Final Results

RNS Number : 3510F

VH Global Sustainable Energy Oppt.

21 March 2022

 

VH Global Sustainable Energy Opportunities plc (the "Company")

Annual results for the period ended 31 December 2021

The Board of VH Global Sustainable Energy Opportunities plc (ticker: GSEO) is pleased to report its first annual results for the period from incorporation on 30 October 2020 to 31 December 2021.

Company highlights:

-  Successful IPO raising £242.6m of new capital

-  Further successful fundraising on 3 December 2021 raising additional £70m

-  Net Asset Value per share of 104p

-  Ongoing Charges Ratio¹ of 1.42%

-  Net Asset Value on an IFRS basis of £323.9m

-  Total shareholder return¹ of 8.3%

-  Dividend declared and paid on 10 December 2021 of 1.25p  

-  As at 31 December 2021, the Company's portfolio spans 24 assets across 4 countries - US, UK, Australia, Brazil - and includes technologies such as liquid storage, solar PV, Solar PV + Battery and Flexible Power + Carbon Capture and reuse.

ESG metrics²

-  An estimated 26,328 tonnes of carbon avoided

-  A forecast of 224,570 MWh clean energy generation

¹ Alternative Performance Measures are defined in the Alternative Performance Measures section

² Sustainability metrics are described in the Annual Report and Accounts

Bernard Bulkin, Chairman of VH Global Sustainable Energy Opportunities plc, commented:

"The Company has had a busy first year. The Board has been pleased to see that since IPO, the Investment Adviser has substantially deployed or committed the capital raised to the Enhanced Pipeline of Assets as showcased in the Prospectus. The funds have been deployed quickly into a very diverse set of technologies and geographies, but always with a rigorous assessment of their suitability and a firm focus on improving lives through the UN Sustainable Development Goals.

"It is also pleasing to see that the Company was able to go back to market to raise additional funds within ten months of listing, such a positive endorsement of our investment proposition as the first publicly listed investment trust in the UK with a global focus on the energy transition. I would like to thank our broad range of shareholders for their continued support."

Analyst presentation

A Presentation for analysts will be hosted by Victory Hill Capital Advisors LLP, at 8.30am today, Monday 21 March 2022.

Please contact Edelman Smithfield at [e-mail] for details

For further information:

Edelman Smithfield (PR Adviser)

Ged Brumby / Kanayo Agwunobi

Tel: + 44 (0)7540 412 301 / [phone]

Victory Hill Capital Advisors LLP (Investment Adviser)

Navin Chauhan

[e-mail]

Numis (Corporate Broker)

David Benda / Matt Goss / Tod Davis

Tel: [phone]

G10 Capital Limited (AIFM)

Mohammed Rahman / Paul Cowland

Tel: + 44 (0)20 7397 5450

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

Anthony Lee

Tel: [phone]

Notes to Editors

About Victory Hill Capital Advisors LLP

Victory Hill Capital Advisors LLP ("VHCA") (FRN 938594) is an Appointed Representative of G10 Capital Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 648953).

Victory Hill is based in London and was founded in May 2020 by an experienced team of energy financiers that have spun-out of a large established global project finance banking group. The team have an established track record built over six years while working together in their previous roles and participating in over $37.1bn in sustainable energy project transaction values, generating over 24.2 per cent. equity returns. In addition, the team has also participated in more than $200bn in transaction values across 91 conventional and renewable energy-related transactions in over 30 jurisdictions worldwide, throughout their individual careers. The average experience per individual is 21 years of relevant energy finance experience.  VHCA is the investment adviser entity of the Victory Hill group.

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

VHCA is a signatory of the United Nations Principles for Responsible Investing (UN PRI), the United Nations Global Compact (UN GC) and is a formal supporter of the Financial Stability Board's Task-Force on Climate-related Disclosures (TFCD).

About the Company

VH Global Sustainable Energy Opportunities plc ('GSEO' or 'the Company') is a closed-ended investment company.

The Company's investment objective is to seek to generate stable returns, principally in the form of income distributions, by investing in a diversified portfolio of global sustainable energy infrastructure assets, predominantly in countries that are members of the EU, OECD, OECD Key Partner Countries or OECD Accession Countries.

The Company's investment policy states that it aims to achieve diversification principally by making a range of sustainable energy infrastructure investments across a number of distinct geographies and a mix of proven technologies that align with the UN Sustainable Development Goals ('SDGs') where the investments are a direct contributor to the acceleration of the energy transition towards a net-zero carbon world.

The Company's investment in proven technologies will include exposure to power generation (renewable and conventional), biomass, transmission, distribution, storage and waste-to-energy. These investments will be operational, in construction or 'ready-to-build' but will not include assets that are under development or in pre-consent stage.

No investment will be made in extraction projects involving either fossil fuels or minerals.

The Annual Report and Accounts for the period ended 31 December 2021 will be made available on the Company's website at https://www.vh-gseo.com  

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

Annual General Meeting

The Company's Annual General Meeting will be held at the offices of Victory Hill Capital Advisors LLP at 4 Albemarle Street, London, W1S 4GA on 27 April 2022 at 12.00 p.m.

The Notice of the Annual General Meeting is set out in the Annual Report and Accounts for the period ended 31 December 2021.

The Company's LEI is 213800RFHAOF372UU580.

Chair's Statement

Enabling the Energy Transition

On behalf of the Board I am pleased to present this first annual report for VH Global Sustainable Energy Opportunities plc ("GSEO" or  "the Company") for the period from incorporation on 30 October 2020 to 31 December 2021 (the "Annual Report").

Following the Company's successful IPO on 2 February 2021, GSEO represents the first publicly listed investment trust in the UK with a global focus on the energy transition. The Board has appointed Victory Hill Capital Advisors LLP ("Victory Hill") as Investment Adviser to the Company.

Since IPO, the Investment Adviser has substantially deployed or committed to the enhanced pipeline of assets as showcased in the Prospectus and was able to go back to market to raise additional funds within ten months of listing. We were delighted to welcome such a broad range of shareholders to the register on both occasions.

Since launch, we have been busy implementing the strategy by identifying and investing in energy transition assets that comply with our return targets and Sustainable Development Goals strategy, but in doing this, contributing towards the low carbon transition and assisting in the acceleration of net zero targets around the world.

COVID-19

Despite the coronavirus pandemic continuing to disrupt the global economy throughout the period, there has been a very limited impact on the Company's assets. While supply chains have been materially affected, close cooperation with construction partners and suppliers has ensured that our construction assets have continued to proceed broadly in-line with expectations. In parallel, the Company has continued to deploy capital whilst originating a new pipeline.

During the COVID-19 pandemic, we have taken comprehensive steps to support and protect employees, contractors and project stakeholders. We are privileged in that the nature of our work has allowed those assets that are operating to continue uninterrupted. During the pandemic, lockdowns have led to large changes in the way businesses function. In spite of this, the Board has been able to meet virtually to consider investments and corporate governance, while the Investment Adviser, AIFM, Administrator and other key service providers have been able to operate effectively with staff working from home using secure IT systems.

Financial performance

This was the Company's first financial period. Following incorporation on 30 October 2020, the Company commenced its operations on 2 February 2021 when the Company listed. Profit for the period before tax was £20.3m and earnings per share were 10.5p. The Company's net asset value ("NAV") as at 31 December was £323.9m or equivalent to 104p per ordinary share. This NAV per Ordinary share represents a 4.2% increase from the previous quarter's NAV. This increase was predominantly due to an uplift in the portfolio revaluation of the US terminals.

Given the global nature of the portfolio, the forex movement in the final quarter of 2021 was negligible.

The Company's ongoing charges ratio ("OCR") reduced to 1.42%, reflecting the increased size of the investment portfolio. The Board will continue to monitor the OCR closely as we seek to grow the Company and deliver value to our shareholders. Further detail on the Company's financial performance including portfolio valuation and OCR can be found in the Financial Statements. 

Dividends and returns

We were pleased to announce an interim dividend on 1 November 2021 of 1.25p per Ordinary Share with respect to the period from IPO to 30 September 2021. Given the strength of the assets and underlying cashflows, this dividend exceeded the dividend target as set out at IPO to pay a minimum total dividend of 1p per Ordinary Share for the financial period ending 31 December 2021.¹ Additionally, we reaffirmed the annual dividend target of 5p per Ordinary Share for the year beginning 1 January 2022.

Going forward, the Board anticipates paying quarterly dividends of 1.25p per share, in line with guidance provided to investors in the January 2021 Prospectus.

Deployment

Our investment strategy seeks to take advantage of the energy transition by investing in a diverse portfolio of energy assets. Diversification is a key part of the strategy. The Company's ability to invest in EU, OECD countries and OECD Accession and Key Partner countries allows us to take advantage of reduced correlation in energy and power prices. Alongside the ability to invest in a range of technologies, this broad geographical scope also diversifies the influence of weather patterns and prevents reliance on any single regulatory regime. We also aim to minimise concentration risk via investing across a large number of projects.

The Company has continued to convert its global pipeline of investments that were highlighted as 'Enhanced Pipeline' assets in the IPO Prospectus. Since the interim results, the Company has continued to commit and deploy funds including the acquisition of its first UK combined heat and power with carbon capture and re-use plant, a second solar PV site in Australia, a further four solar PV projects in Brazil. The Company has also committed a further $35m to the expansion of the US terminals.

• On 6 April 2021, circa two months post IPO, the Company committed $61m to purchase two operating terminal storage sites on the Texas Gulf Coast to support Mexico's greenhouse gas emissions reduction plans by displacing pollutive fuels. The Company closed this transaction a couple of weeks later.
 

• On 28 May 2021, the Company committed $63m to a Brazilian solar programme consisting of 18 remote distribution solar generation projects across ten Brazilian states with a total capacity of 75MW. Brazil is a key partner of the OECD and one of the world's fastest growing energy markets.
 

