TIDMLCA
RNS Number : 9838A
Low Carbon Accelerator Limited
10 February 2011
10 February 2011
Low Carbon Accelerator Limited
Financial Results for the year ended 30 November 2010
Low Carbon Accelerator Limited ("LCA" or "the Company"), the AIM
listed specialist low-carbon investment company, announces its
financial results for the year ended 30 November 2010.
Highlights of the report include:
-- Adjusted NAV growth of 19.9% in the last 12 months
-- Aggregate uplift in value for two portfolio companies of
GBP10.7 m in the year
-- Majority of portfolio companies have matured and
demonstrating real traction
-- Increase in the value of Proven Energy Limited from an
initial cost of GBP9.25m to GBP19.9m
-- Proven Energy Limited delivered significant top line growth
and reached profitability, becoming the clear leader in Europe in
the distributed wind turbine market
-- Disciplined approach in supporting the strongest companies in
the portfolio has continued to prove successful
Commenting on the results, Andrew Affleck, Executive Chairman of
Low Carbon Investors Limited, LCA's investment manager said:
"The management team is once again extremely pleased with the
performance of the fund and ongoing generation of the underlying
value of its portfolio of companies during the year. This has been
epitomised by the strong performance of Proven Energy Limited,
which has made demonstrable progress and resulted in a 100% uplift
in the value of the Group's investment in the company."
"The Adjusted NAV has risen 36.7% since 31 May 2009 reflecting
the real progress made by our portfolio companies despite the
ongoing challenges of the wider economic environment. The
Investment Manager is now executing a strategy to drive these
investments to cash realisation over the next two years."
Enquiries:
Low Carbon Investors Steve Mahon, CIO Tel: +44 (0)20 7631 2630
Limited Andrew Affleck, Chairman
Grant Thornton Corporate Philip Secrett, Tel: +44 (0) 20 7383 5100
Finance Colin Aaronson
Redleaf Polhill Alicia Jennings Tel: +44 (0) 20 7566 6741
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED 30 NOVEMBER 2010
30 November 30 November
2010 2009 Change
ADJUSTED NET ASSET VALUE (GBP'000) 51,921 43,277 19.9%
Adjusted net asset value per
ordinary share (pence) 60.3 50.3 19.9%
Ordinary share price (pence) 38.0 37.5 1.3%
Adjusted profit/(loss) per
share (pence) 10.0 (1.4) 814.3%
------------------------------------ ------------ ------------ -------
Note on Adjusted Net Asset Value
The Group's interest in Proven Energy Limited ("Proven Energy")
is currently greater than 50%. The Board expects that this will be
reduced to a minority holding during the next 12 months. However,
in accordance with the accounting policies (see note 3 (b)) its
interest in Proven Energy is currently designated as a "Non-current
financial asset classified as held for sale".
As set out in note 13, during the year, Proven Energy Limited
("Proven Energy") saw significant top line growth and reached
profitability, becoming the clear leader in Europe in the
distributed wind turbine market, and worldwide in the distribution
of its larger 15kW machine. The demonstrable progress made by
Proven Energy during the year resulted in the Investment Manager
considering that it was appropriate to reassess the value of LCA's
investment in Proven Energy. In line with the IPEV valuation
guidelines, this resulted in an uplift of GBP10.65 million in the
fair value of the Group's investment in Proven Energy from its
historic cost of GBP9.25 million to GBP19.9 million.
As set out in note 3(a) to the Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with International Private Equity and Venture
Capital ("IPEV") valuation guidelines. However, IFRS 5 imposes
restrictions on upward revaluations of investments that are
classified as "Non-current financial assets classified as held for
sale". This applies even when the Board considers that such an
upward revaluation is required to reflect the Board's assessment of
the fair value of such an investment in accordance with IPEV
guidelines.
The Group has, therefore, provided below a reconciliation
between the NAV in accordance with International Financial
Reporting Standards ("IFRS") (the "Accounting NAV") and the NAV in
accordance with IPEV valuation guidelines (the "Adjusted NAV") (see
note 19).
The Board considers that the Adjusted NAV reflects the fair
value of the Group's investment portfolio at the balance sheet date
in accordance with IPEV guidelines. As such, the discussion in both
the Chairman's Statement and the Investment Manager's Report refer
throughout to the Adjusted NAV.
Net Asset Value NAV per share
30 November 2010 GBP'000 Pence
Accounting Net Asset Value 41,271 47.9
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 51,921 60.3
30 November 2009
Accounting and Adjusted Net Asset Value 43,277 50.3
Further copies of these financial statements can be found on the
Group's website (www.lowcarbonaccelerator.com).
CHAIRMAN'S STATEMENT
I am pleased to present the fourth Annual Report and Accounts in
respect of Low Carbon Accelerator Limited ("LCA") and its
subsidiaries (together the "Group") for the year ended 30 November
2010.
Financial Performance
The Adjusted NAV of the Group as at 30 November 2010 was GBP51.9
million equivalent to 60.3 pence per Ordinary Share. This equates
to a 19.9% increase on the 30 November 2009 NAV of 50.3 pence per
Ordinary Share.
In the ongoing uncertain economic climate, the Group is
continuing to see the rewards of the strategy set out in September
2008 to prioritise the strongest performers in the portfolio and
maintain a disciplined approach to resource allocation. This is
evidenced by the strong growth in the Adjusted NAV in the year
driven by the excellent performance of Proven Energy in particular.
As such, in line with the International Private Equity and Venture
Capital Valuation Guidelines, the value of LCA's equity investment
in Proven Energy was increased in the year from the historic cost
of GBP9.25 million to GBP19.9 million.
The Group continues to own more than 50% of the shares in Proven
Energy. The Board's intention to reduce LCA's shareholding to less
than 50% in the near-term remains firm and during the year, the
Investment Manager began discussions with a number of potential
co-investors into Proven Energy with a view to taking the Group's
shareholding to a minority stake. The Investment Manager is also
actively considering, with the management of Proven Energy, other
strategies for the company that would see LCA's shareholding fall
to less than 50%. These discussions are ongoing.
Investment Activities
The Group made one new investment of GBP0.5 million and spent a
total of GBP3.0 million (GBP1.5 million in form of equity and
GBP1.5 million as loans) on follow-on investments into five
existing portfolio companies in the year-ended 30 November
2010.
A more detailed description of the Group's strategy and of the
activities of the portfolio companies can be found in the
Investment Manager's report, which follows this statement.
Share Price Performance
During the year ended 30 November 2010, the LCA's closing
mid-market share price increased by 1.3% to 38.0 pence. This share
price represents a discount of 37.0% to the Adjusted NAV per share
as at 30 November 2010. Since the year-end the share price has
weakened slightly and at close of trading on 7 February 2011 stood
at 35.75 pence, which represents a 40.7% discount to the Adjusted
NAV per share.
The Board considers that the discount of the share price to the
Adjusted NAV remains unjustified, and is disappointed that the
strong growth in the Adjusted NAV during the year (19.9%) has not
been reflected in the share price, which increased by only 1.3% in
the year to 30 November 2010. The Board will, therefore, look to
pursue policies designed to be pro-active in narrowing this
discount and to return value to shareholders. In particular,
shareholders should note that the Board is seeking shareholder
approval to renew LCA's authority to make market purchases of up to
14.99% of its shares at the Annual General Meeting ("AGM").
Outlook
Whilst undoubtedly less turbulent than the prior year, the wider
economic backdrop has continued to present a challenging operating
environment. It is within this context that the Board and Low
Carbon Investors Limited ("LCI" or the "Investment Manager") are
extremely pleased with the delivery of 19.9% growth in the Adjusted
NAV during the 12 months to 30 November 2010 and 36.7% since 31 May
2009.
The uncertainty surrounding the impact of the broad austerity
measures adopted in economies around the world and the slow
emergence from the economic downturn will continue to bring
challenges. However, national government level support for the low
carbon sector remains a strong driver for growth, predominantly due
to the need to meet rising energy demand driven in particular by
emerging markets such as China and India, and for major economies
to improve the security of their energy supply. Furthermore, the
LCA portfolio is now maturing with a number of the portfolio
companies delivering real traction. It is the Investment Manager's
focus to drive these investments towards realisations over the next
two years and thereby to deliver strong returns to
shareholders.
As such, the Board and Investment Manager remain positive about
the ongoing strong momentum in the LCA portfolio and continue to
believe that the prospects for delivering attractive returns from
the current portfolio remain high, as shown by the performance and
uplift in Proven Energy during the year.
Continuation of the Company
The average discount of the share price to the average net asset
value in the year has exceeded 5%. In light of this, in accordance
with its Articles of Incorporation, LCA has triggered its discount
floor provision for the financial year-ended 30 November 2010. As a
result, a continuation vote by way of Ordinary Resolution is to be
proposed at the AGM, to be held on 29 March 2011.
In the event that the continuation vote is not passed, the Board
will, in accordance with the Company's articles, formulate
proposals to be put to shareholders to reorganise, reconstruct or
wind up LCA.
