activities
including power station construction and generation planning. After
a number of years in information services, he returned to the power
industry and joined Airtricity, a significant developer and
constructor of wind farms throughout the UK and Ireland, managing
construction of new wind farms. Martin's role expanded into
operations and ultimately to take responsibility for the growing US
business. He led the integration of the Airtricity generation
business unit into the SSE Renewables Division after its
sale.
Martin is a Chartered Engineer and
a Fellow of Engineers Ireland and a Fellow of the Royal Society for
the Encouragement of Arts, Manufactures and
Commerce.
Jim Smith (appointed 1 May 2023)
Jim Smith (Director), age 61, is
the former Managing Director of SSE Renewables with 34 years
experience within the electricity industry at SSE. Since retiring
from full time employment in 2022 he has transitioned into a number
of part time roles and is Chair of Noriker Power Ltd, Chair of
Inverness & Cromarty Firth Green Freeport Ltd, a non-executive
Director of Seabank Power Ltd and a renewable energy ambassador to
Cowi UK Ltd.
Jim's early career in SSE was in
development, construction and operations in both hydro and gas
fired generation where he became Station Manager at Peterhead Power
Station. He then went on to be Director of Major Projects
responsible for the group's major capital infrastructure
investments in renewables, thermal generation, gas storage and
transmission.
Following SSE's acquisition of
Airtricity in 2008, he led offshore wind development and
construction before taking responsibility for all wind development
and construction. He also spent time as the Managing Director of
the groups energy trading business followed by Managing Director of
Generation Operations. Following a restructuring in 2018 Jim took
up his final position as Managing Director of SSE Renewables with
responsibility for the 4000MW operational fleet and the development
pipeline, taking over 5GW (gross) of projects through financial
close prior to his retirement.
Jim is a Mechanical Engineer,
trained mediator and a mentor for the MCR Pathways
charity.
Shonaid Jemmett-Page (appointed 5 December 2012 and retired
28 April 2023)
Shonaid Jemmett-Page, (Chairman)
FCA (Director), aged 62, is an experienced non-executive director
in the energy and financial sectors. Shonaid spent the first 20
years of her career at KPMG in London and Tokyo, rising to the
position of Partner, Financial Services. In 2001, she moved to
Unilever, where she was Senior Vice President, Finance and
Information for Asia, based in Singapore, before returning to the
UK as Finance Director for Unilever's global non-food business. In
2009, Shonaid joined CDC Group as Chief Operating Officer, a
position she held until 2012.
Since then, Shonaid has focused on
non-executive appointments and is currently Chairman of Cordiant
Digital Infrastructure Limited as well as Chairman of its
nominations and management engagement committees, Chairman of
ClearBank Ltd and a member of its nomination and risk committees,
non-executive Director of Aviva plc as well as Chairman of its
customer and sustainability committee and a member of its
nomination and governance, risk and audit committees, and
non-executive Director of QinetiQ Group plc and Chairman of its
audit committee and a member of its risk and security, remuneration
and nomination committees. Until April 2018 she was non-executive
Director of GKN plc where she served as Chairman of its audit
committee and was a member of its remuneration and nominations
committees. Until November 2019 she was non-executive Director of
MS Amlin plc where she served as Chairman and was also the Chairman
of its remuneration and nominations committees and a member of its
risk and solvency committee. Until March 2020 she served as
non-executive Chairman and then non-executive Director of MS Amlin
Insurance SE (a Belgian subsidiary of MS Amlin plc), and until May
2022 she was a non-executive Director of Caledonia Investments plc
where she served as Chairman of its remuneration committee and a
member of its governance, nomination and audit committees. She is
also the examiner of the UK branch of an Indian children's cancer
charity.
Abigail Rotheroe (with effect from 1 March
2024)
Abigail is a CFA Charterholder and brings over 20
years' experience in the investment industry and knowledge of fund
governance and sustainable investing. She is the former Investment
Director of Snowball Impact Management, responsible for developing
the firm's approach to impact investment and measurement. She has
held positions at Schroder Capital Management, HSBC Asset
Management and was a Director of Columbia Threadneedle Investments,
managing retail and pension fund assets in Asia and emerging
markets.
She is currently a non-executive director of
HydrogenOne Capital Growth plc, Baillie Gifford Shin Nippon plc and
Templeton Emerging Markets Investment Trust plc.
Other UK Listed Public Company
Directorships
In addition to their directorships
of the Company, the below Directors currently hold the following UK
listed public company directorships:
Lucinda Riches C.B.E.
|
|
Ashtead Group plc
|
|
Peel Hunt Limited
|
|
With the exception of Martin
McAdam, the Directors have all offered themselves for re-election
and resolutions concerning this will be proposed at the 2024
AGM.
Conflicts of Interest
The Directors have declared any
conflicts or potential conflicts of interest to the Board which has
the authority to approve such situations. The Company Secretary
maintains the Register of Directors' Conflicts of Interests which
is reviewed bi-annually by the Board and when changes are notified.
The Directors advise the Company Secretary and the Board as soon as
they become aware of any conflicts of interest. Directors who have
conflicts of interest do not take part in discussions which relate
to any of their conflicts.
In accordance with Provision 9 of
the AIC Code, the appointment of any
Director has included consideration of the time they have available
to the role. Any additional external appointments will be submitted
by Directors to the Board for approval before the appointment is
accepted.
The Directors present their Annual
Report, together with the consolidated financial statements of
Greencoat UK Wind PLC for the year to 31 December 2023. The
Corporate Governance Report forms part of this report.
Details of the Directors who held
office during the year and as at the date of this report are given
above.
Capital Structure
The Company has one class of
ordinary shares which carry no rights to fixed income. Shareholders
are entitled to all dividends paid by the Company and, on a winding
up, provided the Company has satisfied all of its liabilities, the
shareholders are entitled to all of the surplus assets of the
Company.
Shareholders will be entitled to
attend and vote at all general meetings of the Company and, on a
poll, to one vote for each ordinary share held.
Authority to Purchase Own Shares
The current authority of the
Company to make market purchases of up to 14.99 per cent of its
issued share capital expires at the conclusion of the 2024 AGM.
Special resolution 15 will be proposed at the forthcoming AGM
seeking renewal of such authority until the next AGM (or 30 June
2025, whichever is earlier). The price paid for the shares will not
be less than the nominal value or more than the maximum amount
permitted to be paid in accordance with the rules of the UK Listing
Authority in force at the date of purchase. This power will be
exercised only if, in the opinion of the Directors, a repurchase
would be in the best interests of shareholders as a whole. Any
shares repurchased under this authority will either be cancelled or
held in treasury at the discretion of the Board for future resale
in appropriate market conditions.
The Directors believe that the
renewal of the Company's authority to purchase shares, as detailed
above, is in the best interests of shareholders as a whole and
therefore recommend shareholders to vote in favour of special
resolution 15.
The Directors also recommend
shareholders to vote in favour of resolutions 12, 13 and 14, which
renew their authority to allot equity securities for the purpose of
satisfying the Company's obligations to pay the Equity Element of
the Investment Manager's fee, and also their authority to allot
equity securities for cash either pursuant to the authority
conferred by resolution 12 or by way of a sale of treasury
shares.
Major Interests in Shares
Significant shareholdings as at 15
February 2024 are detailed below.
Shareholder
|
Ordinary shares held
%
|
15 February
2024
|
BlackRock Investment
Management
|
7.32
|
Rathbone Investment
Management
|
5.58
|
Investec Wealth &
Investment
|
4.61
|
Schroder Investment
Management
|
4.58
|
Newton Investment
Management
|
4.16
|
Hargreaves Lansdown Asset
Management
|
3.69
|
Charles Stanley
|
3.02
|
Significant shareholdings as at 31
December 2023 are detailed below.
Shareholder
|
Ordinary shares held
%
|
31 December
2023
|
BlackRock Investment
Management
|
8.07
|
Rathbone Investment
Management
|
5.49
|
Investec Wealth &
Investment
|
4.65
|
Schroder Investment
Management
|
4.65
|
Newton Investment
Management
|
4.38
|
Hargreaves Lansdown Asset
Management
|
3.50
|
Charles Stanley
|
3.02
|
Companies Act 2006 Disclosures
In accordance with Schedule 7 of
the Large and Medium Sized Companies and Groups (Accounts and
Reports) Regulations 2008 the Directors disclose the following
information:
· the
Company's capital structure is detailed in note 15 to the financial
statements and all shareholders have the same voting rights in
respect of the share capital of the Company. There are no
restrictions on voting rights that the Company is aware of, nor any
agreement between holders of securities that result in restrictions
on the transfer of securities or on voting rights;
· there exist no securities carrying special rights with regard
to the control of the Company;
· the
Company does not have an employees' share scheme;
· the
rules concerning the appointment and replacement of Directors are
contained in the Company's Articles of Association and the
Companies Act 2006;
· there exist no agreements to which the Company is party that
may affect its control following a takeover bid;
· there exist no agreements between the Company and its
Directors providing for compensation for loss of office that may
occur because of a takeover bid; and
·
the Directors' responsibilities pursuant to
Section 172 of the Companies Act 2006, as detailed in the Strategic
Report.
Investment Trust
Status
The Company has been approved as
an investment trust under sections 1158 and 1159 of the Corporation
Taxes Act 2010. As an investment trust, the Company is required to
meet relevant eligibility conditions and ongoing requirements. In
particular, the Company must not retain more than 15 per cent of
its eligible investment income. The Company has conducted and
monitored its affairs so as to enable it to comply with these
requirements.
Diversity and Business Review
A business review is detailed in
the Investment Manager's Report and the Group's policy on diversity
is detailed in the Strategic Report.
Directors' Indemnity
Directors' and Officers' liability
insurance cover is in place in respect of the Directors. The
Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors in respect
of costs which they may incur relating to the defence of any
proceedings brought against them arising out of their positions as
Directors, in which they are acquitted or judgement is given in
their favour by the Court.
Except for such indemnity
provisions in the Company's Articles of Association and in the
Directors' letters of appointment, there are no qualifying third
party indemnity provisions in force.
Streamlined Energy Carbon Reporting
As the Group has outsourced
operations to third parties, there are no significant greenhouse
gas emissions to report from the operations of the Group. The Group
qualifies as a low energy user and is therefore exempt from
disclosures on greenhouse gas emissions and energy
consumption.
The underlying assets of the
Group's investee companies are renewable energy generators which
avoid CO2 emissions on a net basis (at a rate of
approximately 0.4t CO2 per MWh and approximately 2.5
million tonnes per annum given the size of the Group's investment
portfolio as at 31 December 2023).
Further details of the portfolio's
Scope 1, Scope 2 and Scope 3 greenhouse gas emissions can be found
in the Strategic Report.
Risks and Risk Management
The Group is exposed to financial
risks such as price risk, interest rate risk, credit risk and
liquidity risk and the management and monitoring of these risks are
detailed in note 18 to the financial statements.
Independent Auditor
The Directors will propose the
reappointment of BDO LLP as the Company's Auditor and resolutions
concerning this and the remuneration of the Company's Auditor will
be proposed at the 2024 AGM.
So far as each of the Directors at
the time that this report was approved are aware:
· there is no relevant audit information of which the Auditor
is unaware; and
· they
have taken all the steps they ought to have taken to make
themselves aware of any audit information and to establish that the
Auditor is aware of that information.
Annual Accounts
The Board is of the opinion that
the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the position, performance, strategy and
business model of the Company.
The Board recommends that the
Annual Report, the Report of the Directors and the Independent
Auditor's Report for the year ended 31 December 2023 are received
and adopted by the shareholders and a resolution concerning this
will be proposed at the 2024 AGM.
Dividend
The Board recommended an interim
dividend of £79.1 million, equivalent to 3.43 pence
per share with respect to the 3 month period ended 31 December
2023, bringing total dividends with respect to the year to
£231.4 million,
equivalent to 10 pence per share as disclosed in note 8 to the
financial statements.
Subsequent Events
Significant subsequent events have
been disclosed in note 21 to the financial statements.
Strategic Report
A review of the business and future
outlook, going concern statement and the principal risks and
uncertainties of the Group have not been included in this report as
they are disclosed in the Strategic Report.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Directors' Remuneration Report
This report has been prepared by
the Directors in accordance with the requirements of the Companies
Act 2006 and the Large and Medium sized Companies and Groups
(Accounts and Reports) Regulations 2008. A resolution to approve
the Directors' Remuneration Report will be proposed at the 2024
AGM. At the AGM on 28 April 2023, shareholders voted 99.92 per cent
in favour to approve the Directors' Remuneration Report for the
year ended 31 December 2022.
The Company's Auditor is required
to give their opinion on the information provided on Directors'
remuneration in this report and this is explained further in its
report to shareholders. The remainder of this report is outside the
scope of the external audit.
Annual Statement from the Chairman of the
Board
The Board, which is profiled
above, consists solely of non-executive Directors and is considered
to be independent. The Board considers at least annually the level
of the Board's fees, in accordance with the AIC Code. During the
year, the basic fee for non-executive Directors increased by
£10,000 per annum to £65,000, the fee for the Senior Independent
Director and the Audit Committee Chairman increased by £5,000 and
£10,000 per annum respectively, and the fee for the Chairman
increased by £25,000 per annum to £110,000, following an internal
evaluation. The Board confirmed that this increase was appropriate
through benchmarking by an external consultant.
Remuneration Policy
As at the date of this report, the
Board comprised 5 Directors, all of whom are non-executive. The
Board does not have a separate Remuneration Committee as, being
wholly comprised of non-executive Directors, the whole Board
considers these matters.
At the AGM on 28 April 2023,
shareholders voted 99.78 per cent in favour to approve the
Company's Remuneration Policy, which is put to a vote by
shareholders every 3 years. The details of the Company's
Remuneration Policy are set out in full below. No changes are
expected for 2024 and this policy will next be put to a vote by
shareholders at the 2026 AGM.
Each Director receives a fixed fee
per annum based on their roles and responsibility within the
Company and the time commitment required. It is not considered
appropriate that Directors' remuneration should be performance
related and none of the Directors are eligible for pension
benefits, share options, long term incentive schemes or other
benefits in respect of their services as non-executive Directors of
the Company.
The Company's Articles of
Association empower the Board to award a discretionary bonus where
any Director has been engaged in exceptional work on a time spent
basis to compensate for the additional time spent over their
expected time commitment.
The Articles of Association
provide that Directors retire and offer themselves for re-election
at the first AGM after their appointment and at least every 3 years
thereafter. However, in accordance with the AIC Code, the Directors
are required to be re-elected annually. All of the Directors have
been provided with letters of appointment for an initial term of 3
years and for each 3 year term thereafter, which are subject to
annual re-election in accordance with the AIC Code. The following
table outlines the effective date and expiry date of each of the
Directors' current letters of appointment:
|
Effective date of current
appointment letter
|
Expiry date
of
current appointment
letter
|
|
|
|
|
|
|
Lucinda Riches C.B.E.
|
28 April
2023
|
27 April
2026
|
|
Martin McAdam
|
1 March
2021
|
24 April
2024
|
|
Caoimhe Giblin
|
1
September 2022
|
31
August 2025
|
|
Nick Winser C.B.E.
|
28 April
2023
|
27 April
2026
|
|
Jim Smith
|
1 May
2023
|
30 April
2026
|
|
A Director's appointment may at
any time be terminated by and at the discretion of either the
Director or the Company upon 6 months' written notice. A Director's
appointment will automatically end without any right to
compensation whatsoever if they are not re-elected by the
shareholders. A Director's appointment may also be terminated with
immediate effect and without compensation in certain other
circumstances. Being non-executive Directors, none of the Directors
have a service contract with the Company.
The terms and conditions of
appointment of non-executive Directors are available for inspection
from the Company's registered office.
Annual Report on Remuneration
During the year, the basic fee for
non-executive Directors increased by £10,000 per annum to £65,000,
with effect from 1 January 2023, with the Senior Independent
Director and the Audit Committee Chairman receiving an additional
£5,000 and £10,000 per annum respectively. The Chairman's basic fee
was also increased by £25,000 to £110,000 per annum.
The level of fees for Directors
were benchmarked during the year by independent consultants,
Heidrick & Struggles, as in line with the market. The Company
is the largest independent generator of renewable electricity in
the UK. Its GAV has grown to £6.2 billion
through acquisitions and equity raisings and, in the last 3 years,
the Board and its committees have held 84 meetings.
For the first time since listing
in 2013, the Board will be proposing a resolution to increase the
aggregate amount of fees to be paid to Directors per annum to
£500,000, up from £400,000, via an amendment to Article 85 of the
Company's Articles of Association at the 2024 AGM.
The Directors remain eligible to
receive discretionary payments where significant additional work is
incurred, however, no discretionary payments were made during the
year.
The table below (audited
information) shows the total remuneration earned by each individual
Director during the current year:
Paid in the year to 31 December 2023
|
Fixed
remuneration
|
Discretionary
remuneration(1)
|
Total
remuneration
|
Lucinda Riches C.B.E.
(Chairman) (2)
|
£97,178
|
-
|
£97,178
|
Caoimhe Giblin
(Audit Committee Chairman)
|
£75,000
|
-
|
£75,000
|
Nick Winser C.B.E. (Senior
Independent Director) (3)
|
£68,397
|
-
|
£68,397
|
Martin McAdam
|
£65,000
|
-
|
£65,000
|
Jim Smith
(4)
|
£43,630
|
-
|
£43,630
|
Shonaid Jemmett-Page
(5)
|
£35,562
|
-
|
£35,562
|
Total
|
£384,767
|
-
|
£384,767
|
(1) The Directors received no additional discretionary payment
during the year.
(2) Appointed as Chairman with effect from 28 April
2023.
(3) Appointed as Senior Independent Director with effect from 28
April 2023.
(4) Appointed to the Board with effect from 1 May
2023.
(5) Retired with effect from 28 April 2023.
The table below (audited
information) shows the total remuneration earned by each individual
Director during the prior year:
Paid in the year to 31 December 2022
|
Fixed
remuneration
|
Discretionary remuneration
(1)
|
Total
remuneration
|
Shonaid Jemmett-Page
(Chairman)
|
£85,000
|
-
|
£85,000
|
Caoimhe Giblin
(Audit Committee Chairman)
|
£65,000
|
-
|
£65,000
|
Lucinda Riches C.B.E. (Senior
Independent Director) (2)
|
£58,397
|
-
|
£58,397
|
Martin McAdam
|
£55,000
|
-
|
£55,000
|
Nick Winser C.B.E.
|
£55,000
|
-
|
£55,000
|
William Rickett C.B.
(3)
|
£19,397
|
-
|
£19,397
|
Total
|
£337,794
|
-
|
£337,794
|
(1) The Directors received no additional discretionary payment
during the year.
(2) Appointed as Senior Independent Director with effect from 28
April 2022.
(3) Retired with effect from 28 April 2022.
The table below (audited
information) shows the change in total remuneration earned by each
individual Director over prior years:
|
2023
|
2022
|
2021
|
2020
|
Paid in the year to 31 December 2023
|
% change from prior
year(1)
|
% change from prior
year
|
% change from prior
year
|
% change from prior
year
|
Lucinda Riches C.B.E. (Chairman)
(2)
|
66%
|
6%
|
10%
|
11%
|
Caoimhe Giblin
(Audit Committee Chairman)
|
15%
|
0%
|
15%
|
42%
|
Nick Winser C.B.E. (Senior
Independent Director) (3)
|
24%
|
100%
|
n/a
|
n/a
|
Martin McAdam
|
18%
|
0%
|
10%
|
0%
|
Jim Smith
(4)
|
100%
|
n/a
|
n/a
|
n/a
|
Shonaid Jemmett-Page
(5)
|
-58%
|
0%
|
16%
|
22%
|
William Rickett
C.B.(6)
|
n/a
|
0%
|
9%
|
0%
|
Tim Ingram
(7)
|
n/a
|
n/a
|
-100%
|
-13%
|
Dan Badger
(8)
|
n/a
|
n/a
|
n/a
|
-100%
|
(1) Movement in individual Director's salary based on annualised
total figures.
(2) Appointed as Chairman with effect from 28 April
2023.
(3) Appointed as Senior Independent Director with effect from 28
April 2023.
(4) Appointed to the Board with effect from 1 May
2023.
(5) Retired with effect from 28 April 2023.
(6) Retired with effect from 28 April 2022.
(7) Retired with effect from 30 April 2020.
(8) Retired with effect from 31 July 2019.
Directors who held office and had
interests in the shares of the Company as at 31 December 2023 are
given in the table below. There were no changes to the interests of
each Director as at the date of this report.
|
Ordinary shares of 1p each
held at 31 December 2023
|
Ordinary shares of 1p each
held at 31 December 2022
|
|
|
|
|
Martin McAdam
|
153,689
|
103,689
|
|
|
Lucinda Riches C.B.E.
|
120,000
|
120,000
|
|
|
Jim Smith (1)
|
100,000
|
n/a
|
|
|
Caoimhe Giblin
|
70,000
|
40,000
|
|
|
(1) Appointed to the Board with effect from 1 May
2023.
Relative Importance of Spend on Pay
The remuneration of the Directors
with respect to the year totalled £384,767 (2022: £337,794) in comparison to dividends
paid or declared to shareholders with respect to the year of
£231,414,095 (2022: £178,945,737) and the cost of share buybacks of
£9,501,098 (2022: £nil). This is 0.2 per cent (2022: 0.2 per cent)
of dividends paid or declared and 4.1 per cent (2022: 0 per cent)
of the cost of share buybacks.
Company Performance
Due to the positioning of the
Company in the market as a sector focused infrastructure fund
investing in UK wind farms to produce stable and inflating
dividends for investors while aiming to preserve capital value, the
Directors consider that a listed infrastructure fund has
characteristics of both an equity index and a bond
index.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Statement of Directors'
Responsibilities
The Directors are responsible for
preparing the Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors
to prepare financial statements for each financial year.
Under that law the Directors are required to prepare the Group's
financial statements, and have elected to prepare the Company's
financial statements, 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.
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 Group for that period.
In preparing these financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
· provide additional disclosures when compliance with the
specific requirements of IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group and Company financial position and
performance;
· 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 Report of the Directors, 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,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
performance, business model and strategy.
The Directors are also responsible
under section 172 of the Companies Act 2006 to promote the success
of the Company for the benefit of its members as a whole and in
doing so have regard for the needs of wider society and other
stakeholders.
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 UK
governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibilities
also extend to the ongoing integrity of the financial statements
contained therein.
Directors' Responsibilities Pursuant to
DTR4
The Directors confirm to the best
of their knowledge that:
· the
Group's 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, and give a true and fair view of
the assets, liabilities, financial position and profit and loss of
the Group; and
· the
Annual Report includes a fair review of the development and
performance of the business and the financial position of the Group
and the Parent Company, together with a description of the
principal risks and uncertainties that they face.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman
28 February 2024
Corporate Governance Report
This Corporate Governance Report
forms part of the Report of the Directors. The Board operates under
a framework for corporate governance which is appropriate for an
investment company. All companies with a premium listing of equity
shares in the UK are required under the UK Listing Rules to report
on how they have applied the UK Code in their Annual Report and
financial statements.
The Company became a member of the
AIC with effect from 27 March 2013 and has therefore put in place
arrangements to comply with the AIC Code and, in accordance with
the AIC Code, complies with the UK Code.
The AIC Code, as explained by the
AIC Guide, addresses all the principles set out in the UK Code, as
well as setting out additional principles and recommendations on
issues that are of specific relevance to investment companies such
as the Company.
The AIC Code and the AIC Guide are
available on the AIC's website, www.theaic.co.uk. The UK Code is available on the FRC's website,
www.frc.org.uk.
The Company has complied with the
recommendations of the AIC Code throughout the year, where
applicable.
Purpose, Culture and Values
The Company's purpose remains
clear; to provide shareholders with an annual dividend that
increases in line with RPI inflation while preserving the capital
value of its investment portfolio in the long term on a real basis
through reinvestment of excess cash flow.
The Company provides investors
with the opportunity to participate directly in the ownership of UK
wind farms, so increasing the resources and capital dedicated to
the deployment of renewable energy and the reduction of greenhouse
gas emissions.
As an investment trust with no
employees, the Board have agreed that its culture and values should
be aligned with those of the Investment Manager and centred on long
term relationships with the Company's key stakeholders and
sustainable investment as follows:
·
Integrity is at the heart of
every activity, with importance being placed on transparency,
trustworthiness and dependability.