• On 2 August 2021, the Company committed £50m to the Australian energy transition by acquiring a portfolio of distributed solar generation assets with plans to build embedded battery storage capacity.
 

• On 9 September 2021, the Company committed £78m to fund two net zero flexible power generation projects in the UK, which support the energy transition towards more renewable power generation. This investment will fund the construction of two combined heat and power plants which bring together high-efficiency, gas-fired engines technology with a carbon capture and reuse system to provide a clean, net zero, flexible and dependable electricity solution to the UK. The combined capacity will be 45MW.

As at 31 December 2021, the Company's portfolio spans 24 assets across four countries - US, UK, Australia, Brazil - and includes technologies such as liquid storage, solar PV, Solar PV + Battery and Flexible Power + Carbon Capture and reuse. As at the end of the reporting period the cashflows on operating assets are contracted and inflation-linked.

Corporate governance

I am pleased to be joined on the Board by Louise Kingham, Margaret Stephens and Richard Horlick, who bring a wealth of relevant skills and experience with them. The Board recognises the importance of a strong corporate governance culture that meets the requirements of the Listing Rules of the Financial Conduct Authority and the Association of Investment Companies ('AIC') Code of Corporate Governance.
 

The Company aims to communicate through all available mediums and maintain an open dialogue with investors regarding its strategic objectives, both financial and operational, and how they are executed.
 

During the period since IPO, the Company engaged, via its Investment Adviser and Corporate Broker, with shareholders through meetings, market announcements and diverse written materials. Where applicable, we have had feedback directly from shareholders. The Board plans to engage actively with shareholders going forward and are available to meet shareholders when required.

The Board will be available to answer shareholders' questions directly at the Annual General Meeting which will be held on 27 April 2022.

Sustainability / ESG

Sustainability is central to all activities undertaken by the Company and the Investment Adviser, and we recognise that investing responsibly is critical to our performance and growth over the longer term. Therefore, I am delighted to announce that Louise Kingham is the board member with responsibility for Environmental, Social and Governance ('ESG') and sustainability matters for the Company.

 

Our goal is to make a positive impact as we deploy capital into sustainable energy projects around the world, and ensure that ESG criteria are incorporated into all of our investment decisions. This is reflected across our investment philosophy and approach, including the selection of our Investment Adviser, Victory Hill, which is dedicated to the energy transition and in doing so has developed a sustainable development culture at the Company level. As a signatory to the UN Principles for Responsible Investments, Victory Hill has integrated ESG risks as well as opportunity assessments across every single stage of its investment process in sustainable assets around the world, reflecting the sustainable culture of both Victory Hill and the Company.
 

The Board recognises that impact investing is also becoming increasingly important for investors so we will be aiming to report in a transparent way, making it easier for investors to assess and quantify the positive impact that GSEO is having on communities around the world and the environment more broadly. Furthermore, we intend to adopt reporting standards as they are developed and adopted by the industry, such as those being developed by the Task Force on Climate-related Financial Disclosures ('TCFD') and the Sustainable Finance Disclosure Regulation ('SFDR').

Ukraine

The Company condemns the actions taken by the Russian Government against the people of Ukraine in violation of international law. The Russian aggression goes against everything the Company stands for. The Board and the Investment Adviser have undertaken a review to ascertain if there is any exposure, direct or indirect, to Russia in the underlying assets of the Company. This included, but was not limited to, reviewing inventory, supply chain, logistics, impact on revenue, and any corporates or individuals targeted by sanctions. The Company has no exposure to Russia.

We believe the current uncertainty around Russian sources of energy will precipitate a greater focus on ensuring overall resilience and security of supply in global energy systems. In particular, we believe this will accelerate the use of alternative sources of transition fuels and the development of renewable power generation to meet Net Zero goals.

The human impact of this conflict is devastating, and our hope is that peace will prevail quickly.

Equity issuance

We were pleased to announce that the Company raised a further £70 million in December 2021 through a placing of Ordinary Shares which we intend to use to invest in a pipeline of assets which are of high quality and diversified by geography and technology. Going back to market within ten months of the IPO highlights the Investment Adviser's strength in executing on the pipeline it had shown to investors but also its origination capabilities.
 

Taking the £70 million raised by the Placing means that we have successfully raised over £312 million since the Company was launched in February 2021. The capital raised, coupled with the strong pipeline of opportunities that the Investment Adviser has already identified, should allow us to maintain our strong investment momentum into 2022.
 

As economies around the world reassess their approaches towards a net zero carbon future following COP26 (Conference of the Parties), the Company is both well positioned, and well capitalised, to continue its leadership role, driving the energy transition while making a positive impact on the environment and the local communities in which we invest.

Pipeline and Outlook

GSEO is uniquely positioned to contribute strongly to global decarbonisation, whilst providing a compelling investment opportunity and stable, predictable long-term yield.

The Board is pleased with the Company's acquisitions completed since IPO. Furthermore, the Board looks forward to further opportunities to acquire assets which complement and provide enhanced value to the existing portfolio, while still maintaining a disciplined investment approach. The Board believes the Company is on track to deliver for shareholders the returns and yield as set out in the Company's Prospectus. The Board and the Investment Adviser regularly review the existing portfolio to find ways in which to create additional value and to optimise the portfolio, through active portfolio management for example. The investments made and pipeline generated are notable examples of the Investment Adviser's capabilities and discipline in that regard.

With the additional funds raised in December 2021, the portfolio is c.80% committed or deployed. The Board, together with the Investment Adviser, is confident that the remaining proceeds will be deployed within a relatively short time frame, and the Company will continue to invest in and maintain a portfolio that is both geographically and technologically diversified. 
 

On behalf of the Board, I would like to thank shareholders for their support since the IPO and we look forward to delivering yield and growth whilst driving a high positive impact on the environment and society.

BERNARD BULKIN, PHD, OBE

CHAIR

18 M arch 2022

¹ See dividend cover calculation in the Alternative Performance Measures section

Investment adviser's report

The topic of climate change and the centrality of energy in our society again took centre stage in the media and public consciousness in 2021. This was driven by issues around energy security and cost in the UK and other countries given the rise in natural gas prices, the pronouncements of a return to focus on energy infrastructure spending by the incoming Biden Administration in the US, as well as the coming together of international governments at the COP26 summit in Glasgow.

The diplomatic negotiations and resolutions proffered by governments of the developing and developed world resulted in the publication of the Glasgow Climate Impact (GCI), which many agreed did not go far enough in delivering a knockout punch to achieving targets of reducing global warming to 1.5 degrees above the average from the pre-industrial levels. In particular, the backing down on coal, proposing that it will remain a substantive part of the energy value chain for the short to medium term. The GCI nevertheless, in a more prosaic way, delivered a way forward in the overall transition.

Most significantly, COP26 demonstrated that while governments focused on the wider debate, it was clear that the burden of providing financial support for the transition to net zero would fall on the private capital world. The estimation of funding required over the next three decades by the Glasgow Financial Alliance for Net Zero (GFANZ), was put at US$100 trillion, clearly outside the reach of governments around the globe which already face stretched balance sheets. We believe that this is a conservative estimate and only points to the funding required for works in renewable and decarbonisation technologies, without also factoring in investment required in conventional energy infrastructure, which will also be required in a net zero world, and which needs consistent investment.

There is no clearer demonstration of the need for consistent investment throughout the energy value chain, both renewable and conventional, than two key events during the year.

Firstly, President Joe Biden signed a US$1 trillion infrastructure bill in November 2021, a large part of which addresses climate change issues. On closer inspection, the bill seems to not only favour renewables, but also commits a portion of its US$65 billion for clean energy to grid related investments, and a further US$21 billion to clean up brownfield sites, and cap orphaned oil and gas wells. Taken together, it is clear that the US views the transition in more holistic terms. Investments in the electricity grid network acknowledges the need to make the grid more resilient and to promote energy efficiency through co-locating power generation sources closer to demand centres, through so-called distributed energy systems, one of the core focuses of the Company.

Secondly, the need for a truly diversified and resilient energy mix has never been more evident for the UK, and other countries, as population and power demand grows and governments contemplate the need to offer energy security, whilst tackling climate change. In the context of the UK, greater reliance on renewable energy to tackle climate change, has led to increased reliance on fossil fuel generation (including coal) in the periods when the wind did not blow and the sun did not shine. This intermittency issue has caused demand for natural gas to spike and, combined with supply constraints in natural gas, has caused energy prices in the UK to increase substantially. It has been clear to Victory Hill for some time that the intermittency issues related to renewable power sources is the key sustainability issue in the UK, not the need for capital for more renewables investments per se. The UK needs to pursue a more diversified strategy for overall power supply, including natural gas generation with carbon capture, together with medium and longer duration energy storage solutions to supplement the growth in renewable supply. The Government should also better manage the knock-on effects of needing to use coal, which drives up carbon costs and therefore the cost of delivered power.

Over the course of the year, the Company's investments have sought to tackle these issues head on. We have not been satisfied with simply investing in further renewable power generation, as we do not see this as compatible with our mission for the attainment of sustainable energy globally.

In the US, we have implemented a programme to help in the desulfurisation of the Mexican fuels value chain, thereby making a substantial impact in mitigating the ecological disaster of burning untreated high sulfur fuels.

In Brazil, our investments contribute to meeting the sustainability objectives of addressing, climate change, as well as offering energy security to thousands of households, as well as grid security.

In Australia, our investments in hybrid solar and battery storage projects will help create greater efficiency on the grid and stimulate further investments in renewable power generation in the country.

The investment in the UK is unique in tackling the issue of energy security, by offering a highly efficient flexible natural gas combined heat and power ("CHP") unit to offer baseload power, and also respond to periods of intermittency on the grid, whilst also capturing fully the carbon emissions to offer a purified C0₂ product to the food and beverage industry, where shortages of the product have been well documented during the course of 2021. It is only through acknowledging that sustainable energy is a global phenomenon and needs tackling head on, that we can make an impact, and also offer our shareholders a truly differentiated yield.