The outlook for the low carbon market continues to be strong,
and the Board and the Investment Manager believe LCA is well
positioned and remains an attractive investment opportunity. A
number of the Company's investments are now making good progress
and becoming genuine leaders in the low carbon sector. The Board
and the Investment Manager consider it appropriate to give the
portfolio the opportunity to deliver the performance expected of
these investments, as they consider this to be the best route to
maximising shareholder value. The Investment Manager believes that
the current level of maturity in the portfolio alongside the
expected growth profile of many of the companies means that there
is a realistic prospect of material cash realisations over the next
two years.
Furthermore, given the illiquid nature of the Company's
investment portfolio the Investment Manager has reported to the
Board that it considers that it would be more challenging to
dispose of the Company's assets at their fair value where the
timing of their disposal is driven by the Company's requirement to
wind up its position in the short-term, rather than being driven by
the performance of and the opportunities for each of the underlying
assets.
Based on the positive outlook and the progress of the Group's
investment portfolio, the Board is of the opinion that the
continuation of LCA as an investment company is in the best
interests of shareholders and recommends that shareholders vote in
favour of the continuation resolution to be proposed at the
AGM.
John Hawkins Chairman 9 February 2011
INVESTMENT MANAGER'S REPORT
We are extremely pleased to end the financial year to 30
November 2010 by reporting year-on-year growth in Adjusted NAV of
LCA of 19.9%. The investment portfolio continued to make the strong
progress that commenced in mid-2009, and many companies in the
portfolio are now demonstrating real traction. We believe this is
epitomised by the performance of Proven Energy, which, despite the
on-going challenges of the wider economic environment, has seen
significant top line growth and reached profitability, becoming the
clear leader in Europe in the distributed wind turbine market, and
worldwide in the distribution of its larger 15kW machine. The
demonstrable progress made by Proven Energy during the year
resulted in the Investment Manager considering that it was
appropriate to reassess the value of LCA's investment in the
company. This has resulted in an uplift in the value of the Group's
investment in Proven Energy from its historic cost of GBP9.25
million to GBP19.9 million. Proven Energy is now the largest
investment in the Company's portfolio.
As the majority of companies in the portfolio have matured and
are, we believe, set for ongoing strong commercial growth, we are
now executing a strategy to drive these investments to realisation
over the next two years. In essence, we shall continue to execute
the plan started in September 2008, as previously reported to
shareholders.
NAV growth
For the majority of LCA's shareholders who invested in both 2006
and 2009, the average entry price for their shareholding is 63.8
pence per Ordinary share, which based on the total of 86.1 million
shares issued, implies the "par" NAV for such an investor is
GBP54.9 million.
As such, the strong growth in NAV since 31 May 2009 has led to
an Adjusted NAV as at 30 November 2010 of GBP51.9 million, standing
at 5.5% below the "par" NAV. This compares very favourably with the
discount of 31% to the par NAV as at 31 May 2009. It is the
Investment Manager's expectation that the continuing strong
performance of the Company's portfolio will see the NAV rise above
the GBP54.9 million par level in the coming quarters.
It is the norm for the net asset performance profile of an early
stage venture capital fund to follow a net asset value 'J-curve'
similar to that experienced by LCA since its launch in 2006. This
J-curve arises in large part because the best investments in an
early stage portfolio take time to mature. The Investment Manager
believes that the net asset value as at 31 May 2009 represented the
bottom of the industry 'J-curve' for the Group and we also believe
that as a result of the implementation of the plan started at the
end of 2008, the NAV has risen by 36.7% since that inflection
point.
Bridging the "valley of death"
It is well recognised that early stage companies face a huge
problem in moving from finance from venture capital funds that
takes them to the point of small scale pilot projects to finding
sources of finance for early commercial scale projects. The chasm,
commonly known as the funding "valley of death", poses significant
risk to the commercial growth of a venture capital-backed
technology company.
It is this market inefficiency that the Investment Manager has
sought to overcome through investment in a project developer such
as Vigor in the year. Vigor's development of wind projects based on
small scale wind turbines is being carried out in collaboration
with Proven Energy. As such, Vigor provides one of the avenues for
revenue pull-through for Proven Energy. Of course, this is not the
only channel to market for Proven Energy and Vigor retains the
option to use a diversified portfolio of technologies in its
projects. However, the investment ensures that both the supply of
the technology and the demand of the technology can be driven
through LCA's investment portfolio.
Of course, the project developer requires finance for the
proposed projects. In the case of Vigor, the company is benefiting
from the emergence of investment funds that are committed into
projects that take advantage of the FIT scheme that was launched in
the UK on 1 April 2010. The Investment Manager has itself worked
with Downing Corporate Finance Limited ("Downing") to launch the
Downing Low Carbon EIS Fund, which closed on 22 November 2010 and
was oversubscribed on the target fundraise of GBP10 million.
It should also be noted that with the number of project
developers in the UK renewables sector also growing, a key
differentiator for Vigor in the competition for project finance is
its close collaboration with a major technology provider, in this
case Proven Energy and its wind turbines. This factor, combined
with a business model that focuses on quick to implement projects
rather than simply size, means that there is a genuine prospect for
Vigor to become a leader in the UK FIT market by the end of
2011.
The Investment Manager believes that this is a successful model
for bridging the "valley of death", which can prove a serious
obstacle and risk to the growth of early stage companies, and shall
seek to replicate this model further in the future where
appropriate if the Company raises further capital.
It is also the Investment Manager's belief that by ensuring
revenues for the technology company, and alongside this by creating
value in the project developer, the investment fund is able to
offer a more balanced risk-return profile to investors. In the
challenging markets that lie ahead, ability to deliver cash returns
more quickly and generate early liquidity from venture capital
funds in the clean energy space, we believe will be highly valued
by investors.
Impact of Feed-in-Tariffs on the Company
On 7 February 2011 the UK coalition Government announced that it
would be starting its comprehensive review of the UK's FITs scheme.
It stated that the comprehensive review will:
-- assess all aspects of the scheme including tariff levels,
administration and eligibility of technologies;
-- be completed by the end of the year, with tariffs remaining
unchanged until April 2012 (unless the review reveals a need for
greater urgency); and
-- fast track consideration of large scale solar projects (over
50kW) with a view to making any resulting changes to tariffs as
soon as practical, subject to consultation and Parliamentary
scrutiny as required by the Energy Act 2008.
These comments from the Department of Energy and Climate Change
("DECC") clearly increase the short term risk to UK solar projects
of 50kW and above, and at this time there is insufficient guidance
from DECC to be able to predict what the outcome of this fast track
consideration will be. However, the Investment Manager believes
that a reduction in the attractiveness of the tariffs for solar
would be expected to result in fewer of these projects being
developed, thereby increasing the FIT budget available for more
cost effective technologies such as wind. We would, therefore,
expect both Proven Energy and Vigor to benefit from this
review.
Since FITs were launched in the UK, there have been widely
publicised changes to FIT regimes in other markets, most notably
Spain which retrospectively changed the terms for some of its parks
on 24 December 2010, but also in other markets such as Germany and
France. These changes should not, in the Investment Manager's view,
be taken to mean that there is a problem with FITs as a system per
se, but rather reflect the particular situation of each country.
For example, in Spain the issue has as much to do with an existing
subsidy of energy prices to consumers as it has to do with FITs per
se.
It is the Investment Manager's assessment that the FITs scheme
in the UK is well designed, and whilst good projects can just about
deliver the returns expected of infrastructure investors, the
scheme does not offer financial speculators the chance for
disproportionate returns as has been the case in some other
markets. We do not expect many traditional infrastructure funds to
move into the UK FITs market as they have done in some other
countries (notably Spain, Germany and Italy) because the project
sizes are simply too small for them. For these reason, whilst we
recognise that there is a genuine risk that the Government may make
some changes to the FITs programme prior to the expected first
review in 2012 at the same time we also believe that FITs will
remain in place in the UK for at least the mid-term. As such, they
will continue to represent an excellent opportunity for Vigor and
Proven Energy to grow rapidly.
Furthermore, FITs are, and in the Investment Managers opinion
will remain, together with carbon credits the primary route for the
incentivisation of renewable energy projects across the globe. This
is seen in the adoption of FITs style schemes in Asian economies,
expected to expand in the near term. South Korea, China, Thailand,
Japan and India have been leaders in implementing FITs schemes to
encourage investment.
By building an expertise on delivering FITs projects in the UK,
some companies within the LCA portfolio will be well placed for
international expansion to other markets with similar regimes.
Company by company review
Proven Energy Limited ("Proven Energy")
This year has marked a key turning point for Proven Energy. The
company has consolidated its position as Europe's leading
distributed wind turbine company (i.e. supplying sub-100kW
turbines) and is delivering strong sales growth driven by FITs. As
a result of the company's strong performance, and in line with the
International Private Equity and Venture Capital Valuation
Guidelines, the value of the Group's equity investment in Proven
Energy has been increased from the historic cost of GBP9.25 million
to GBP19.9 million. The value of GBP19.9 million represents an
uplift of 115% on historic cost and an IRR of 31%.