·
The trust
of stakeholders is very important to maintain the Company's
reputation, particularly for execution certainty for asset sellers
and delivery of investment promises to investors.
·
Respect for differing
opinions is to be shown across all interaction and
communication.
·
Individual empowerment is sought with growth in
responsibility and autonomy being actively encouraged.
· Collaboration
and effectively utilising the collective skills
of all participants is important to ensure ideas and information
are best shared.
The Board
As at the date of this report, the
Board consists of 5 non-executive Directors and represents a range
of investment, financial and business skills and experience. During
the year, Shonaid Jemmett-Page retired as Director and Chairman of
the Company with effect from 28 April 2023, and Jim Smith was
appointed as a Director with effect from 1 May 2023.
The Chairman of the Board is
Lucinda Riches C.B.E, who was selected to succeed Shonaid following
the 2023 AGM. In considering the independence of the Chairman, the
Board took note of the provisions of the AIC Code relating to
independence, and has determined that Lucinda remains independent
as a non-executive Director with a clear division of
responsibilities from the Investment Manager. The Senior
Independent Director is Nick Winser C.B.E., who was selected to
succeed Lucinda following the 2023 AGM. The Company, as an
Investment Trust, has no employees and therefore there is no
requirement for a chief executive.
The Articles of Association
provide that Directors shall retire and offer themselves for
re-election at the first AGM after their appointment and at least
every 3 years thereafter. However, the AIC Code requires that
Directors be subject to an annual election by shareholders, and the
Directors comply with this requirement. All of the Directors, other
than Martin McAdam, shall offer themselves for re-election at the
forthcoming AGM. Having considered their effectiveness,
demonstration of commitment to the role, length of service,
attendance at meetings and contribution to the Board's
deliberations, the Board approves the nomination for re-election of
the Directors.
The Company's view is that the
continuity and experience of its Directors are important and that a
suitable balance needs to be struck with the need for independence
and the refreshing of the skills and expertise of the Board. The
Company believes that some limited flexibility in its approach to
Director rotation and Chair tenure will enable it to manage
succession planning more effectively, as set out below. During the
year, the Board conducted comprehensive recruitment processes aimed
at ensuring a sustained balance of skills and experience on the
Board in addition to maintaining diversity. In addition to the
appointment of Jim Smith, the Board engaged an external recruitment
consultant to recruit a non-executive Director to replace Martin
who has surpassed the nine year director tenure limit and therefore
will not seek re-election at the 2024 AGM. On 1 March 2024, Abigail
Rotheroe will join the Board bringing over 20 years' experience
from the investment industry and knowledge of fund governance and
sustainable investing.
The terms and conditions of
appointment of non-executive Directors are available for inspection
from the Company's registered office.
Chair Tenure Policy
The Company's policy on Chair
tenure is available on the Company website. The Company's policy on
Chair tenure is that the Chairman should normally serve no longer
than 9 years as a Director and Chairman but, where it is in the
best interests of the Company, its shareholders and stakeholders,
the Chairman may serve for a limited time beyond that to help the
Company manage succession planning whilst at the same time still
address the need for regular refreshment and diversity. In such
circumstances the independence of the other Directors will ensure
that the Board as a whole remains independent.
Diversity Policy
The Company's policy on Board
diversity is available on the Company website and sets out the
approach that will be adopted to ensure that the Board remains
appropriately balanced, and relevant to the Company's operations.
The composition of the Board is reviewed annually by the Nomination
Committee, including the balance of skills, knowledge, experience
and the diversity policy is considered in conjunction with all
Board appointments. The Board's composition is detailed within the
Strategic Report.
Performance and Evaluation
Pursuant to Provision 26 of the
AIC Code, the Board undertakes a formal and rigorous evaluation of
its performance each financial year. As a FTSE 250 company, in
keeping with the provisions of the AIC Code, it is the Company's
policy that every 3 years an external consultant, who has no
connection with the Company, carries out a formal review of the
Board's performance. This was last conducted in 2022 and therefore
the Board will be subject to an external evaluation again in
2025.
An internal evaluation of the
Board, the Committees and individual Directors was conducted during
2023 in the form of annual performance appraisals, questionnaires
and discussions to determine effectiveness and performance in
various areas, as well as the Directors' continued independence and
tenure. This process was facilitated by the Company Secretary. The
reviews concluded that the overall performance of the Board and its
Committees was satisfactory and the Board was confident in its
ability to continue to govern the Company well.
Each individual Director's
training and development needs are reviewed annually. All new
Directors receive an induction from the Investment Manager and
Company Secretary, which includes the provision of information
about the Company and their responsibilities. In addition, site
visits and specific Board training sessions are arranged involving
presentations on relevant topics on a regular basis.
Board Responsibilities
The Board will meet, on average, 6
times in each calendar year for scheduled Board meetings and on an
ad hoc basis as and when necessary. At each meeting the Board
follows a formal agenda that will cover the business to be
discussed. Between meetings there is regular contact with the
Investment Manager and the Administrator. The Board requires to be
supplied with information by the Investment Manager, the
Administrator and other advisers in a form appropriate to enable it
to discharge its duties.
The Board has responsibility for
ensuring that the Company keeps proper accounting records which
disclose with reasonable accuracy at any time the financial
position of the Company and which enable it to ensure that the
financial statements comply with applicable regulation. It is the
Board's responsibility to present a fair, balanced and
understandable Annual Report, which provides the information
necessary for shareholders to assess the performance, strategy and
business model of the Company. This responsibility extends to the
half year and other price-sensitive public reports.
Audit Committee
The Company's Audit Committee is
chaired by Caoimhe Giblin and consists of a minimum of 3 members.
In accordance with best practice, the Company's Chairman is not a
member of the Audit Committee however she does attend Audit
Committee meetings as and when deemed appropriate. The Audit
Committee Report in this report describes the work of the Audit
Committee.
Management Engagement Committee
The Company's Management
Engagement Committee comprises all of the Directors and is required
to meet at least once per year. The Chairman of the Management
Engagement Committee is Lucinda Riches C.B.E. The Management
Engagement Committee's main function is to keep under review the
performance of the Investment Manager and make recommendations on
any proposed amendment to the Investment Management
Agreement.
The Management Engagement
Committee met once during the year and agreed an amendment to the
Investment Management Agreement with the Investment
Manager.
Terms of reference for the
Management Engagement Committee have been approved by the Board and
are available on the Company's website.
Nominations Committee
The Company's Nominations
Committee comprises all of the Directors and is required to meet at
least once per year. The Chairman of the Nominations Committee is
Lucinda Riches C.B.E. The Nominations Committee's main function is
to plan for Board succession and to review annually the structure,
size and composition of the Board and make recommendation to the
Board with regard to any changes that are deemed necessary. Terms
of reference for the Nominations Committee have been approved by
the Board and are available on the Company's website.
The Nominations Committee met 5
times during the year to consider Director remuneration and Board
succession planning, as well as to commence a Director recruitment
process with the assistance of an external recruitment consultant,
Heidrick & Struggles.
Communications and Disclosure Committee
The Company has established a
Communications and Disclosure Committee which is required to meet
at least once a year. The committee has responsibility for, amongst
other things, determining on a timely basis the disclosure
treatment of material information, and assisting in the design,
implementation and periodic evaluation of disclosure controls and
procedures. The Committee also has responsibility for the
identification of inside information for the purpose of maintaining
the Company's insider list.
Terms of reference for the
Communications and Disclosure Committee have been approved by the
Board and are available on the Company's website. Membership
consists of the Chairman (or one other Director) and one of Stephen
Lilley and Laurence Fumagalli (to be succeeded by Matt Ridley on 1
March 2024). Additional members of the Committee may be appointed
and existing members removed by the Committee. The membership of
the Committee is reviewed by the Board on a periodic basis and at
least once a year.
The AIC Code recommends that
companies appoint a Remuneration Committee, however the Board has
not deemed this necessary, as being wholly comprised of
non-executive Directors, the whole Board considers these
matters.
The Investment Manager
The Board has entered into the
Investment Management Agreement with the Investment Manager under
which the Investment Manager is responsible for developing strategy
and the day-to-day management of the Group's investment portfolio,
in accordance with the Group's Investment Objective and Investment
Policy, subject to the overall supervision of the Board. A summary
of the fees paid to the Investment Manager are given in note 3 to
the financial statements.
The Investment Management
Agreement may be terminated with immediate effect and without
compensation, by either the Investment Manager or the Company if
the other party has gone into liquidation, administration or
receivership or has committed a material breach of the Investment
Management Agreement.
The Board as a whole reviewed the
Company's compliance with the UK Corporate Governance Code, the
Listing Rules, the Disclosure Guidance and Transparency Rules and
the AIC Code. In accordance with the Listing Rules, the Directors
confirm that the continued appointment of the Investment Manager
under the current terms of the Investment Management Agreement is
in the interests of shareholders. The Board also reviewed the
performance of other service providers and examined the
effectiveness of the Company's internal control systems during the
year.
Board Meetings, Committee Meetings and Directors'
Attendance
The number of meetings of the full
Board attended in the year to 31 December 2023 by each Director is
set out below:
|
Scheduled Board
Meetings
(Total of
5)
|
Additional Board
Meetings
(Total of
7)
|
|
|
Lucinda Riches C.B.E.
|
5
|
6
|
|
Martin McAdam
|
5
|
5
|
|
Caoimhe Giblin
|
5
|
6
|
|
Nick Winser C.B.E.
|
5
|
6
|
|
Jim Smith
(1)
|
2
|
2
|
|
Shonaid Jemmett-Page
(2)
|
3
|
5
|
|
(1) Appointed with effect from 1 May 2023, at which point 3
scheduled Board meetings and 5 additional Board meetings had taken
place.
(2) Resigned with effect from 28 April 2023, at which point 3
scheduled Board meetings and 5 additional Board meetings had taken
place.
The number of meetings of the
committees of the Board attended in the year to 31 December 2023 by
each committee member is set out below:
|
Audit Committee
Meetings
(Total of
4)
|
Management Engagement
Committee Meetings
(Total of
1)
|
Nominations Committee
Meetings
(Total of
5)
|
|
|
|
|
|
|
|
Lucinda Riches C.B.E.
(1)
|
2
|
1
|
5
|
|
Martin McAdam
|
4
|
1
|
5
|
|
Caoimhe Giblin
|
4
|
1
|
5
|
|
Nick Winser C.B.E.
|
4
|
1
|
5
|
|
Jim Smith
(2)
|
2
|
1
|
4
|
|
Shonaid Jemmett-Page
(3)
|
n/a
|
0
|
1
|
|
(1)
Appointed as Chairman and resigned from Audit
Committee with effect from 28 April 2023, at which point 2 Audit
Committee meetings had taken place.
(2)
Appointed to the Board with effect from 1 May
2023, at which point 2 Audit Committee meetings, no Management
Engagement Committee meetings and 1 Nominations Committee meeting
had taken place.
(3)
Resigned as Chairman with effect from 28 April
2023, at which point no Management Engagement Committee meetings
and 1 Nominations Committee meeting had taken place.
Internal Control
The Board is responsible for the
Company's system of internal control and for reviewing its
effectiveness. The Board confirms that it has an ongoing process
for identifying, evaluating and managing the significant risks
faced by the Company. This process has been in place throughout the
year and has continued since the year end.
The Company's principal risks and
uncertainties are detailed in the
Strategic Report. As further explained in
the Audit Committee Report, the risks of the Company are outlined
in a risk matrix which was reviewed and updated during the year.
The Board continually reviews its policy setting and updates the
risk matrix at least annually to ensure that procedures are in
place with the intention of identifying, mitigating and minimising
the impact of risks should they crystallise. The Board has a
process in place to identify emerging risks, such as climate
related risks, and to determine whether any actions are required.
The Board relies on reports periodically provided by the Investment
Manager and the Administrator regarding risks that the Company
faces. When required, experts are employed to gather information,
including tax and legal advisers. The Board also regularly monitors
the investment environment and the management of the Company's
portfolio, and applies the principles detailed in the internal
control guidance issued by the FRC.
The Board holds an annual risk and
strategy discussion, which enables the Directors to consider risk
outside the scheduled quarterly Board meetings. This enables
emerging risks to be identified and discussions on horizon scanning
to occur, so the Board can consider how to manage and potentially
mitigate any relevant emerging risks.
The principal features of the
internal controls systems which the Investment Manager and
Administrator have in place in respect of the Group's financial
reporting are focused around the 3 lines of defence model and
include:
· internal review of all financial reports;
· review by the Board of financial information prior to its
publication;
· authorisation limits over expenditure incurred by the
Group;
· review of valuations; and
· authorisation of investments.
Whistleblowing
The Board has considered the AIC
Code recommendations in respect of arrangements by which staff of
the Investment Manager or Administrator may, in confidence, raise
concerns within their respective organisations about possible
improprieties in matters of financial reporting or other matters.
It has concluded that adequate arrangements are in place for
the
proportionate and independent
investigation of such matters and, where necessary, for appropriate
follow-up action to be taken within their organisation.
Amendment of Articles of Association
The Company's Articles of
Association may be amended by the members of the Company by special
resolution (requiring a majority of at least 75 per cent of the
persons voting on the relevant resolution).
Engagement with Stakeholders
The Company is committed to
maintaining good communications and building positive relationships
with all stakeholders, including shareholders, debt providers,
analysts, potential investors, suppliers and the wider communities
in which the Group and its investee companies operate. This
includes regular engagement with the Company's shareholders and
other stakeholders by the Board, the Investment Manager and the
Administrator. Highlights of some of the principal decisions that
have been made in the interests of stakeholders can be found within
the section 172 statement of this report. Regular feedback is
provided to the Board to ensure they understand the views of
stakeholders and a stakeholder matrix is reviewed at each scheduled
Board and Audit Committee meeting to record the stakeholders
considered for each item of business.
Relations with
Shareholders
The Company welcomes the views of
shareholders and places great importance on communication with its
shareholders. The Investment Manager is available at all reasonable
times to meet with principal shareholders and key sector analysts.
The Chairman, the Senior Independent Director and other Directors
are also available to meet with shareholders, if
required.
All shareholders have the
opportunity to put questions to the Company at its registered
address or via email. The AGM of the Company also provides a forum
for shareholders to meet and discuss issues with the Directors and
Investment Manager. The Company issues regulatory announcements via
the London Stock Exchange in respect of routine reporting
obligations, periodic financial and portfolio information updates
and in response to other events.
The Board receives comprehensive
shareholder reports from the Company's Registrar and regularly
monitors the views of shareholders and the shareholder profile of
the Company. The Board is also kept fully informed of all relevant
market commentary on the Company by the Investment
Manager.
Relations with Other
Stakeholders
The Company values its
relationships with its debt providers. The Investment Manager
ensures the Company continues to meet its debt covenants and
reporting requirements. During the year, the Company drew £640
million of new term debt and repaid £150 million of existing term
debt, as disclosed in note 13 to the financial
statements.
The Investment Manager conducts
presentations with analysts and investors to coincide with the
announcement of the Company's full and half year results, providing
an opportunity for discussions and queries on the Company's
activities, performance and key metrics. In addition to these
semi-annual presentations, the Investment Manager meets regularly
with analysts and investors to provide further updates with how the
Company and the investment portfolio are performing.
The Directors and Investment
Manager receive informal feedback from analysts and investors,
which is presented to the Board by the Company's Joint Brokers. The
Company Secretary also receives informal feedback via queries
submitted through the Company's website and these are addressed by
the Board, the Investment Manager or the Company Secretary, where
applicable.
The Company recognises that
relationships with suppliers are enhanced by prompt payment and the
Company's Administrator ensures all payments are processed within
the contractual terms agreed with the individual
suppliers.
The Company, via its Investment
Manager, has long term and important relationships with its
operational site managers and turbine operations and maintenance
managers and reviews performance, including health and safety, on a
monthly basis. Representatives of the site manager and SPV board
directors from the Investment Manager, visit all operational sites
on a regular basis and generally carry out safety walks at least
once a year on each site. The Board's Health and Safety Director
also visits sites at regular intervals.
Similarly, environment protection
issues are reported on every month by the site managers and annual
habitat management plans are agreed by each SPV board for all sites
to ensure that the environment in and surrounding each windfarm is
carefully protected.
The Directors recognise that the
long term success of the Company is linked to the success of the
communities in which the Group, and its investee companies,
operate. During the year, a number of community projects were
supported by the Group's investee companies.
Key decisions made or approved by
the Directors during the year and the impact of those decisions on
the Company's members and wider stakeholders is disclosed further
in the Strategic Report.
Shareholders may also find Company
information or contact the Company through its website.
On behalf of the Board
Lucinda Riches C.B.E.
Chairman of the Board
28 February 2024
Audit Committee Report
At the date of this report, the
Audit Committee comprised Caoimhe Giblin (Chairman), Martin McAdam,
Nick Winser C.B.E. and Jim Smith. The AIC Code has a requirement
that at least one member of the Audit Committee should have recent
and relevant financial experience and the Audit Committee as a
whole shall have competence relevant to the sector. The Board is
satisfied that the Audit Committee is properly constituted in these
respects. The qualifications and experience of all Audit Committee
members are disclosed in the Board of
Directors section of this report.
The Audit Committee operates
within clearly defined terms of reference which were reviewed
during the financial year and approved by the Board, and include
all matters indicated by Disclosure Guidance and Transparency Rule
7.1 and the AIC Code and are available for inspection on the
Company's website: www.greencoat-ukwind.com. The Company's Annual
Report complies with the provisions of the Competition and Markets
Authority's (CMA) Order.
Audit Committee meetings are
scheduled at appropriate times in the reporting and auditing cycle.
The Chairman, other Directors and third parties may be invited to
attend meetings as and when deemed appropriate.
Summary of the Role and Responsibilities of the Audit
Committee
The duties of the Audit Committee,
amongst other things, include reviewing the Company's quarterly
NAV, half year report, Annual Report and financial statements and
any formal announcements relating to the Company's financial
performance.
The Audit Committee is the forum
through which the external Auditor reports to the Board and is
responsible for reviewing the terms of appointment of the Auditor,
together with their remuneration. On an ongoing basis, the Audit
Committee is responsible for reviewing the objectivity of the
Auditor along with the effectiveness of the audit and the terms
under which the Auditor is engaged to perform non-audit services
(restricted to the limited scope review of the half year report and
reporting accountant services in relation to equity raises). The
Audit Committee is also responsible for reviewing the Company's
corporate governance framework, system of internal controls and
risk management, ensuring they are suitable for an investment
company.
The Audit Committee reports its
findings to the Board, identifying any matters on which it
considers that action or improvement is needed, and makes
recommendations on the steps to be taken.
During the year, the Audit
Committee undertook an assessment of its obligations and processes
under the FRC's Minimum Standard for audit committees published
during the year.
Overview
During the year, the Audit
Committee's discussions have been broad ranging. In addition to the
4 formally convened Audit Committee meetings, the Audit Committee
has had regular contact and meetings with the Investment Manager,
the Administrator and the Auditor. These meetings and discussions
focused on, but were not limited to:
· a
detailed analysis of the Company's quarterly NAVs;
· reviewing the updated risk matrix of the Company and
assessing the Company's risk management systems;
· reviewing the Company's corporate governance framework,
including climate related reporting disclosures under the TCFD
framework;
· reviewing the internal controls framework for the Company,
the Administrator and the Investment Manager, considering the need
for a separate internal audit function;
· considering any incidents of internal control failure or
fraud and the Company's response;
· considering the ongoing assessment of the Company as a going
concern;
· considering the principal risks and period of assessment for
the longer term viability of the Company;
· monitoring the ongoing appropriateness of the Company's
status as an investment entity under IFRS 10, in particular
following an acquisition;
· monitoring compliance with AIFMD, the AIC code and other
regulatory and governance frameworks;
· reviewing and approving the audit plan in relation to the
audit of the Company's Annual Report and financial
statements;
· monitoring the performance of the Auditor and its engagement
with the Investment Manager and Administrator;
· monitoring compliance with the Company's policy on the
provision of non-audit services by the Auditor;
· reviewing the effectiveness, resources, qualifications and
independence of the Auditor;
· reviewing the Company's adherence to the responsibilities
within the FRC Audit Committees and the External Audit: Minimum
Standard; and
· reviewing the anti-money laundering procedures for the
Company, the Administrator and the Investment Manager.
Financial Reporting
The primary role of the Audit
Committee in relation to financial reporting is to review with the
Investment Manager, the Administrator and the Auditor the
appropriateness of the half year report and Annual Report and
financial statements, concentrating on, amongst other
matters:
· the
quality and acceptability of accounting policies and
practices;
· the
clarity of the disclosures and compliance with financial reporting
standards and relevant financial and governance reporting
requirements;
· amendments to legislation and corporate governance reporting
requirements and accounting treatment of new transactions in the
year;
· the
impact of new and amended accounting standards on the Company's
financial statements;
· whether the Audit Committee believes that proper and
appropriate processes and procedures have been followed in the
preparation of the half year report and Annual Report and financial
statements;
· considering and recommending to the Board for approval the
contents of the annual financial statements and reviewing the
Auditor's report thereon including considering whether the
financial statements are overall fair, balanced and
understandable;
· material areas in which significant judgements have been
applied or there has been discussion with the Auditor;
and
· any
correspondence from regulators in relation to the Company's
financial reporting.
BDO LLP attended 2 of the 4 Audit
Committee meetings held during the year. The Audit Committee has
also held private meetings with the Auditor to provide additional
opportunities for open dialogue and feedback. Matters typically
discussed include the Auditor's assessment of the transparency and
openness of interactions with the Investment Manager and the
Administrator, confirmation that there has been no restriction in
scope placed on them, the independence of their audit and how they
have exercised professional scepticism.
Significant Issues
The Audit Committee discussed the
planning, conduct and conclusions of the external audit as it
proceeded. At the Audit Committee meeting in advance of the year
end, the Audit Committee discussed and approved the Auditor's audit
plan. The Audit Committee identified the carrying value of
investments as a key area of risk of misstatement in the Company's
financial statements.
Assessment of the Carrying
Value of Investments
The Group has an accounting policy
to designate investments at fair value through profit or loss.
Therefore, the most significant risk in the Group's financial
statements is whether its investments are fairly valued due to the
uncertainty involved in determining the investment valuations.
There is also an inherent risk of management override as the
Investment Manager's fee is calculated based on NAV, as disclosed
in note 3 to the financial statements. The Investment Manager is
responsible for calculating the NAV with the assistance of the
Administrator, prior to approval by the Board.
On a quarterly basis, the
Investment Manager provides a detailed analysis of the NAV
highlighting any movements and assumption changes from the previous
quarter's NAV. This analysis and the rationale for any changes made
is considered and challenged by the Chairman of the Audit Committee
and subsequently considered, challenged and approved by the Board.
The Audit Committee has satisfied itself that the key estimates and
assumptions used in the valuation model are appropriate and that
the investments have been fairly valued. The key estimates and
assumptions include the useful life of the assets, the discount
rates, the level of wind resource, the rate of inflation, the price
at which the power and associated benefits can be sold and the
amount of electricity the assets are expected to
produce.
Internal Control
The Audit Committee has
established a set of ongoing processes designed to meet the
particular needs of the Company in managing the risks to which it
is exposed.
The Investment Manager has
identified the principal risks to which the Company is exposed, and
recorded them on a risk matrix together with the controls employed
to mitigate these risks. The Investment Manager also identifies
emerging risks and determines whether any actions are required. A
residual risk rating has been applied to each risk. The Audit
Committee is responsible for reviewing the risk matrix and
associated controls before recommending to the Board for
consideration and approval, challenging the Investment Manager's
assumptions, to ensure a robust internal risk management
process.
The Audit Committee considers risk
and strategy regularly, and formally reviewed the updated risk
matrix in Q1 2024 and will continue to do so at least annually. By
their nature, these procedures provide a reasonable, but not
absolute, assurance against material misstatement or loss. Regular
reports are provided to the Audit Committee highlighting material
changes to risk ratings.
The Audit Committee reviewed the
Group's principal risks and uncertainties as at 30 June 2023 to
determine that these were unchanged from those disclosed in the
Company's 2022 Annual Report and remained the most likely to affect
the Group in the second half of the year.