Pipeline

We continue to originate sustainable energy opportunities globally, as was set out in the announcements we made for the follow-on capital raise in early December 2021. Our focus on deploying capital from the first two raises and from future raises will be on hydroelectric, geothermal, wind and battery opportunities in a broad range of geographies, including Brazil, UK, Mexico and US.

We see great potential to continue to deliver on a portfolio that is diversified by geography and by technology. Thanks to a very robust pipeline, we are able to prioritise opportunities according to the shape of the portfolio.

Investment Update

At the end of 2021, we saw another uplift in the Company's NAV, driven by the strong performance of our US terminals. Our programmes in Brazil and the UK are under construction so will not impact NAV until they reach Commercial Operational Date ("COD") and they will continue to be valued at cost in this period.

The Australian solar PV plus battery programme has started with the acquisition of two assets at the end of Q4 2021 which will be measured at fair value, based on the highest and best use of the assets. This includes the acquisition price and upgrade with the Battery Energy Storage System ("BESS") implementation, which is the main driver of the value creation for this programme.

The strong performance of the US terminals has been driven by a more focused management of the assets, which identified further revenues streams and with a commercial team on the ground originating more contracts for the use of the terminals.

With the expansion of the terminals, we expect further improvements in cash flows, as we take advantage of available land and infrastructure and continue to monetise on the high demand for this type of asset in that strategic location.

Case study Update:

US Terminal Storage Assets

Since completion of the acquisition of the two terminals in South Texas, we have seen a great level of improvement in the operations and commercial arrangements. On the operating side, we have maintained the existing teams and have added capabilities by switching to 24/7 operation, increasing the volumes we had been handling. On the commercial front, we have extended existing contracts at higher rates and optimised ancillary services revenues.

The financial performance of this asset has greatly exceeded our expectations in 2021 and the prospects ahead are for even greater potential, as we embark on the expansion of the storage capacity.

A final development on this project was that, thanks to the profile of the contracts in place, we have managed to raise non-recourse debt from specialised local banks. The leverage for this asset as of 31 December 2021 is 16% (defined as debt over total capitalisation).

Market Outlook

The transformation in the energy market will continue to affect people across the globe on macro and micro levels and a reversal to the old norm can now be completely discarded. Countries' commitments to tackling climate change and sustainability head on, technological advancements and intelligent solutions will continue to shape the way we power our economies for years to come. At Victory Hill, we firmly believe that we have only just started on the energy transition journey.

Sustainable energy investments will continue to be supported by favourable market conditions.

The 'old' energy industry is grappling with the increase in the cost of capital for extraction of fossil fuels by significantly reducing investments despite improved commodity prices. This paradox is creating a unique situation for a prolonged high commodity price cycle which is consistent with an energy transition landscape. Higher commodity prices will make their way into energy prices for end consumers, counter-balancing the downward pressure on energy prices caused by greater renewable energy penetration. In the meantime, governments will continue to implement initiatives to try to mitigate energy inflation's impact on end users' lives which will favour sustainable assets.

Commitments to tackling climate change are getting more and more robust. While governments are fluctuating around greater levels of commitment to lower levels, the private initiative remains relentlessly focused on developing solutions and capturing opportunities as they become available.

GSEO is at the forefront of the private capital participation in the energy transition with a global focus to enable sustainable energy projects with long-term equity capital. Our global approach means that our attention will be centred around different themes depending on the geography, as the energy transition means different approaches required in each market. "Think global, act local" is our approach.

In the UK, we will continue to focus on grid balancing initiatives. Through the autumn and winter of 2021 we have seen very low wind resources resulting in the UK network having to dispatch an unwanted amount of coal-fired power plants. This is a major setback with so much capacity being built for renewable sources. We will therefore continue to direct our investments in the UK towards addressing the unreliability of solar and wind with net zero flexible power solutions using high efficiency natural gas power plants. High efficiency means less natural gas as feedstock for each MWh to be produced. This will be crucial at a time when natural gas prices are expected to be high due to a combination of supply and demand factors and geopolitical tensions.

On the US and Mexico border, the need to keep the flow to clean up Mexican fuel will remain as strong as ever. The Mexican government will continue to push on the agenda to support state owned enterprises which control the fuel value chain and the power generation segment. These entities depend greatly on the ability to clean the domestic fuel to avoid environmental disaster of burning the indigenous fuel untreated.

In Brazil, the commitment to renewable energy penetration will continue to go from strength to strength. While the country goes into the usual political year paralysis, both sides of the political spectrum will continue to see favourably the great benefits of distributed generation solar PV plants. These plants will play a crucial role in supplying the Brazilian economy with clean and affordable energy at a time when electricity prices will continue to cause a lot of pain on Brazilian households. Like in all economies, inflation in Brazil will continue to be high, putting some pressure on the currency although also contributing to the inflation-linked revenues for our projects there.

In Australia, where power generation has a disproportionally high reliance on coal, power prices are expected to remain very volatile. High commodity prices, including coal, will make their way into power prices at peak hours, making the case for trading strategies using energy storage even more compelling.

In terms of currencies, as part of our investment criteria we always embed some cushion to absorb negative shocks on the exchange rates versus the GBP. Having said that, we do not anticipate major movements in the currencies we are exposed to, even under the current extreme geopolitical tensions. Of those currencies, the BRL is the most volatile and remains at historical lows, although this has been mostly a result of higher inflation in the last 10 years versus US and UK.

Case study Update:

Brazil Solar PV Programme

Brazil offers great potential for solar PV developments, given the role that renewable energy can play in the energy mix. This potential has been almost completely untapped to date. Under this programme, we continue to complete the onboarding of the projects identified as part of the original pipeline and to progress on the construction of the projects already acquired. The final batch of projects to be onboarded is expected in Q2 2022.

With multiple sites under construction, this programme has faced the supply-chain hurdles that impacted the global economy in 2021 and equipment has taken longer than expected to arrive on the sites, causing a few weeks delay in the projects reaching COD. However, thanks to the Engineering, Procurement and Construction (EPC) arrangement in place, these delays will be offset by contractual compensation provisions.

We are at the final stages of the construction of the first two batches which involved 11 sites with a total capacity of 30 MW. First COD for some projects in this programme is occurring in March and April 2022 with the remainder occurring in subsequent months. The third batch, which was approved in December 2021, remains on track for COD in Q3 2022 with one project expected to be completed in Q2 2022. The whole investment programme should reach COD in 2022, including the last remaining projects that are yet to be constructed.

In terms of the regulatory framework, a new law (PL 5829/2019) was implemented in January 2022 that secured the prevailing taxes and tariffs on the projects until 2045.

Enhancing Australia's Grid System by Addressing Market Shortfalls

Sustainability

GSEO's investments in renewable power generation in Australia aim to reduce the climate impact by displacing fossil fuel derived electricity and optimising its use in the grid through deployment of BESS. In addition, the investment looks at the broader sustainability impact. For example, solar panel manufactures have been vetted for environmental actions such as recyclability, and partner ESG policies and processes reviewed to ensure sustainability-focused management practices. 

The Australian market is very unique in that it has one of the greatest renewable resources potential (land availability, wind and solar resources) but is starting from the opposite end of the spectrum, which is to have the majority of its energy needs generated by coal. This makes the transition one of the most challenging tasks around the world.

Australia continues to see a very rapid penetration of renewable energy that cannot be absorbed by the energy system because coal plants provide the baseload power to the economy. In the peak hours of the day for electricity demand, solar availability tends to be very low so almost all the power is provided from coal plants. This means that power prices at peak hours are high. During the day, when the sun is available, supply from solar PV sources is extremely high compared to levels of demand. As a result, power prices are low and at times even negative. Solar PV curtailment and negative prices make solar PV power generation a very challenging proposition.

Australia calls for battery storage to shift the supply of electricity to the optimal times of the day. Battery storage not only offers a solution to decarbonise the Australian power sector but it is also a great source of value creation via a trading strategy. Because the power price patterns during the day are so pronounced and predictable, Australia offers an opportunity to do intra-day power trading and to capture an attractive margin in the process.

We have chosen this programme for Australia which involves the construction or acquisition of solar PV plants and addition of BESS. The BESS addition to solar PV improves the unlevered investment returns.

Project details

• Initial acquisition of two operating solar PV generation assets totaling 17MW (Phase I) and construction of battery storage systems of 9MWh (Phase II)
 

• Acquisition of a further 21 MW of solar PV generation assets (Phase III) and an associated build of 25MWh BESS (Phase IV)
 

• The operating partner is Birdwood Energy Investments Pty Ltd, a team of energy entrepreneurs with a successful development track record of power generation and battery projects globally

• Building BESS allows the projects to capture positive power price movements and prevent over exposure to negative power prices
 

• Working with the operating partner to optimise the output and availability of plants and improve existing commercial terms
 

• Capture enhanced revenues by providing frequency stabilisation services

Sustainable Solution for Problems in Intermittency and Stabilisation of the Grid

Sustainability

This UK-based investment helps provide energy access through grid stabilisation while addressing greenhouse gas emissions by not only using efficient technology but also capturing carbon dioxide as a product for the food and beverage sector. This creates an economic carbon cycle.

Active engagement through the value chain ensures ESG impacts are managed whether it's to identify opportunities to recycle waste products or improve efficiency.

In line with our strategy to focus on grid-balancing opportunities for the UK, we are proud to be supporting this very innovative flexible power generation solution. It is undeniable that renewable energy is highly desirable as a cheap and carbon-neutral energy source. However, without an infrastructure in place to deal with the intermittency of renewable sources such as solar and wind, the logic of adding renewable energy becomes less strong or the task itself simply becomes problematic due to the challenges imposed on the grid operator. Last year, during periods of very cold weather and low wind resources, we witnessed the UK network operator having to call on coal-fired power plants to keep the market supplied. That is a major setback and should be avoided.