On 1 July 2010, the Group invested a further GBP250,000 in
Proven Energy in the form of a convertible loan note to allow the
company to accelerate the delivery of its largest wind turbine to
market, the P35-2 capable of generating in excess of 35,000 kWh per
year, to ensure that the company takes maximum advantage of the
FITs regime.
The Investment Manager continues to be impressed with the
progress of Proven Energy and believes there remains more upside
potential.
Going forward, the company will look to consolidate its growing
presence in markets around the globe. In particular, the US and
Asian markets will be key to the roll-out of the Proven Energy
suite of distributed wind turbines and we expect the company will
play a significant role in the inevitable consolidation of this
sub-sector.
Sterling Planet Inc. ("Sterling Planet")
The commitment by the US Federal Government to purchasing green
power through Renewable Energy Certificates ("RECs"), as well as by
the US States that have introduced Renewable Portfolio Standards,
has continued to drive demand for Sterling Planet's services. The
company is on track to deliver its second consecutive profitable
year in 2010 driven by the continued strength of the mandated
market for RECs.
The company is currently in discussions with a number of parties
regarding potentially major additional investment, which would be
used to strengthen the company's balance sheet further and to
consolidate its position as the market leader in this space in the
US. The Investment Manager is extremely pleased with the
performance of the company and expects it to continue to drive
value within the Group's investment portfolio.
The company's renewable energy project development business
unit, Sterling Energy Assets, Inc., has four power projects under
development. These development projects, if all realised, will
total more than 130MW in total capacity and be a valuable addition
to Sterling Planet's core business.
ResponsiveLoad Limited ("RLtec")
On 22 July 2010, the Group announced that it had made a further
equity investment of GBP602,997 in RLtec, being the second tranche
draw down of LCA's total commitment of GBP1,000,000 announced on 1
October 2009. This 2009 commitment was part of an overall
GBP5,790,000 funding round attracting two new investors with smart
grid expertise, Naxos Capital Partners and the Carbon Trust.
The first tranche of GBP2,300,000, of which LCA invested
GBP397,003, was drawn down at the time of the initial announcement.
Following the successful completion of certain milestones relating
to the commercial deployment of its technology, the total second
tranche of GBP3,490,000 was also drawn down.
RLtec has continued to work on the delivery of load balancing
services under its contract with National Grid. Appliances such as
fridges and air conditioning systems can be fitted with RLtec's
technology to modify automatically their power consumption in
response to second-by-second changes in the balance between supply
and demand on the grid, without affecting the performance of the
equipment to which it is fitted. The technology has the potential
to create a 'virtual' power station and if widely used in the UK
could significantly reduce the need for carbon emitting coal-fired
balancing stations and save up to 2 million tonnes of carbon
dioxide per year.
LUMEnergi inc. ("LUMEnergi")
The Group announced on 2 June 2010 that it has made a further
investment of US$240,000 (approx GBP166,000) in LUMEnergi as an
extension to the existing convertible loan note investments, which
had previously been announced on 11 August 2009, 14 December 2009
and 7 April 2010. This short-term funding was to provide LUMEnergi
with the resources it needs to finalise its expansion capital.
The Investment Manager was extremely pleased that during the
year LUMEnergi closed commitments on a US$12.7 million Series B
funding round (approx. GBP8.1 million) bringing in two new
investors, Braemar Energy Ventures II, L.P. and Townsend VC, LLC.
The Series B funding included the existing total convertible loan
investment of US$3.7 million (approx. GBP2.4 million) from LCA and
its co-investor, Noventi Ventures, that was issued in four tranches
from August 2009 to June 2010 and which converted into equity at
the price set for the Series B Preferred shares.
The new investors bring with them real expertise in the US
lighting and energy efficiency market. This new capital will be
used to fund the commercial expansion of LUMEnergi as it seeks to
meet the strong market demand and to convert its growing sales
pipeline.
In particular, the company is seeing strong customer growth
driven by the public sector as energy savings plans are
implemented. Lighting typically accounts for approximately 25% of
the energy used in commercial buildings, making it one of the key
target areas for building owners seeking to reduce their energy
consumption.
Vigor Renewables Limited ("Vigor")
On 8 March 2010, LCA announced that it had made a new investment
of GBP500,000 in the form of equity into Vigor, a renewable energy
project developer. Vigor was a newly formed company established to
take advantage of the new UK FITs regime by partnering with
land-owners and commercial property owners and managers, to build,
own and operate renewable power generating assets on sites across
the UK.
Vigor has identified a strong pipeline of potential deal-flow
and is currently in negotiation on options for over 50 sites
including agricultural plots for small-scale wind projects and
industrial sites for roof-top mounted solar projects.
The Investment Manager believes that through its close
collaboration with Proven Energy, and hence with access to market
leading small-scale wind-turbines, Vigor has a significant
advantage over the competition from other developers. Market data
would indicate that the majority of Vigor's competitors have
focused either on the domestic solar market, or on large green
field projects at the 5MW scale. As noted above, both of these
sectors are potentially threatened by hints of changes to the UK
FITs regime. By focusing on more than one technology, and by
focusing on smaller scale, industrial roof-top mounted projects, it
is believed that Vigor's model is more sustainable than that of
some of its competitors, and less at risk of future regulatory
change.
On 26 January 2011, the Company announced that it has invested a
further GBP200,000 in Vigor in the form of an unsecured loan. The
additional funds are being provided to expand and accelerate the
current pipeline of projects over the next 12 months. If this is
achieved, then there is a realistic prospect of Vigor becoming a
genuine leader in the UK FITs market.
Vykson Limited ("Vykson")
The Investment Manager was pleased to announce the completion of
the GBP500,000 funding round into Vykson in April 2010. Dr. Ramnath
Nandakumar and a representative of E-Synergy, two new investors in
the round, are proving to be valuable additional members of the
board of Vykson. As part of this equity funding round, LCA invested
a further GBP150,000 taking its total investment in the company to
GBP450,000. Pricing LCA's shareholding at the price set at the
latest funding round means that the investment is carried at
GBP643,000 on the books of LCA, representing a small uplift to the
Company's cost of investment.
Vykson's turbines take gas that is ordinarily vented or flared
and turn it into electricity. The company has been demonstrating
the operation of its first commercial scale engine on a landfill
site of a major UK waste company, under a revenue sharing
agreement, with power being produced from the waste gas at the site
and exported to the national grid.
The Vykson engine is able to generate power from low quality
gases with low methane content where most other engines no longer
become viable, thereby turning the cost of venting or flaring into
a revenue stream for a customer generating waste gas.
We believe Vykson has significant potential in a number of large
markets generating waste gas, such as oil and gas, landfill sites,
sewage, and mines. It is also expected that demand from Asian
markets will become a strong driver of growth for the company.
QuantaSol Limited ("QuantaSol")
On 3 September 2010, the Group announced that it had made a
further investment of GBP1,000,000 by way of a convertible loan in
QuantaSol. This formed part of a GBP2,000,000 investment made
alongside Imperial Innovations. The loan will be drawn down in two
tranches, subject to milestones, of GBP1,000,000 each, split
equally between LCA and Imperial Innovations, the first of which
has already been drawn down. This investment was made in addition
to the existing GBP1,500,000 convertible loan to QuantaSol
announced in December 2009 of which LCA provided GBP750,000.
QuantaSol is currently seeking strategic partnerships to deliver
its technology to the market and is in discussions with several
parties to forge the best alliance for delivering shareholder
value.
Vaperma Inc. ("Vaperma")
Given the historic challenges in the market for the production
of ethanol, which was severely hit by the contraction of credit
markets that made finance for large scale projects less
forthcoming, the Group announced on 1 November 2010 that it had
decided to take a provision against the remaining carrying value of
its investment in Vaperma.
Eco-Solids International Limited ("Eco-Solids")
The company continues to perform well in its key contract with
Yorkshire Water that was signed during the year. Under the terms of
the contract, subject to strict performance criteria, the company
should begin to generate its first significant revenues.
The key challenge for the business remains to be able to secure
its working capital needs through to a position where it will have
an installed base that enables the company to be cashflow
positive.
EnergyMixx AG ("EnergyMixx")
The company has been delisted from the Open Market of the
Frankfurt Stock Exchange due to lack of trading. In addition, it is
the Investment Manager's expectation that the company's expected
roll-out of renewable energy projects will not occur to plan and
that some of the company's key assets have not performed as
expected. As such, the Group is taking a full provision against the
carrying value of this investment which, having previously been a
public listed equity, was marked-to-market in the prior year. Low
Carbon Investors Limited 9 February 2011
INVESTING POLICY
Low Carbon Accelerator's objective is "to provide shareholders
with an attractive return on their investment primarily through
significant minority holdings in a diverse portfolio of unquoted
private companies providing low carbon products and services."