During the year, the Audit
Committee discussed and reviewed in depth the internal controls
frameworks in place at the Investment Manager and the
Administrator. Discussions were centred around 3 lines of defence:
assurances at operational level; internal oversight; and
independent objective assurance. The Administrator holds the
International Standard on Assurance Engagements (ISAE) 3402 Type 2
certification. This entails an independent rigorous examination and
testing of their controls and processes.
The Audit Committee concluded that
these frameworks were appropriate for the identification,
assessment, management and monitoring of financial, regulatory and
other risks, with particular regard to the protection of the
interests of the Company's shareholders.
Internal Audit
The Audit Committee continues to
review the need for an internal audit function and has decided that
the systems, processes and procedures employed by the Company,
Investment Manager and Administrator, including their own internal
controls and procedures, provide sufficient assurance that an
appropriate level of risk management and internal control is
maintained. In addition to this, the Company's external Depositary
provides cash monitoring, asset verification and oversight services
to the Company.
The Audit Committee has therefore
concluded that shareholders' investments and the Company's assets
are adequately safeguarded and an internal audit function specific
to the Company is considered unnecessary.
The Audit Committee is available
on request to meet investors in relation to the Company's financial
reporting and internal controls.
External Auditor
Effectiveness of the Audit
Process
The Audit Committee assessed the
effectiveness of the audit process by considering BDO LLP's
fulfilment of the agreed audit plan through the reporting presented
to the Audit Committee by BDO LLP and the discussions at the Audit
Committee meeting, which highlighted the major issues that arose
during the course of the audit. In addition, the Audit Committee
also sought feedback from the Investment Manager and the
Administrator on the effectiveness of the audit process. For this
financial year, the Audit Committee was satisfied that there had
been appropriate focus and challenge on the primary areas of audit
risk and assessed the quality of the audit process to be
good.
Non-Audit
Services
The Audit Committee has a policy
regarding the provision of non-audit services by the external
Auditor. The Audit Committee monitors the Group's expenditure on
non-audit services provided by the Company's Auditor who should
only be engaged for non-audit services where they are deemed to be
the most commercially viable supplier and prior approval of the
Audit Committee has been sought.
Details of fees paid to BDO LLP
during the year are disclosed in note 5 to the financial
statements. The Audit Committee approved these fees after a review
of the level and nature of work to be performed and are satisfied
that they are appropriate for the scope of the work required. The
Audit Committee seeks to ensure that any non-audit services
provided by the external Auditor do not conflict with their
statutory and regulatory responsibilities, as well as their
independence, before giving written approval prior to their
engagement. The Audit Committee was satisfied that provision of
these non-audit services did not provide threats to the Auditor's
independence.
Independence
The Audit Committee is required to
consider the independence of the external Auditor. In fulfilling
this requirement, the Audit Committee has considered a report from
BDO LLP describing its arrangements to identify, report and manage
any conflict of interest and the extent of non-audit services
provided by them.
The Audit Committee has concluded
that it considers BDO LLP to be independent of the Company and that
the provision of the non-audit services described above is not a
threat to the objectivity and independence of the conduct of the
audit.
Re-appointment
BDO LLP has been the Company's
Auditor from its incorporation on 4 December 2012. The Auditor is
required to rotate the audit partner responsible for the Group
audit every 5 years. A new lead partner was appointed in 2020
and therefore the lead partner will be required to rotate after the
completion of the 2024 year end audit.
The external audit contract is
required to be put to tender at least every 10 years. The Audit
Committee last conducted a formal and competitive external audit
tender process in 2022 and resolved to reappoint BDO LLP as the
Company's Auditor for the year ending 31 December 2023.
As described above, the Audit
Committee reviewed the effectiveness and independence of the
Auditor and remains satisfied that the Auditor provides effective
independent challenge to the Board, the Investment Manager and the
Administrator. The Audit Committee will continue to monitor the
performance of the Auditor on an annual basis and will consider
their independence and objectivity, taking account of appropriate
guidelines.
The Audit Committee has therefore
recommended to the Board that BDO LLP be proposed for
re-appointment as the Company's Auditor at the 2024 AGM of the
Company.
Caoimhe Giblin
Chairman of the Audit
Committee
28 February 2024
Consolidated Statement of Comprehensive
Income
For the year ended
31 December 2023
|
Note
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Investment income
|
4
|
422,724
|
577,156
|
Unrealised movement in fair value
of investments
|
9
|
(191,402)
|
446,096
|
Other income
|
|
3,059
|
1,878
|
Total income and gains
|
|
234,381
|
1,025,130
|
|
|
|
|
Operating expenses
|
5
|
(37,608)
|
(35,346)
|
Investment acquisition
costs
|
|
(2,797)
|
(3,146)
|
Operating profit
|
|
193,976
|
986,638
|
|
|
|
|
Finance expense
|
13
|
(67,396)
|
(32,775)
|
|
|
|
|
Profit for the year before tax
|
|
126,580
|
953,863
|
Tax
|
6
|
(392)
|
-
|
|
|
|
|
Profit for the year after tax
|
|
126,188
|
953,863
|
|
|
|
|
Profit and total comprehensive income attributable
to:
|
|
|
|
Equity holders of the
Company
|
|
126,188
|
953,863
|
|
|
|
|
Earnings per share
|
|
|
|
Basic and diluted earnings from
continuing operations in the year (pence)
|
7
|
5.44
|
41.16
|
The accompanying notes form an
integral part of the financial statements.
Consolidated Statement of Financial
Position
As at 31 December 2023
|
Note
|
31 December
2023
|
31 December
2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Non current assets
|
|
|
|
Investments at fair value through
profit or loss
|
9
|
5,538,636
|
4,959,312
|
|
|
5,538,636
|
4,959,312
|
Current assets
|
|
|
|
Receivables
|
11
|
41,129
|
2,487
|
Cash at bank
|
|
21,805
|
19,783
|
|
|
62,934
|
22,270
|
Current liabilities
|
|
|
|
Loans and borrowings
|
13
|
(500,000)
|
(150,000)
|
Payables
|
12
|
(17,573)
|
(8,354)
|
Net current liabilities
|
|
(454,639)
|
(136,084)
|
|
|
|
|
Non current liabilities
|
|
|
|
Loans and borrowings
|
13
|
(1,290,000)
|
(950,000)
|
Net assets
|
|
3,793,997
|
3,873,228
|
|
|
|
|
Capital and reserves
|
|
|
|
Called up share capital
|
15
|
23,121
|
23,181
|
Share premium account
|
15
|
2,471,515
|
2,470,396
|
Capital redemption
reserve
|
15
|
66
|
-
|
Retained earnings
|
|
1,299,295
|
1,379,651
|
Total shareholders' funds
|
|
3,793,997
|
3,873,228
|
Net assets per share (pence)
|
16
|
164.1
|
167.1
|
Authorised for issue by the Board
of Greencoat UK Wind PLC (registered number 08318092) on 28
February 2024 and
signed on its behalf by:
Lucinda Riches
C.B.E.
Caoimhe Giblin
Chairman
Director
The accompanying notes form an
integral part of the financial statements.
Statement of Financial Position -
Company
As at 31 December 2023
|
Note
|
31 December
2023
|
31 December
2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Non current assets
|
|
|
|
Investments at fair value through
profit or loss
|
9
|
5,558,357
|
4,978,816
|
|
|
5,558,357
|
4,978,816
|
Current assets
|
|
|
|
Receivables
|
11
|
40,381
|
125
|
Cash at bank
|
|
52
|
2,446
|
|
|
40,433
|
2,571
|
Current liabilities
|
|
|
|
Loans and borrowings
|
13
|
(500,000)
|
(150,000)
|
Payables
|
12
|
(14,793)
|
(8,159)
|
Net current liabilities
|
|
(474,360)
|
(155,588)
|
|
|
|
|
Non current liabilities
|
|
|
|
Loans and borrowings
|
13
|
(1,290,000)
|
(950,000)
|
Net assets
|
|
3,793,997
|
3,873,228
|
|
|
|
|
Capital and reserves
|
|
|
|
Called up share capital
|
15
|
23,121
|
23,181
|
Share premium account
|
15
|
2,471,515
|
2,470,396
|
Capital redemption
reserve
|
15
|
66
|
-
|
Retained earnings
|
|
1,299,295
|
1,379,651
|
Total shareholders' funds
|
|
3,793,997
|
3,873,228
|
Net assets per share (pence)
|
16
|
164.1
|
167.1
|
The Company has taken advantage of
the exemption under section 408 of the Companies Act 2006 and
accordingly has not presented a Statement of Comprehensive Income
for the Company alone. The profit after tax of the Company alone
for the year was £126,188,000 (2022: £953,863,000).
Authorised for issue by the Board
on 28 February 2024 and signed on its behalf by:
Lucinda Riches
C.B.E.
Caoimhe Giblin
Chairman
Director
The accompanying notes form an
integral part of the financial statements.
Consolidated and Company
Statement of Changes in Equity
For the year ended
31 December 2023
For the year ended
31 December 2023
|
Note
|
Share
capital
|
Share
premium
|
Capital redemption
reserve
|
Retained
earnings
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Opening net assets attributable to
shareholders
(1 January 2023)
|
|
23,181
|
2,470,396
|
-
|
1,379,651
|
3,873,228
|
Issue of share capital
|
15
|
6
|
1,119
|
-
|
-
|
1,125
|
Share buybacks
|
15
|
(66)
|
-
|
66
|
(9,439)
|
(9,439)
|
Share buyback costs
|
|
-
|
-
|
-
|
(62)
|
(62)
|
Profit and total comprehensive
income for the year
|
|
-
|
-
|
-
|
126,188
|
126,188
|
Interim dividends paid in the
year
|
8
|
-
|
-
|
-
|
(197,043)
|
(197,043)
|
|
|
|
|
|
|
|
Closing net assets attributable to
shareholders
|
|
23,121
|
2,471,515
|
66
|
1,299,295
|
3,793,997
|
After taking account of cumulative
unrealised gains of £522,040,697,
the total reserves distributable by way of a
dividend as at 31 December 2023 were £777,254,592.
For the year ended
31 December 2022
|
Note
|
Share
capital
|
Share
premium
|
Retained
earnings
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Opening net assets attributable to
shareholders (1 January 2022)
|
|
23,171
|
2,468,940
|
601,588
|
3,093,699
|
Issue of share capital
|
15
|
10
|
1,490
|
-
|
1,500
|
Share issue costs
|
15
|
-
|
(34)
|
-
|
(34)
|
Profit and total comprehensive
income for the year
|
|
-
|
-
|
953,863
|
953,863
|
Interim dividends paid in the
year
|
8
|
-
|
-
|
(175,800)
|
(175,800)
|
|
|
|
|
|
|
Closing net assets attributable to
shareholders
|
|
23,181
|
2,470,396
|
1,379,651
|
3,873,228
|
After taking account of cumulative
unrealised gains of £713,442,660,
the total reserves distributable by way of a
dividend as at 31 December 2022 were £666,208,331.
The accompanying notes form an
integral part of the financial statements.
Consolidated Statement of Cash
Flows
For the year ended
31 December 2023
|
Note
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Net cash flows from operating activities
|
17
|
359,801
|
545,851
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Acquisition of
investments
|
9
|
(820,925)
|
(484,153)
|
Investment acquisition
costs
|
|
(2,742)
|
(4,667)
|
Repayment of shareholder loan
investments
|
9
|
50,199
|
13,482
|
Net cash flows from investing activities
|
|
(773,468)
|
(475,338)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Payment of issue costs
|
|
-
|
(42)
|
Share buybacks
|
|
(9,439)
|
-
|
Share buyback costs
|
|
(56)
|
-
|
Amounts drawn down on loan
facilities
|
13
|
1,040,000
|
460,000
|
Amounts repaid on loan
facilities
|
13
|
(350,000)
|
(310,000)
|
Finance costs
|
|
(67,773)
|
(29,689)
|
Dividends paid
|
8
|
(197,043)
|
(175,800)
|
Net cash flows from financing activities
|
|
415,689
|
(55,531)
|
|
|
|
|
Net increase in cash during the
year
|
|
2,022
|
14,982
|
|
|
|
|
Cash at the beginning of the
year
|
|
19,783
|
4,801
|
|
|
|
|
Cash at the end of the year
|
|
21,805
|
19,783
|
The accompanying notes form an
integral part of the financial statements.
Statement of Cash Flows -
Company
For the year ended
31 December 2023
|
Note
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
£'000
|
£'000
|
|
|
|
|
Net cash flows from operating activities
|
17
|
(65,695)
|
(30,949)
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Loans advanced to Group
companies
|
9
|
(680,800)
|
(260,811)
|
Repayment of loans to Group
companies
|
9
|
328,412
|
347,862
|
Net cash flows from investing activities
|
|
(352,388)
|
87,051
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Payment of issue costs
|
|
-
|
(42)
|
Share buybacks
|
|
(9,439)
|
-
|
Share buyback costs
|
|
(56)
|
-
|
Amounts drawn down on loan
facilities
|
13
|
1,040,000
|
460,000
|
Amounts repaid on loan
facilities
|
13
|
(350,000)
|
(310,000)
|
Finance costs
|
|
(67,773)
|
(29,689)
|
Dividends paid
|
8
|
(197,043)
|
(175,800)
|
Net cash flows from financing activities
|
|
415,689
|
(55,531)
|
|
|
|
|
Net (decrease)/increase in cash
during the year
|
|
(2,394)
|
571
|
|
|
|
|
Cash at the beginning of the
year
|
|
2,446
|
1,875
|
|
|
|
|
Cash at the end of the year
|
|
52
|
2,446
|
The accompanying notes form an
integral part of the financial statements.
Notes to the Consolidated
Financial Statements
For the year ended
31 December 2023
1.
Material accounting policies
Basis of accounting
The consolidated annual 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 annual financial statements
have been prepared on the historical cost basis, as modified for
the measurement of certain financial instruments at fair value
through profit or loss. The principal accounting policies are set
out below.
These consolidated financial
statements are presented in pounds sterling, which is the currency
of the primary economic environment in which the Group operates and
are rounded to the nearest thousand, unless otherwise
stated.
Going concern
The Group's business activities,
together with the factors likely to affect its future development,
performance and position, are set out in the Investment Manager's
Report. The Group faces a number of risks and uncertainties, as set
out in the Strategic Report. The financial risk management
objectives and policies of the Group, including exposure to price
risk, interest rate risk, credit risk and liquidity risk are
discussed in note 18 to the financial statements.
As at 31 December 2023, the Group
had net current liabilities of £454.6 million (2022:
£136.1 million),
cash balances of £21.8 million (2022: £19.8
million) (excluding cash balances within investee
companies of £159.3 million) and security cash deposits of £40.1
million (2022: £nil). The significant net current liabilities
position of the Group at 31 December 2023 is due to both the
Company's revolving credit facility and two of the Company's term
debt tranches with NAB and CBA maturing within 12 months of the
year end and therefore being classified as current liabilities. The
Company expects to refinance the maturing term debt during
2024.
The Company had £1,390 million
(2022: £1,100 million) of term debt as at 31 December 2023, with an
additional £400 million drawn on its £600 million revolving credit
facility. The covenants on the Company's banking facilities are
limited to gearing and interest cover and the Company is expected
to continue to comply with these covenants going
forward.
The Group continues to meet
day-to-day liquidity needs through its cash resources.
The major cash outflows of the
Group are the payment of dividends, costs relating to the
acquisition of new assets and purchases of
its own shares, all of which are
discretionary. The Group has sufficient access to debt, including
its revolving credit facility, in order to fund any future wind
farm investment within the parameters of its Investment
Policy.
As the Company's shares traded at
an average discount to NAV of 10.5 per cent during the year, a
continuation vote is to be proposed at the Company's AGM in April
2024 in line with its Articles of Association. The Board believe
that the Company's share price performance during the year is
reflective of its macroeconomic environment, and not of the
financial prospects of the Company. The Board believe that the
outcome of the shareholder continuation vote will not impair the
Company's ability to operate as a going concern.
The Board has reviewed Group
forecasts and projections which cover a period of at least 12
months from the date of approval of this report. On the basis of
this review, taking into account foreseeable changes in investment
and trading performance, and after making due enquiries, the
Directors have a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence
from the date of approval of this report to at least February 2025.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
Accounting for
subsidiaries
The Directors have concluded that
the Group has all the elements of control as prescribed by IFRS 10
"Consolidated Financial Statements" in relation to all its
subsidiaries and that the Company continues to satisfy the 3
essential criteria to be regarded as an investment entity as
defined in IFRS 10, IFRS 12 "Disclosure of Interests in Other
Entities" and IAS 27 "Consolidated and Separate Financial
Statements". The 3 essential criteria are such 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 essential
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. Although the
Company has invested in equity interests in wind farms that have an
indefinite life, the underlying wind farm assets that it invests in
have an expected life of 30 years. The Company intends to hold
these wind farms for the remainder of their useful life to preserve
the capital value of the portfolio. However, as the wind farms are
expected to have no residual value after their 30 year life, 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" and IFRS 9 "Financial
Instruments". The financial support provided by the Company to its
unconsolidated subsidiaries is disclosed in note 10.
Notwithstanding this, IFRS 10
requires subsidiaries that provide services that relate to the
investment entity's investment activities to be consolidated.
Accordingly, the annual financial statements include the
consolidated financial statements of Greencoat UK Wind PLC and
Greencoat UK Wind Holdco Limited (a 100 per cent owned UK
subsidiary). In respect of these entities, intra-Group balances and
any unrealised gains arising from intra-Group transactions are
eliminated in preparing the consolidated financial statements.
Unrealised losses are eliminated unless the costs cannot be
recovered. The financial statements of subsidiaries that are
included in the consolidated financial statements are included from
the date that control commences until the dates that control
ceases.
In the Parent Company's financial
statements, investments in subsidiaries are measured at fair value
through profit or loss in accordance with IFRS 9, as permitted by
IAS 27.
Accounting for associates and
joint ventures
The Group has taken the exemption
permitted by IAS 28 "Investments in Associates and Joint Ventures"
and IFRS 11 "Joint Arrangements" for entities similar to investment
entities and measures its investments in associates and joint
ventures at fair value. The Directors consider an associate to be
an entity over which the Group has significant influence, through
an ownership of between 20 per cent and 50 per cent. The Group's
associates and joint ventures are disclosed in note 10.
New and amended standards and
interpretations applied
The following new standards or
interpretations are effective for the first time for periods
beginning on or after 1 January 2023 and had an effect on the
Group's or Company's financial statements:
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial
Statements and IFRS Practice Statement 2 Making Materiality
Judgements);
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting Policies, Changes in
Accounting Estimates and Errors); and
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes).
New and amended
standards and interpretations not applied
At the date of authorisation of
these financial statements, the following amendments had been
published and will be effective in future accounting
periods.
Effective for accounting periods
beginning on or after 1 January 2024:
· Classification of Liabilities as Current or Non-Current
(Amendments to IAS 1 Presentation
of Financial Statements);
· Non-current Liabilities with Covenants (Amendments to IAS 1
Presentation of Financial
Statements); and
· Supplier Finance Arrangements (Amendments to IAS 7
Statement of
Cash Flows and IFRS 7
Financial
Instruments: Disclosures)
Effective for accounting periods
beginning on or after 1 January 2025:
· Lack
of Exchangeability (Amendments to IAS 21 The Effects of Changes in Foreign Exchange
Rates)
The impact of these standards is
not expected to be material to the reported results and financial
position of the Group.
Financial instruments
Financial assets and financial
liabilities are recognised in the Group's Consolidated Statement of
Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
At 31 December 2023 and 2022, the
carrying amounts of cash at bank, security cash deposits,
receivables, payables, accrued expenses and short term borrowings
reflected in the financial statements are reasonable estimates of
fair value in view of the nature of these instruments or the
relatively short period of time between the original instruments
and their expected realisation. The fair value of advances and
other balances with related parties which are short term or
repayable on demand is equivalent to their carrying
amount.
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. All purchases of financial assets are
recorded at the date on which the Group became party to the
contractual requirements of the financial asset.
The Group's and Company's
financial assets principally comprise of investments held at fair
value through profit or loss and receivables.
Receivables at amortised
cost
Impairment provisions for
receivables are recognised based on a forward-looking expected
credit loss model. All financial assets assessed under this model
are immaterial to the financial statements.
Financial assets held at fair
value through profit or loss
Investments are designated upon
initial recognition as held at fair value through profit or loss.
Gains or losses resulting from the movement in fair value of the
Group's loan and equity investments are recognised in the
Consolidated Statement of Comprehensive Income at each valuation
point. 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's loan and equity
investments in Holdco are held at fair value through profit or
loss. Gains or losses resulting from the movement in fair value are
recognised in the Company's Statement of Comprehensive Income at
each valuation point.
Fair value is defined as the
amount for which an asset could be exchanged between knowledgeable
willing parties in an arm's length transaction. Fair value is
calculated on a discounted cash flow basis in accordance with IFRS
13 and IFRS 9.
Recognition and derecognition of
financial assets
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 in the
Consolidated Statement of Comprehensive Income as
incurred.
A financial asset (in whole or in
part) is derecognised either:
· when
the Group has transferred substantially all the risks and rewards
of ownership; or
· when
it has neither transferred or retained substantially all the risks
and rewards and when it no longer has control over the assets or a
portion of the asset; or
· when
the contractual right to receive cash flow has expired.
Financial liabilities
Financial liabilities are
classified according to the substance of the contractual agreements
entered into and are recorded on the date on which the Group
becomes party to the contractual requirements of the financial
liability.
All loans and borrowings are
initially recognised at cost, being fair value of the consideration
received, less issue costs where applicable. After initial
recognition, all interest bearing loans and borrowings are
subsequently measured at amortised cost using the effective
interest rate method. Loan balances as at
the year end have not been discounted to reflect amortised cost, as
the amounts are not materially different from the outstanding
balances.
Finance expenses
Borrowing costs are recognised in
the Consolidated Statement of Comprehensive Income in the period to
which they relate on an accruals basis.
Share capital
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.
Incremental costs directly
attributable to the issue of new shares are shown in share premium
as a deduction from proceeds. 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.
Repurchase of ordinary share
capital
The cost of repurchasing ordinary
shares including the related stamp duty and transaction costs are
recognised in the Consolidated Statement of Changes in Equity and
included within retained earnings. Share repurchase transactions
are accounted for on a trade date basis. The nominal value of
ordinary share capital repurchased and cancelled is transferred out
of share capital and into the capital redemption
reserve.
Cash at bank
Cash at bank comprises cash
balances held at bank.
Security cash deposits
Security cash deposits comprise
amounts held on call with banks and other short term highly liquid
deposits, that are readily convertible to a known amount of cash
and are subject to an insignificant risk of changes in value. These
balances have been included within receivables.
Dividends
Dividends payable are recognised
as distributions in the financial statements when the Company's
obligation to make payment has been established.
Income recognition
Dividend income and interest
income on shareholder loan investments are recognised when the
Group's entitlement to receive payment is established.
Gains or losses resulting from the
movement in fair value of the Group's and Company's investments
held at fair value through profit or loss are recognised in the
Consolidated or Company Statement of Comprehensive Income at each
valuation point.
Expenses
Expenses are accounted for on an
accruals basis. Share issue expenses of the Company directly
attributable to the issue and listing of shares are charged to the
share premium account.
The Company issues shares to the
Investment Manager in exchange for receiving investment management
services. The fair value of the investment management services
received in exchange for shares is recognised as an expense at the
time at which the investment management fees are earned, with a
corresponding increase in equity. The fair value of the investment
management services is calculated by reference to the definition of
investment management fees in the Investment Management
Agreement.
Taxation
Under the current system of
taxation in the UK, the Group is liable to taxation on its
operations in the UK.
Current tax is the expected tax
payable on the taxable income for the period, using tax rates that
have been enacted or substantively enacted at the date of the
Consolidated Statement of Financial Position.
The Group does not expect to
recognise any deferred tax assets or liabilities as it would expect
to avail from substantial shareholder relief on any temporary or
permanent difference arising from any potential future sale of an
investment.
2.
Critical accounting judgements, estimates and
assumptions
The preparation of the financial
statements requires the application of estimates and assumptions
which may affect the results reported in the financial statements.
Estimates, by their nature, are based on judgement and available
information.
As disclosed in note 1, the
Directors have concluded that the Company meets the definition of
an investment entity as defined in IFRS 10, IFRS 12 and IAS 27.
This conclusion involved a degree of judgement and assessment as to
whether the Company met the criteria outlined in the accounting
standards.