Project details

• The construction of two flexible power projects that are uniquely combined with carbon capture and re-use technology (Phase I) 10 MW & (Phase II) 35 MW.
 

• The programme involves global industrial groups participating in its development, such as Rolls Royce MTU, Climeon, Mitsubishi Turboden and ASCO Carbon Dioxide Ltd.
 

• The operating partner is Landmark Power Holdings Ltd, which is led by a group of UK energy entrepreneurs.

• Secured a 15 year PPA with a 5 year rolling "spark spread"
 

• Opportunity to improve the commercial terms with CO₂ offtakers
 

• Additional revenues from grid ancillary services such as balancing and capacity markets
 

• Additional capacity to be sold private wire power supply agreement with a leading UK supermarket group which intends to use the energy for its onsite electric vehicle charging stations

Our flexible power and carbon capture programme in the UK is the way we have chosen to participate in the UK energy market, which is to supply reliable baseload power without adding to carbon emissions. By combining a range of existing and proven technologies, this programme offers a very compelling solution to enable further renewable energy penetration in the UK energy mix. The way this programme contributes to de-carbonising the UK energy market is multi-faceted:

Firstly, by displacing coal as the source to call on when renewable resources are not available. According to the International Energy Agency, natural gas emits at least 50-60% less CO₂ than coal when burned, and a 10th of the pollutants which comes from burning coal. This displacement has been traditionally done via the construction of gas peaker plants with the rationale that using natural gas is much less harmful than coal. This is a starting point for this programme but not the end game.

Secondly, increasing efficiency of the gas-fired power engines with the addition of Organic Rankine Cycle (ORC) technology. Essentially, adding heat exchangers to generate additional power from the temperature differentials and exhaust gases of the power production and cooling systems. This has the impact of delivering a unit of power with a much lower consumption of natural gas. With this process, we have increased efficiency of our gas-fired power engines from a typical low 30% to close to 50%. This is almost double the efficiency or almost half the natural gas consumption.

Thirdly, and the most important contribution, is by capturing the exhaust gases at the end of the cycle, "scrubbing" it and turning it into purified food-grade CO₂. This has the impact of displacing imports of industrial CO₂ (which have been in shortage in the UK) as well as displacing domestic CO₂ originated from ammonia plants.

The end result is a flexible and reliable power source that does not add to CO₂ emissions.

In terms of the execution of this programme, the first project has a full-wrap turnkey lumpsum EPC contract in place and broke ground at the end of 2021. We expect to see power production starting in the beginning of 2023 with the full CO₂ capture completed in mid 2023.

PRINCIPAL RISKS AND UNCERTAINTIES

The Prospectus issued in January 2021 includes details of risks faced by the business. The Board considers that the principal risks and uncertainties faced by the Group are as follows:

Risk	Description of Risk	Risk Impact	Mitigation
1. Risks relating to the Company
Reliance on Investment Adviser	The Company relies on the Investment Adviser for the achievement of its investment objective.	The departure of some key individuals or all of Victory Hill's investment professionals could prevent the Company from achieving its investment objective.   There can be no assurance that the Directors will be able to find a replacement adviser if Victory Hill resigns.	The Investment Adviser consists of five managing partners supported by three investment professionals. A collegiate approach is taken to Investment Advisory activities with the team having a broad range of skills to support the pursuit of the Company's investment objective.   The performance of the Company's Investment Adviser is closely monitored by the Board.   In addition, at least once a year the Management Engagement Committee performs a formal review process to consider the ongoing performance of the Investment Adviser and makes a recommendation on the continuing appointment of the Investment Adviser to the Board.   The initial term of the Investment Advisory agreement is five years.
Reliance on third party service providers	The Company has no employees and the Directors have all been appointed on a non-executive basis. Therefore, the Company is reliant upon its third party service providers for the performance of certain functions.	Service provider control failures may result in operational and/or reputational problems and may have an adverse effect on the Company's NAV, revenues and returns to shareholders.	The Board oversees and keeps under review the provision of services by each of the Company's service providers on an ongoing basis.   The Management Engagement Committee performs a formal review process to consider the ongoing performance of its service providers.
Currency risks	The Company will make investments which are based in countries whose local currency may not be Sterling and the Company may make and/ or receive payments that are denominated in currencies other than Sterling.	When foreign currencies are translated into Sterling there could be a material adverse effect on the Company's profitability, the NAV and the price of shares.	Investments are held for the long term.   The Company intends to enter into hedging arrangements for periods of up to 12 months to hedge against short-term currency movements.   Currency risk is taken into consideration at the time of investment and is included in the Investment Adviser's assessment of minimum hurdle rate from investments.
2. Risks relating to the portfolio investment strategy
Illiquidity of investments	The Company's investments in sustainable energy infrastructure investments are illiquid and may be difficult to realise at a particular time and/or at the prevailing valuation.	Shareholder returns could be materially negatively impacted should the Company be required to realise them in the near term (requirement for early liquidity).	The Company is expected to hold most of its investments on a long-term basis. The Investment Adviser and the Board will monitor the position on a regular basis. Cash flow forecasts of the Company are also monitored on a regular basis to ensure sufficient liquidity buffer at the Company level.
3. Risks relating to investments
Construction risks	Construction project risks associated with the risk of inaccurate assessment of a construction opportunity, delays or disruptions which are outside the Company's control, changes in market conditions, and the inability of contractors to perform their contractual commitment.	Failure to complete projects in accordance with expectations could adversely impact the Company's performance and shareholder returns.	The Investment Adviser monitors construction carefully and reports frequently to the Board and AIFM.   The Investment Adviser undertakes extensive due diligence on construction opportunities and seeks to have appropriate insurances in place to mitigate any costs relating to delays. In addition, the Investment Adviser seeks to utilise EPC contractors that can provide single point, lump sum turnkey arrangements wherever possible.

Due diligence	Due diligence may not identify all risks and liabilities in respect of an investment.	Failure to identify risks and liabilities may impact the profitability or valuation of the investment.	The senior management team at the Investment Adviser have extensive experience in executing strategies similar to that of the Company.   Where appropriate, in accordance with a disciplined process, due diligence conducted by the Investment Adviser may be supplemented, for example, by independent legal, tax and technical advisers.
Demand, usage and throughput risks	Residual demand, usage and throughput risk can affect the performance of infrastructure investments.	The actual return to shareholders may be materially lower than the target total return.	The Investment Adviser performs extensive due diligence on the project economics vs. alternative energy options before entering into a project. Furthermore, project revenues are largely contracted for the medium to long term.   The Investment Adviser constantly reviews assumptions made regarding the demand, usage and throughput vs. actual results.
Meteorology risks	Dependency on meteorology, meteorology forecasts and other feedstocks may have a negative impact on the performance of the Company's investments.	The actual return to shareholders may be materially lower than the total target return.	The Investment Adviser performs extensive due diligence on meteorology and other feedstocks before entering into a project.   The Investment Adviser regularly reviews meteorology and feedstock factors and will action any potential remedies.
Counterparty risks	Counterparties defaulting on their contractual obligations or suffering an insolvency event.	The failure by a counterparty to make contractual payments or perform other contractual obligations or the early termination of the relevant contract due to the insolvency.	Due diligence on counterparty risk is performed before entering into projects and counterparty risk is monitored on a regular basis.
Uninsured loss and damage	The risk that an investment may be destroyed or suffer material damage, and the existing insurances may not be sufficient to cover all the losses and damages.	The actual return to shareholders may be materially lower than the target total return.	An independent insurance adviser is appointed for each project to review project risks in conjunction with the Investment Adviser and to ensure that appropriate insurance arrangements are in place.   Insurance requirements are reviewed on an ongoing basis.
Curtailment risks	Investments may be subject to the risk of interruption in grid connection or irregularities in overall power supply.	In such cases, affected investments may not receive any compensation or only limited compensation.	Extensive due diligence is performed on each project before investment.   The Investment Adviser constantly reviews curtailment risks.
Commodity price risks	The operation and cash flows of certain investments may depend upon prevailing market prices for electricity and fuel, and particularly natural gas.	The actual return to shareholders may be materially lower than the target total return.	The Company intends to mitigate these risks by entering into (i) hedging arrangements; (ii) extendable short, medium and long-term contracts; (iii) fixed price or availability based asset-level commercial contracts.
4. Risks relating to the Company's shares
Discount to NAV	The share price may not reflect the underlying NAV.   Discount management provisions being unable to be satisfied may result in a significant share price discount to NAV.	Lack of liquidity in the Company's shares could negatively impact on shareholder returns.	The Board, Corporate Broker and Investment Adviser monitor discount or premium to NAV at which the shares trade.
5. Risks relating to regulation
Regulation	The Company is exposed to the risk that the competent authorities may pass legislation that might hinder or invalidate rights under existing contracts as well as hinder or impair the obtaining of the necessary permits or licenses necessary for sustainable energy infrastructure investments in the construction phase.	The actual return to shareholders may be materially lower than the target total return.	The Company aims to hold a diversified portfolio of sustainable energy infrastructure investments and so it is unlikely that all assets will be impacted equally by a single change in legislation.   The Investment Adviser ensures that contracts are not exposed to government subsidies, thus mitigating exposure to policy risks linked to contract pricing.   There is also strong public demand for support of the renewables market to hit net zero carbon emission targets.   The Investment Adviser monitors the position and provides regular reports to the Board on the wider macro environment.
6. Operational risks
Operation and management risks of the portfolio of assets	Poor management or operational performance of an asset by the Company's operating partners and selected operations and maintenance providers.	The actual return from single portfolio assets may be lower than the target total return for the asset.	Operating partners operate to an annual budget and a series of key performance indicators to ensure contractual alignment between the relevant parties.
Valuation risks	Valuation of the portfolio of assets is based on financial projections and estimations of future results.	Actual results may vary significantly from the projections, which may reduce the profitability of the Company leading to reduced returns to Shareholders and a fall in the Company's NAV.	The Company has adopted a valuation policy which was disclosed in the Company's prospectus.   Fair value for each investment is calculated by the Investment Adviser. However, if considered necessary and appropriate, the Board may appoint an independent valuer.   The Investment Adviser has significant experience in the valuation of energy assets.   The Investment Adviser has an independent valuation committee to perform and challenge valuations. In addition, the Investment Adviser partnership committee reviews and challenges valuations.   The Board and AIFM review the valuations provided quarterly by the Investment Adviser.