As the fund manager, Low Carbon Investors Limited ("LCI")
identifies opportunities where LCA can exceed the target IRR of 30%
within a three to five year timeframe. Returns are expected to be
derived primarily from capital gains.
LCI use their knowledge of market sectors and extensive network
of business and technology contacts to evaluate opportunities for
investment and actively manage the LCA portfolio. LCI looks for
companies with, inter alia:
-- an exceptional management team with a proven track record and
clear vision;
-- products or services capable of immediate reductions in
carbon emissions;
-- defensible, proven technology, IP or know-how with a clear
commercial application;
-- a viable, attractive and scalable business model;
-- cost competitive products which do not require behavioural
change;
-- real trading businesses with key commercial relationships in
place;
-- an opportunity to gain a large share of a new or expanding
market;
-- a sensible valuation; and
-- an exit strategy.
LCA's interests are represented by members of the LCI management
or advisory teams who sit on the boards of investee businesses.
Through these individuals, LCI plays an active role in supporting
the growth of the businesses by leveraging the experience and
networks of the LCI management and advisory teams.
Dividend policy
The Directors intend to manage the Company's affairs to achieve
shareholder returns through capital growth rather than income.
However, in the event that the Company receives dividends from its
investments, the Directors may, in accordance with the Articles,
determine to pay dividends from time to time to Shareholders.
Borrowings
It is not proposed that the Company will have any long-term or
fixed structured gearing. However, the Company may borrow for the
purpose of the orderly settlement of transactions, to implement any
currency hedging strategy or for other general working capital
purposes. Borrowings by the Company itself will not exceed 25% of
the Net Asset Value at the time of drawdown.
CONSOLIDATED INCOME STATEMENT
For the year ended 30 November 2010
Year ended Year ended
30 November 30 November
2010 2009
Note GBP'000 GBP'000
Income
Interest income 149 -
Deferred consideration on sale of
investments 12 - 334
Net increase in fair value of financial
assets and financial liabilities at
fair value through profit or loss 12 - 4,353
Other income 21 -
170 4,687
Investment management fees (1,156) (860)
Net decrease in fair value of financial
assets and financial liabilities at
fair value through profit or loss 12 (335) -
Custodian, secretarial, brokers, Nomad
and administration fees (175) (187)
Net foreign currency losses - (2,481)
Other operating expenses 7 (510) (2,014)
Interest expense 6 - (34)
Total operating expenses (2,176) (5,576)
Operating loss (2,006) (889)
Other comprehensive income 6 - -
Total comprehensive expense (2,006) (889)
Basic loss per share (pence) 10 (2.3) (1.4)
Diluted loss per share (pence) 10 (2.3) (1.4)
Adjusted basic profit/(loss) per share
(pence) 11 10.0 (1.4)
Adjusted diluted profit/(loss) per
share (pence) 11 10.0 (1.4)
All income is attributable to the equity holders of the Company.
There are no minority interests.
All activities are derived from continuing activities.
The Group has no recognised gains or losses other than the
profit for the year.
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED BALANCE SHEET
As at 30 November 2010
2010 2009
Note GBP'000 GBP'000
NON-CURRENT ASSETS
Financial assets at fair value
through profit or loss 12 26,386 24,214
CURRENT ASSETS
Cash and cash equivalents 4,169 9,337
Non-current financial assets classified
as held for sale 13 9,250 9,250
Other receivables 14 1,527 608
TOTAL CURRENT ASSETS 14,946 19,195
TOTAL ASSETS 41,332 43,409
CURRENT LIABILITIES
Other payables 15 (61) (132)
NET ASSETS 41,271 43,277
EQUITY
Share capital 16 - -
Share premium 17 52,720 52,720
Reserves 18 (11,449) (9,443)
TOTAL EQUITY 41,271 43,277
Number of ordinary shares ('000) 86,100 86,100
Net asset value (basic and diluted)
per share 19 47.9 50.3
Adjusted net asset value (basic
and diluted) per share 19 60.3 50.3
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Retained
Share capital Share premium earnings Total
GBP'000 GBP'000 GBP'000 GBP'000
As at 30 November 2008 - 42,720 (8,554) 34,166
Issue of ordinary shares
(net of issue costs) - 10,000 - 10,000
Loss for the year - - (889) (889)
As at 30 November 2009 - 52,720 (9,443) 43,277
Total comprehensive loss
for the year - - (2,006) (2,006)
As at 30 November 2010 - 52,720 (11,449) 41,271
The accompanying notes form an integral part of these financial
statements.
CONSOLIDATED CASHFLOW STATEMENT for the year ended 30 November
2010
Year ended Year ended
30 November 30 November
2010 2009
Notes GBP'000 GBP'000
CASHFLOWS FROM OPERATING ACTIVITIES
Operating Loss for the period (2,006) (889)
Net changes in fair value of financial
assets and financial liabilities at
fair value through profit or loss 12 335 (4,353)
Gain on sale of investment - (334)
Provisions made against long-term loans - 1,645
Decrease in other receivables excluding
short-term loans 14 93 229
Decrease in other payables 15 (71) (150)
NET CASH OUTFLOWS FROM OPERATING
ACTIVITIES (1,649) (3,852)
CASHFLOWS FROM INVESTING ACTIVITIES
Purchase of investments 12 (2,019) (6,666)
Short-term loans 14 (1,500) (488)
Long-term loans 14 - (99)
NET CASH OUTFLOWS FROM INVESTING
ACTIVITIES (3,519) (7,253)
CASHFLOWS FROM FINANCING ACTIVITIES
Issue of ordinary shares 17 - 10,400
Transaction costs on issue of ordinary
shares 17 - (400)
NET CASH INFLOWS FROM FINANCING
ACTIVITIES - 10,000
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,168) (1,105)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 9,337 10,442
CASH AND CASH EQUIVALENTS AT END OF
YEAR 4,169 9,337
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 November 2010
1. GENERAL INFORMATION
Low Carbon Accelerator Limited ("LCA" or "the Company") is a
company incorporated and registered in Guernsey on 26 September
2006. LCA is a closed-end investment company with limited liability
under the Companies (Guernsey) Law, 2008, and its shares are
admitted to trading on the AIM market of the London Stock
Exchange.
The nature of LCA's operations and its principal activities are
set out in the Directors' report. The address of the LCA's
Registered Office is set out on page 1.
These financial statements are presented in Pounds Sterling
because that is the currency of the primary economic environment in
which the Company and its subsidiaries operate.
2. BASIS OF PREPARATION
The consolidated financial statements incorporate the financial
statements LCA and entities (including special purpose entities)
controlled by LCA (its subsidiaries) (together known as "the
Group"). Control is achieved where the Company has the power to
govern the financial and operating policies of an entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring their accounting
policies into line with those used by other members of the
Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
The Company holds two investments via a wholly owned
intermediate holding group structure. The acquisition of equity in
the underlying investments was funded by a long term loan account
through the intermediate holding companies.
It was noted in the financial statements for the prior year
ended 30 November 2009 that it was the Board's intention to seek to
reduce LCA's interest in Proven Energy Limited ("Proven Energy") to
a minority shareholding within the following 12 months. To date,
however, the Group continues to own more than 50% of the equity in
Proven Energy.
The Board's intention to reduce LCA's shareholding to a minority
stake in the near-term remains firm and, the Investment Manager is
actively pursuing a number of opportunities. In particular, the
Investment Manager has continued detailed discussions, started in
the prior year, with a potential party specifically seeking
investment opportunities in the small scale wind turbine market.
The Investment Manager is also actively considering, with the
management of Proven Energy, other strategies for the company that
would see LCA's shareholding fall to less than 50% within the next
12 months.
On this basis, and in accordance with IFRS 5, the Group has
continued not to consolidate the results of Proven Energy for the
year ended 30 November 2010 and this investment is treated as held
for sale (see also note 13).
In accordance with Article 122(e)(i) of the Company's Articles
of Incorporation, a continuation vote will be put to the
Shareholders at the next Annual General Meeting on 29 March 2011,
as the average discount of the share price to Net Asset Value per
Ordinary Share exceeded 5% for the year ended 30 November 2010. The
Directors are strongly recommending a vote in favour of the
continuation resolution and believe it is in the best interests of
Shareholders that the Company continue as an investment company.
The financial statements are prepared on a going concern basis
supported by the Director's current assessment of:
-- the Company's ability to continue in existence for the
foreseeable future,
-- ongoing shareholder interest in the continuation of the
Company.
Based on the above, the Directors have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future, and they continue to adopt
the going concern basis.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are made up for the year ended 30
November 2010 and have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
The following is a description of the significant accounting
policies of the Group. The accounting policies are consistent with
those applied in the year ended 30 November 2009 and amended to
reflect the adoption of the new standards, amendments to standards
or interpretations which are mandatory for the first time for the
financial year ended 30 November 2010.