Significant accounting estimates and
assumptions
The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying value of assets and liabilities are those used to
determine the fair value of the investments as disclosed in note 9
to the financial statements.
The key assumptions that have a
significant impact on the carrying value of investments that are
valued by reference to the discounted value of future cash flows
are the useful life of the assets, the discount rates, the level of
wind resource, the rate of inflation, the price at which the power
and associated benefits can be sold and the amount of electricity
the assets are expected to produce. The sensitivity analysis of
these key assumptions is outlined in note 9 to the financial
statements.
Significant judgement
Useful lives are based on the
Investment Manager's estimates of the period over which the assets
will generate revenue which are periodically reviewed for continued
appropriateness. The assumption used for the useful life of the
wind farms is 30 years. The actual useful life may be a shorter or
longer period depending on the actual operating conditions
experienced by the asset.
The discount rates are subjective
and therefore it is feasible that a reasonable alternative
assumption may be used resulting in a different value. The discount
rates applied to the cash flows are reviewed periodically by the
Investment Manager to ensure they are at the appropriate level. The
Investment Manager will take into consideration market
transactions, where of similar nature, when considering changes to
the discount rates used.
The revenues and expenditure of
the investee companies are frequently partly or wholly subject to
indexation and an assumption is made that inflation will increase
at a long term rate.
The price at which the output from
the generating assets is sold is a factor of both wholesale
electricity prices and the revenue received from the Government
support regimes. Future power prices are estimated using external
third party forecasts, and may be adjusted by the Investment
Manager where more conservative assumptions are considered
appropriate. These third party forecasts take the form of
specialist consultancy reports, reflecting various factors
including gas prices, carbon prices and renewables deployment, each
of which reflect the UK and global response to climate change. The
future power price assumptions are reviewed as and when these
forecasts are updated. There is an inherent uncertainty in future
wholesale electricity price projection.
Specifically commissioned external
reports are used to estimate the expected electrical output from
the wind farm assets taking into account the expected average wind
speed at each location and generation data from historical
operation. The actual electrical output may differ considerably
from that estimated in such a report mainly due to the variability
of actual wind to that modelled in any one period. Assumptions
around electrical output will be reviewed only if there is good
reason to suggest there has been a material change in this
expectation.
As disclosed in note 10, the fair
value of guarantees and counter-indemnities provided by the Group
on behalf of its investments are considered to be £nil, as the
Directors do not expect Group cash flows to crystalise as a result
of these guarantees or counter-indemnities.
3.
Investment management fees
Under the terms of the Investment
Management Agreement, the Investment Manager is entitled to a
combination of a Cash Fee and an Equity Element from the
Company.
The Cash Fee is based upon the NAV
as at the start of the quarter in question on the following
basis:
· on
that part of the then most recently announced NAV up to and
including £500 million, an amount equal to 0.25 per cent of such
part of the NAV;
· on
that part of the then most recently announced NAV over £500 million
and up to and including £1,000 million, an amount equal to 0.225
per cent of such part of the NAV;
· on
that part of the then most recently announced NAV over £1,000
million and up to and including £3,000 million, an amount equal to
0.2 per cent of such part of the NAV; and
· on
that part of the then most recently announced NAV over £3,000
million, an amount equal to 0.175 per cent of such part of the
NAV.
The Equity Element is calculated
quarterly in advance and has a value as set out below:
· on
that part of the then most recently announced NAV up to and
including £500 million, 0.05 per cent; and
· on
that part of the then most recently announced NAV over £500 million
up to and including £1,000 million, 0.025 per cent.
The ordinary shares issued to the
Investment Manager under the Equity Element are subject to a 3 year
lock-up starting from the quarter in which they are due to be
paid.
As at 31 December each year, the
Cash Fee and Equity Element shall be subject to a true-up to the
value that would have been deliverable had they been calculated
quarterly in arrears.
Investment management fees paid or
accrued in the year were as follows:
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
Cash Fee
|
31,344
|
29,848
|
Equity Element
|
1,500
|
1,500
|
|
32,844
|
31,348
|
The value of the Equity Element
and the Cash Fee detailed in the table above include the true-up
amount for the year calculated in accordance with the Investment
Management Agreement.
The Cash Fee and Equity Element
relating to the quarter ended 31 December 2023 were accrued at year
end. This is further detailed in note 19.
4.
Investment income
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
Dividends received (note
19)
|
359,939
|
525,897
|
Interest on shareholder loan
investment received (note 19)
|
62,785
|
51,259
|
|
422,724
|
577,156
|
5.
Operating expenses
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
Management fees (note
3)
|
32,844
|
31,348
|
Group and SPV administration
fees
|
1,231
|
1,000
|
Non-executive Directors'
fees
|
385
|
338
|
Other expenses
|
2,895
|
2,469
|
Fees to the Company's
Auditor:
|
|
|
for audit of the statutory
financial statements
|
248
|
187
|
for other audit related
services
|
5
|
4
|
|
37,608
|
35,346
|
Total fees payable to the
Company's Auditor, BDO LLP, for non-audit services during the year
ended 31 December 2023 were £4,800 (2022: £4,290), payable in
relation to a limited review of the half year report.
6.
Taxation
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
UK Corporation Tax
charge
|
392
|
-
|
|
392
|
-
|
The corporation tax rate increased
from 19 per cent to 25 per cent (for companies with profits over
£250,000), from 1 April 2023.
The tax charge for the year shown
in the Statement of Comprehensive Income is lower than the standard
rate of corporation tax of 23.52 per cent (2022: 19 per cent). The
differences are explained below.
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
Profit for the year before
taxation
|
126,580
|
953,863
|
|
|
|
Profit for the year multiplied by
the standard rate of corporation tax of 23.52 per cent (2022: 19
per cent)
|
29,772
|
181,234
|
|
|
|
Fair value movements (not subject
to taxation)
|
47,667
|
(83,484)
|
Dividends received (not subject to
taxation)
|
(84,660)
|
(99,920)
|
Expenditure not deductible for tax
purposes
|
658
|
603
|
Surrendering of tax losses to
other group companies for nil consideration
|
5,042
|
819
|
Other net tax
adjustments
|
1,521
|
748
|
Adjustment from previous
period
|
392
|
-
|
Total tax charge
|
392
|
-
|
7.
Earnings per share
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
|
Profit attributable to equity
holders of the Company - £'000
|
126,188
|
953,863
|
Weighted average number of
ordinary shares in issue
|
2,317,758,378
|
2,317,629,517
|
Basic and diluted earnings from continuing operations in the
year (pence)
|
5.44
|
41.16
|
Dilution of the earnings per share
as a result of the Equity Element of the investment management fee
as disclosed in note 3 does not have a significant impact on the
basic earnings per share.
8.
Dividends declared with respect to the
year
Interim dividends paid during the year ended 31 December
2023
|
Dividend per
share
|
Total
dividend
|
|
pence
|
£'000
|
With respect to the quarter ended
31 December 2022
|
1.93
|
44,742
|
With respect to the quarter ended
31 March 2023
|
2.19
|
50,775
|
With respect to the quarter ended
30 June 2023
|
2.19
|
50,780
|
With respect to the quarter ended
30 September 2023
|
2.19
|
50,746
|
|
8.50
|
197,043
|
Interim dividends declared after 31 December 2023 and not
accrued in the year
|
Dividend per
share
|
Total
dividend
|
|
pence
|
£'000
|
With respect to the quarter ended
31 December 2023
|
3.43
|
79,114
|
|
3.43
|
79,114
|
On 29 January 2024, the Company
announced a dividend of 3.43 pence per share with respect to the
quarter ended 31 December 2023, bringing the total dividend
declared with respect to the year to 31 December 2023 to £231.4
million, equivalent to 10 pence per share. The record date for the
dividend is 16 February 2024 and the payment date is 29 February
2024.
The following table shows
dividends paid in the prior year.
Interim dividends paid during the year ended 31 December
2022
|
Dividend per
share
|
Total
dividend
|
|
pence
|
£'000
|
With respect to the quarter ended
31 December 2021
|
1.795
|
41,597
|
With respect to the quarter ended
31 March 2022
|
1.930
|
44,730
|
With respect to the quarter ended
30 June 2022
|
1.930
|
44,734
|
With respect to the quarter ended
30 September 2022
|
1.930
|
44,739
|
|
7.585
|
175,800
|
9.
Investments at fair value through profit or
loss
Group
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Opening balance
|
4,959,312
|
4,042,545
|
Additions
|
820,925
|
484,153
|
Repayment of shareholder loan
investments (note 19)
|
(50,199)
|
(13,482)
|
Unrealised movement in fair value
of investments
|
(191,402)
|
446,096
|
|
5,538,636
|
4,959,312
|
The investments made in underlying
assets are carried at fair value through profit and loss. The
investments are typically made through a combination of shareholder
loans and equity into the SPVs which own the underlying asset. The
nominal value of the shareholder loan investments as at 31 December
2023 was £1,484,003,180 (2022: £1,087,080,412).
The movement in investments of the
Company during the year and the prior year was made up as
follows:
Company
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Opening balance
|
4,978,816
|
4,046,365
|
Loan advanced to Holdco (note
19)
|
680,800
|
260,811
|
Repayment of loan to Holdco (note
19)
|
(328,412)
|
(347,862)
|
Unrealised movement in fair value
of investments
|
227,153
|
1,019,502
|
|
5,558,357
|
4,978,816
|
The Company's shareholder loan
investment in Holdco is repayable on demand.
Fair value measurements
IFRS 13 requires disclosure of
fair value measurement by level. The level of fair value hierarchy
within the financial assets or financial liabilities is determined
on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities
are classified in their entirety into only one of the following 3
levels:
· Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
· Level 2 - inputs other than quoted prices included
within Level 1 that are observable for the assets or liabilities,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices); and
· Level 3 - inputs for assets or liabilities that are not based
on observable market data (unobservable inputs).
The determination of what
constitutes 'observable' requires significant judgement by the
Group. The Group considers observable data to be market data that
is readily available, regularly distributed or updated, reliable
and verifiable, not proprietary, and provided by independent
sources that are actively involved in the relevant
market.
The only financial instruments
held at fair value are the instruments held by the Group in the
SPVs, which are fair valued at each reporting date. The Group's
investments have been classified within Level 3 as the investments
are not traded and contain unobservable inputs. The Company's
investments are all considered to be Level 3 assets. As the fair
value of the Company's equity and loan investments in Holdco is
ultimately determined by the underlying fair values of the SPV
investments, the Company's sensitivity analysis of reasonably
possible alternative input assumptions is the same as for the
Group.
Due to the nature of the
investments, they are always expected to be classified as Level 3.
There have been no transfers between levels during the year ended
31 December 2023.
Any transfers between the levels
would be accounted for on the last day of each financial
period.
Valuations are derived using a
discounted cash flow methodology in line with IPEV Valuation
Guidelines and take into account, inter alia, the
following:
· due
diligence findings where relevant;
· the
terms of any material contracts including PPAs;
· asset performance;
· power price forecast from a leading market consultant;
and
· the
economic, taxation or regulatory environment.
Sensitivity analysis
The fair value of the Group's
investments is £5,538,635,628 (2022: £4,959,311,361). The analysis
below is provided to illustrate the sensitivity of the fair value
of investments to an individual input, while all other variables
remain constant. The Board considers these changes in inputs to be
within reasonable expected ranges. This is not intended to imply
the likelihood of change or that possible changes in value would be
restricted to this range.
31 December 2023
Input
|
Base case
|
Change in
input
|
Change
in
fair value of investments
|
Change in NAV per
share
|
|
|
|
£'000
|
pence
|
Discount rate
|
11 per cent levered portfolio
IRR
|
+ 0.5
per cent
|
(170,310)
|
(7.4)
|
|
|
- 0.5
per cent
|
179,963
|
7.8
|
|
|
|
|
|
Long term inflation
rate
|
RPI: 3.5 per cent to 2030, 2.5 per
cent thereafter
CPI: 2.5 per cent
|
- 0.5
per cent
|
(162,604)
|
(7.0)
|
|
+ 0.5
per cent
|
170,870
|
7.4
|
|
|
|
|
|
Energy yield
|
P50
|
10 year
P90
|
(352,901)
|
(15.3)
|
|
|
10 year
P10
|
352,854
|
15.3
|
|
|
|
|
|
Power price
|
Forecast by leading
consultant
|
- 10 per
cent
|
(335,334)
|
(14.5)
|
|
+ 10 per
cent
|
316,943
|
13.7
|
|
|
|
|
|
Asset life
|
30 years
|
- 5
years
|
(313,935)
|
(13.6)
|
|
|
+ 5
years
|
204,932
|
8.9
|
31 December 2022
Input
|
Base case
|
Change in
input
|
Change
in
fair value of investments
|
Change in NAV per
share
|
|
|
|
£'000
|
pence
|
Discount rate
|
10 per cent levered portfolio
IRR
|
+ 0.5
per cent
|
(155,166)
|
(6.7)
|
|
|
- 0.5
per cent
|
163,665
|
7.1
|
|
|
|
|
|
Long term inflation
rate
|
RPI: 3.5 per cent to 2030, 2.5 per
cent thereafter
CPI: 2.5 per cent
|
- 0.5
per cent
|
(144,045)
|
(6.2)
|
|
+ 0.5
per cent
|
151,076
|
6.5
|
|
|
|
|
|
Energy yield
|
P50
|
10 year
P90
|
(323,717)
|
(14.0)
|
|
|
10 year
P10
|
323,657
|
14.0
|
|
|
|
|
|
Power price
|
Forecast by leading
consultant
|
- 10 per
cent
|
(249,393)
|
(10.8)
|
|
+ 10 per
cent
|
236,130
|
10.2
|
|
|
|
|
|
Asset life
|
30 years
|
- 5
years
|
(229,237)
|
(9.9)
|
|
|
+ 5
years
|
148,321
|
6.4
|
The portfolio is valued on an
unlevered basis using a lower discount rate for fixed cash flows
and a higher discount rate for merchant cash flows. This
results in a blended unlevered portfolio IRR. The equivalent
levered portfolio IRR is calculated assuming 35 per cent gearing
and an all-in interest cost of 5 per cent.
The sensitivities above are
assumed to be independent of each other. Combined sensitivities are
not presented. The sensitivity analysis shown above would be the
same for the Company as for the Group. Also see the high transition
risk scenario discussed in the Strategic
Report.
10. Unconsolidated subsidiaries, associates and joint
ventures
The following table shows
subsidiaries of the Group. As the Company is regarded as an
Investment Entity as referred to in note 1, these subsidiaries have
not been consolidated in the preparation of the financial
statements:
Investment
|
Place of Business
|
Ownership Interest as at
31 December 2023
|
Ownership Interest as at
31 December 2022
|
|
|
|
|
Andershaw
|
Scotland(11)
|
100%
|
100%
|
|
|
Bin Mountain
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Bishopthorpe
|
England(11)
|
100%
|
100%
|
|
|
Braes of Doune
|
Scotland(12)
|
100%
|
100%
|
|
|
Breeze
Bidco(1)
|
Scotland(11)
|
100%
|
100%
|
|
|
Brockaghboy
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Carcant
|
Scotland(12)
|
100%
|
100%
|
|
|
Church Hill
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Corriegarth
|
Scotland(12)
|
100%
|
100%
|
|
|
Cotton Farm
|
England(11)
|
100%
|
100%
|
|
|
Crighshane
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Dalquhandy
|
Scotland(12)
|
100%
|
-
|
|
|
Douglas West
|
Scotland(12)
|
100%
|
100%
|
|
|
Earl's Hall Farm
|
England(11)
|
100%
|
100%
|
|
|
Glen Kyllachy
|
Scotland(10)
|
100%
|
100%
|
|
|
Kildrummy
|
Scotland(11)
|
100%
|
100%
|
|
|
Langhope Rig
|
Scotland(11)
|
100%
|
100%
|
|
|
Maerdy
|
Wales(11)
|
100%
|
100%
|
|
|
North Hoyle
|
Wales(11)
|
100%
|
100%
|
|
|
Screggagh
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Slieve Divena
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Slieve Divena 2
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
South Kyle
|
Scotland(12)
|
100%
|
-
|
|
|
Stroupster
|
Scotland(11)
|
100%
|
100%
|
|
|
Tappaghan
|
Northern
Ireland(10)
|
100%
|
100%
|
|
|
Twentyshilling
|
Scotland(11)
|
100%
|
100%
|
|
|
Walney
Holdco(2)
|
England(11)
|
100%
|
100%
|
|
|
Windy Rig
|
Scotland(11)
|
100%
|
100%
|
|
|
Bicker Fen
|
England(11)
|
80%
|
80%
|
|
|
Fenlands(3)
|
England(11)
|
80%
|
80%
|
|
|
Humber
Holdco(4)
|
England(11)
|
77.2%
|
77.2%
|
|
|
Nanclach(1)
|
Scotland(12)
|
75%
|
75%
|
|
|
Dunmaglass
Holdco(5)
|
Scotland(12)
|
71.2%
|
71.2%
|
|
|
Stronelairg
Holdco(6)
|
Scotland(12)
|
71.2%
|
71.2%
|
|
|
Hoylake(7)
|
England(12)
|
63%
|
63%
|
|
|
London Array
(8)
|
England(12)
|
54.9%
|
-
|
|
|
Drone Hill
|
Scotland(12)
|
51.6%
|
51.6%
|
|
|
North Rhins
|
Scotland(11)
|
51.6%
|
51.6%
|
|
|
Sixpenny Wood
|
England(11)
|
51.6%
|
51.6%
|
|
|
Yelvertoft
|
England(11)
|
51.6%
|
51.6%
|
|
|
SYND
Holdco(9)
|
UK(11)
|
51.6%
|
51.6%
|
|
|
1 The Group's investment in Nanclach is held through Breeze
Bidco.
2 The Group holds 100 per cent of Walney Holdco, which owns
25.1 per cent of Walney Wind Farm, resulting in the Group holding a
25.1 per cent indirect investment in Walney Wind Farm.
3 The Group's investments in Deeping St. Nicholas, Glass Moor,
Red House and Red Tile are held through Fenlands.
4 The Group holds 77.2 per cent of Humber Holdco, which owns 49
per cent of Humber Wind Farm, resulting in the Group holding a 37.8
per cent indirect investment in Humber Wind Farm.
5 The Group holds 71.2 per cent of Dunmaglass Holdco, which
owns 49.9 per cent of Dunmaglass Wind Farm, resulting in the Group
holding a 35.5 per cent indirect investment in Dunmaglass Wind
Farm.
6 The Group holds 71.2 per cent of Stronelairg Holdco, which
owns 49.9 per cent of Stronelairg Wind Farm, resulting in the Group
holding a 35.5 per cent indirect investment in Stronelairg Wind
Farm.
7 The Group holds 62.7 per cent of Hoylake, which owns 25 per
cent of Burbo Bank Extension, resulting in the Group holding a 15.7
per cent indirect investment in Burbo Bank Extension.
8 The Group holds 54.9 per cent of
London Array Holdco, which owns 25 per cent of London Array
Limited, resulting in the Group holding a 13.7 per cent indirect
investment in London Array Limited.
9 The Group's investments in Drone Hill, North Rhins, Sixpenny
Wood and Yelvertoft are held through SYND Holdco.
10 The registered office address is The Legacy Building,
Northern Ireland Science Park, Belfast, BT3 9DT.
11 The registered office address is 5th Floor, 20
Fenchurch Street, London, EC3M 3BY.
12 The registered office address is Collins House, Rutland
Square, Edinburgh, EH1 2AA.
There are no significant
restrictions on the ability of the Group's unconsolidated
subsidiaries to transfer funds in the form of cash
dividends.
The following table shows
associates and joint ventures of the Group which have been
recognised at fair value as permitted by IAS 28 "Investments in
Associates and Joint Ventures":
Investment
|
Place of Business
|
Ownership Interest as at
31 December 2023
|
Ownership Interest as at
31 December 2022
|
|
|
|
|
Kype Muir Extension
|
Scotland(3)
|
49.9%
|
-
|
|
|
ML Wind(1)
|
England(4)
|
49%
|
49%
|
|
|
Little Cheyne Court
|
England(4)
|
41%
|
41%
|
|
|
Clyde
|
Scotland(5)
|
28.2%
|
28.2%
|
|
|
Hornsea 1
Holdco(2)
|
England(6)
|
25%
|
25%
|
|
|
Rhyl Flats
|
Wales(4)
|
24.95%
|
24.95%
|
|
|
1 The Group's investments in Middlemoor and Lindhurst are 49
per cent (2022: 49 per cent). These are held through ML
Wind.
2 The Group holds 25 per cent of Hornsea 1 Holdco, which owns
50 per cent of Hornsea 1 Limited, resulting in the Group holding a
12.5 per cent indirect investment in Hornsea 1 Limited.
3 The registered office address is Inkerman House St John's
Road, Meadowfield, Durham, DH7 8XL.
4 The registered office address is Windmill Hill Business Park,
Whitehill Way, Swindon, Wiltshire, SN5 6PB.
5 The registered office address is Inveralmond House, 200
Dunkeld Road, Perth, PH1 3AQ.
6 The registered office address is 1 Bartholomew Lane, London,
England, EC2N 2AX.
Loans advanced by Holdco to the
investments are disclosed in note 19.
Guarantees and counter-indemnities
provided by the Group on behalf of its investments are as
follows:
Provider of security
|
Investment
|
Beneficiary
|
Nature
|
Purpose
|
Amount
£'000
|
The Company
|
Hornsea 1
|
National Westminster
Bank
|
Letter of credit
|
Debt service reserve
|
65,300
|
The Company
|
London Array
|
Orsted
|
Guarantee
|
PPA
|
60,000
|
Holdco
|
Clyde
|
SSE
|
Counter-indemnity
|
Grid, radar,
decommissioning
|
21,771
|
The Company
|
London Array
|
Shareholders
|
Guarantee
|
JOA participants
guarantee
|
20,000
|
The Company
|
North Hoyle
|
The Crown Estate
|
Guarantee
|
Decommissioning, rent
|
14,744
|
The Company
|
Glen Kyllachy
|
RWE
|
Counter-indemnity
|
Decommissioning, grid
|
12,238
|
The Company
|
Burbo Bank Extension
|
Orsted
|
Counter-indemnity
|
Rent, radar
|
11,000
|
The Company
|
Twentyshilling
|
Whiteside Hill Wind
Farm
|
Guarantee
|
Land access, cabling
|
10,000
|
The Company
|
Hornsea 1
|
Orsted
|
Letter of Credit
|
Lease obligations
|
8,410
|
The Company
|
London Array
|
Orsted
|
Counter-indemnity
|
OFTO, O&M
|
8,300
|
The Company
|
Dalquhandy
|
BT
|
Guarantee
|
PPA
|
5,897
|
The Company
|
South Kyle
|
Land owner
|
Guarantee
|
Decommissioning
|
5,332
|
The Company
|
South Kyle
|
East Ayrshire Council
|
Counter-indemnity
|
Decommissioning
|
5,000
|
The Company
|
Humber Gateway
|
RWE
|
Guarantee
|
Radar
|
4,900
|
The Company
|
South Kyle
|
Scottish Ministers
|
Counter-indemnity
|
Decommissioning
|
4,327
|
The Company
|
South Kyle
|
Dumfries and Galloway
Council
|
Counter-indemnity
|
Decommissioning
|
3,748
|
The Company
|
Andershaw
|
Statkraft
|
Guarantee
|
Decommissioning
|
3,500
|
Holdco
|
Kype Muir
Extension
|
Nordex
|
Guarantee
|
Turbine supply
|
3,185
|
Holdco
|
Dalquhandy
|
BayWa
|
Counter-indemnity
|
Decommissioning
|
2,525
|
The Company
|
Braes of Doune
|
Land owner
|
Guarantee
|
Decommissioning
|
2,000
|
The Company
|
Rhyl Flats
|
The Crown Estate
|
Guarantee
|
Decommissioning
|
1,829
|
The Company
|
Twentyshilling
|
Santander
|
Counter-indemnity
|
Decommissioning
|
1,807
|
The Company
|
Twentyshilling
|
Ministry of
Defence
|
Guarantee
|
Seismic array equipment
|
1,800
|
The Company
|
Windy Rig
|
Santander
|
Counter-indemnity
|
Access rights, decommissioning,
grid
|
1,409
|
The Company
|
Tom nan Clach
|
RBS
|
Unsecured guarantee
|
Decommissioning
|
1,348
|
The Company
|
Twentyshilling
|
NATS
|
Guarantee
|
Radar
|
1,244
|
The Company
|
Douglas West
|
Land owner
|
Guarantee
|
Decommissioning
|
1,200
|
The Company
|
Windy Rig
|
NATS
|
Guarantee
|
Radar
|
601
|
The Company
|
Stroupster
|
RBS
|
Unsecured guarantee
|
Decommissioning
|
366
|
Holdco
|
Stronelairg
|
SSE
|
Guarantee
|
Grid
|
301
|
The Company
|
South Kyle
|
NATS
|
Guarantee
|
Radar
|
285
|
Holdco
|
Dunmaglass
|
SSE
|
Guarantee
|
Grid
|
201
|
The Company
|
Cotton Farm
|
Land owner
|
Guarantee
|
Decommissioning
|
165
|
The Company
|
Sixpenny Wood
|
Land owner
|
Guarantee
|
Community fund
|
150
|
The Company
|
Twentyshilling
|
Santander
|
Counter-indemnity
|
Decommissioning
|
96
|
The Company
|
Yelvertoft
|
Daventry District
Council
|
Guarantee
|
Decommissioning
|
82
|
The Company
|
Langhope Rig
|
Barclays
|
Counter-indemnity
|
Decommissioning
|
81
|
The Company
|
Maerdy
|
Natural Resource
Wales
|
Guarantee
|
Access rights to neighbouring
land
|
n/a
|
|
|
|
|
|
285,142
|
The fair value of these guarantees
and counter-indemnities provided by the Group are considered to be
£nil (2022: £nil)
as disclosed in note 2.