7. Climate related risks
Physical risks	Longer term changes in climate patterns, e.g., reduction or increase in wind levels, decrease solar optimal days impacting renewable output and associated earnings.   Increased occurrence of extreme weather events such as cyclones, storms, flooding and heatwaves causing damage to assets, disruption to feedstocks, value chain, outputs and associated earnings.	Reduction in output from assets leading to reduced income stream. This risk may increase over the long term in the absence of climate mitigation1	GSEO is investing in a diversified portfolio of energy transition infrastructure by geography, technology and capability. These investments are targeted at the energy transition to net zero. This will provide a buffer against variable weather patterns across the portfolio.   The Company also mitigates risk through project revenues being contracted for the medium- and long-term.   At the asset level weather conditions are monitored and many of the renewable projects have battery storage capabilities to optimise energy input to the grid. Meteorology and feedback due diligence is undertaken before investment and reviewed regularly. All assets have crisis management and business continuity plans to respond to disruptions. The assets are also required to have continuous improvement management systems to build capability and capacity in the local teams and operations.
	Increased insurance premium for assets in high-risk locations	Increased cost of doing business	When making investments the due diligence process accounts for climate change risk and impacts.   The Investment Adviser employs an insurance specialist when making investments and seeks to have appropriate contractual indemnities and insurance provisions in place to mitigate any costs relating to delays or operation disruption. Insurance requirements are reviewed on an ongoing basis.
Transition risks	Market shifts may dampen ability to engage investors on a broader portfolio of energy transition projects than a traditional European renewable focus including different geographies and new technologies e.g., carbon capture and reuse	Reduced access to capital	There is strong public demand for support of the renewables market towards net zero carbon emission targets.   The Company is expected to hold most of its investments on a long-term basis and the Board and Investment Adviser monitors the position on a regular basis.   The senior management team at the Investment Adviser have extensive experience in executing strategies similar to that of the Company.
	Policy shift may introduce regulation around climate change e.g., increased disclosure, taxes etc	Increased cost of doing business Reduced access to capital	The Company is supportive of the policy aims of the Disclosure Regulation and will comply and monitor changes.   The Company engages with partners and stakeholders to gather data and drive action to improve ESG management and support disclosure and policy requirements. This includes monthly metric reporting on climate related KPIs including energy used and generated, mitigation actions for risks and impacts, as well as any energy reduction projects. IFC performance standards are used to guide these interactions.   The Company's investment strategy targeting the energy transition is aligned with global policy movements on climate change which would limit impact.

¹ IPCC Fifth Assessment Report

Risk management

The risk management framework established by the Board has been designed to identify, evaluate and mitigate the significant risks faced by the Company. A risk management framework can only provide reasonable, not absolute, assurance. The Board has contractually delegated the management of the investment portfolio, the registration services, administrative services and other services to third party service providers and reliance is therefore placed on the internal controls of those service providers. Risk assessments are performed on a regular basis and this is facilitated through the use of a detailed risk assessment programme which categorises the risks identified and the controls in place to mitigate those risks.

Risk appetite

The Board's risk appetite is aligned with the Company's investment objective and policy for which the Board has ultimate responsibility. The investment objective and policy is included in the Strategic Report in the Annual Report. Identification and management of risks is integrated into the Investment Adviser's investment process.

Emerging risks

As part of its risk assessment, the Board considers emerging risks and any such risks identified are included in the detailed risk assessment programme.

Climate risk and TCFD

Climate risk and TCFD disclosures are included in the Annual Report and Accounts.

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 Company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. In preparing the Company's financial statements, the Directors have also elected to comply with International Financial Reporting Standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union. Pursuant to the Companies Act 2006, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with international accounting

standards in conformity with the requirements of the Companies Act 2006 and with International Financial Reporting Standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, subject to any material departures disclosed and explained in the financial statements;

• prepare a Directors' report, a Strategic report and Directors' Remuneration report which comply

with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced, and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Website publication

The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

Directors' responsibilities pursuant to Disclosure Guidance and Transparency Rules Chapter 4 (DTR4)

The Directors confirm to the best of their knowledge:

• The Company's financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company.

• The annual report includes a fair review of the development and performance of the business and the financial position of the Company and the parent company, together with a description of the principal risks and uncertainties that they face.

Having taken advice from the Audit Committee, the Directors consider that the Annual Report and financial statements taken as a whole are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business

model and strategy.

Approval

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

Bernard Bulkin

Chair of the Board of Directors

18 March 2022

Financial Statements

Statement of comprehensive income

For the period 30 October 2020 to 31 December 2021

	Note	Revenue £'000	Capital £'000	Total £'000
Gains/(losses) on investments	7	-	22,046	22,046
Investment income	4	1,674	-	1,674
Total income and gains		1,674	22,046	23,720
Investment advisory fees	16	(2,218)	-	(2,218)
Operating expenses	5	(1,136)	-	(1,136)
(Loss)/profit for the period before taxation		(1,680)	22,046	20,366
Taxation	6	-	-	-
(Loss)/profit for the period after taxation		(1,680)	22,046	20,366
Profit and total comprehensive income attributable to:
Equity holders of the company		(1,680)	22,046	20,366
(Loss)/earnings per share - basic and diluted (pence)1	18	(0.87)	11.39	10.52

¹ Based on the weighted average number of ordinary shares in issue since the Company's incorporation on 30 October 2020 to 31 December

2021.

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

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

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

The notes form part of these financial statements.

Statement of financial position

As at 31 December 2021

	Note	£'000
Non-current assets
Investments at fair value through profit or loss	7	159,618
Total non-current assets		159,618
Current assets
Cash and cash equivalents	10	163,810
Other receivables	9	811
Total current assets		164,621
Total assets		324,239
Current liabilities
Accounts payable and accrued expenses	11	(341)
Total current liabilities		(341)
Total liabilities		(341)
Net assets	19	323,898
Capital and reserves
Share capital	13	3,116
Share premium		67,949
Special distributable reserve	14,15	232,467
Capital reserve		22,046
Revenue reserve		(1,680)
Total capital and reserves attributable to equity holders of the Company		323,898
Net asset value per Ordinary Share		103.95

The financial statements were approved and authorised for issue by the Board of Directors on 18 March 2022 and signed on their behalf by:

BERNARD BULKIN

CHAIRMAN

Company Registration Number 12986255

The notes form part of these financial statements.

Statement of changes in shareholders' equity

As at 31 December 2021

	Note	Share capital £'000	Share premium £'000	Special distributable reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
Opening balance		-	-	-	-	-	-
Issue of share capital	13,14	3,116	309,508	-	-	-	312,624
Cost of issue of shares	14	-	(6,059)	-	-	-	(6,059)
Transfer to special distributable reserve	14,15	-	(235,500)	235,500	-	-	-
Total comprehensive income/(loss) for the period		-	-	-	22,046	(1,680)	20,366
Interim dividends paid during the period				(3,033)			(3,033)
Balance at 31 December 2021		3,116	67,949	232,467	22,046	(1,680)	323,898

A total of 311,589,799 ordinary shares were issued in the period to 31 December 2021.

The capital reserve represents the unrealised gains or losses on the revaluation of investments. The unrealised element of the capital reserve is not distributable. The special distributable reserve was created on court cancellation of the share premium account. The revenue, special distributable and realised capital reserves are distributable by way of dividend. The total distributable reserves as at 31 December 2021 was £230,787,289, after accounting for the cumulative unrealised gains of £22,045,723.

The notes form part of these financial statements.

Statement of cash flows

For the period 30 October 2020 to 31 December 2021

	Note	£'000
Cash flows from operating activities
Profit before tax		20,366
Less: Change in fair value of investments	7	(23,595)
Operating result before working capital changes		(3,229)
Increase in prepayments and other receivables		(802)
Increase in interest receivables		(9)
Increase in accounts payable and accrued expenses		341
Net cash flow used in operating activities		(3,699)
Cash flows from investing activities
Purchase of investments	7	(136,023)
Net cash used in investing activities		(136,023)
Cash flows from financing activities
Proceeds from issue of shares		312,624
Payment of share issue costs		(6,059)
Dividends paid in the year		(3,033)
Net cash generated from financing activities		303,532
Net increase in cash and cash equivalents		163,810
Cash and cash equivalents at beginning of the period		-
Cash and cash equivalents at end of the period	10	163,810

The notes form part of these financial statements.

Notes to the financial statements

1. General information

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

The financial statements comprise only the results of the Company, as its investment in VH GESO UK Holdings Limited ("GESO Holdings") is included at fair value through profit or loss as detailed in the key accounting policies below.

The Company and the AIFM has appointed Victory Hill Capital Advisors LLP as its Investment Adviser pursuant to the Investment Advisory Agreement dated 5 January 2021.

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

2. Significant accounting policies

2.1 Basis of preparation of financial statements

As this is the Company's first accounting period, annual statutory financial statements will be filed with the Registrar of Companies. The Company has prepared its first statutory financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. These financial statements are also prepared in accordance with International Financial Reporting Standards ('IFRS') adopted pursuant to Regulation (EC) No 1606/2002 as it applies to the European Union.

The 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 in note 3.

The financial statements have also been prepared, as far as is consistent with IFRS and relevant and applicable to the Company in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ("SORP") issued in October 2019 by the Association of Investment Companies ("AIC").

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

The current year financial information is from the period of incorporation on 30 October 2020 to 31 December 2021. Comparative information is not required as this is the first period of operations.