Standards, amendments and interpretations to published standards
not yet effective
-- IFRS 1 - First-time Adoption of International Financial
Reporting Standards - Amendments relating to oil and gas assets and
determining whether an arrangement contains a lease - for
accounting periods beginning on or after 1 January 2010
-- IFRS 1 - First-time Adoption of International Financial
Reporting Standards - Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters - for accounting periods
beginning on or after 1 July 2010
-- IFRS 1 - First-time Adoption of International Financial
Reporting Standards - Amendments resulting from May 2010 Annual
Improvements to IFRSs - for accounting periods beginning on or
after 1 January 2011
-- IFRS 1 - First-time Adoption of International Financial
Reporting Standards - Replacement of 'fixed dates' for certain
exceptions with 'the date of transition to IFRSs' - for accounting
periods beginning on or after 1 July 2011
-- IFRS 1 - First-time Adoption of International Financial
Reporting Standards - Additional exemption for entities ceasing to
suffer from severe hyperinflation - for accounting periods
beginning on or after 1 July 2011
-- IFRS 2 - Share-based Payment - Amendments relating to group
cash-settled share-based payment transactions - for accounting
periods beginning on or after 1 January 2010
-- IFRS 3 - Business Combinations - Amendments resulting from
May 2010 Annual Improvements to IFRSs - for accounting periods
beginning on or after 1 July 2010
-- IFRS 5 - Non-current Assets Held for Sale and Discontinued
Operations - Amendments resulting from April 2009 Annual
Improvements to IFRSs - for accounting periods beginning on or
after 1 January 2010
-- IFRS 7 - Financial Instruments: Disclosures - Amendments
resulting from May 2010 Annual Improvements to IFRSs - for
accounting periods beginning on or after 1 January 2011
-- IFRS 7 - Financial Instruments: Disclosures - Amendments
enhancing disclosures about transfers of financial assets - for
accounting periods beginning on or after 1 July 2011
-- IFRS 8 - Operating Segments - Amendments resulting from April
2009 Annual Improvements to IFRSs - for accounting periods
beginning on or after 1 January 2010
-- IFRS 9 - Financial Instruments - Classification and
Measurement - for accounting periods beginning on or after 1
January 2013
-- IFRS for SMEs - International Financial Reporting Standard
for Small and Medium-sized Entities - Effective immediately on
issue
-- IAS 1 - Presentation of Financial Statements - Amendments
resulting from April 2009 Annual Improvements to IFRSs - for
accounting periods beginning on or after 1 January 2010
-- IAS 7 - Statement of Cash Flows - Amendments resulting from
April 2009 Annual Improvements to IFRSs - for accounting periods
beginning on or after 1 January 2010
-- IAS 12 - Income Taxes - Limited scope amendment (recovery of
underlying assets) - for accounting periods beginning on or after 1
January 2012
-- IAS 17 - Leases - Amendments resulting from April 2009 Annual
Improvements to IFRSs - for accounting periods beginning on or
after 1 January 2010
-- IAS 24 - Related Party Disclosures - Revised definition of
related parties - for accounting periods beginning on or after 1
January 2011
-- IAS 27 - Consolidated and Separate Financial Statements -
Amendments resulting from May 2010 Annual Improvements to IFRSs -
for accounting periods beginning on or after 1 July 2010
-- IAS 32 - Financial Instruments: Presentation - Amendments
relating to classification of rights issue - for accounting periods
beginning on or after 1 February 2010
-- IAS 34 - Interim Financial Reporting - Amendments resulting
from May 2010 Annual Improvements to IFRSs - for accounting periods
beginning on or after 1 January 2011
-- IAS 36 - Impairment of Assets - Amendments resulting from
April 2009 Annual Improvements to IFRSs - for accounting periods
beginning on or after 1 January 2010
-- IAS 39 - Financial Instruments: Recognition and Measurement -
Amendments resulting from April 2009 Annual Improvements to IFRSs -
for accounting periods beginning on or after 1 January 2010
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group.
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of financial assets
and financial liabilities at fair value through profit or loss and
foreign currency derivatives.
The preparation of the financial statements requires the
Directors to make estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities, and
the disclosure of contingent liabilities at the date of the
financial statements. If in the future such estimates and
assumptions, which are based on the Directors' best judgement at
the date of the financial statements, deviate from actual
circumstances, the original estimates and assumptions will be
modified as appropriate in the period in the which the
circumstances change.
The principal accounting policies adopted are set out below.
(a) Financial assets at fair value through profit or loss
Classification
The Group classifies its equity investments as financial assets
at fair value through profit and loss and all such investments are
designated as such on acquisition. This includes investments in
associated undertakings that are held by the Group with a view to
the ultimate realisation of capital gains.
Financial assets and financial liabilities designated at fair
value through profit or loss at inception are those that are
managed and their performance evaluated on a fair value basis in
accordance with the Group's documented investment strategy. The
Group's policy is for the Investment Manager and the Board of
Directors to evaluate the information about these financial assets
on a fair value basis together with other related financial
information. These financial assets are expected to be realised
within 2 - 5 years of the initial investment.
Recognition / De-recognition
Purchases and sales of investments are recognised on the date on
which the Group commits to purchase or sell the investment.
Investments are derecognised when the rights to receive cash flows
from the investments have expired or the Group has transferred
substantially all risks and rewards of ownership.
Measurement
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
as incurred in the income statement. Subsequent to initial
recognition, all financial assets at fair value through profit or
loss are measured at fair value.
Gains and losses arising from changes in the fair value of the
financial assets at fair value through profit or loss are presented
in the income statement in the period in which they arise. The net
gain or loss recognised in profit or loss incorporates any dividend
or interest earned on the financial asset. Fair value
estimation
The fair values of unlisted securities are established using
International Private Equity and Venture Capital ("IPEV") valuation
guidelines. The valuation methodology used most commonly by the
Group is the 'price of recent investment' contained in the IPEV
valuation guidelines. Where the investment being valued was itself
made recently, its cost will generally provide a good indication of
fair value. Where there has been any recent investment by third
parties, the price of that investment will provide a basis of the
valuation.
Where there has been a reasonable period of time since the time
of the most recent investment, and it is the Group's view that the
'price of the recent investment' no longer represents the true fair
value of the investment, the Group considers alternative
methodologies in the IPEV guidelines, being principally discounted
cash flows and price-earnings multiples. These methodologies
require management to make assumptions over the timing and nature
of future earnings and cash flows when calculating fair value.
Where the Directors do not believe there has been a material
change (positive or negative) in the fair value of an investment,
the investment is reported at the carrying value at the previous
reporting date.
All recorded values of investments are reviewed quarterly for
any indication of impairment and adjusted accordingly.
Classification of fair value measurements
The Company has adopted the amendment to IFRS 7, effective 1st
January 2009. This requires the Company to classify fair value
measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The
fair value hierarchy has the following levels:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1);
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2); and
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, the measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement considering factors
specific to the asset or liability. The determination of what
constitutes "observable" requires significant judgement by the
Company. The Company considers observable data to be that market
data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by
independent sources that are actively involved in the relevant
market.
(b) Non-current financial assets classified as held for
resale
Classification
On occasion the Group may take a majority shareholding in a
portfolio company. This is usually a result of the Group making a
follow-on investment in a Company in which it already holds a large
minority shareholding.
It is the Group's investment policy where possible to hold large
minority shareholdings in its investments. Where the Group does
take a majority shareholding in one of its portfolio companies, the
Group will usually look to reduce this shareholding to a minority
position within 12 months either by selling some of its stake to a
third party, or by raising further equity into the portfolio
company, and thereby reducing the Group's shareholding to less than
50%.
Where the Group acquires a majority stake in an equity
investment with the intention to bring that stake down to a
minority shareholding within the following 12 month period, the
Group classifies that equity investment as a current asset under
"non-current financial assets classified as held for sale", in
accordance with IFRS 5 - Non-current Assets Held for Sale and
Discontinued Operations.
Recognition / De-recognition
Investments held as "financial assets at fair value through
profit or loss" are reclassified as "non-current financial assets
classified as held for sale" on the date on which the Group
purchases further shares in the investee company and such purchase
results in the Group owning more than 50% of the shares of the
investee company and where the intention is to reduce the Group's
shareholding to less than 50% within 12 months of such
purchase.
Investments held as "non-current financial assets classified as
held for sale" are derecognised when the rights to receive cash
flows from the investments have expired or the Group has
transferred substantially all risks and rewards of ownership.
Investments held as "non-current financial assets classified as
held for sale" are reclassified as "financial assets at fair value
through profit or loss" when the Group's shareholding in the
relevant investee company falls to less than 50%.
Measurement
Non-current financial assets classified as held for sale are
valued at the lower of carrying value at the date at which the
assets were classified as such or fair value less costs to
sell.