11. Receivables
Group
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Security cash deposits
|
40,119
|
-
|
VAT receivable
|
676
|
527
|
Interest income
receivable
|
111
|
-
|
Prepayments
|
151
|
122
|
Other receivables
|
72
|
190
|
Amounts due from SPVs (note
19)
|
-
|
1,648
|
|
41,129
|
2,487
|
Company
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Security cash deposits
|
40,119
|
-
|
Prepayments
|
151
|
122
|
Interest income
receivable
|
111
|
-
|
Other receivables
|
-
|
3
|
|
40,381
|
125
|
12. Payables
Group
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Investment management fee
payable
|
8,090
|
1,364
|
Loan interest payable (note
13)
|
5,487
|
5,490
|
Commitment fee payable (note
13)
|
235
|
402
|
Letter of credit fees payable
(note 13)
|
93
|
324
|
Amounts due to SPVs (note
19)
|
2,508
|
-
|
Acquisition costs
payable
|
55
|
-
|
Other payables
|
1,105
|
774
|
|
17,573
|
8,354
|
Company
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Investment management fee
payable
|
8,090
|
1,364
|
Loan interest payable (note
13)
|
5,487
|
5,490
|
Commitment fee payable (note
13)
|
235
|
402
|
Letter of credit fees payable
(note 13)
|
93
|
324
|
Other payables
|
888
|
579
|
|
14,793
|
8,159
|
13. Loans and borrowings
Group and Company
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Opening balance
|
1,100,000
|
950,000
|
Revolving credit
facility
|
|
|
Drawdowns
|
400,000
|
260,000
|
Repayments
|
(200,000)
|
(310,000)
|
Term debt facilities
|
|
|
Drawdowns
|
640,000
|
200,000
|
Repayments
|
(150,000)
|
-
|
Closing balance
|
1,790,000
|
1,100,000
|
Reconciled as:
|
|
|
Current liabilities
|
500,000
|
150,000
|
Non current liabilities
|
1,290,000
|
950,000
|
Group and Company
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
|
|
|
Loan interest
|
58,787
|
27,489
|
Facility arrangement
fees
|
4,350
|
500
|
Commitment fees
|
2,289
|
3,114
|
Letter of credit fees
|
1,137
|
324
|
Professional fees
|
589
|
1,163
|
Other facility fees
|
244
|
185
|
Finance expense
|
67,396
|
32,775
|
The loan balance as at 31 December
2023 has not been adjusted to reflect amortised cost, as the
amounts are not materially different from the outstanding
balances.
The terms of the revolving credit
facility remain unchanged and comprise a margin of 1.75 per cent
per annum and a commitment fee of 0.65 per cent per annum of any
undrawn facility.
As at 31 December 2023, the
Company has a total revolving credit facility of £600 million
(2022: £600 million), of which amounts drawn were £400 million
(2022: £200 million), accrued interest payable was £228,404 (2022:
£52,675) and the outstanding commitment fee payable was £235,068
(2022: £401,753). The facility has a maturity date of 29 October
2024 and is classified as a current liability.
In the prior year, the Company
placed a letter of credit facility provided by Lloyds. The fee for
this facility is 1.25 per cent and the fee payable, as at 31
December 2023, was £93,400 (2022: £324,221).
On 31 August 2023, the Company
placed a letter of credit facility provided by ANZ. The fee for
this facility is 0.24 per cent per annum.
The Company's term debt facilities
and associated interest rate swaps have various maturity dates, as
set out in the below table.
|
|
|
|
|
|
Accrued interest at 31
December 2023
|
Provider
|
Maturity
date
|
Loan
margin
|
Swap rate /
SONIA
|
All-in
rate
|
Loan
principal
|
|
|
%
|
%
|
%
|
£'000
|
£'000
|
NAB
|
4 Nov
2024
|
1.15
|
1.06
|
2.21
|
50,000
|
179
|
CBA
|
14 Nov
2024
|
1.35
|
0.81
|
2.16
|
50,000
|
166
|
CBA
|
6 Mar
2025
|
1.55
|
1.53
|
3.08
|
50,000
|
236
|
CIBC
|
3 Nov
2025
|
1.50
|
1.51
|
3.01
|
100,000
|
454
|
ANZ
|
3 May
2026
|
1.45
|
5.92
|
7.37
|
75,000
|
45
|
NAB
|
1 Nov
2026
|
1.50
|
1.60
|
3.10
|
75,000
|
376
|
NAB
|
1 Nov
2026
|
1.50
|
0.84
|
2.34
|
25,000
|
95
|
CIBC
|
14 Nov
2026
|
1.40
|
0.81
|
2.21
|
100,000
|
334
|
Lloyds
|
9 May
2027
|
1.60
|
5.65
|
7.25
|
150,000
|
89
|
CBA
|
4 Nov
2027
|
1.60
|
1.37
|
2.97
|
100,000
|
455
|
ABN AMRO
|
2 May
2028
|
1.75
|
5.04
|
6.79
|
100,000
|
57
|
ANZ
|
3 May
2028
|
1.75
|
5.38
|
7.13
|
75,000
|
44
|
Barclays
|
3 May
2028
|
1.75
|
4.99
|
6.74
|
100,000
|
57
|
AXA
|
31 Jan
2030
|
-
|
-
|
3.03
|
125,000
|
1,598
|
AXA
|
31 Jan
2030
|
1.70
|
1.45
|
3.15
|
75,000
|
995
|
AXA
|
28 Apr
2031
|
-
|
-
|
6.43
|
25,000
|
13
|
AXA
|
28 Apr
2031
|
1.80
|
5.201
|
7.00
|
115,000
|
66
|
|
|
|
|
|
1,390,000
|
5,259
|
1 Facility pays SONIA as variable rate.
Loans with maturity dates of less
than 12 months amount to £100 million and are classified as current
liabilities. The remaining term debt of £1,290 million is
classified as non current liabilities.
£1,125 million of these term loans
contain swaps. £1,050 million of these instruments have been
treated as a single fixed rate loan agreement, which effectively
set interest rates payable at fixed rates as:
•
the contractual agreements for the loan and swap
are directly linked, were executed at the same time and are not
independently transferable;
•
there is a common counterparty for loan and swap
instruments; and
•
all loan and swap instruments are co terminus and
their commercial and financial terms reflect each other.
The £75 million term loan with AXA
is hedged with an interest rate swap with NAB, which demonstrates
consistent characteristics with the other term loans and swaps
other than the common counterparty. Similarly, the £150 million
term loan with Lloyds is hedged with an interest rate swap with a
different Lloyds counterparty. In such cases, the interest
rate swaps have not been recognised as separate instruments at fair
value and the Board is of the view that their fair values are not
sufficiently material to be separately recognised.
The £115 million term loan tranche
with AXA has not been hedged with an interest rate swap and so the
loan will be fully variable until maturity of the loan.
£150 million term loan tranches
with AXA have fixed all-in rates and have not been hedged by
interest rate swaps.
All borrowing ranks pari passu and
is secured by a debenture over the assets of the Company, including
its shares in Holdco, and a floating charge over Holdco's bank
accounts.
14. Contingencies and commitments
The Group had no contingencies and
commitments for the year ended 31 December 2023.
15. Share capital - ordinary shares
of £0.01
Date
|
Authorised, issued and fully paid
|
Number of shares
issued
|
Share
capital
|
Share
premium
|
Capital redemption
reserve
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
1
January 2023
|
|
2,318,089,989
|
23,181
|
2,470,396
|
-
|
2,493,577
|
Shares issued to the Investment Manager
|
|
|
|
|
|
3 February 2023
|
True-up of 2022 and
Q1 2023 Equity Element
|
167,923
|
2
|
373
|
-
|
375
|
5 May 2023
|
Q2 2023 Equity Element
|
225,441
|
2
|
373
|
-
|
375
|
4 August 2023
|
Q3 2023 Equity Element
|
226,182
|
2
|
373
|
-
|
375
|
|
|
619,546
|
6
|
1,119
|
-
|
1,125
|
|
|
|
|
|
|
|
Share buybacks
|
(6,577,736)
|
(66)
|
-
|
66
|
-
|
|
|
|
|
|
|
|
31
December 2023
|
|
2,312,131,799
|
23,121
|
2,471,515
|
66
|
2,494,702
|
Date
|
Authorised, issued and fully paid
|
Number of shares
issued
|
Share
capital
|
Share
premium
|
Total
|
|
|
|
£'000
|
£'000
|
£'000
|
1
January 2022
|
|
2,317,097,822
|
23,171
|
2,468,940
|
2,492,111
|
Shares issued to the Investment Manager
|
|
|
|
|
4 February 2022
|
True-up of 2021 and
Q1 2022 Equity Element
|
254,855
|
3
|
372
|
375
|
6 May 2022
|
Q2 2022 Equity Element
|
251,219
|
3
|
372
|
375
|
5 August 2022
|
Q3 2022 Equity Element
|
244,151
|
2
|
373
|
375
|
4 November 2022
|
Q4 2022 Equity Element
|
241,942
|
2
|
373
|
375
|
|
|
992,167
|
10
|
1,490
|
1,500
|
Other
|
|
|
|
|
1 January 2022
|
Less costs relating to 29 November
2021 share issue
|
-
|
-
|
(34)
|
(34)
|
31 December 2022
|
|
2,318,089,989
|
23,181
|
2,470,396
|
2,493,577
|
Shareholders are entitled to all
dividends paid by the Company and, on a winding up, provided the
Company has satisfied all of its liabilities, the shareholders are
entitled to all of the residual assets of the Company.
Pursuant to the terms of the
Investment Management Agreement, the Investment Manager receives an
Equity Element as part payment of its investment management fee as
disclosed in note 3. The figures given in the table in note 3
include the true-up amount of the investment management fee for the
periods calculated in accordance with the Investment Management
Agreement and issued subsequent to 31 December 2023.
Following the commencement of the
share buyback programme at the end of October 2023, the Company
repurchased and cancelled 6.6 million shares in the final 2 months
of the year. Further details regarding the Company's purchase of
its own shares are included in the Chairman's Statement.
16. Net assets per share
Group and Company
|
31 December
2023
|
31 December
2022
|
|
|
|
Net assets - £'000
|
3,793,997
|
3,873,228
|
Number of ordinary shares
issued
|
2,312,131,799
|
2,318,089,989
|
Total net assets - pence
|
164.1
|
167.1
|
17. Reconciliation of operating profit for the year to net cash
from operating activities
Group
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
Operating profit for the
year
|
193,976
|
986,638
|
Adjustments for:
|
|
|
Unrealised movement in fair value
of investments (note 9)
|
191,402
|
(446,096)
|
Investment acquisition
costs
|
2,797
|
3,146
|
(Increase)/decrease in
receivables
|
(38,639)
|
144
|
Increase in payables
|
9,157
|
519
|
Equity Element of Investment
Manager's fee (note 3)
|
1,500
|
1,500
|
Tax paid
|
(392)
|
-
|
Net cash flows from operating activities
|
359,801
|
545,851
|
Company
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
Operating profit for the
year
|
193,976
|
986,638
|
Adjustments for:
|
|
|
Unrealised movement in fair value
of investments (note 9)
|
(227,153)
|
(1,019,502)
|
Increase in receivables
|
(40,253)
|
(19)
|
Increase in payables
|
6,627
|
434
|
Equity Element of Investment
Manager's fee (note 3)
|
1,500
|
1,500
|
Tax paid
|
(392)
|
-
|
Net cash flows from operating activities
|
(65,695)
|
(30,949)
|
Reconciliation of cash flows and
non-cash flow changes in liabilities arising from financing
activities
Group and Company
|
Loans and
borrowings
|
Other
liabilities
|
|
£'000
|
£'000
|
As at 1 January 2023
|
1,100,000
|
6,168
|
Cash flows (net)
|
690,000
|
(67,773)
|
Movements in Statement of
Comprehensive Income
|
-
|
67,396
|
As at 31 December 2023
|
1,790,000
|
5,791
|
|
|
|
Group and Company
|
Loans and
borrowings
|
Other
liabilities
|
|
£'000
|
£'000
|
As at 1 January 2022
|
950,000
|
3,082
|
Cash flows (net)
|
150,000
|
(29,689)
|
Movements in Statement of
Comprehensive Income
|
-
|
32,775
|
As at 31 December 2022
|
1,100,000
|
6,168
|
18. Financial risk management
The Investment Manager and the
Administrator report to the Board on a quarterly basis and provide
information to the Board which allows it to monitor and manage
financial risks relating to its operations. The Group's activities
expose it to a variety of financial risks: market risk (including
price risk, interest rate risk and foreign currency risk), credit
risk and liquidity risk.
The Group's market risk is managed
by the Investment Manager in accordance with the policies and
procedures in place. The Group's overall market positions are
monitored on a quarterly basis by the Board.
Price risk
Price risk is defined as the risk
that the fair value of a financial instrument held by the Group
will fluctuate. Investments are measured at fair value through
profit or loss and are valued on a discounted cash flow basis.
Therefore, the value of these investments will be (amongst other
risk factors) a function of the discounted value of their expected
cash flows and, as such, will vary with movements in interest rates
and competition for such assets. As disclosed in note 9, the key
assumptions determining fair value of investments are subjective
and therefore it is feasible that a reasonable alternative
assumption may be used resulting in a different valuation for these
investments.
Interest rate risk
The Group's interest rate risk on
interest bearing financial assets is limited to interest earned on
security cash deposits. The Group also has exposure to interest
rate risk due to floating interest rates required to service
external borrowings through the revolving credit facility and the
unhedged £115 million term loan tranche with AXA. An increase of 1
per cent (2022: 3 per cent) represents the Investment Manager's
assessment of a reasonably possible change in interest rates.
Should the SONIA rate increase by 1 per cent, the annual interest
due on the facility and term loan would increase by £5,150,000
(2022: £6,000,000) on the basis that the revolving credit facility
is £400 million drawn (2022: £200 million). The Group's only other
exposure to interest rate risk is due to the £75 million term loan
with AXA and £150 million term loan with Lloyds that are hedged by
different counterparties. No material impact is expected for these
swaps. The Investment Manager regularly monitors interest rates to
ensure the Group has adequate provisions in place in the event of
significant fluctuations.
The
associated interest rate swaps on amounts drawn under the other
term debt facilities detailed in note 13, effectively set interest
payable at a fixed rate for the full term of the loans, thereby
mitigating the risks associated with the variability of cash flows
arising from interest rate fluctuations.
The Board considers that, as
shareholder loan investments bear interest at a fixed rate, they do
not carry any interest rate risk.
The Group's interest bearing
assets and liabilities as at 31 December 2023 are summarised
below:
|
|
Group
|
Fixed rate
|
Floating
rate
|
|
£'000
|
£'000
|
Assets
|
|
|
Security cash deposits (note
11)
|
-
|
40,119
|
Other receivables (note
11)
|
-
|
111
|
Investments
|
1,484,003
|
-
|
|
1,484,003
|
40,230
|
Liabilities
|
|
|
Loans and borrowings (note
13)
|
(1,275,000)
|
(515,000)
|
|
(1,275,000)
|
(515,000)
|
The Group's interest bearing
assets and liabilities as at 31 December 2022 are summarised
below:
|
|
Group
|
Fixed rate
|
Floating
rate
|
|
£'000
|
£'000
|
Assets
|
|
|
Investments
|
1,087,081
|
-
|
|
1,087,081
|
-
|
Liabilities
|
|
|
Loans and borrowings (note
13)
|
(900,000)
|
(200,000)
|
|
(900,000)
|
(200,000)
|
The Company's interest bearing
assets and liabilities as at 31 December 2023 are summarised
below:
|
|
Company
|
Fixed rate
|
Floating
rate
|
|
£'000
|
£'000
|
Assets
|
|
|
Security cash deposits (note
11)
|
-
|
40,119
|
Other receivables (note
11)
|
-
|
111
|
|
-
|
40,230
|
Liabilities
|
|
|
Loans and borrowings (note
13)
|
(1,275,000)
|
(515,000)
|
|
(1,275,000)
|
(515,000)
|
The Company's interest bearing
assets and liabilities as at 31 December 2022 are summarised
below:
|
|
Company
|
Fixed rate
|
Floating
rate
|
|
£'000
|
£'000
|
Liabilities
|
|
|
Loans and borrowings (note
13)
|
(900,000)
|
(200,000)
|
|
(900,000)
|
(200,000)
|
Foreign currency risk
Foreign currency risk is defined
as the risk that the fair values of future cash flows will
fluctuate because of changes in foreign exchange rates. The Group's
financial assets and liabilities are denominated in GBP and
substantially all of its revenues and expenses are in GBP. The
Group is not considered to be materially exposed to foreign
currency risk.
Credit risk
Credit risk is the risk of loss
due to the failure of a borrower or counterparty to fulfil its
contractual obligations. The Group is exposed to credit risk in
respect of other receivables, cash at bank, security cash deposits,
loan investments and loan advances. The Group's credit risk
exposure is minimised by dealing with financial institutions with
investment grade credit ratings and making loan investments which
are equity in nature. As loan investments are carried at fair
value, any credit risk movement is reflected in the fair value. The
Investment Manager regularly reviews the future cash flows and
valuations of the investee companies, to gain comfort as to the
recoverability of the loans. No balances are past due or
impaired.
The table below details the
Group's maximum exposure to credit risk:
Group
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
Other receivables (note
11)
|
859
|
717
|
Cash at bank
|
21,805
|
19,783
|
Security cash deposits (note
11)
|
40,119
|
-
|
Loan investments (note
9)
|
1,484,003
|
1,087,081
|
|
1,546,786
|
1,107,581
|
The table below details the
Company's maximum exposure to credit risk:
Company
|
31 December
2023
|
31 December
2022
|
|
£'000
|
£'000
|
|
|
|
Other receivables (note
11)
|
111
|
3
|
Cash at bank
|
52
|
2,446
|
Security cash deposits (note
11)
|
40,119
|
-
|
Loan investments (note
9)
|
2,696,103
|
2,343,715
|
|
2,736,385
|
2,346,164
|
The table below shows the cash
balances of the Group and the credit rating for each
counterparty:
Group
|
Rating
|
31 December
2023
|
31 December
2022
|
|
|
£'000
|
£'000
|
|
|
|
|
RBS International
|
A
|
21,805
|
17,505
|
The Crown Estate
|
n/a
|
-
|
2,278
|
|
|
21,805
|
19,783
|
The table below shows the cash
balances of the Company and the credit rating for each
counterparty:
Company
|
Rating
|
31 December
2023
|
31 December
2022
|
|
|
£'000
|
£'000
|
|
|
|
|
RBS International
|
A
|
52
|
168
|
The Crown Estate
|
n/a
|
-
|
2,278
|
|
|
52
|
2,446
|
Liquidity risk
Liquidity risk is the risk that
the Group and the Company may not be able to meet a demand for cash
or fund an obligation when due. The Investment Manager and the
Board continuously monitor forecast and actual cash flows from
operating, financing and investing activities to consider payment
of dividends, the repurchase of ordinary shares, repayment of the
Company's outstanding debt or further investing
activities.
The significant net current
liabilities position of the Group at 31 December 2023 is due to
both the Company's revolving credit facility and two of the
Company's term debt tranches with NAB and CBA maturing within 12
months of the year end and therefore being classified as current
liabilities. The Company expects to refinance the maturing term
debt during 2024.
The following tables detail the
Group's expected maturity for its financial assets (excluding
equity) and liabilities together with the contractual undiscounted
cash flow amounts:
Group - 31 December 2023
|
Less than 1
year
|
1 - 5
years
|
5+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Assets
|
|
|
|
|
Other receivables (note
11)
|
859
|
-
|
-
|
859
|
Cash at bank
|
21,805
|
-
|
-
|
21,805
|
Security cash deposits (note
11)
|
40,119
|
-
|
-
|
40,119
|
Loan investments
|
-
|
-
|
1,484,003
|
1,484,003
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Other payables (note
12)
|
(17,573)
|
-
|
-
|
(17,573)
|
Loans and borrowings
|
(589,744)
|
(1,129,977)
|
(369,089)
|
(2,088,810)
|
|
(544,534)
|
(1,129,977)
|
1,114,914
|
(559,597)
|
Group - 31 December 2022
|
Less than 1
year
|
1 - 5
years
|
5+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Assets
|
|
|
|
|
Other receivables (note
11)
|
717
|
-
|
-
|
717
|
Cash at bank
|
19,783
|
-
|
-
|
19,783
|
Loan investments
|
-
|
-
|
1,087,081
|
1,087,081
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Other payables (note
12)
|
(8,354)
|
-
|
-
|
(8,354)
|
Loans and borrowings
|
(185,768)
|
(819,975)
|
(212,815)
|
(1,218,558)
|
|
(173,622)
|
(819,975)
|
874,266
|
(119,331)
|
The shareholder loan investments
are repayable on demand.
The following tables detail the
Company's expected maturity for its financial assets (excluding
equity) and liabilities together with the contractual undiscounted
cash flow amounts:
Company - 31 December 2023
|
Less than 1
year
|
1 - 5
years
|
5+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Assets
|
|
|
|
|
Other receivables (note
11)
|
111
|
-
|
-
|
111
|
Cash at bank
|
52
|
-
|
-
|
52
|
Security cash deposits (note
11)
|
40,119
|
-
|
-
|
40,119
|
Loan investments
|
-
|
-
|
2,696,103
|
2,696,103
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Other payables (note
12)
|
(14,793)
|
-
|
-
|
(14,793)
|
Loans and borrowings
|
(589,744)
|
(1,129,977)
|
(369,089)
|
(2,088,810)
|
|
(564,255)
|
(1,129,977)
|
2,327,014
|
632,782
|
Company - 31 December 2022
|
Less than 1
year
|
1 - 5
years
|
5+ years
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Assets
|
|
|
|
|
Other receivables (note
11)
|
3
|
-
|
-
|
3
|
Cash at bank
|
2,446
|
-
|
-
|
2,446
|
Loan investments
|
-
|
-
|
2,343,715
|
2,343,715
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Other payables (note
12)
|
(8,159)
|
-
|
-
|
(8,159)
|
Loans and borrowings
|
(185,768)
|
(819,975)
|
(212,815)
|
(1,218,558)
|
|
(191,478)
|
(819,975)
|
2,130,900
|
1,119,447
|
The Group and Company will use
cash flow generation, equity placings, debt refinancing or
disposal of assets to manage liabilities as they fall due in the
longer term.
Capital risk management
The Company considers its capital
to comprise ordinary share capital, distributable reserves and
retained earnings. The Company is not subject to any externally
imposed capital requirements.
The Group's and 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 current cash, debt and equity.