2.2 Investment entity and basis of non-consolidation of subsidiaries

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

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

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

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

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

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

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

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

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

Further detail on the significant judgements in valuing the Company's investments is disclosed in note 3.

2.3 Going concern

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

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

Following the successful IPO of the Company on 2 February 2021 and additional share issuance on 3 December 2021, the Company continues to meet day-to-day liquidity needs through its cash resources. As at 31 December 2021, the Company had cash balances of £163.8 million, which are sufficient to meet current obligations as they fall due.

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

The Directors have reviewed Company forecasts and pipeline projections which cover a period of at least 12 months from the date of approval of this report, considering foreseeable changes in investment and the wider pipeline, which show that the Company has sufficient financial resources to continue in operation for at least the next 12 months from the date of approval of this report. Based on this review, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least 12 months from the date of approval of this report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

In considering the above key potential impacts of COVID-19 on the Company and its subsidiaries operations, the Directors have assessed these with reference to the mitigation measures in place. The key personnel at the Investment Adviser, the AIFM and Administrator have successfully implemented business continuity plans to ensure business disruption is minimised, including remote working, and all staff are continuing to assume their day-to-day responsibilities.

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

The Board has considered the impact of Brexit on the Company's operations and does not consider that either has a material uncertainty over the Company's ability to continue as a going concern.

2.4 Financial Instruments

Financial assets and financial liabilities are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial assets

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

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

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

Investments held at fair value through profit or loss

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

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

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

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

Transaction costs are recognised as incurred and allocated to the capital column of the profit or loss.

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

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

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

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

• when the contractual right to receive cashflow has expired.

Financial assets at amortised cost

Loans and other receivables that are non-derivative financial assets and that have fixed or determinable payments that are not quoted in an active market are classified as financial assets at amortised cost. Financial assets are measured at amortised cost using the effective interest rate method, less any impairment. Impairment provisions for loans and 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.

The Company's financial assets held at amortised cost comprise of cash and cash equivalents and other receivables in the Statement of Financial Position.

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 Company becomes party to the contractual requirements of the financial liability.

The Company's other financial liabilities measured at amortised cost include trade and other payables and other short term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the statement of comprehensive income.

2.5 Cash and cash equivalents

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

2.6 Foreign currencies

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

Foreign currency monetary assets and liabilities are translated to the functional currency at the exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation to the functional currency are recognised in the Statement of Comprehensive Income. Foreign exchange differences relating to investments held at fair value through profit or loss are shown within the line Gains/(losses) on investments.

2.7 Dividends

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

2.8 Income recognition

Investment income comprises interest income and dividend income received from the Company's subsidiaries. Interest income is recognised in the Income Statement using the effective interest method. Investment income and interest income are allocated to the revenue column of the Company's statement of comprehensive income unless such income is of a capital nature.

Other income is accounted for on an accruals basis using the effective interest rate method.

Gains or losses resulting from the movement in fair value of the Company's investments held at fair value through profit or loss are allocated to the capital column of the Company's statement of comprehensive income at each valuation point.

2.9 Expenses

Expenses are accounted for on an accruals basis. All expenses other than those directly attributable to investments and share issue expenses are allocated to the revenue column of the statement of comprehensive income.

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

2.10 Share capital

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

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

The costs incurred in relation to the Company's IPO and for the additional raise in December 2021 were charged to the share premium account.

2.11 Taxation

Under the current system of taxation in the UK, the Company 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 statement of financial position.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit or the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments, except where the Company is able to control the timing of the reversal of the difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the profit or loss except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Deferred tax assets and liabilities are not discounted.

2.12 Segmental reporting

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

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

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

2.13 Changes to accounting standards and interpretations

At the date of authorisation of the financial statements, there were a number of standards and interpretations which were in issue but not yet effective. The Company has assessed the impact of these amendments and has determined that the application of these amendments and interpretations in current and future periods will not have a significant impact on its financial statements.

Description	Effective Date
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2	Periods beginning on or after 1 January 2021
Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets	Periods beginning on or after 1 January 2022
Annual Improvements to IFRSs (2018-2020 Cycle) - IFRS 1, IFRS 9, Illustrative Examples accompanying IFRS 16, IAS 41	Periods beginning on or after 1 January 2022
Amendments to IAS 1: Classification of Liabilities as Current or Non-current	Periods beginning on or after 1 January 2023

3. Critical accounting estimates, judgements, and assumptions

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

The estimates and underlying assumptions underpinning our investments are reviewed on an ongoing basis by

both the Board and the Investment Adviser. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The estimates and associated assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below:

Investment Entity

As detailed in Note 2.2 above, the Directors have concluded that the Company meets the definition of an investment entity by satisfying the three key conditions as set out in IFRS 10. This assessment involves an element of judgement as to whether the Company continues to meet the criteria outlined in the accounting standards.

Investments held at fair value through profit or loss

Fair value for each investment is calculated by the Investment Adviser. Fair value for operational sustainable energy infrastructure investments will typically be derived from a discounted cash flow ('DCF') methodology and the results will be benchmarked against appropriate multiples and key performance indicators, where available for the relevant sector/industry. 
 For sustainable energy infrastructure investments that are not yet operational at the time of valuation, the price of recent investment may be used as an appropriate estimate of fair value initially, but it is likely that a DCF will provide a better estimate of fair value as the asset moves closer to operation.

In a DCF analysis the fair value is derived from the present value of the investment's expected future cash flows to the Company, using reasonable assumptions and forecasts for revenues, operating costs, macro-level factors, project specific factors and an appropriate discount rate. The AIFM and the Investment Adviser exercise their judgement in assessing the discount rate for each investment. This is based on knowledge of the market, taking into account market intelligence gained from publicly available information, bidding activities, discussions with financial advisers, consultants, accountants and lawyers. The risk of climate change has been considered in the valuation of investments, where applicable. Future power prices are estimated using forecast data from third-party specialist consultancy reports, which reflect various factors including gas process, carbon prices and renewables deployment.

Equity and debt investment in VH GSEO Holdings Limited

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

4. Investment Income

	For the Period From 30 October 2020 to 31 December 2021
	Revenue  £'000	Capital  £'000	Total  £'000
Interest on cash deposits	132		132
Interest income from investments	1,542	-	1,542
Investment income	1,674	-	1,674

5. Operating expenses

	30 October 2020 to 31 December 2021  £'000
Fees for payable to the Company's auditor (exclusive of VAT) for the: Statutory audit of the period-end financial statements Assurance related services relating to the Initial Accounts for the period to 30 June 2021 Other non-audit services	110 60 5
Tax Advisory fees	84
AIFM fees	66
Director's fee	202
Other expenses	609
Total other expenses	1,136

Fees with respect to the Investment Adviser and the AIFM are set out in note 16, related parties transactions.

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

6. Taxation

a. Analysis of charge in the period

	For the period ended 31 December 2021
	Revenue  £'000	Capital  £'000	Total  £'000
Corporation tax	-	-	-

b. Factors affecting total tax charge for the period

The effective UK corporation tax rate applicable to the Company for the period is 19%. The tax charge differs from the charge resulting from applying the standard rate of UK corporation tax for an investment trust company.

The differences are explained below:

	For the period ended 31 December 2021
	Revenue  £'000	Capital  £'000	Total  £'000
Profit/(losses) for the period before taxation	(1,680)	22,046	20,366
Corporation tax at 19%	(319)	4,189	3,870
Effect of:
Capital (gains) / losses not taxable	-	(4,189)	(4,189)
Expenditure not deductible	13	-	13
Management expenses not utilised/recognised	306	-	306
Total tax charge for the period	-	-	-

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

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

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

c. Deferred taxation

The Company has unutilised excess management expenses of £1,612,479. No deferred tax asset has been recognised in respect of these expenses. The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from 1 April 2023. This rate has been substantively enacted at the balance sheet date. The unrecognised deferred tax asset at 31 December 2021 of £403,120 has been calculated using the current corporation tax rate of 25%.

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

7. Investments at fair value through profit or loss

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

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

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

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

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

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

Fair value hierarchy

As at 31 December 2021	Total  £'000	Quoted prices in active markets (level 1)  £'000	Significant observable inputs (level 2)  £'000	Significant unobservable inputs (level 3)  £'000
Assets measured at fair value:
Non-current assets
Investments held at fair value through profit or loss	159,618	-	-	159,618

All of the Company's investments have been classified as Level 3 and there have been no transfers between levels during the period ended 31 December 2021.

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

	As at 31 December 2021 £'000
Opening balance on Incorporation	-
Additions during the period at cost1	136,023
	136,023
Fair value movement on investments:
Change in fair value of equity investments	22,046
Interest on loan investments2	1,549
Total fair value movement on investments	23,595
Closing balance	159,618

1  The Additions during the period at cost include acquisition costs associated with the purchase of the portfolio of assets totalling £2.64 million, which have been expensed to the profit and loss in these companies

2  Interest on loan investments here includes £7,000 of foreign exchange movement. Total investment income on the Statement of Comprehensive Income is £1.68 million including interest on cash deposits of £131,830

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

Valuation methodology

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

The Company acquired underlying investments in special purpose vehicles ('SPVs') through its investment in GSEO Holdings, as detailed in note 8. The Investment Adviser has carried out fair market valuations of the SPV investments, where applicable, as at 31 December 2021, reviewed by the AIFM.

The Company records the net asset value of GSEO Holdings by calculating and aggregating the fair value of each of the individual investments in which the Company holds an indirect investment. As mentioned in note 3, fair value of underlying investments is determined by the DCF methodology. The total change in the value of the investment in GSEO Holdings is recorded through profit and loss in the Statement of Comprehensive Income Statement of the Company.

The Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied, and the valuation. Investments in the US terminals and the Australia renewable power generation and battery storage assets are at fair value through profit or loss and are valued using the IFRS 13 framework for fair value measurement. The following economic assumptions were used in the valuation.