IFRS 5 does not allow for upward fair value adjustments to be
made to assets classified as "non-current financial assets
classified as held for sale" in excess of any previous impairments
that had been applied to those same assets. This restriction can
mean, therefore, that where the Board considers there to be an
upward revaluation required of an investment classified as a
"non-current financial assets classified as held for sale" in
accordance with International Private Equity and Venture Capital
("IPEV") valuation guidelines, this fair value adjustment may not
be made under IFRS if the asset had not previously been impaired
since reclassification or to the extent that such revaluation was
in excess of a previous impairment since the assets
reclassification. As such, the treatment of non-current financial
assets classified as held for sale can, in certain circumstances,
conflict with the Group's general policy for valuing its investment
portfolio. Where this is the case, the Group provides a
reconciliation between the NAV in accordance with IFRS 5
("Accounting NAV") and the NAV in accordance with IPEV valuation
guidelines ("Adjusted NAV").
(c) Revenue recognition Interest income is accrued on a time
basis, by reference to the principal outstanding and the effective
interest rates applicable.
Dividend income is recognised in the income statement when the
Group's right to receive payment is established.
(d) Expenses Expenses are accounted for on an accruals basis.
Expenses are charged through the income statement except where they
relate to the raising of capital.
(e) Foreign currency translation Functional and presentation
currency
The performance of the Group is measured in Pounds Sterling
(GBP). The Board of Directors considers GBP as the currency that
most faithfully represents the economic effects of the underlying
transactions, events and conditions, and thus is the functional
currency.
The financial statements are presented in GBP.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement. Translation differences on non-monetary financial assets
and liabilities such as equities at fair value through profit or
loss are recognised in the income statement within the fair value
net gain or loss.
(f) Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all
of its liabilities.
(f) Loans receivable
Loans receivable that have fixed or determinable payments that
are not quoted in an active market are classified as 'loans and
receivables'. Loans and receivables are measured at amortised cost
using the effective interest method less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables where the recognition of interest
would be immaterial.
(g) Financial instruments Financial assets and financial
liabilities are recognised on the Group's balance sheet when the
Group becomes party to the contractual provisions of the
instrument.
The Group shall offset financial assets and financial
liabilities if the Group has a legally enforceable right to set off
the recognised amounts and interests and intends to settle on a net
basis.
(h) Cash and cash equivalents Cash at bank and short term
deposits are carried at cost. Cash and cash equivalents consist of
cash in hand, short term deposits in banks and money market
instruments with an original maturity of three months or less.
(i) Trade and other receivables. Other receivables do not carry
any interest and are short-term in nature and are accordingly
stated at their nominal value as reduced by appropriate allowances
for estimated irrecoverable amounts.
(j) Trade and other payables Trade and other payables are not
interest-bearing and are stated at their nominal value.
(k) Investments in associates An associate is an entity over
which the Group has significant influence and that is neither a
subsidiary nor an interest in a joint venture. Significant
influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or
joint control over those policies.
Investments which fall within the definition of an associate
under IAS 28 (Investments in Associates) are accounted for as
investments held at fair value through profit and loss, as
permitted by that standard. IAS 28 requires certain disclosures to
be made about associates, including summary historical financial
information, even where these associates have been accounted for in
accordance with IAS 39 and held at fair value. The Group has a
number of investments which fall within the definition of an
associate, all of which are held at fair value.
The disclosures required by IAS 28 have not been made. It is
considered that, in the context of the current investment
portfolio, such information would not be useful to users of the
accounts. Information is considered useful if it helps users assess
the net asset value of the Group or the future growth therein. Many
factors are taken into account in determining the fair value of
individual investments, of which historical financial information
is only one. Taken alone, this information would not be useful in
making such an assessment and may even be misleading in some
instances.
4. MATERIAL AGREEMENTS
(a) Under the terms of the Investment Management Agreement dated
6 October 2006, a management fee is payable to Low Carbon Investors
Limited ("LCI") for investment management services. These are paid
quarterly in advance and are equal to 0.625% of the adjusted net
asset value ("Adjusted NAV") of the Group (see note 19), as at the
last day of the preceding quarter.
In addition, LCI will be paid an annual performance fee equal to
20% of any amount by which the Adjusted NAV of the Group at the
relevant year end exceeds the previous high watermark subject to
performance exceeding the previous high watermark plus a hurdle
rate of 7.5%.
On 30 June 2009 the Investment Management Agreement was amended
to reset the Hurdle Base, on a weighted average basis, following
the issue by the Group of any new Ordinary Shares pursuant to a
placing for cash.
(b) Under the terms of the Broker Agreement dated 6 October
2006, subsequently amended on 19 December 2006, between RBS Hoare
Govett and the Company, RBS Hoare Govett is entitled to a retainer
fee as appointed broker of the Company. The retainer fee is at a
rate of not less than GBP25,000 per annum and increasing at a rate
of GBP1,000 per annum for each GBP1 million by which the net assets
of the Group exceeds GBP50 million subject to a maximum fee of
GBP75,000 per annum where the net assets of the Group are equal to,
or exceed, GBP100 million.
(c) Under the Terms of Engagement dated 18 December 2006, the
Company is liable to pay a retainer's fee to Grant Thornton for its
services as nominated adviser. The retainer fee is at a rate of
GBP25,000 per annum payable quarterly in advance.
5. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the
Group.
For management purposes, the Group is organised into one
business segment which focuses on achieving medium term capital
growth by investing in early stage low carbon companies.
The Group operates in four main geographical areas. The
geographic split of its non-current assets and non-current
financial assets classified as held for sale as at 30 November 2010
was:
2010 2009
GBP'000 GBP'000
UK 18,124 16,838
USA 17,512 15,433
Eurozone - 230
Canada - 963
35,636 33,464
6. INTEREST EXPENSE
In the prior year to 30 November 2009, the Group had a net
interest cost of GBP34,000 due to an over accrual of interest
income at 30 November 2008. However, during the same period the
Group had a positive balance on each of its bank accounts, and
interest paid was GBPnil, resulting in a book interest 'expense' of
GBP34,000.
There was no interest expense in the year ended 30 November
2010.
7. OTHER OPERATING EXPENSES
2010 2009
GBP'000 GBP'000
Provision against long-term loan to Low
Carbon Accelerator Luxembourg Limited
s.a.r.l. 85 -
Provision against interest receivable
on short-term loan to QuantaSol Limited 127 -
Provision against long-term loan to Hemcore
Limited - 420
Provision against long-term loan to Classical
Renaissance Espana SL - 750
Provision against long-term loan to Black
Mountain Limited - 475
Provision against other receivable to
Hemcore Limited - 15
Other expenses 298 354
510 2,014
8. TAXATION
The Company has been granted exemption from income tax in
Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of
Guernsey) Ordinance, 1989. As such it will not be liable to income
tax in Guernsey other than on Guernsey source income (excluding
deposit interest on funds deposited with a Guernsey bank). No
withholding tax is applicable to distributions to shareholders by
the Company.
The companies in which the Group has made an investment are
subject to taxation in their relevant jurisdiction.
9. DIVIDENDS In accordance with the strategy set out in the
Company's AIM Admission Document, no dividend has been declared for
the year to 30 November 2010 (2009 - GBPnil).
10. BASIC AND DILUTED EARNINGS PER SHARE The calculation of
basic and diluted return per share is based on the return on
ordinary activities for the year ending 30 November 2010 and on
86,100,000 (2009 - 61,937,808) Ordinary Shares, being the weighted
average number of shares in issue during the period.
11. RECONCILIATION OF LOSS PER SHARE
Result for Profit/(loss)
the period per share
30 November 2010 GBP'000 Pence
Basic loss (2,006) (2.3)
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.3
Adjusted Profit 8,644 10.0
30 November 2009
Basic and adjusted loss (889) (1.4)
The difference between the loss for the period of GBP2.0 million
as shown in the Consolidated Income Statement and the Adjusted
profit for the period of GBP8.6 million arises as a result of
compliance with restrictions on measurement of assets under IFRS
5.
During the period, Proven Energy consolidated its position as
Europe's leading distributed wind turbine company (i.e. supplying
sub-100kW turbines) and delivered very strong sales growth driven
by feed-in tariffs. As such, in line with the International Private
Equity and Venture Capital Valuation ("IPEV") Guidelines, the Board
revised the fair value of LCA's equity investment in Proven Energy
during the period from the historic cost of GBP9.25 million to
GBP19.9 million, being an increase of GBP10.65 million.
As set out in note 3(a) to these Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with IPEV valuation guidelines. However, IFRS 5
prevents the Group from making upward revaluations of investments
that are classified as "Non-current financial assets classified as
held for sale" in excess of any previous impairments that had been
applied to those same assets, even where the Board considers that
such an upward revaluation is required to reflect the Board's
assessment of the fair value of such an investment in accordance
with IPEV guidelines.
As compliance with IFRS takes precedence over the Group's
general valuation policy for investments, the uplift of GBP10.65
million in the value of the Group's investment in Proven Energy is
not reflected in the Consolidated Income Statement.