19. Related party transactions
Amounts paid to the Directors
during the year are as outlined in the Directors' Remuneration
Report. £46,461 (2022: £39,927) of employer's national insurance
was paid on non-executive Directors' fees during the
year.
During the year, the Company
increased its loan to Holdco by £680,800,000 (2022: £260,811,425)
and Holdco settled amounts of £328,411,737 (2022: £347,862,031).
The amount outstanding at the year end was £2,696,103,477 (31
December 2022: £2,343,715,214).
Under the terms of a Management
Services Agreement with Holdco, the Company receives
£800,000 per
annum in relation to management and administration services. During
the year, £800,000 (2022: £800,000) was paid from Holdco to the Company under
this agreement and amounts due to the Company at the year end were
£nil (2022:
£nil).
Holdco has Management Service
Agreements in place with various wind farms. Total amounts received
by Holdco, amounts paid to the Investment Manager and amounts paid
to the Administrator during the year, are outlined in the table
below.
During the year, Holdco received
£1,861,994 (2022: £2,847,873) in relation to renewables obligation
proceeds on behalf of Bin Mountain, Carcant and Tappaghan. Amounts
due to these investee companies as at 31 December 2023 were £3,246
(2022: £nil).
As at 31 December 2023, £182,698
was due to Bicker Fen (2022: £230,214 due from Bicker Fen),
£834,064 was due
to Fenlands (2022: £120,135 due from Fenlands),
£924,611 was due
to North Hoyle (2022: £869,799 due from
North Hoyle), £147,295 was due to Nanclach
(2022: £nil), £51,783 was due to Langhope Rig (2022: £nil),
£27,133 was due to Douglas West (2022:
£nil) and £1,017,709 was due from Burbo (2022: £nil) in respect of tax
payments/rebates paid/received by Holdco.
As at 31 December 2023, under the
terms of Management Services Agreements with the SPVs, Holdco was
due to receive £982 from Fenlands (2022: £899 from Bicker Fen, £899
from Fenlands and £32,588 from Windy Rig).
As at 31 December 2023, under the
terms of the Investment Management Agreement, the Company owed the
Investment Manager a Cash Fee of £7,715,319 and an Equity Element
of £375,000, relating to the final quarter of the year and a 2023
true-up.
As at 31 December 2023, an amount
of £1,539,501 (2022: £nil) was payable from the Group to Douglas
West, being a return of a dividend received during the
year.
|
For the year ended
31 December 2023
|
|
Income
received
|
Expenses paid to the
Investment Manager
|
Expenses paid to the
Administrator
|
|
£
|
£
|
£
|
Andershaw, Bin Mountain,
Bishopthorpe, Brockaghboy, Carcant, Church Hill, Cotton Farm,
Corriegarth, Crighshane, Douglas West, Earl's Hall Farm, Glen
Kyllachy, Kildrummy, Langhope Rig, Maerdy, North Hoyle, Screggagh,
Slieve Divena, Slieve Divena 2, Stroupster, Tappaghan, Tom nan
Clach, Twentyshilling, Windy Rig:
£56,918 income receivable per wind farm per annum
£28,459 expenses payable to the Investment Manager per wind farm
per annum
£28,459 expenses payable to the Administrator per wind farm per
annum
|
1,366,019
|
683,010
|
683,010
|
Braes of Doune, Drone Hill, North
Rhins, Sixpenny Wood, Yelvertoft:
£42,688 income receivable per wind farm per annum
£14,229 expenses payable to the Investment Manager per wind farm
per annum
£28,459 expenses payable to the Administrator per wind farm per
annum
|
213,440
|
71,147
|
142,293
|
Dalquhandy:
£32,200 income receivable per annum
£16,100 expenses payable to the Investment Manager per annum
£16,100 expenses payable to the Administrator per annum
|
32,200
|
16,100
|
16,100
|
Dunmaglass Holdco, Stronelairg
Holdco:
£8,574 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per
annum
£8,574 expenses payable to the Administrator per wind farm per
annum
|
17,148
|
-
|
17,148
|
Bicker Fen, Fenlands:
£3,274 income receivable per wind farm per annum
£3,274 expenses payable to the Investment Manager per wind farm per
annum
£nil expenses payable to the Administrator per wind farm per
annum
|
6,548
|
6,548
|
-
|
Walney Holdco:
£21,570 income receivable per annum
£10,785 expenses payable to the Investment Manager per annum
£10,785 expenses payable to the Administrator per annum
|
21,570
|
10,785
|
10,785
|
Humber Holdco:
£8,459 income receivable per annum
£nil expenses payable to the Investment Manager per annum
£8,459 expenses payable to the Administrator per annum
|
8,459
|
-
|
8,459
|
Burbo Bank Extension:
£6,740 income receivable per annum
£6,740 expenses payable to the Investment Manager per annum
£nil expenses payable to the Administrator per wind farm per
annum
|
6,740
|
6,740
|
-
|
|
|
|
|
Total
|
1,672,124
|
794,329
|
877,795
|
|
For the year ended
31 December 2022
|
|
Income
received
|
Expenses paid to the
Investment Manager
|
Expenses paid to the
Administrator
|
|
£
|
£
|
£
|
Andershaw, Bishopthorpe,
Brockaghboy, Church Hill, Corriegarth, Crighshane, Douglas West,
Glen Kyllachy(1), Langhope Rig, North Hoyle, Screggagh,
Slieve Divena, Slieve Divena 2, Stroupster, Tom nan Clach,
Twentyshilling(2), Windy
Rig(3):
£52,102 income receivable per wind farm per annum
£26,051 expenses payable to the Investment Manager per wind farm
per annum
£26,051 expenses payable to the Administrator per wind farm per
annum
|
864,312
|
432,156
|
432,156
|
Bin Mountain, Braes of Doune,
Carcant, Cotton Farm, Drone Hill, Earl's Hall Farm, Kildrummy,
Maerdy, North Rhins, Sixpenny Wood, Tappaghan,
Yelvertoft:
£39,077 income receivable per wind farm per annum
£13,026 expenses payable to the Investment Manager per wind farm
per annum
£26,051 expenses payable to the Administrator per wind farm per
annum
|
468,922
|
156,307
|
312,615
|
Dunmaglass Holdco, Stronelairg
Holdco:
£7,848 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per
annum
£7,848 expenses payable to the Administrator per wind farm per
annum
|
15,697
|
-
|
15,697
|
Bicker Fen,
Fenlands:
£2,997 income receivable per wind farm per annum
£2,997 expenses payable to the Investment Manager per wind farm per
annum
£nil expenses payable to the Administrator per wind farm per
annum
|
5,994
|
5,994
|
-
|
Walney Holdco:
£19,746 income receivable per annum
£9,873 expenses payable to the Investment Manager per annum
£9,873 expenses payable to the Administrator per annum
|
19,746
|
9,873
|
9,873
|
Humber Holdco:
£7,744 income receivable per wind farm per annum
£nil expenses payable to the Investment Manager per wind farm per
annum
£7,744 expenses payable to the Administrator per wind farm per
annum
|
7,744
|
-
|
7,744
|
|
|
|
|
Total
|
1,382,415
|
604,330
|
778,085
|
(1) Acquired in December 2021. £53,396 income received and
£26,698 paid to the Investment Manager during the year.
(2) Acquired in June 2022. £27,157 income received and £13,579
paid to the Investment Manager during the year.
(3) Acquired in December 2021. £54,326 income received and
£27,163 paid to the Investment Manager during the year.
The table below shows dividends
received in the year from the Group's investments.
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
£'000
|
£'000
|
Humber Holdco
(1)
|
53,436
|
53,017
|
Clyde
|
46,776
|
51,055
|
Stronelairg Holdco
(2)
|
26,154
|
33,733
|
Walney Holdco
(3)
|
25,298
|
28,890
|
Hornsea 1 Holdco
(4)
|
16,842
|
-
|
North Hoyle
|
14,412
|
27,730
|
Braes of Doune
|
14,361
|
28,724
|
Brockaghboy
|
13,804
|
18,763
|
Corriegarth
|
13,097
|
32,463
|
Hoylake (5)
|
12,583
|
7,342
|
Dunmaglass Holdco
(6)
|
11,298
|
13,177
|
ML Wind (7)
|
10,143
|
16,317
|
Fenlands (8)
|
9,515
|
16,937
|
SYND Holdco
(9)
|
9,430
|
18,695
|
Rhyl Flats
|
8,258
|
13,099
|
Stroupster
|
6,610
|
3,021
|
Little Cheyne Court
|
6,437
|
9,184
|
Windy Rig
|
5,277
|
14,942
|
Tappaghan
|
5,017
|
9,221
|
Andershaw
|
4,417
|
15,599
|
Slieve Divena
|
4,345
|
7,951
|
Maerdy
|
4,318
|
9,038
|
Twentyshilling
|
4,046
|
8,384
|
Bishopthorpe
|
3,944
|
7,952
|
Bicker Fen
|
3,770
|
6,382
|
Langhope Rig
|
3,475
|
9,287
|
Screggagh
|
3,404
|
6,477
|
Cotton Farm
|
2,960
|
4,467
|
Slieve Divena 2
|
2,732
|
5,490
|
Kildrummy
|
2,359
|
4,614
|
Crighshane
|
2,201
|
5,677
|
Glen Kyllachy
|
2,131
|
11,300
|
Earl's Hall Farm
|
1,788
|
2,264
|
Douglas West
|
1,500
|
14,250
|
Carcant
|
1,340
|
3,237
|
Bin Mountain
|
1,260
|
3,168
|
Church Hill
|
1,201
|
4,050
|
|
359,939
|
525,897
|
1 The Group's investment in Humber Gateway is held through
Humber Holdco.
2 The Group's investment in Stronelairg is held through
Stronelairg Holdco.
3 The Group's investment in Walney is held through Walney
Holdco.
4 The Group's investment in Hornsea 1 is held through Hornsea 1
Holdco.
5 The Group's investment in Burbo Bank Extension is held
through Hoylake.
6 The Group's investment in Dunmaglass is held through
Dunmaglass Holdco.
7 The Group's investments in Middlemoor and Lindhurst are held
through ML Wind.
8 The Group's investments in Deeping St. Nicholas, Glass Moor,
Red House and Red Tile are held through Fenlands.
9 The Group's investments in Drone Hill, North Rhins, Sixpenny
Wood and Yelvertoft are held through SYND Holdco.
The table below shows interest
received in the year from the Group's shareholder loan
investments.
|
For the year ended 31
December 2023
|
For the year ended 31
December 2022
|
|
|
|
|
|
£'000
|
£'000
|
|
|
|
|
|
|
|
Hoylake (1)
|
10,662
|
6,706
|
|
|
Walney Holdco
(2)
|
9,994
|
11,244
|
|
|
Stronelairg Holdco
(3)
|
5,197
|
5,197
|
|
|
Clyde
|
4,283
|
4,206
|
|
|
South Kyle
|
4,239
|
-
|
|
|
Dunmaglass Holdco
(4)
|
3,412
|
3,412
|
|
|
Tom nan Clach
|
2,890
|
2,809
|
|
|
Glen Kyllachy
|
2,886
|
3,085
|
|
|
Corriegarth
|
2,805
|
2,658
|
|
|
London Array
(5)
|
2,605
|
-
|
|
|
Douglas West
|
2,532
|
2,947
|
|
|
Hornsea 1 Holdco
(6)
|
2,206
|
-
|
|
|
Andershaw
|
1,894
|
2,125
|
|
|
Windy Rig
|
1,850
|
2,309
|
|
|
Twentyshilling
|
1,473
|
1,005
|
|
|
Slieve Divena 2
|
1,340
|
1,329
|
|
|
Crighshane
|
1,257
|
1,283
|
|
|
Church Hill
|
843
|
944
|
|
|
Dalquhandy
|
417
|
-
|
|
|
|
62,785
|
51,259
|
|
|
1 The Group's investment in Burbo Bank Extension is held
through Hoylake.
2 The Group's investment in Walney is held through Walney
Holdco.
3 The Group's investment in Stronelairg is held through
Stronelairg Holdco.
4 The Group's investment in Dunmaglass is held through
Dunmaglass Holdco.
5 The Group's investment in London Array is held through London
Array Holdco.
6 The Group's investment in Hornsea 1 is held through Hornsea 1
Holdco.
The table below shows the Group's
shareholder loans with the wind farm investments.
|
Loans at 1 January
2023(1)
|
Loans advanced in the year
(2)
|
Loans restructured in the
year
|
Loan repayments in the
year
|
Loans at 31 December
2023
|
Accrued interest at 31
December 2023
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Andershaw
|
32,641
|
-
|
-
|
(2,695)
|
29,946
|
135
|
30,081
|
Church Hill
|
13,830
|
-
|
-
|
(1,176)
|
12,654
|
2
|
12,656
|
Clyde
|
71,503
|
-
|
-
|
-
|
71,503
|
1,022
|
72,525
|
Corriegarth
|
42,553
|
-
|
-
|
-
|
42,553
|
70
|
42,623
|
Crighshane
|
20,497
|
-
|
-
|
(1,970)
|
18,527
|
-
|
18,527
|
Dalquhandy
|
-
|
40,878
|
-
|
-
|
40,878
|
987
|
41,865
|
Douglas West
|
43,248
|
-
|
-
|
(3,139)
|
40,109
|
-
|
40,109
|
Dunmaglass Holdco
(3)
|
56,864
|
-
|
-
|
-
|
56,864
|
860
|
57,724
|
Glen Kyllachy
|
48,776
|
-
|
-
|
(2,146)
|
46,630
|
-
|
46,630
|
Hornsea 1 Holdco
(4)
|
109,475
|
6,906
|
-
|
(15,050)
|
101,331
|
34
|
101,365
|
Hoylake (5)
|
178,120
|
1,239
|
-
|
-
|
179,359
|
-
|
179,359
|
Kype Muir Extension
|
39,415
|
6,553
|
(15,809)
|
-
|
30,159
|
152
|
30,311
|
London
Array(6)
|
-
|
146,987
|
-
|
(13,718)
|
133,269
|
1,542
|
134,811
|
Slieve Divena 2
|
21,378
|
-
|
-
|
(706)
|
20,672
|
-
|
20,672
|
South Kyle
|
-
|
208,505
|
-
|
(1,714)
|
206,791
|
-
|
206,791
|
Stronelairg
|
86,619
|
-
|
-
|
-
|
86,619
|
1,310
|
87,929
|
Tom nan Clach
|
73,709
|
-
|
-
|
(7,885)
|
65,824
|
11
|
65,835
|
Twentyshilling
|
32,190
|
-
|
-
|
-
|
32,190
|
464
|
32,654
|
Walney Holdco
(7)
|
172,727
|
-
|
-
|
-
|
172,727
|
369
|
173,096
|
Windy Rig
|
36,772
|
-
|
-
|
-
|
36,772
|
369
|
37,141
|
|
|
|
|
|
|
|
|
|
1,080,317
|
411,068
|
(15,809)
|
(50,199)
|
1,425,377
|
7,327
|
1,432,704
|
1 Excludes accrued interest at 31 December 2022 of
£6,763,541.
2 Includes capitalised interest of £2,074,396 for Kype Muir
Extension, £1,239,406 for Hoylake and £5,070,644 for Hornsea 1,
plus a true-up of £1,835,512 relating to the Hornsea 1
loan.
3 The Group's investment in Dunmaglass is held through
Dunmaglass Holdco.
4 The Group's investment in Hornsea 1 is held through Hornsea 1
Holdco.
5 The Group's investment in Burbo Bank Extension is held
through Hoylake.
6 The Group's investment in London Array is held through London
Array Holdco.
7 The Group's investment in Walney is held through Walney
Holdco.
20. Ultimate controlling party
In the opinion of the Board, on
the basis of the shareholdings advised to them, the Company has no
ultimate controlling party.
21. Subsequent events
On 29 January 2024, the Company
announced a dividend of £79.1 million, equivalent to 3.43 pence per
share with respect to the quarter ended 31 December 2023, bringing
the total dividend declared with respect to the year to 31 December
2023 to 10 pence per share. The record date for the dividend was 16
February 2024 and the payment date is 29 February 2024.
On 30 January 2024, the Company
announced that Abigail Rotheroe will join the Board, effective from
1 March 2024.
Post year end, the Company had
announced cumulative buybacks of 14 million shares between 1
January and 27 February 2024.
Company Information
Directors (all non-executive)
|
Registered Company Number
|
Lucinda Riches C.B.E
(Chairman)
|
08318092
|
Martin McAdam
|
|
Caoimhe Giblin
|
Registered Office
|
Nick Winser C.B.E.
|
5th Floor
|
Jim Smith(1)
|
20 Fenchurch Street
|
Shonaid
Jemmett-Page(2)
|
London
|
|
EC3M 3BY
|
Investment Manager
|
|
Schroders Greencoat LLP
|
Registered Auditor
|
4th Floor, The
Peak
|
BDO LLP
|
5 Wilton Road
|
55 Baker Street
|
London
|
London
|
SW1V 1AN
|
W1U 7EU
|
|
|
Administrator and Company Secretary
|
|
Ocorian Administration (UK)
Limited
|
Joint Broker
|
Unit 4, The Legacy
Building
|
RBC Capital Markets
|
Northern Ireland Science
Park
|
100 Bishopsgate
|
Queen's Road
|
London
|
Belfast
|
EC2N 4AA
|
BT3 9DT
|
|
|
|
Depositary
|
Joint Broker
|
Ocorian Depositary
(UK) Limited
|
Jefferies International
Limited
|
Unit 4, The Legacy
Building
|
100 Bishopsgate
|
Northern Ireland Science
Park
|
London
|
Queen's Road
|
EC2N 4JL
|
Belfast
|
|
BT3 9DT
|
|
|
|
Registrar
|
|
Computershare Limited
|
|
The Pavilions
|
|
Bridgwater Road
|
|
Bristol
|
|
BS99 6ZZ
|
|
|
|
(1) Appointed to the Board with effect from 1 May
2023.
(2) Retired from the Board with effect from 28 April
2023.
Supplementary Information
(unaudited)
Under the Alternative Investment
Fund Manager Regulations 2013 (as amended) the Company is a UK AIF
and the Investment Manager is a full scope UK AIFM.
Ocorian Depositary (UK) Limited
provides depositary services under the AIFMD.
The AIFMD outlines the required
information which has to be made available to investors prior to
investing in an AIF and directs that material changes to this
information be disclosed in the Annual Report of the AIF. There
were no material changes in the year.
All information required to be
disclosed under the AIFMD is either disclosed in this Annual Report
or is detailed within a schedule of disclosures on the Company's
website at www.greencoat-ukwind.com.
The Investment Manager covers the
potential professional liability risks resulting from its
activities by holding professional indemnity insurance in
accordance with Article 9(7)(b) of AIFMD.
The information in this paragraph
relates to the Investment Manager, the AIFM, and its subsidiary
company providing services to the AIFM and it does not relate to
the Company. The total amount of remuneration paid by the
Investment Manager, in its capacity as AIFM, to its 118 staff for
the financial year ending 31 December 2023 was £29.4 million,
consisting of £19.1 million fixed and £10.3 million variable
remuneration. The aggregate amount of remuneration for the 14 staff
members of the Investment Manager constituting senior management
and those staff whose actions have a material impact on the risk
profile of the Company was £5.3 million. These figures relate to
the Investment Manager's entire AIFM business and not to the
Company.
EU Sustainable Finance
Disclosure Regulation (unaudited)
ANNEX V
Template periodic disclosure
for the financial products referred to in Article
9, paragraphs 1 to 4a,
of Regulation (EU) 2019/2088 and Article 5,
first paragraph, of Regulation (EU) 2020/852
Product name:
Greencoat UK Wind PLC (the "Company")
Legal entity
identifier: 213800ZPBBK8H51RX165
Sustainable investment
objective
Did this financial product have a sustainable investment
objective?
Yes - It made sustainable investments with an environmental
objective: 99% -
in economic activities that
qualify as environmentally sustainable under the EU
Taxonomy
To
what extent was the sustainable investment objective of this
financial product met?
The Company invests in operating UK wind farms,
supporting the transition to Net Zero. The Company's aim is to
provide investors with an annual dividend per Ordinary Share that
increases in line with RPI inflation while preserving the capital
value of its investment portfolio on a real basis over the long
term, through re-investment of excess cashflow.
The Company has sustainable investment as its
objective within the meaning of Article 9 SFDR. More specifically,
the Company is intended to contribute to the environmental
objective of climate change mitigation on the basis of the
activities of the assets targeted by the Company, which are wind
power generation assets that help to facilitate the transition to a
low-carbon economy.
The Company does not have a carbon reduction
objective and has not designated a reference benchmark for the
purpose of attaining the sustainable investment objective.
As at 31 December 2023, the Company's portfolio
comprises interests in 49 operating wind farms totalling 2,007MW
capacity.
These sustainable investments contribute to the
Company's sustainable investment objective as the electricity
generated from wind farms can be used in place of non-renewable
energy sources, thereby helping to stabilise greenhouse gas
concentrations in the atmosphere and contributing to climate change
mitigation. These investments are considered environmentally
sustainable in accordance with the technical screening criteria of
the EU Taxonomy relating to the environmental objective of climate
change mitigation and electricity generation from wind power.
How did the sustainability
indicators perform?
The sustainability indicators used to measure
attainment of the sustainable investment objective of the Company
performed as follows in the reporting period:
-
Renewable energy generated: 4,743GWh
-
Greenhouse gas emissions[1] avoided: 1.9 million tonnes
CO2e
-
Equivalent number of homes powered [2]: 1.8 million
Carbon footprint indicators are measured in line
with the industry standard Greenhouse Gas Protocol based on an
equity control approach, meaning emissions from the Group's
operations are weighted according to the Group's proportionate
ownership in its SPV investments.
Scope emissions calculations are verified by third
party consultants.
Scope 3 emissions are the result of activities from
assets not owned or controlled by the Group, but that the Group
indirectly impacts in its value chain. Scope 3 emissions include
all sources not within the Group's Scope 1 and 2 boundary and
include, inter alia, emissions arising from the construction of
each wind farm acquired in 2023, including those emissions
associated with the manufacturing and transport of all equipment
and material, before the wind farm was commissioned as well as the
expected spare part provision throughout its lifetime.
[1] This reflects CO2e
savings calculated based on the thermal generation displaced. In
the UK, this assumes the displacement of CCGT generation at a
carbon intensity factor of 0.4 kgCO2e/KWh
(IEA).
[2] Calculated based on average
household consumption estimates. In the UK, this was 2.7MWh/annum
(Ofgem).
…and compared to previous
periods?
Sustainability
Indicator
|
2023
|
2022
|
Renewable
electricity generated (GWh)
|
4,743
|
4,362
|
Greenhouse gas
emissions avoided (tCO2)
|
1.9 million
|
1.7 million
|
Equivalent number of
homes powered
|
1.8 million
|
1.5 million
|
All indicators increased year-on-year reflecting the
increase in operating capacity of the Group resulting from new
investments in the year. Relative to its MW capacity, homes powered
by the Group decreased as the annual average household consumption
in the UK fell from 2.9MWh to 2.7MWh per annum.
How did
the sustainable investments not cause significant harm to any
sustainable investment objective?
The Investment Manager has sought to ensure that the
Company's sustainable investments cause no significant harm to any
sustainable investment objective by predominately investing in
operating wind farms and by actively engaging and managing
sustainability risks and opportunities for the Company and its
investments prior to investment and on an ongoing basis once an
investment has been made.
Prior to each investment, the Investment Manager's
Investment Committee, responsible for the Company, considered the
Company's investment policy, investment restrictions and the
Company's ESG Policy (a copy of which can be found on the Company's
website, as well as the sustainability risks and opportunities
identified during due diligence (including by means of an ESG
checklist).
Each investment made is held through SPVs and the
Investment Manager has appointed directors to each of the boards of
those SPVs to oversee all major strategic and operational
decisions.
Sustainability risks and opportunities have been
fully embedded into the risk management framework at both Company
and asset SPV level. A risk matrix has been set up for each new
SPV, which includes sustainability risks, and assesses risks (in
respect of the likelihood of its occurrence and the impact of its
occurrence) on a numerical scale.
Ongoing sustainability risks for the portfolio were
monitored, managed and reported on by the Investment Manager to the
Company's Board of Directors which has overall responsibility for
the activities of the Company and its investments.