Valuation Assumptions

Discount rates	The discount rate used in the valuations is derived according to internationally recognised methods. Typical components of the discount rate are risk free rates, country-specific and asset-specific risk premia. The latter comprise the risks inherent to the respective asset class as well as specific premia for other risks such as construction.
Power price	Power prices will be based on power price forecasts from leading market consultants. During the period under review, there were no operating power generation assets.
Energy yield	Estimated based on energy yield assessments from leading technical consultants as well as operational performance data (where applicable). During the period under review there were no operating power generation assets.
Inflation rates	Long-term inflation is based on central bank targets for the respective jurisdiction.
Asset life	In general, an operating life of 30 years for terminals is assumed. In individual cases a longer operating life may be assumed where the contractual set-up supports such assumption.
Operating expenses	The operating expenses are primarily based on the respective contracts and budgets. Operating expenses are primarily fixed expenses.
Taxation rates	The underlying country-specific tax rates are derived from leading tax consulting firms.
Capital expenditure	Based on the contractual arrangements (e.g. EPC agreement), where applicable.

Key Assumptions

		31 December 2021
Discount rate	Weighted Average	6.8%
Long-term inflation	United States	2.0%
Remaining Asset Life	Terminals	30 years
Exchange rates	GBP:USD	1:1.353
	GBP:BRL	1:7.539
	GBP:AUD	1:1.861

Valuation sensitivity

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

The discount rate applied in the valuation of the US terminals as at 31 December 2021 is 6.8%, which is considered to be an appropriate base case for sensitivity analysis. A variance of +/- 0.5% is considered to be a reasonable range of alternative assumptions for discount rate.

The base case long term inflation rate assumption is 2% for the United States Assets. A variance of +/- 0.5% is considered to be a reasonable range of alternative assumptions for inflation.

As at 31 December 2021, only the US terminals are operating. Therefore, the expected future cash flows investment based on the project's expected life, key external macro-economic assumptions and specific operating assumptions have been considered for the fair value of these assets. The base case asset life for the terminals is 30 years. The sensitivity below assumes that asset life may be one year shorter or longer than the base case.

In line with IFRS 13, the fair value of the Australian Renewable power generation and Battery storage assets is calculated based on the highest and best use of the assets, from the point of view of market participants, which would be when the battery technology has been fully integrated with the solar plants. Furthermore, the transaction price of the acquisition would be a reasonable approximation of the fair value, due to the recency of the transaction (November 2021) from period end and that little have changed with the asset. Therefore, the fair value of the Australian assets at 31 December 2021 is calculated as the acquisition price of the solar plants and the cash flows associated with the installation and operation of the batteries.

The expansion of the US terminals, Brazil Solar PV assets, and the UK Flexible Power, Carbon Capture & Reuse are in construction as at period end. Therefore, until commencement of operations, the cost basis is considered to be the most appropriate measure of valuation. There are no indications at 31 December 2021 that the cost basis should be impaired. As a result, only GBP:BRL and GBP:AUD sensitivity is shown in the table below for these assets.

	Base case	Change in input	Change in fair value of Investments (£'000)	Change in NAV per share cent
Discount Rate	6.8%	-0.50%	3,841	1.23
		0.50%	(3,526)	(1.13)
Inflation	2.0%	-0.50%	(5,540)	(1.78)
		0.50%	5,979	1.92
Asset life	30 years	-1 year	(1,127)	(0.36)
		+1 year	1,034	0.33
Operating expenses	-	-5%	2,518	0.81
		5%	(2,493)	(0.80)
FX (GBP:USD)	1.353	-10%	11,196	3.59
		10%	(9,160)	(2.94)
FX (GBP:BRL)	7.539	-10%	4,108	1.32
		10%	(3,361)	(1.08)
FX (GBP:AUD)	1.861	-10%	1,753	0.56
		10%	(1,434)	(0.46)

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

8. Unconsolidated subsidiaries

The following table shows subsidiaries of the company. As the company is regarded as an investment entity as referred to in Note 2.1, these subsidiaries have not been consolidated in the preparation of the financial statements.

Investment	Place of Business	Ownership interests as at 31 December 2021
VH GSEO UK Holdings Limited	United Kingdom	100%
Victory Hill Distributed Energy Investments Limited	United Kingdom	100%
Victory Hill Flexible Power Limited	United Kingdom	100%
Rhodesia Power Limited	United Kingdom	100%
Wellcape Land Limited	United Kingdom	100%
Victory Hill USA Holdings LLC	United States	100%
Victory Hill Midstream Investments LLC	United States	100%
Victory Hill Midstream Energy LLC	United States	100%
Motus T1 LLC	United States	100%
Motus T2 LLC	United States	100%
Victory Hill Australia Investments Pty Ltd	Australia	100%
Victory Hill Distributed Power Pty Ltd	Australia	100%
Port Pirie Solar Pty Ltd	Australia	100%
Dunblane Solar Pty Ltd	Australia	100%
Victory Hill Holdings Brasil S.A.	Brazil	99.99%
Energea Itaguaí I Aluguel De Equipamentos E Manutençao LTDA	Brazil	100%
Energea Itaguaí II Aluguel De Equipamentos E Manutençao LTDA	Brazil	100%
Energea Itaguaí III Aluguel De Equipamentos E Manutençao LTDA	Brazil	100%
Energea Nova Friburgo LTDA	Brazil	100%
Gera Solar SE LTDA	Brazil	100%
Gera Solar RN LTDA	Brazil	100%
Gera Solar PA LTDA	Brazil	100%
Gera Solar PB Energia LTDA	Brazil	100%
Gera Solar MS LTDA	Brazil	100%
Energea Palmas Geracao S.A	Brazil	100%
Energea Geracao de Projetos Minas Gerais LTDA	Brazil	100%
Energea Geracao de Projetos RJ LTDA	Brazil	100%
Energea Geracao de Projetos RJ II LTDA	Brazil	100%
Energea Vassouras VH Geracao LTDA	Brazil	100%
CGS Sao Paulo Locacoes LTDA	Brazil	100%

At 31 December 2021 the Company has one direct subsidiary and owns 100% of GSEO Holdings. The Company owns investments in the other entities per the table above through its ownership of GSEO Holdings. GSEO Holdings owns 100% of Victory Hill USA Holdings LLC, Victory Hill Australia Investments Pty Ltd, Victory Hill Distributed Energy Investments Limited and Victory Hill Flexible Power Limited.

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

The Company's investments in the Brazilian entities are held through Victory Hill Distributed Energy Investments Limited, which holds 99.99% of Victory Hill Holdings Brasil S.A. These relate to the Brazil Solar PV assets.

The Company's investments in Victory Hill Distributed Power Pty Ltd, Port Pirie Solar Pty Ltd and Dunblane Solar Pty Ltd are held through Victory Hill Australia Investments Pty Ltd. These relate to the Australia Renewable power generation and Battery storage assets.

The Company's investments in Rhodesia Power Limited and Wellcape Land Limited are held through Victory Hill Flexible Power Limited. These relate to the UK Flexible Power, Carbon Capture & Reuse assets.

9. Other receivables

	As at 31 December 2021 £'000
Other receivables	811

The Directors have analysed the expected credit loss in respect of receivables and concluded there was no material exposure for the period ended 31 December 2021.

10. Cash and cash equivalents

	As at 31 December 2021 £'000
Cash at bank	92,094
Cash on deposit	71,716
Total cash at bank	163,810

Cash on deposit consists of funds held in a 32 day notice deposit account with Barclays Bank plc.

11. Accounts payable and accrued expenses

	As at 31 December 2021 £'000
Accrued expenses	197
Other payables	144
Accounts payable and accrued expenses	341

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

12. Financial risk management

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

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

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

Currency risk

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

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

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

Interest rate risk

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

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

The Company's interest and non-interest bearing assets and liabilities as at 31 December 2021 are summarised as below:

Assets	Interest bearing £'000	Non-interest bearing £'000	Total £'000
Cash and cash equivalents	163,810	-	163,810
Prepayments and other receivables	-	802	802
Interest receivable	9	-	9
Investments at fair value through profit or loss	56,717	102,901	159,618
Total assets	220,536	103,703	324,239
Liabilities
Accounts payable and accrued expenses	-	(341)	(341)
Total liabilities	-	(341)	(341)

Price risk

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

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

Credit risk

Credit risk is the risk that a counterparty will cause financial loss to the Company by failing to meet a commitment it has entered into with the Company. The Group is exposed to credit risk in respect of other receivables, cash at bank and loan investments. It is the Company's policy to enter into banking arrangements with reputable financial institutions. The Investment Adviser monitors the credit ratings of banks used by the Company on a regular basis.

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

	As at 31 December 2021 £'000
Cash and cash equivalents	163,840
Investments at fair value through profit or loss	56,717
Other receivables (Note 9)	811
	221,368

The substantial majority of cash held at the period end was held with Barclays Bank plc which has a current Standard & Poor's short-term credit rating of A-1.

The Company had no derivatives during the period.

Liquidity risk

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

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

As at 31 December 2021	< 3 months  £'000	3-12 months  £'000	1-5 years  £'000	> 5 years  £'000	Total  £'000
Accounts payable and accrued expenses	311	30	-	-	341
	311	30	-	-	341

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

Capital management

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

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

13. Share Capital

Date	Issued and fully paid	Number of shares	Share Capital £'000	Share premium £'000	Special Distributable Reserve £'000	As at 31 December 2021 £'000
30 October 2020	Ordinary shares	1	-	-	-	-
2 February 2021	Ordinary shares	242,624,280	2,426	240,198	-	242,624
2 February 2021	Share issue costs			(4,698)		(4,698)
13 April 2021	Transfer to special distributable reserve	-	-	(235,500)	235,500	-
3 December 2021	Ordinary shares	68,965,518	690	69,310	-	70,000
3 December 2021	Share issue costs		-	(1,361)		(1,361)
31 December 2021		311,589,799	3,116	67,949	235,500	306,565

The Company was incorporated on 30 October 2020 when the issued share capital of the Company was £0.01 represented by one Ordinary Share and £50,000 represented by 50,000 management shares of nominal value of £1.00 each, which were subscribed for by Victory Hill Capital Advisors LLP. On 2 February 2021, the Company issued a further 242,624,280 ordinary shares and on that date 242,624,281 ordinary shares were admitted to trading on the London Stock exchange. The management shares were redeemed at par on 2 February 2021.