12. INVESTMENTS - DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS
2010 2009
GBP'000 GBP'000
Total financial assets at fair value
through profit or loss at beginning of
year 24,214 21,161
Additions during the year
- acquired for cash 2,019 5,916
- loans from prior year converted into
equity (see note 14) 488 1,700
- net gain on share swap - 334
Non-current financial assets classified
as held for sale (see note 13) - (9,250)
Net changes in fair value through profit
or loss (335) 4,353
Total financial assets at fair value
through profit or loss at end of year 26,386 24,214
The net changes in fair value through profit or loss represents
amounts relating to the revaluation of investments and foreign
currency gains or losses relating to investments made in currencies
other than GBP.
The Group had a net gain on foreign exchange of GBP825,000
during the year (2009 - loss GBP1,816,000) and is included within
"Net changes in fair value through profit or loss".
During the year the Group made the following upward revaluations
to investments:
-- Vykson Limited
The company completed a funding round of GBP500,000 during the
year from a syndicate of investors, which included a follow-on
investment of GBP150,000 from LCA. The carrying value of this
investment was increased by GBP33,000 to reflect the valuation of
the company set at the time of this funding round.
-- Sterling Planet Inc.
A net foreign currency gain of GBP683,000 was made on this
investment, which reflects the depreciation of sterling against the
US dollar in the period.
-- LUMEnergi Inc.
A net foreign currency gain of GBP142,000 was made on this
investment, which reflects the depreciation of sterling against the
US dollar in the period.
During the year the Group made the following provisions and
write-downs against investments:
-- Vaperma Inc. ("Vaperma")
During the year, given the historic challenges in the market for
the production of ethanol, which was severely hit by the
contraction of credit markets that made finance for large scale
projects less forthcoming, LCA made a provision against the
remaining carrying value of its investment in Vaperma.
At 30 November 2009, LCA had already made a 77% provision
against the cost of its equity investment in Vaperma such that the
carrying value was written-down to CAN$1.7 million. During the
current period, this remaining carrying value, GBP963,000 as
adjusted for foreign currency differences, was fully provided
against.
-- EnergyMixx AG ("EnergyMixx")
During the year, the shares of EnergyMixx were delisted from the
Open Market of the Frankfurt Stock Exchange due to the lack of
trading activity and limited progress has been made in the
company's core trading activity. As such, the carrying value of
this investment has been written down to zero by LCA.
The table below summarises the underlying investments of the
Group. All of the investments are in unquoted companies.
2010 2009
Cost of Cost of
investment investment
in in
original Value of original Value of
Currency of currency investment currency investment
investment '000 GBP'000 '000 GBP'000
Sterling
Planet, Inc. USD 7,000 13,675 7,000 12,993
ResponsiveLoad
Limited GBP 3,354 4,627 2,750 4,023
Lumenergi Inc USD 5,973 3,836 4,000 2,440
Quantasol
Limited GBP 2,375 2,375 2,375 2,375
Eco-Solids
International
Limited GBP 825 730 825 730
Vykson Limited GBP 450 643 300 460
Vigor
Renewables
Limited GBP 500 500 - -
Vaperma CAN $ 7,150 - 7,150 963
EnergyMixx AG GBP 1,100 - 1,100 230
Group total 26,386 24,214
13. NON-CURRENT FINANCIAL ASSETS CLASSIFIED AS HELD FOR SALE
During the year the Group made the following upward revaluations
to non-current financial assets classified as held for resale:
Proven Energy
Proven Energy has consolidated its position as Europe's leading
distributed wind turbine company (i.e. supplying sub-100kW
turbines) and delivered very strong sales growth driven by feed-in
tariffs ("FITs"). As such, in line with the International Private
Equity and Venture Capital Valuation Guidelines, the value of LCA's
equity investment in Proven Energy was increased during the year
from the historic cost of GBP9.25 million to GBP19.9 million, being
an increase of GBP10.65 million.
It was noted in the financial statements for the prior year
ended 30 November 2009 that it was the Board's intention to seek to
reduce LCA's interest in Proven Energy Limited ("Proven Energy") to
a minority shareholding within the following 12 months. To date,
however, the Group continues to own more than 50% of the equity in
Proven Energy.
The Board's intention to reduce LCA's shareholding to a minority
stake in the near-term remains firm and, the Investment Manager is
actively pursuing a number of opportunities to achieve this
objective. In particular, the Investment Manager has continued
detailed discussions, started in the prior period, with a potential
party specifically seeking investment opportunities in the small
scale wind turbine market. The Investment Manager is also actively
considering, with the management of Proven Energy, other strategies
for the company that would see LCA's shareholding fall to less than
50%.
As such, the entire investment in Proven Energy has continued to
be classed as "Non-current financial assets classified as held for
sale" in the current period in accordance with IFRS 5. As IFRS 5
does not allow for the upward revaluation of assets classified as
"Non-current financial assets classified as held for sale" in
excess of any previous impairments that had been applied to those
same assets, the above fair value adjustment of GBP10.65 million
has not been reflected in the Group's results for the period, or in
its NAV as shown in the Consolidated Balance Sheet as at 30
November 2010. The Group has therefore provided a reconciliation
between the Accounting NAV and the Adjusted NAV in note 19.
14. OTHER RECEIVABLES
2010 2009
GBP'000 GBP'000
Proven Energy 250 -
QuantaSol Limited 1,250 -
LUMEnergi Inc. - 488
Prepayments 13 41
Other receivables 14 79
1,527 608
The short-term loan to Proven Energy is unsecured and accrues
interest at 10.0% per annum and is repayable before or at 31 March
2011. Warrants are also attached this loan. On 12 January 2011, LCA
received written notice from Proven Energy of its intention to
repay GBP100,000 of the balance on 11 February 2011.
The short-term loan to QuantaSol Limited is unsecured and
accrues interest at 15.0% per annum, and at the request of LCA, can
either be converted into equity in QuantaSol Limited or repaid at
any time on or after 30 June 2011. A full provision has been made
against the interest income accrued in the year to 30 November 2010
on this loan.
The Group invested a further US$1,173,000 into LUMEnergi Inc. in
the form of a short term loan during the year. On 25 August 2010,
LCA announced that the total outstanding short-term loan of
US$1,973,000 (GBP1.267 million at 30 November 2010) had been
converted into equity in LUMEnergi Inc.
15. OTHER PAYABLES
2010 2009
GBP'000 GBP'000
Trade creditors 22 49
Accruals 39 83
61 132
16. SHARE CAPITAL
Authorised No. GBP'000
Ordinary shares of no par value Unlimited -
Issued and fully paid
Ordinary shares of no par value 86,100,000 -
No.
Balance as at 30 November 2009 86,100,000
Issued (ordinary shares of no par value) -
Balance as at 30 November 2010 86,100,000
The Company has one class of ordinary shares which carry no right to fixed income.
17. SHARE PREMIUM
GBP'000
Balance as at 30 November 2009 and
2010 52,720
18. RECONCILIATION OF MOVEMENT IN RESERVES
GBP'000
Balance as at 30 November 2009 (9,443)
Total comprehensive expense (2,006)
Balance as at 30 November 2010 (11,449)
19. RECONCILIATION OF ACCOUNTING NAV AND ADJUSTED NAV
Net Asset NAV per
Value share
30 November 2010 GBP'000 Pence
Accounting Net Asset Value 41,271 47.9
Fair value adjustment to non-current
financial assets classified as held
for sale 10,650 12.4
Adjusted Net Asset Value 51,921 60.3
30 November 2009
Accounting and Adjusted Net Asset Value 43,277 50.3
The difference between the Accounting NAV of GBP41.3 million as
shown in the Consolidated Balance Sheet and the Adjusted NAV of
GBP51.9 million arises as a result of compliance with restrictions
on measurement of assets under IFRS 5.
As set out in note 3(a) to these Financial Statements, it is the
Group's accounting policy to value its investment portfolio at fair
value in accordance with International Private Equity and Venture
Capital ("IPEV") valuation guidelines. However, IFRS 5 prevents the
Group from making upward revaluations of investments that are
classified as "Non-current financial assets classified as held for
sale" in excess of any previous impairments that had been applied
to those same assets, even where the Board considers that such an
upward revaluation is required to reflect the Board's assessment of
the fair value of such an investment in accordance with IPEV
guidelines.
The Board considers that the Adjusted NAV reflects the fair
value of the Group's investment portfolio at the balance sheet date
in accordance with IPEV guidelines.
20. FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial
risks: market price risk, credit risk, interest rate risk, currency
risk and liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's
financial performance. The risk management policies employed by the
Group to manage these risks are discussed below:
Market price risk
The Group's equity securities are susceptible to market price
risk arising from uncertainties about future values of the
investment securities. The Investment Manager provides the Group
with investment recommendations that are consistent with the
Group's objectives. The Board of Directors reviews these
recommendations before the investment decisions are
implemented.