During 2023, there were no material incidents across
the portfolio. Specifically with regards to health and safety,
there were 30 workdays lost to injuries (based on 2 reportable lost
time incidents). The Investment Manager continues its focus on
managing health and safety risks including regular training for
asset managers and Operations & Maintenance teams to promote a
culture of reporting to improve awareness and openness on the
management of health and safety at sites. The Investment Manager
will continue to monitor health and safety performance of all sites
closely, in line with its ESG Policy commitments.
In addition, the Company complied with the
principles of good governance contained in the AIC Code, which
ensures the Company is in accordance with the requirements of the
UK Corporate Governance Code and provides a framework of best
practice for listed investment companies.
How were the
indicators for adverse impacts on sustainability factors taken into
account?
The Investment Manager considers the Principal
Adverse Impacts ("PAIs") of
its investment decisions relating to the Company on sustainability
factors and this informs its approach to long term investment
stewardship and stakeholder engagement.
As the Company predominantly targets investments in
operating UK wind farms, the PAIs that are most relevant to the
Company include (but are not limited to):
•
Greenhouse gas emissions (Table 1 RTS: PAIs 1-6); and
•
Number of workdays lost to injuries, accidents, or illness (Table 3
RTS: PAI 3)
The Investment Manager sought to mitigate the impact
of the PAIs and other indicators considered in relation to the
Company firstly by implementing the Company's ESG Policy, which has
been developed in line with the Investment Manager's own ESG
Policy. This sets guidance and principles for integrating
sustainability across the Company's business and looks to establish
best practice in climate related risk management, reporting and
transparency. It outlines areas of focus for wind power generation
assets including environment, workplace standards, health and
safety practices, governance (including compliance with applicable
laws and regulations) and local community engagements. It also
includes a list of key performance indicators that are monitored
and reported on (as appropriate). Sustainability factors were
considered prior to investment as part of early stage screening,
detailed due diligence and the Investment Committee's decision
making, and are managed post acquisition in accordance with the
Investment Manager's wider asset management practices.
A statement on principal adverse impacts on
sustainability factors (the "PAI
Statement"), including the list of PAI indicators and
associated metrics considered in relation to the Company, can be
found on the Company's website.
The Investment Manager considers the impacts
reported within the PAI Statement do not constitute significant
harm to any sustainable investment objective, as further described
in the PAI Statement.
Were sustainable
investments aligned with the OECD Guidelines for Multinational
Enterprises and the UN Guiding Principles on Business and Human
Rights? Details:
Yes - the Investment Manager believes that the
Company's sustainable investments were aligned with the OECD
Guidelines for Multinational Enterprises and the UN Guiding
Principles on Business and Human Rights (the "Minimum Safeguards").
During 2023, the Investment Manager conducted
initial due diligence (for new investments) and ongoing monitoring
(for existing investments) of the SPVs in which the underlying wind
assets are held to ensure their alignment with the Minimum
Safeguards.
Further, the Investment Manager ensured that the key
service providers involved in the operations, maintenance and
management of the SPVs acquired in 2023 comply with all applicable
laws, rules, regulations and overarching principles in the
countries where they operate. This covers anti bribery and
corruption, financial crime, data protection and employment and
health and safety laws (including those relating to human rights,
human trafficking, modern slavery, and public safety). This was
achieved, where possible, through the application of the Investment
Manager's 'Code of Conduct' Side Letter or otherwise provided for
in the key service provider contracts, and monitoring by the
Investment Manager's risk function.
There has been no material change to any existing
service providers, or any reports by the SPVs of any misalignment
to the Minimum Safeguards.
For more information on how the sustainable
investment objective of this financial product was met, please
refer to the Company's ESG Report which can be found on the
Company's website.
How did this financial product consider principal adverse
impacts on sustainability factors?
See the response to the question above "How were the
indicators for adverse impacts on sustainability factors taken into
account."
What were the top investments of this financial
product?
Largest
investments
|
Sector
|
% Assets
|
Country
|
Hornsea 1
|
Wind
|
16%
|
UK
|
Humber Gateway
|
Wind
|
9%
|
UK
|
London Array
|
Wind
|
8%
|
UK
|
Walney
|
Wind
|
7%
|
UK
|
Clyde
|
Wind
|
7%
|
UK
|
South Kyle
|
Wind
|
6%
|
UK
|
Stronelairg
|
Wind
|
5%
4%
|
UK
|
Corriegarth
|
Wind
|
4%
|
UK
|
Burbo Bank Extension
|
Wind
|
3%
|
UK
|
Brockaghboy
|
Wind
|
3%
|
UK
|
What was the proportion of sustainability-related
investments?
· What was the asset
allocation?
#1 Sustainable 99% >
Environmental 100% > Taxonomy aligned 100%
#1 Sustainable covers sustainable investments with environmental
or social objectives.
#2 Not
sustainable includes investments which do not qualify as
sustainable investments.
·
In which economic
sectors were the investments made?
All of the Company's investments are in the economic
sector "electricity generation from wind power" (activity 4.3 of
the Climate Change Mitigation Technical Screening Criteria).
To
what extent were sustainable investments with an environmental
objective aligned with the EU Taxonomy?
·
Did the financial
product invest in fossil gas and/or nuclear energy related
activities complying with the EU Taxonomy1?
The Company did not make any investments in fossil
gas or nuclear energy activities. In line with its Investment
Policy, the Company will only invest in UK wind farms.
1 Fossil gas and/or
nuclear related activities will only comply with the EU Taxonomy
where they contribute to limiting climate change ("climate change
mitigation") and do no significant harm to any EU Taxonomy
objective - see explanatory note in the left hand margin. The full
criteria for fossil gas and nuclear energy economic activities that
comply with the EU Taxonomy are laid down in the Commission
Delegated Regulation (EU) 2022/1214
·
What was the share of
investments made in transitional and enabling
activities?
All activities of the Company are low carbon
activities so the share of investments in transitional and enabling
activities is zero.
·
How did the percentage
of investments aligned with the EU Taxonomy compare with previous
reference periods?
Not applicable as this is the Company's first report
produced with respect to the EU Taxonomy alignment of the Company's
investments.
What was the share of sustainable investments with an
environmental objective that were not aligned with the EU
Taxonomy
There was no share of sustainable investments with
an environmental objective that were not aligned with the EU
Taxonomy. 100 per cent of the Company's sustainable investments are
in wind generation assets which are considered aligned with the EU
Taxonomy in accordance with the relevant Technical Screening
Criteria for climate change mitigation (activity 4.3).
What was the share of socially sustainable
investments?
0 per cent of the Company's investments are socially
sustainable investments. The Company does not target sustainable
investments with a social objective.
What investments were included under "not sustainable", what
was their purpose and were there any minimum environmental or
social safeguards?
The investments included under "#2 Not sustainable"
comprise cash collateral reserves (to the extent not generated from
sustainable investments).
In 2023, "not sustainable" assets were 1 per cent of
the Company's NAV and reflected cash collateral reserves. Given the
purpose of these investments, there were no minimum environmental
and social safeguards applied to such investments.
What actions have been taken to attain the sustainable
investment objective during the reference period?
The Investment Manager sought to attain the
Company's sustainable investment objective by implementing the
binding elements described in the Company's pre contractual
disclosures (Annex 3 RTS) on a continuous basis, and by integrating
sustainability risks in its investment decision making as described
above: "How did the sustainable
investments not cause significant harm to any sustainable
investment objective?".
The Company continues to invest in further operating
wind farms and in construction projects to increase its renewable
energy generation capacity.
In 2023, the Investment Manager continued to enhance
its processes to measure and monitor the application of the binding
elements. For example, the Investment Manager's ESG Policy,
upon which the Company's ESG Policy has been developed, was updated
again in Q4 2023 to incorporate the Investment Manager's approach
to good governance and minimum safeguards.
Further, the Investment Manager continued to engage
with stakeholders relevant to the Group's portfolio to ensure its
renewable investments positively impact the local communities in
which they operate. Sustainability related risks and challenges
were regularly discussed within the Investment Manager's asset
management teams, which were also reported to and discussed with
the Board through regular meetings and specific risk register
review discussions. Key sustainability factors such as those
relating to health and safety, compliance with environmental
standards and stakeholder relations were regularly discussed and
documented.
How did this financial product perform compared to the
reference sustainable benchmark?
Not applicable (N/A) as the Company does not have a
carbon reduction objective and is not managed against a reference
benchmark
·
How did the reference
benchmark differ from a broad market index?
N/A
·
How did this financial
product perform with regard to the sustainability indicators to
determine the alignment of the reference benchmark with the
sustainable investment objective?
N/A
·
How did this financial
product perform compared with the reference benchmark?
N/A
·
How did this financial
product perform compared with the broad market index?
N/A
Statement on principal
adverse impacts "PAIs" of investment decisions on sustainability
factors
Financial Product:
Greencoat UK Wind PLC (LEI:
213800ZPBBK8H51RX165) (the "Company"), managed by Schroders
Greencoat LLP (the "Investment Manager")
1. Summary
The Investment Manager considers PAIs
of its investment decisions on sustainability factors in relation
to the Company. The present statement is the consolidated statement
on PAIs on sustainability factors of the Company. This statement on
principal adverse impacts on sustainability factors of the Company
covers the reference period from 1 January to 31 December
2023.
The adverse sustainability indicators
applicable to investee companies considered by the Investment
Manager are summarised in the table below (including the relevant
table and number associated with the adverse sustainability
indicators listed in Annex I of the RTS[1]).
Theme
|
Adverse Sustainability Indicator
|
RTS
Annex I Table
|
RTS
Annex I Number
|
Climate and other
environment-related indicators
|
Greenhouse gas ("GHG")
emissions
|
1
|
1
|
Carbon footprint
|
1
|
2
|
GHG intensity of investee
companies
|
1
|
3
|
Exposure to companies active in the
fossil fuel sector
|
1
|
4
|
Share of non-renewable energy
consumption and production
|
1
|
5
|
Energy consumption intensity per
high impact climate sector
|
1
|
6
|
Emissions to water
|
1
|
8
|
Hazardous waste and radioactive
waste ratio
|
1
|
9
|
Natural species and protected
areas
|
2
|
14
|
Social and employee, respect for
human rights, anti corruption and anti bribery matters
|
Violations of UN Global Compact
principles and Organisation for Economic Cooperation and
Development (OECD) Guidelines for Multinational
Enterprises
|
1
|
10
|
Lack of processes and compliance
mechanisms to monitor compliance with UN Global Compact principles
and OECD Guidelines for Multinational Enterprises
|
1
|
11
|
Exposure to controversial weapons
(anti-personnel mines, cluster munitions, chemical weapons and
biological weapons)
|
1
|
14
|
Number of days lost to injuries,
accidents, fatalities or illness
|
3
|
3
|
Lack of a supplier code of
conduct
|
3
|
4
|
Lack of anti corruption and
anti-bribery policies
|
3
|
15
|
[1] The
Regulatory Technical Standards accompanying the EU Sustainable
Finance Disclosure Regulation.
2. Description of the PAIs on sustainability factors
|
Adverse sustainability indicator
|
Metric
|
Impact 2023
|
Impact 2022
|
Explanation
|
Actions taken, and actions planned and targets set for the
next reference period
|
Greenhouse gas emissions
|
1. GHG
emissions
|
Scope 1 GHG emissions
|
13 tonnes of
CO2
|
149 tonnes of
CO2
|
Carbon footprint indicators are
measured in line with the industry standard GHG Protocol based on
an equity control approach, meaning emissions from the Group's
operations are weighted according to the Group's SPV ownership
interest. Scope emissions calculations are verified by third party
consultants.
Scope 3 emissions are the result of
activities from assets not owned or controlled by the Group, but
that the Group indirectly impacts in its value chain. Scope 3
emissions include all sources not within the Company's Scope 1 and
2 boundary and include, inter alia, emissions arising from the
construction of each wind farm acquired in 2023, including those
emissions associated with the manufacturing and transport of all
equipment and material, before the wind farm was commissioned as
well as the expected spare part provision throughout its
lifetime.
|
The GHG emissions of the Company
increased year on year. This was mostly driven by Scope 3 emissions
which reflects the purchase of new assets for which carbon
emissions reflect those associated with the original construction
(embodied emissions) of those assets. More detail on the drivers of
emissions can be found in the historical comparison section
below.
In 2023,
the Investment Manager worked to reduce GHG emissions associated
with Scope 2 by switching import electricity consumption for 16% of
the assets in its portfolio to fully renewable tariffs. Based on
the switching of tariffs for these assets, using 2022 reported
Scope 2 carbon emissions for the Group's portfolio, this initiative
resulted in a reduction of 227tCO2, a 16% reduction from
the total portfolio Scope 2 emissions on a like-for-like basis. The
asset management team will continue to work with the Investment
Manager to switch import electricity tariffs to fully renewable as
contracts come up for renewal in 2024. The team will also consider
engaging with co-investors for joint venture investments to try to
switch tariffs and consider opportunities to reduce Scope 1
emissions.
|
Scope 2 GHG
emissions |
1,485 tonnes of CO2
(market-based)
2,162 tonnes of CO2
(location-based)
|
1,422 tonnes of CO2
(market-based)
1,731 tonnes of CO2
(location-based)
|
Scope 3 GHG
emissions |
261,138 tonnes of
CO2
|
136,161 tonnes of
CO2
|
Total GHG
emissions |
262,637 tonnes of
CO2
|
137,732 tonnes of
CO2
|
2. Carbon
footprint
|
Carbon footprint
|
42.9 tonnes of
CO2
|
24.6 tonnes of
CO2
|
3. GHG intensity of
investee companies
|
GHG intensity of investee
companies
|
1,193 tonnes of
CO2
|
535 tonnes of CO2 / £
million revenue
|
4. Exposure to
companies active in the fossil fuel sector
|
Share of investments in companies
active in the fossil fuel sector
|
0%
|
0%
|
The Group does not have any
exposure to the fossil fuel sector and will only invest in UK wind
farms in accordance with its Investment Objective and
Investment Policy.
|
The Investment Manager continues to
screen all investments against this exclusion list as part of
initial investment screening.
With regards to non-renewable
energy consumption, see the comment in
relation to PAIS 1-3 above
|
5. Share of non renewable energy consumption and
production
|
Share of non renewable energy
consumption and non renewable energy production of investee
companies from non renewable energy sources compared to renewable
energy sources, expressed as a percentage of total energy
sources
|
Production share:
0% non renewable.
Consumption share:
41.9% non renewable.
|
Production share:
0% non renewable.
Consumption share:
38% non renewable.
|
The Group's wind farm portfolio
generates renewable electricity that avoids the carbon emissions
and air pollution that would have otherwise been generated using
fossil fuels. These assets consume electricity in the generation of
renewable electricity.
|
6. Energy consumption
intensity per high impact climate sector
|
Energy consumption in MWh per
million GBP of revenue of investee companies, per high impact
climate sector
|
N/A
|
N/A
|
|
PAI 6 is considered not relevant
for the porfolio as the investment assets are in high impact
climate sectors.
|
Water
|
8. Emissions to
water
|
Tonnes of emissions to water
generated by investee companies per million GBP invested, expressed
as a weighted average
|
N/A
|
N/A
|
|
PAI 8 is considered not relevant
for the porfolio as the investments do not produce emissions to
water.
|
Waste
|
9. Hazardous waste and
radioactive waste ratio
|
Tonnes of hazardous waste and
radioactive waste generated by investee companies per million GBP
invested, expressed as a weighted average
|
N/A
|
N/A
|
|
There was a very minor spill of oil
at a wind turbine site in 2023 of 0.045 tonnes which was reported
to SEPA. Remediation actions were implemented immediately by the
Operations Manager on site and the incident has been closed.
Learnings were identified by the Investment Manager to prevent
similar incidents at other sites.
On a tonnes per million invested
basis this has been considered not material enough to
report.
|
Social and employee
matters
|
10. Violations of UN Global Compact
principles and Organisation for Economic
Cooperation and Development (OECD)
Guidelines for Multinational Enterprises
|
Share of investments in investee
companies that have been involved in violations of the UNGC
principles or OECD Guidelines for Multinational
Enterprises
|
Data not available
|
Data not available
|
The Company invests in UK wind
farms which are held through special purpose vehicles ("SPVs"),
which are standalone legal entities that typically do not have any
employees. The SPVs outsource all operations, maintenance and
management activities to third parties, through long term
contracts.
The Investment Manager conducts
initial due diligence and provides ongoing monitoring of SPVs to
ensure their alignment with the Minimum Safeguards. Where possible,
the Investment Manager imposed obligations on the key service
providers involved in the operations and management of the SPVs to
ensure their ongoing compliance. In most instances, this was
achieved by the Investment Manager's 'Code of Conduct Side Letter'
(or an equivalent standard) which requires key service providers to
comply with all applicable laws, rules, regulations and overarching
principles in the countries where they operate (which includes the
Minimum Safeguards). This covers anti bribery and corruption,
financial crime, data protection and employment and health and
safety laws (including those relating to human rights, human
trafficking, modern slavery, and public safety).
|
In 2023, the Investment Manager
adopted the Schroders Group's Global Norms Framework to support in
the identification of companies and investments deemed in breach of
OECD and UNGC principles and updated the Investment Manager's
Greencoat ESG Policy to reflect this.
The ultimate output of this
framework is the Global Norms list which comprises a list of
companies that have: been identified as causing significant damage;
not sufficiently addressed the issue in question through
transparent communication and action; and not provided sufficient
remedy for affected stakeholders. This list is then applied as an
exclusion criteria for Article 9 funds to ensure that investments
in scope adhere to the 'Do No Significant Harm' element of
SFDR.
In addition to the Global Norms
process noted above, the Investment Manager
is working to develop a standard methodology to assess the
alignment of the key service providers with the OECD Guidelines for
Multinational Enterprises and the UN Guiding Principles on Business
and Human Rights. This commenced in 2023 and the Investment Manager
expects the methodology to be completed and implemented in
2024.
|
11. Lack of
processes and compliance mechanisms to monitor compliance with UN
Global Compact principles and OECD Guidelines for Multinational
Enterprises
|
Share of investments in investee
companies without policies to monitor compliance with the UNGC
principles or OECD Guidelines for Multinational Enterprises or
grievance /complaints handling mechanisms to address violations of
the UNGC principles or OECD Guidelines for Multinational
Enterprises
|
Data not available
|
Data not available
|
The Investment Manager is currently
enhancing its processes to monitor service provider's adherence to
compliance with UNGC principles and OECD Guidelines through updates
to the Code of Conduct. The Investment Manager commenced this
project in 2023, including external legal guidance, and will
finalise the updated Code of Conduct in 2024 before working to roll
out the updated version to all service providers.
|
14. Exposure to controversial weapons (anti-personnel mines,
cluster munitions, chemical weapons and biological
weapons)
|
Share of investments in investee
companies involved in the manufacture or selling of controversial
weapons
|
0%
|
0%
|
Exposure to controversial weapons
is not within the Company's Investment Objective and no permissible
within its Investment Policy.
|
The Investment Manager continues to
screen all investments against this exclusion list as part of
initial investment screening.
|
Water, waste and material
emissions
|
14. Natural species and protected
areas
|
Share of investments in investee
companies whose operations affect threatened species
|
N/A
|
N/A
|
All habitat management plans are
agreed for relevant sites to ensure that the environment in and
surrounding each wind farm is carefully protected.
|
Wind farms have the potential to
have a negative environmental impact through the manufacturing and
supply chain process or locally through the ongoing management of
the projects. The Company's ESG policy helps to mitigate against
these risks. The policies in place outline the environmental
standards the Company aims to meet.
The Investment Manager continues to
carry out due diligence on new investments relating to
environmental and biodiversity-related risks and is committed to
implementing any regulatory obligations regarding habitat and
environmental management.
There was and continues to be a
strong commitment to continuous improvement of environmental
management.
|
Share of investments in investee
companies without a biodiversity protection policy covering
operational sites owned, leased, managed in a protected area or an
area of high biodiversity value outside protected areas
|
Percentage of SPV investments
without habitat management plans, or any environmental planning
requirements, in place: 0%
|
Percentage of SPV investments
without habitat management plans, or any environmental planning
requirements, in place: 0%
|
Social and employee
matters
|
3. Number of days lost to injuries,
accidents, fatalities or illness
|
Number of workdays lost to
injuries, accidents, or illness in investee companies
|
Number of workdays lost:
30
|
Number of workdays lost:
41
This figure is restated.
|
A set of KPIs to improve
health and safety management and performance is monitored
continuously. These are reported at least on a monthly basis
directly to the Investment Manager, the Directors of the SPVs, and
the Board.
|
The Investment Manager has
stringent health and safety policies and processes in place, which
include safety statements, a Schroders Capital Health and Safety
Forum, incidents/developing trends reports, site visits, onboarding
and training, and audits by both operating managers and accredited
professionals.
There is a nominated health and
safety director for each fully owned wind farm SPV. The Investment
Manager's asset management teams are responsible for the day to day
implementation and monitoring of health and safety audits and
initiatives. The Board also reviews health and safety matters at
each of its scheduled meetings.
The Investment Manager continued to
apply the policies and processes referenced above in 2023 and will
continue to apply these in 2024, using learnings from audits and
trend reports to continue to enhance its approach.
In 2023, the Company began vertical
audits to its contractors (the Investment Manager's asset
management team and O&M partners) with Quadriga to ensure that
all elements of their health and safety management systems remain
fit for purpose. The Investment Manager audited 16 service
providers in total. Similarly, HV management systems of 5 of our HV
operators were audited by a specialist HV auditor.
|
4. Lack of a supplier code of
conduct
|
Share of investments in investee
companies without any supplier code of conduct (against unsafe
working conditions, precarious work, child labour and forced
labour)
|
Data not available
|
Data not available
|
Upon acquisition, all wholly owned
SPV's adopt the policies of the Company including the ESG Policy
which states expectations regarding service providers in relation
to legal and regulatory obligations related to ESG
matters.
Where possible, the Investment
Manager imposes obligations on the key service providers involved
in the operations and management of the portfolio to ensure their
ongoing compliance. In most instances, this was achieved by the
Investment Manager's 'Code of Conduct Side Letter' (or an
equivalent standard) which requires key service providers to comply
with all applicable laws, rules, regulations and overarching
principles in the countries where they operate (which includes the
Minimum Safeguards). This covers anti bribery and corruption,
financial crime, data protection and employment and health and
safety laws (including those relating to human rights, human
trafficking, modern slavery, and public safety).
|
The Investment Manager is currently
enhancing its processes to monitor service provider's adherence to
compliance with UNGC principles and OECD Guidelines through updates
to the Code of Conduct. The Investment Manager commenced this
project in 2023, including external legal counsel guidance, and
will finalise the updated Code of Conduct in 2024.
The Manager will work to roll out
the updated version to all service providers.
|
Anti corruption and anti
bribery
|
15. Lack of anti corruption and
anti bribery policies
|
Share of investments in entities
without policies on anti corruption and anti bribery consistent
with the United Nations Convention against Corruption
|
0%
|
0%
|
Upon acquisition, all wholly owned
SPV's adopt the policies of the Company including anti-corruption
and anti-bribery. These policies are regularly reviewed by legal
experts, and are updated for new legislation and new
geographies.
|
|
|
|
|
|
|
|
|
|
3. Description of policies to
identify and prioritise principal adverse impacts on sustainability
factors
The Investment Manager seeks to
mitigate the impact of PAIs and other indicators considered in
relation to the Company initially by implementing the Company's ESG
Policy (a copy of which can be found on the Company's website). The
Company ESG Policy, which has been developed in line with the
Investment Manager's ESG Policy, sets guidance and principles for
integrating sustainability across the Company's business and looks
to establish best practice in climate related risk management,
reporting and transparency. It outlines areas of focus for wind
farms including environment, workplace standards, health and safety
practices, governance (including compliance with applicable laws
and regulations) and local community engagement. It also includes a
list of KPIs that are monitored and reported on as appropriate.
Sustainability factors are considered prior to investment as part
of early stage screening, detailed due diligence and the Investment
Manager's Investment Committee's decision making, and managed, post
acquisition, in accordance with the Investment Manager's wider
asset management practices.
The Company's ESG Policy is
reviewed at least annually by the Investment Manager's ESG
Committee and approved by the Board. It was last approved in
November 2023.