On 1 December 2021, the Board announced the Company would be issuing a further 68,965,518 ordinary shares and on 3 December 2021 68,965,518 ordinary shares were admitted to trading on the London Stock exchange. The 68,965,518 New Ordinary Shares were issued at the placing price of 101.5 pence per New Ordinary Share.

The holders of the ordinary shares shall be entitled to receive, and to participate in, any dividends which the Company has declared, from time to time proportionate to the amounts paid or credited as paid in relation to the ordinary shares that they hold.   The ordinary shares carry the right to receive notice of, attend and vote at General Meetings and on a poll, with one vote for each Ordinary Share held.

On a winding-up, provided the Company has satisfied all its liabilities and subject to the rights conferred on any other class of shares in issue at that time to participate in the winding-up, the holders of ordinary shares shall be entitled to all the surplus assets of the Company.

There are no restrictions on the free transferability of the ordinary shares, subject to compliance with applicable securities laws.

14. Special distributable reserve

	As at 31 December 2021  £'000
Balance at beginning of period	-
Transfer from share premium account	235,500
Dividends paid in the period	(3,033)
Balance at end of period	232,467

In order to increase distributable reserves available for the payment of future dividends, the Company resolved on 5 January 2021 that, conditional upon admission and the approval of the Court, the amount standing to the credit of the share premium account of the Company immediately following completion of the issue be cancelled and transferred to a special distributable reserve.

As stated by the Institute of Chartered Accountants in England and Wales ("ICAEW") and the Institute of Chartered Accountants in Scotland ("ICAS") in the technical release TECH 02/17BL, The Companies (Reduction of Share Capital) Order 2008 SI 2008/1915 ("the Order") specifies the cases in which a reserve arising from a reduction in a company's capital (i.e., share capital, share premium account, capital redemption reserve or redenomination reserve) is to be treated as a realised profit as a matter of law.

The Order also disapplies the general prohibition in section 654 on the distribution of a reserve arising from a reduction of capital. The Order provides that if a limited company having a share capital reduces its capital and the reduction is confirmed by order of court, the reserve arising from the reduction is treated as a realised profit unless the court orders otherwise.

Subsequently, following approval by the Court and registration of the cancellation with the Registrar of Companies, an amount of £235,499,532 was transferred to a special distributable reserve with effect from 13 April 2021, which can be utilised to fund distributions by way of dividends to the Company's shareholders.

15. Dividends

The Board of directors of VH Global Sustainable Energy Opportunities plc (the "Company") announced an interim dividend of 1.25p per Ordinary Share with respect to the period 2 February 2021 to 30 September 2021, which was paid on 10 December 2021.

16. Transactions with AIFM, Investment Adviser and Related Parties

AIFM

On 5 January 2021, the Company entered into the AIFM Agreement with G10 Capital Limited (the 'AIFM') under which the AIFM has been appointed to act as the Company's alternative investment fund manager with overall responsibility for the risk management and portfolio management of the Company, providing alternative investment fund manager services and ensuring compliance with the requirements of the AIFM Rules, subject to the overall supervision of the Directors in accordance with the policies laid down by the Directors from time to time and the investment restrictions referred to in the AIFM Agreement.

The AIFM Agreement provides that the Company will pay to the AIFM a fixed monthly fee of £5,000, exclusive of VAT. The Company will also reimburse the AIFM for reasonable expenses properly incurred by the AIFM in the performance of its obligations under the AIFM Agreement.

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

The AIFM fees for the period amounted to £66,000 and no amount was outstanding at the period end.

Investment Adviser

On 5 January 2021, the Company and the AIFM entered into an Investment Advisory Agreement with Victory Hill Capital Advisors LLP. Under the Investment Advisory Agreement, the AIFM and the Company have appointed Victory Hill as investment adviser to the Company and the AIFM.

Under the terms of the Investment Advisory Agreement, the Investment Adviser will (i) seek out and evaluate investment opportunities: (ii) recommend the manner in which investments should be made, retained and realised; (iii) advise the Company and the AIFM in relation to acquisitions and disposals of assets; (iv) provide asset valuations to assist the Administrator in the calculation of; the quarterly Net Asset Value; and (v) provide operational, monitoring and asset management services.

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

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

The Investment advisory fees for the period amounted to £2,217,992 of which none was outstanding and included in accounts payable and accrued expenses at the end of the period.

Directors

With effect from the admission of the Company's shares to trading on the London Stock Exchange on 2 February 2021, the Directors have been entitled to aggregate annual remuneration (excluding expenses) payable and benefits in kind granted as follows:

	Fees £'000
Bernard Bulkin OBE	64
Margaret Stephens	46
Richard Horlick	46
Louise Kingham CBE	46
	202

The Directors are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits. There is no amount set aside or accrued by the Company in respect of contingent or deferred compensation payments or any benefits in kind payable to the Directors. During the period ended 31 December 2021, Directors fees of £202,000 were paid, of which none was payable at the period end.

The Directors held the following beneficial interests in the ordinary shares of the Company as at 31 December 2021.

	Number of ordinary shares held	% of ordinary shares in issue
Bernard Bulkin OBE	20,000	0.006
Margaret Stephens	10,000	0.003
Richard Horlick	200,000	0.064
Louise Kingham CBE	10,000	0.003

The above Directors were appointed on 30 October 2020 and 6 November 2020. Bernard Bulkin, Richard Horlick and Louise Kingham were appointed as Directors on incorporation of the Company, and Margaret Stephens appointed as Director on 6 November 2020.

Other balances with related parties

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

• Victory Hill USA Holdings LLC (USD 61,565,000)

• Victory Hill Australia Investments Pty Ltd (AUD 18,000,000)

No dividends have been paid to the Company during the reporting period up to 31 December 2021.

17. Contingent liabilities and commitments

At 31 December 2021 the Company had no contingent liabilities.

In Brazil, the Company has a remaining commitment of US$13m in the construction of remote distributed solar generation projects across ten Brazilian states with a total capacity of 75MW.

In Australia, the Company has a remaining commitment of £34m to acquire a portfolio of distributed solar generation assets with plans to build battery storage capacity in Australia in two tranches.

In the UK, the Company has a remaining commitment £71.9m to fund two Flexible Power plants which bring together high-efficiency gas-fired turbine technology with carbon capture systems to provide a clean and flexible electricity solution for the United Kingdom, with a combined capacity of 45MW.

There are no remaining commitments to fulfill as at period end relating to the US terminals.

18. Earnings per share

Earnings per share ("EPS") is calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue since the Company's incorporation on 30 October 2020 to 31 December 2021. Amounts shown below are both basic and diluted measures as there were no dilutive instruments in issue throughout the current period.

	Revenue	Capital	Total
Earnings (£'000)	(1,680)	22,046	20,366
Weighted average number of ordinary shares	193,505,110	193,505,110	193,505,110
EPS (p)	(0.87)	11.39	10.52

19. Net asset value per share

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

	Period ended 31 December 2021
NAV (£'000)	323,898
Number of ordinary shares	311,589,799
NAV per share (p)	103.95

20. Post balance sheet events

There are no post balance sheet events between period end and the issue date of this report.

21. Controlling parties

There is no ultimate controlling party of the Company.

Alternative performance measures

Alternative Performance Measures ("APMs") are often used to describe the performance of investment companies although they are not specifically defined under IFRS. Calculations for APMs used by the Company are shown below.

Earnings per share

In addition to Note 18, the Board considers it appropriate to disclose an additional earnings per share figure calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue since the Company commenced its operations on 2 February 2021 to 31 December 2021. The Board believes this provides a relevant measure of the Company's performance.

	Revenue	Capital	Total
Earnings (£'000)	(1,680)	22,046	20,366
Weighted average number of ordinary shares	248,458,222	248,458,222	248,458,222
EPS (p)	(0.68)	8.87	8.20

Ongoing charges

A measure expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company, calculated in accordance with the AIC methodology.

Period ended 31 December 2021
Average undiluted NAV (in £'m)	259.4
Recurring costs in period from commencement of operations on 2 February 2021 to 31 December 2021 (in £'m)	3.38
Recurring costs (annualised, in £'m)	3.68
Ongoing charges	1.42%

Premium

The amount, expressed as a percentage, by which the share price is more than the NAV per share.

As at 31 December 2021
NAV per ordinary share	103.95p
Ordinary share price	107.00p
Premium to NAV as at 31 December 2021	2.93%

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of any dividends paid out by the Company, with reinvestment on ex-dividend date.

Period ended 31 December 2021		NAV	Share price
Opening as at commencement of operations on 2 February 2021	a	100.00p	100.00p
Closing as at 31 December 2021	b	103.95p	107.00p
Dividends paid in the period		1.25p	1.25p
Dividend adjustment factor	c	1.0123	1.0123
Adjusted closing	d = b x c	105.22	108.31p
Total return (%)	(d - a)/a	5.22%	8.31%

Dividend cover

Dividend cover ratio calculation is based on net cash flows generated at the SPVs adjusted for the Company level expenses and dividends paid by the Company.

Period ended 31 December 2021
Net cash flow generated at the SPVs in (£'000)	3,054
Dividend cover	1.01x

Annual Results

This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts for the period ended 31 December 2021, which will be delivered to the registrar of companies. The auditors have reported on the accounts for the period ended 31 December 2021; their report was unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.

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