The method of valuation of these investments is described within
the accounting policies. The nature of the Group's investments, all
being unquoted investments in private companies, means that the
investments are valued by the Directors after due consideration of
the most recent available information from the underlying
investments as adjusted where relevant by the Directors.
All of the Group's "Financial assets at fair value through
profit or loss" and "Non-current financial assets classified as
held for sale" on the balance sheet are classified as Level 3 in
the fair value hierarchy. Investments classified within level 3
have significant unobservable inputs. Level 3 instruments include
unquoted equity instruments which the Company values in accordance
with the International Private Equity and Venture Capital valuation
guidelines. Credit risk
The Group is exposed to credit risk in respect of its cash and
cash equivalents, arising from possible default of the relevant
counterparty, with a maximum exposure equal to the carrying value
of those assets. The credit risk on liquid funds is limited because
the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies. The Group monitors the
placement of cash balances on an ongoing basis. During the prior
year to 30 November 2009, the Company changed its bankers in
response to the uncertainties regarding the solvency of certain
banks at that time.
The Group is also exposed to credit risk in respect of the loans
granted to its investments and subsidiaries, with a maximum
exposure equal to the value of the loans advanced. The Group
manages the credit risk of third party borrowers by regularly
reviewing their underlying financial performance.
Interest rate risk
A significant proportion of the Group's financial assets and
liabilities are non-interest bearing. The short-term loan of
GBP250,000 made in the year to Proven Energy Limited bears a fixed
coupon and is repayable before or at 31 March 2011. The short-term
loan of GBP1,250,000 made in the year to QuantaSol Limited also
bears a fixed coupon and is repayable at or any time after 30 June
2011 at the request of LCA.
As such, the Group is not subject to significant amounts of risk
due to fluctuations in the prevailing levels of market interest
rates.
The following table summarises the Group's exposure to interest
rate risks.
Interest Non-interest
bearing bearing Total
As at 30 November 2010 GBP'000 GBP'000 GBP'000
Assets
Financial assets at fair value
through profit or loss - 26,386 26,386
Cash and cash equivalents 4,169 - 4,169
Non-current financial assets
classified as held for sale - 9,250 9,250
Trade and other receivables 1,500 27 1,527
5,669 35,663 41,332
Liabilities
Trade and other payables - (61) (61)
Total interest gap 5,669 35,602 41,271
As at 30 November 2010, if interest rates had been 200 basis
points higher with all other variables held constant, profit after
tax for the year and net assets would have been GBP0.15 million
higher, mainly as a result of higher interest expense on floating
rate deposits.
Interest Non-interest
bearing bearing Total
As at 30 November 2009 GBP'000 GBP'000 GBP'000
Assets
Financial assets at fair value
through profit or loss - 24,214 24,214
Cash and cash equivalents 9,337 - 9,337
Non-current financial assets
classified as held for sale - 9,250 9,250
Trade and other receivables 488 120 608
9,825 33,584 43,409
Liabilities
Trade and other payables - (132) (132)
Total interest gap 9,825 33,452 43,277
Currency risk
The Group has assets denominated in currencies other than GBP,
the functional currency. The Group is therefore exposed to currency
risk, as the value of the assets and liabilities denominated in
other currencies will fluctuate due to changes in exchange rates.
On 29 January 2009 the Company announced that it had changed its
hedging policy. Prior to this date the Company had entered into
hedging contracts to reduce the currency risk on investments that
had been made in foreign currencies. From this date, the Company
stopped entering into hedging contracts in relation to such
investments.
The table below summarises the Group's exposure to currency
risks at the period end.
2010 2009
Amount Amount
in currency in currency
Currency '000 GBP'000 '000 GBP'000
Assets
Financial assets at
fair value through
profit or loss USD 27,273 17,512 25,300 15,433
EURO - - 251 230
CAD - - 1,673 963
17,512 16,626
Other receivables USD - - 800 488
17,512 17,114
As at 30 November 2010, if foreign currency rates against the value of GBP had been 30% higher or 30% lower with all other variables held constant, profit after tax for the year and net assets would have been GBP4.0 million lower or GBP7.5 million higher respectively, as a result of higher/lower exchange rates on assets denominated in currencies other than GBP.
Liquidity risk
The Group's financial instruments include investments in
unlisted securities, which are not traded in an organised public
market and may generally be illiquid. As a result, the Group may
not be able to liquidate quickly its investments in these
instruments at an amount close to fair value in order to respond to
its liquidity requirements or to specific events. The Directors
believe that the Group, as a closed ended vehicle with no fixed
wind up date is ideally suited to making long term investments with
limited marketability.
As at 30 November 2010 the Group had a cash balance of GBP4.2
million, and total liabilities of GBP61,000. The Group has no
gearing. Outstanding commitments to portfolio companies at 30
November 2010 totalled GBP500,000.
Capital Management
The Group monitors capital which comprises all components of
equity (i.e. share premium and revenue reserves). The Group's
objectives when maintaining capital are:
-- to safeguard the Group's ability to continued as a going
concern, so that it can continue to provide returns for
shareholders; and
-- to provide an IRR of 30% within a three to five year
timeframe. Returns are expected to be derived primarily from
capital gains.
The Directors set and manage the amount of capital required in
proportion to risk. It is not proposed that the Group will have any
long-term or fixed structured gearing. However, the Group may
borrow for the purpose of the orderly settlement of transactions,
to implement any currency hedging strategy or for other general
working capital purposes. Borrowings by the Group itself will not
exceed 25% of the Net Asset Value at the time of drawdown. The
Group may also be indirectly exposed to the effect of gearing to
the extent that investee companies have outstanding borrowings.
The Group is not subject to any external capital requirements.
As at 30 November 2010 the Group had no borrowings.
21. POST BALANCE SHEET EVENTS Between the balance sheet date and
9 February 2011 the Group announced that it had made a further
investment of GBP200,000 in Vigor in the form of an unsecured loan.
The loan bears a coupon of 15% and is repayable at or before 30
June 2012.
22. FINANCIAL COMMITMENTS As at 9 February 2011, the Group had
the following commitments to companies in its portfolio:
a. QuantaSol Limited ("Quantasol")
On 3 September 2010, the Group announced that it had made a
further investment of GBP1 million by way of a convertible loan in
Quantasol. This forms part of a GBP2 million investment made
alongside Imperial Innovations. GBP1 million was drawn down
immediately, with the draw-down of the remaining GBP1 million,
split equally between Imperial Innovations, being subject to the
achievement of certain milestones.
23. RELATED PARTY TRANSACTIONS
a. The Company has appointed Low Carbon Investors Limited, a
company in which Gerald Davis (who resigned from the Board of LCA
on 18 December 2009) and David Nussbaum hold shares, provide
advisory services, and sit on the investment committee, to provide
investment management services. During the year the Group paid a
management fee to Low Carbon Investors Limited of GBP1,156,000
(2009 - GBP860,000).
b. RBS Hoare Govett Limited provides corporate broking and
financial advisory services to the Group and is a wholly-owned
subsidiary of The Royal Bank of Scotland N.V., which is a
shareholder in the Company. The advisory fees charged during the
period by RBS Hoare Govett Limited amounted to GBP25,000 (2009 -
GBP25,000).
c. LCA Board member Alan Mark Tanguy is an employee of Ogier
Fiduciary Services (Guernsey) Limited and a director of certain of
its subsidiaries including Ogier Fund Administration (Guernsey)
Limited. Ogier Fund Administration (Guernsey) Limited provides
administration services to LCA. During the period the LCA paid fees
of GBP126,000 (2009 - GBP133,000) to Ogier Fund Administration
(Guernsey) Limited.
The financial information set out in this announcement does not
constitute the LCA's statutory accounts for the year ended 30
November 2010 but is derived from those accounts. A copy of the
annual report and accounts is available on the Company's website
www.lowcarbon.gg.
About Low Carbon Accelerator: www.lowcarbon.gg
Low Carbon Accelerator Limited is a closed ended investment
company created to invest in a portfolio of fast-growing low carbon
businesses. The Company listed on the AIM Market of the London
Stock Exchange on 11 October 2006, raising GBP44.5 million. On 26
June 2009, the Company announced that it had raised a further GBP10
million, net of expenses, following the successful placing of a
further 41.6 million shares.
The Company's investment objective is to provide shareholders
with an attractive return on their investment primarily through
significant minority (predominately 25% and above) holdings in a
diverse portfolio of unquoted private companies providing low
carbon products and services.
The Company invests principally in companies which provide low
carbon products and services across the following sectors:
-- Energy efficiency (reductions in energy inputs at source,
improved conversion and reductions at point of use)
-- Energy generation (sustainable and clean energy, micro and
distributed generation)
The Company's investment strategy is to target trading
businesses with patentable technologies and products with a clear
commercial application and the opportunity to gain a large market
share of a new or expanding market. The Company focuses on
businesses with experienced management teams who have developed
commercially viable products providing easily adoptable solutions
which deliver immediate reductions in carbon dioxide emissions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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