In implementing its approach to
integrating sustainability and the consideration of PAIs on
sustainability factors, the Investment Manager does not rely on a
dedicated team, but rather responsibilities are shared on a
holistic basis:
· the
investment and asset management team (as the first line of defence)
who embed sustainability practices (including the consideration of
PAIs on sustainability factors) into their investment decision
making and ongoing management of the assets;
· a
dedicated ESG Committee focused on developing the ESG Policy with
support from the sustainability team;
· the
Investment Committees; and
· a
Valuation Committee independent of portfolio management and the
Investment Manager's Risk Management Committee (as overseen by the
AIFM).
Sustainability related risks and
challenges are regularly discussed within the Investment Manager's
asset management team and are also reported to and discussed with
the Board at quarterly meetings. A specific risk matrix is also
reviewed and approved on an annual basis by the Board. Key
sustainability factors such as those relating to health and safety,
compliance with environmental standards and stakeholder relations
are regularly discussed and documented.
The boards of each SPV are
responsible for ensuring sustainability factors are considered in
the context of the operational performance, business objectives and
broader stakeholder relationships. During the holding period,
representatives of the Investment Manager will take one or more
seats on the board of each SPV and will oversee all major strategic
and operational decisions. Given this structure, outside health and
safety risks and organisational (including governance) risks within
the SPVs are limited. None of the SPVs have employees or management
teams and therefore any employee related social factors are focused
on the third party service providers.
The Investment Manager's ESG
Committee is responsible for (i) determining the ESG Policy and
reviewing it regularly to ensure it remains relevant to evolving
conditions, (ii) developing and evolving sustainability integration
practices for material sustainability factors within the different
businesses and assets, (iii) leveraging existing resources and
research capabilities on sustainability related topics for the
benefit of the investment management team, and (iv) promoting
education and awareness of sustainability trends and developments
and sharing best practice.
The Investment Manager uses
information provided directly from wind farm SPVs in relation to
the PAIs. In order to ensure data quality, the Investment Manager
works with specialist external advisers, such as environmental
consultants. These advisers review the Investment Manager's
methodologies for identifying and prioritising PAIs and advise on
industry best practices.
The data collected as described
above is processed as follows:
· KPI
data is sourced directly from SPVs and supplemented by specialist
external advisers such as environmental consultants, as
required;
· operations and maintenance service providers used by the SPVs
report to the Investment Manager, on a monthly basis, on a standard
set of KPIs and qualitative factors, such as health and safety,
compliance with relevant laws and regulations, local community
engagement and habitat management, where relevant; and
· carbon footprint indicators are measured in line with the
industry standard GHG Protocol based on an equity control approach,
meaning emissions from the Company's operations are weighted
according to the Company or its SPV's ownership interest. Scope
emissions calculations will be verified by third party
consultants.
In some instances, the Company may
need to use estimates or proxy data. Where estimated data is used
it will typically represent the minority of data used and will be
based upon reasonable assumptions and appropriate comparators. The
Board and the Investment Manager will act reasonably in using
estimated or proxy data. As the use of such data will vary on a
case by case basis, it is not possible to provide a proportion of
estimated data.
Engagement policies
The Company is committed to
engaging with all stakeholders relevant to its portfolio to ensure
its renewable investments positively impact the communities in
which they operate. The Board and Investment Manager recognise that
engagement is critical to long term sustainable investment and seek
to build strong, long term relationships with high quality,
experienced counterparties to give consistency of service and
standards.
References to international standards
The Company proactively engages
with the following responsible business codes and/or
internationally recognised standards to promote sustainable
investment practices, as discussed in the Company's ESG report
available on its website:
1. Task Force on
Climate Related Financial Disclosures ("TCFD")
Relevant for Table 1, PAI 1-5
(Greenhouse gas emissions)
The Company aligns with the TCFD recommendations and
makes disclosures in the Strategic Report. These disclosures report
on climate change related impacts,
opportunities and risks to the Company. Given the Company's long
term investment perspective, the Board and the Investment Manager
constantly assess the risks its portfolio might be exposed to and
factors them into decision making and risk
monitoring.
Historical comparison
Please refer to Table 1 for
historical data comparison.
Specifically in relation to health
and safety, in 2023 there were 30 workdays lost to injuries (based
on 2 reportable lost time incidents) in 2023. This decreased from
2022, with 41 workdays lost to injuries (based on 6 reportable lost
time incidents). The Investment Manager continues its focus on
managing health and safety risks including regular training for
asset managers and Operations & Maintenance teams to promote a
culture of reporting to improve awareness and openness on the
management of health and safety at sites. The Manager will continue
to monitor health and safety performance of all sites closely, in
line with its ESG Policy commitments.
In 2023, the Company began
vertical audits to its contractors (Asset managers and O&M)
with quadriga at a corporate level, to ensure that all elements of
their health and safety management systems remain fit for purpose.
The Investment Manager audited 16 service providers in total.
Similarly, the HV management systems of 5 HV operators were audited
by a specialist HV auditor.
The Company had a 91 per cent
increase in total scope 1-3 emissions in 2023, compared with the
previous reporting year. The largest increase was due to a 108 per
cent increase in scope 3 embodied carbon emissions, the indirect
emissions associated with the construction phase of infrastructure
investments. Scope 3 embodied carbon emissions must be accounted
for in the year an asset is acquired, and are not amortised for the
year the asset is bought, under GHG Protocol guidance. The Company
has concerns that this leads to double counting across the wind
industry supply chain.
Scope 1 emissions decreased by 92
per cent as a result of a reduction in SF6 leakages. Scope 2
emissions increased by 29 per cent due to an increase in
electricity imported as a result of growth in the portfolio's
operating capacity. In 2023, the Company worked to switch
electricity consumption for 16 per cent of the assets in its
portfolio to fully renewable tariffs. The asset management team
will continue to work to switch electricity tariffs to fully
renewable as contracts come up for renewal, including for new
assets purchased. The team will also consider engaging with
co-investors for JV assets to try to switch tariffs.
ANNEX
Defined terms used in this
statement
For the purposes of this statement,
the following definitions shall apply:
(1)
Scope 1, 2 and 3 GHG
emissions means the scope of greenhouse gas emissions
referred to in points (1)(e)(i) to (iii) of Annex III to Regulation
(EU) 2016/1011 of the European Parliament and of the
Council[2];
(2)
Greenhouse gas ("GHG")
emissions means greenhouse gas emissions as defined in
Article 3, point (1), of Regulation (EU) 2018/842 of the European
Parliament and of the Council[3];
(3)
Weighted average means a
ratio of the weight of the investment by the financial market
participant in a investee company in relation to the GAV of the
investee company;
(4)
Companies active in the fossil
fuel sector means companies that derive any revenues from
exploration, mining, extraction, production, processing, storage,
refining or distribution, including transportation, storage and
trade, of fossil fuels as defined in Article 2, point (62), of
Regulation (EU) 2018/1999 of the European Parliament and of the
Council[4];
(5)
Renewable energy sources
means renewable non fossil sources, namely wind, solar (solar
thermal and solar photovoltaic) and geothermal energy, ambient
energy, tide, wave and other ocean energy, hydropower, biomass,
landfill gas, sewage treatment plant gas, and biogas;
(6)
Non renewable energy
sources means energy sources other than those referred to in
point (5);
(7)
Energy consumption
intensity means the ratio of energy consumption per unit of
activity, output or any other metric of the investee company to the
total energy consumption of that investee company;
(8)
Protected area means
designated areas in the European Environment Agency's Common
Database on Designated Areas (CDDA);
(0)
High impact climate sectors means the sectors listed in
Sections A to H and Section L of Annex I to Regulation (EC) No
1893/2006 of the European Parliament and of the Council[5];
(10)
Area of high biodiversity value
outside protected areas means land with high biodiversity
value as referred to in Article 7b(3) of Directive 98/70/EC of the
European Parliament and of the Council[6];
(11)
Emissions to water means
direct emissions of priority substances as defined in Article 2(30)
of Directive 2000/60/EC of the European Parliament and of the
Council[7] and direct emissions of
nitrates, phosphates and pesticides ;
(12)
Hazardous waste means
hazardous waste as defined in Article 3(2) of Directive 2008/98/EC
of the European Parliament and of the Council[8] ;
(13)
Radioactive waste means
radioactive waste as defined in Article 3(7) of Council Directive
2011/70/Euratom[9];
(14)
Threatened species means
endangered species, including flora and fauna, listed in the
European Red List or the IUCN Red List, as referred to in Section 7
of Annex II to Delegated Regulation (EU) 2021/2139;
(15)
UN Global Compact
principles means the ten Principles of the United Nations
Global Compact; and
(16)
Board means the Directors
of the Company.
For the purposes of this Annex, the
following formulas shall apply:
(1)
'GHG emissions' shall be calculated in accordance with the
following formula:
(2)
'carbon footprint' shall be calculated in accordance with the
following formula:
(3)
'GHG intensity of investee companies' shall be calculated in
accordance with the following formula:
(4)
'GHG intensity of sovereigns' shall be calculated in accordance
with the following formula:
(5)
'inefficient real estate assets' shall be calculated in accordance
with the following formula:
[7] Directive
2000/60/EC of the European Parliament and of the Council of 23
October 2000 establishing a framework for Community action in the
field of water policy (OJ L 327, 22.12.2000, p. 1).
[8] Directive
2008/98/EC of the European Parliament and of the Council of 19
November 2008 on waste and repealing certain Directives (OJ L 312,
22.11.2008, p. 3).
[9] Council Directive
2011/70/Euratom of 19 July 2011 establishing a Community framework
for the responsible and safe management of spent fuel and
radioactive waste (OJ L 199, 2.8.2011, p. 48).
For the purposes of the formulas, the
following definitions shall apply:
(1)
Current value of investment means the value in EUR of the
investment by the financial market participant in the investee
company;
(2)
Current value of all
investments means the value in EUR of all investments by the
financial market participant;
(3)
Nearly zero energy building
(NZEB), primary energy demand (PED) and energy performance certificate (EPC)
shall have the meanings given to them in paragraphs 2, 5 and 12 of
Article 2 of Directive 2010/31/EU of the European Parliament and of
the Council[10].
Defined Terms
ABN AMRO means ABN AMO Bank
N.V.
Aggregate Group Debt means
the Group's proportionate share of outstanding third party
borrowings, including its share of limited recourse debt in Hornsea
1
AGM means Annual General
Meeting of the Company
AIC means the Association of
Investment Companies
AIC Code means the AIC's Code
of Corporate Governance
AIF means an Alternative
Investment Fund as defined under the AIFMD
AIFM means an Alternative
Investment Fund Manager as defined under the AIFMD
AIFMD means the Alternative
Investment Fund Managers Directive
Alternative Performance Measure means a financial measure other than those
defined or specified in the applicable financial reporting
framework
Andershaw means Andershaw
Wind Power Limited
ANZ means Australia and New
Zealand Banking Group Limited
AXA means funds managed by
AXA Investment Managers UK Limited
Barclays means Barclays Bank
PLC
BDO LLP means the Company's
Auditor as at the reporting date
Bicker Fen means Bicker Fen
Windfarm Limited
Bin Mountain means Bin
Mountain Wind Farm (NI) Limited
Bishopthorpe means
Bishopthorpe Wind Farm Limited
Board means the Directors of
the Company
Braes of Doune means Braes of
Doune Wind Farm (Scotland) Limited
Breeze Bidco means Breeze
Bidco (TNC) Limited
Brockaghboy means Brockaghboy
Windfarm Limited
Burbo Bank Extension means
Hoylake Wind Limited, Greencoat Burbo Extension Holding (UK)
Limited, Burbo Extension Holding Limited and Burbo Extension
Limited
Carbon Footprint means the
calculation per TCFD guidance ni(outstanding amount
investedi total investee debt+equityi
*investee scope 1 and 2 GHG emissionsi Company market
value
Carcant means Carcant Wind
Farm (Scotland) Limited
Cash Fee means the cash fee
that the Investment Manager is entitled to under the Investment
Management Agreement
CBA means Commonwealth Bank
of Australia
CCGT means combined cycle gas
turbine
CFD means Contract For
Difference
Church Hill means Church Hill
Wind Farm Limited
CIBC means Canadian Imperial
Bank of Commerce
Clyde means Clyde Wind Farm
(Scotland) Limited
CO2 means carbon
dioxide
Company means Greencoat UK
Wind PLC
Corriegarth means Corriegarth
Wind Energy Limited
Cotton Farm means Cotton Farm
Wind Farm Limited
CPI means the Consumer Price
Index
Crighshane means Crighshane
Wind Farm Limited
Dalquhandy means Dalquhandy
Wind Farm Limited
DCF means Discounted Cash
Flow
Deeping St. Nicholas means
Deeping St. Nicholas wind farm
Depreciation means the
unwinding of the discount rate assumptions
Douglas West means Douglas
West Wind Farm Limited
Drone Hill means Drone Hill
Wind Farm Limited
DTR means the Disclosure
Guidance and Transparency Rules sourcebook issued by the Financial
Conduct Authority
Dunmaglass means Dunmaglass
Holdco and Dunmaglass Wind Farm
Dunmaglass Holdco means
Greencoat Dunmaglass Holdco Limited
Dunmaglass Wind Farm means
Dunmaglass Wind Farm Limited
Earl's Hall Farm means Earl's
Hall Farm Wind Farm Limited
Equity Element means the
ordinary shares issued to the Investment Manager under the
Investment Management Agreement
ESG means Environmental,
Social and Governance
EU means European
Union
EU SFDR means EU Sustainable
Financial Disclosure Regulation
FCA means Financial Conduct
Authority
Fenlands means Fenland
Windfarms Limited
FRC means the Financial
Reporting Council
GAV means Gross Asset
Value
GB means Great Britain
consisting of England, Scotland and Wales
Glass Moor means Glass Moor
wind farm
Glen Kyllachy means Glen
Kyllachy Wind Farm Limited
Group means Greencoat UK Wind
PLC and Greencoat UK Wind Holdco Limited
Holdco means Greencoat UK
Wind Holdco Limited
Hornsea 1 means Hornsea 1
Holdco and Hornsea 1 Limited
Hornsea 1 Holdco means
Jupiter Investor TopCo Limited
Hoylake means Hoylake Wind
Limited
Humber Gateway means Humber
Holdco and Humber Wind Farm
Humber Holdco means Greencoat
Humber Limited
Humber Wind Farm means RWE
Renewables UK Humber Wind Limited
HV means high
voltage
IAS means International
Accounting Standards
IFRS means International
Financial Reporting Standards
Investment Management Agreement means the agreement between the Company and the Investment
Manager
Investment Manager means
Schroders Greencoat LLP
IPEV Valuation Guidelines means the International Private Equity and Venture Capital
Valuation Guidelines
IPO mean Initial Public
Offering
IRR means Internal Rate of
Return
Kildrummy means Kildrummy
Wind Farm Limited
KPI means Key Performance
Indicator
Kype Muir Extension means
Kype Muir Extension Wind Farm Limited
Langhope Rig means Langhope
Rig Wind Farm Limited
Levered portfolio IRR means
the Internal Rate of Return with an assumed level of
gearing
Lindhurst means Lindhurst
Wind Farm
Listing Rules means the
listing rules made by the UK Listing Authority under Section 73A of
the Financial Services and Markets Act 2000
Little Cheyne Court means
Little Cheyne Court Wind Farm Limited
Lloyds means Lloyds Bank PLC
and Lloyds Bank Corporate Markets PLC
London Array means London
Array Holdco and London Array Limited
London Array Holdco means
Greencoat London Array Holdco Limited
Maerdy means Maerdy Wind Farm
Limited
Middlemoor means Middlemoor
Wind Farm
ML Wind means ML Wind
LLP
NAB means National Australia
Bank
Nanclach means Nanclach
Limited
NAV means Net Asset
Value
NAV per Share means the Net
Asset Value per Ordinary Share
Net Zero means the UK
Government's strategy to decarbonise all sectors of the UK
economy
North Hoyle means North Hoyle
Wind Farm Limited
North Rhins means North Rhins
Wind Farm Limited
O&M means operations and
maintenance
PPA means Power Purchase
Agreement entered into by the Group's wind farms
RBC means the Royal Bank of
Canada
RBS International means the
Royal Bank of Scotland International Limited
RCF means revolving credit
facility
Red House means Red House
wind farm
Red Tile means Red Tile wind
farm
REGO means
Renewable Energy Guarantee of Origin
REMA means Government's
Review of Electricity Market Arrangements
Review Section means the
front end review section of this report (including but not limited
to the Chairman's Statement, and Investment Manager's
Report)
Rhyl Flats means Rhyl Flats
Wind Farm Limited
ROC means Renewable
Obligation Certificate
RPI means the Retail Price
Index
Santander means Santander
Global Banking and Markets
Screggagh means Screggagh
Wind Farm Limited
SDG means Sustainable
Development Goal
Slieve Divena means Slieve
Divena Wind Farm Limited
Slieve Divena 2 means Slieve
Divena Wind Farm No. 2 Limited
SONIA means the Sterling
Overnight Index Average
South Kyle means South Kyle
Wind Farm Limited
SPVs means the Special
Purpose Vehicles which hold the Group's investment portfolio of
underlying wind farms
Stronelairg means Stronelairg
Holdco and Stronelairg Wind Farm
Stronelairg Holdco means
Greencoat Stronelairg Holdco Limited
Stronelairg Wind Farm means
Stronelairg Wind Farm Limited
Stroupster means Stroupster
Caithness Wind Farm Limited
SYND Holdco means SYND Holdco
Limited
Tappaghan means Tappaghan
Wind Farm (NI) Limited
TCFD means Task Force on
Climate-Related Financial Disclosures
Tom nan Clach means Breeze
Bidco and Nanclach
TSR means Total Shareholder
Return
Twentyshilling means
Twentyshilling Limited
UK means the United Kingdom
of Great Britain and Northern Ireland
UK Code means the UK
Corporate Governance Code issued by the FRC
UREGNI means the Utility
Regulator in Northern Ireland
WACI (revenue) means Weighted
Average Carbon Intensity calculated per TCFD guidance
nioutstanding amount investeditotal investee debt+equityi *investee scope 1 and 2 GHG
emissionsiinvestee revenuei
WACI (activity) means the
metric applies to the same approach as revenue based WACI,
however replaces an asset's revenue with
MWh energy generation and covers only Scope 1 and 2
emissions.
Walney means Walney Holdco
and Walney Wind Farm
Walney Holdco means Greencoat Walney Holdco
Limited
Walney Wind Farm means Walney
(UK) Offshore Windfarms Limited
Windy Rig means Windy Rig
Wind Farm Limited
Yelvertoft means Yelvertoft
Wind Farm Limited
Alternative Performance Measures
Performance Measure
|
Definition
|
2023
|
2022
|
Aggregate Group Debt
|
The Group's proportionate share of
outstanding third party borrowings of £1,790 million per note 13 to
the financial statements plus limited recourse debt of £585 million
at Hornsea 1, not included in the Consolidated Statement of
Financial Position
|
£2,375
million
|
£1,780
million
|
CO2 emissions avoided
per annum
|
The estimate of the portfolio's
annual CO2 emissions avoided through the displacement of
thermal generation, based on the portfolio's estimated generation
as at the relevant reporting date
|
2.5
million tonnes
|
2.0
million tonnes
|
GAV
|
Gross Asset Value
|
£6,169.0
million
|
£5,652.7
million
|
Homes powered per annum
|
The estimate of the number of
homes powered by electricity generated by the portfolio, based on
the portfolio's estimated generation as at the relevant reporting
date
|
2.3
million homes
|
1.8
million homes
|
NAV
|
Net Asset Value
|
£3,794.0
million
|
£3,873.2
million
|
NAV per share
|
The Net Asset Value per ordinary
share per note 16 to the financial statements
|
164.1
pence
|
167.1
pence
|
Net cash generation
|
The operating cash flow of the
Group and wind farm SPVs as broken down below
|
£405.5
million
|
£560.1
million
|
Total Shareholder
Return
|
The theoretical return to a
shareholder on a closing market basis, assuming that all dividends
received were reinvested without transaction costs into the
Ordinary Shares of the Company at the close of business on the day
the shares were quoted ex dividend
|
5.4 per
cent
|
13.5 per
cent
|
Group and wind farm SPV cash flows
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
|
|
£'000
|
£'000
|
|
|
Net cash generation
|
405,510
|
560,077
|
|
|
Dividends paid
|
(197,043)
|
(175,800)
|
|
|
|
|
|
|
|
Acquisitions
|
(820,925)
|
(484,153)
|
|
|
Acquisition costs
|
(2,742)
|
(4,667)
|
|
|
|
|
|
|
|
Share buybacks / equity
issuance
|
(9,439)
|
-
|
|
|
Share buyback / equity issuance
costs
|
(56)
|
(42)
|
|
|
|
|
|
|
|
Net amounts drawn under debt
facilities
|
690,000
|
150,000
|
|
|
Upfront finance costs
|
(4,939)
|
(1,663)
|
|
|
Movement in cash (Group and wind farm SPVs)
|
60,366
|
43,752
|
|
|
Opening cash balance (Group and
wind farm SPVs)
|
160,851
|
117,099
|
|
|
Closing cash balance (Group and wind farm
SPVs)
|
221,217
|
160,851
|
|
|
|
|
|
|
|
Net cash generation
|
405,510
|
560,077
|
|
|
Dividends
|
197,043
|
175,800
|
|
|
Dividend cover
|
2.1x
|
3.2x
|
|
|
Net Cash Generation - Breakdown
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
|
|
£'000
|
£'000
|
|
|
Revenue
|
785,608
|
981,752
|
|
|
Operating expenses
|
(198,611)
|
(234,439)
|
|
|
Tax
|
(62,661)
|
(122,910)
|
|
|
SPV level debt interest
|
(20,044)
|
(9,948)
|
|
|
SPV level debt
amortisation
|
(47,129)
|
(19,947)
|
|
|
Other
|
28,133
|
21,838
|
|
|
Wind farm cash flow
|
485,296
|
616,446
|
|
|
|
|
|
|
|
Management fee
|
(24,993)
|
(29,556)
|
|
|
Operating expenses
|
(2,564)
|
(2,141)
|
|
|
Ongoing finance costs
|
(62,834)
|
(28,026)
|
|
|
Other
|
5,013
|
2,507
|
|
|
Group cash flow
|
(85,378)
|
(57,216)
|
|
|
|
|
|
|
|
VAT (Group and wind farm
SPVs)
|
5,592
|
847
|
|
|
Net cash generation
|
405,510
|
560,077
|
|
|
Net Cash Generation - Reconciliation to Net Cash Flows from
Operating Activities
|
For the year ended
31 December 2023
|
For the year ended
31 December 2022
|
|
|
|
|
£'000
|
£'000
|
|
|
Net cash flows from operating
activities
|
359,801
|
545,851
|
|
|
Movement in cash balances of wind
farm SPVs
|
18,225
|
28,770
|
|
|
Repayment of shareholder loan
investment
|
50,199
|
13,482
|
|
|
Finance costs
|
(67,773)
|
(29,689)
|
|
|
Upfront finance costs
|
4,939
|
1,663
|
|
|
Placing of security cash
deposits
|
40,119
|
-
|
|
|
Net cash generation
|
405,510
|
560,077
|
|
|
Cautionary Statement
The Review Section of this report
has been prepared solely to provide additional information to
shareholders to assess the Company's strategies and the potential
for those strategies to succeed. These should not be relied on by
any other party or for any other purpose.
The Review Section may include
statements that are, or may be deemed to be, "forward-looking
statements". These forward-looking statements can be identified by
the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends",
"may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology.
These forward-looking statements
include all matters that are not historical facts. They appear in a
number of places throughout this document and include statements
regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager concerning, amongst other
things, the investment objectives and Investment Policy, financing
strategies, investment performance, results of operations,
financial condition, liquidity, prospects, and distribution policy
of the Company and the markets in which it invests.
By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. Forward-looking statements are not guarantees of future
performance. The Company's actual investment performance, results
of operations, financial condition, liquidity, distribution policy
and the development of its financing strategies may differ
materially from the impression created by the forward-looking
statements contained in this document.
Subject to their legal and
regulatory obligations, the Directors and the Investment Manager
expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events,
conditions or circumstances on which any statement is
based.
In addition, the Review Section
may include target figures for future financial periods. Any such
figures are targets only and are not forecasts.
This Annual Report has been
prepared for the Company as a whole and therefore gives greater
emphasis to those matters which are significant in respect of
Greencoat UK Wind PLC and its subsidiary undertakings when viewed
as a whole.