Company registration number 10327799 (England and Wales)
IREL SOLAR HOLDCO LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2022
IREL SOLAR HOLDCO LIMITED
COMPANY INFORMATION
Directors
N A Wood
(Appointed 10 May 2022)
L J B Roberts
(Appointed 10 May 2022)
Secretary
FLB Company Secretarial Services Limited
Company number
10327799
Registered office
1010 Eskdale Road
Winnersh Triangle
Wokingham
Berkshire
RG41 5TS
Independent auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
IREL SOLAR HOLDCO LIMITED
CONTENTS
Page
Directors' report
1 - 3
Independent auditor's report
4 - 7
Statement of comprehensive income
8
Statement of financial position
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 26
IREL SOLAR HOLDCO LIMITED
DIRECTORS' REPORT
FOR THE PERIOD ENDED 30 JUNE 2022
- 1 -
The directors present their annual report and audited financial statements of IREL Solar HoldCo Limited (the "Company") for the period 1 January 2022 to 30 June 2022. The period of 6 months is a shorter period than the comparative year to 31 December 2021, due to a change in the Company's year end to align with other entities within the Bluefield Solar Income Fund Limited group ("the Group").
Principal activities
The principal activity of the Company was that of holding investments that operate renewable energy installations ("Renewable Projects") to generate renewable electricity.
Country of incorporation and legal form of the entity
IREL Solar HoldCo Limited was incorporated as a private company, limited by shares, under the Registrar of Companies for England and Wales on 12 August 2016.
Risk management and Control
In the ordinary course of business, the Company is exposed to and manages a variety of risks in relation to its activities, including financial risk. The management of credit, interest rate, liquidity and operational risks are fundamental to the Company, with the Board of directors having responsibility for the overall system of internal control and for reviewing its effectiveness.
The primary areas of risk considered by the directors are:
Interest risk: Fluctuations in the prevailing levels of market rates of interest pose a risk to the Company's financial position and cash flow. This is not considered a significant risk to the Company as the interest on loans owed to group undertakings is charged at a rate agreed by the parent company and are not subject to interest movements in the market. The Company also holds external loans which bear interest at a prescribed margin over the UK Base Rate, which is subject to increases and decreases. The Company uses interest rate swap contracts to mitigate its exposure to the interest rate risk attached to changes in the Base Rate on its external loans, which is subject to fluctuation.
Liquidity risk: Failure to meet financial obligations in a timely and cost effective manner due to mismatches in the maturity profile of assets and liabilities. The Company closely monitors its cash flow levels and financial obligations to anticipate its future cash commitments.
Portfolio operation risk: The Directors consider that the principal risks impacting the Company relate to portfolio operation, management and reporting. The risks associated with the underperformance of the portfolio are mitigated through the asset management activities of Bluefield Services Limited who send weekly, monthly and annual reports highlighting the operational status of the portfolio as well as engaging with contractors to ensure technical issues are resolved promptly. Reporting risks, which principally cover possible valuation discrepancies (details of which are highlighted in note 10), are mitigated through work performed by the Company's Investment Advisor who are an active participant within the UK solar market.
COVID-19 risk: During the period there has been limited impact on the business and its activities. The directors have continued to review the forecasts to ensure a true and fair reflection of the impact, if any, of COVID-19.
Russia/Ukraine conflict risk: The directors are continuously monitoring the impact, if any, that the ongoing conflict in Ukraine may have on the entity and the impact on energy prices across the portfolio. The Company has no direct exposure to either Ukraine or Russia.
Results and dividends
The profit for the period, after taxation, amounted to £4,488,722 (2021: £2,062,240 as restated).
No dividends were distributed in the current period or prior year.
IREL SOLAR HOLDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 2 -
Directors
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
N A Forster
(Resigned 10 May 2022)
D M Reid
(Resigned 10 May 2022)
N A Wood
(Appointed 10 May 2022)
L J B Roberts
(Appointed 10 May 2022)
Qualifying third party indemnity provisions
The Company has made qualifying third party indemnity provisions for the benefit of its directors during the period following their appointment. These provisions remain in force at the reporting date.
Post reporting date events
There have been no significant events affecting the Company since the period end.
Independent Auditor
KPMG Channel Islands Limited were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Statement of directors' responsibilities
The directors are responsible for preparing the Directors' 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 they have elected to prepare the financial statements in accordance with UK accounting standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the 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 applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show 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 responsible for such internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and prevent and detect fraud and other irregularities.
Statement of disclosure to auditor
So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
IREL SOLAR HOLDCO LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 3 -
Small companies
In preparing the financial statements, the directors have taken advantage of section 414B of the Companies Act 2006 and have not prepared a Strategic Report.
On behalf of the board
N A Wood
Director
30 October 2023
IREL SOLAR HOLDCO LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF IREL SOLAR HOLDCO LIMITED
- 4 -
Our opinion
We have audited the financial statements of IREL Solar HoldCo Limited (the “Company”), which comprise the statement of financial position as at 30 June 2022, the statements of comprehensive income, changes in equity and cash flows for the period from 1 January 2022 to 30 June 2022, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
give a true and fair view of the state of the Company's affairs as at 30 June 2022 and of the Company's profit for the period from 1 January 2022 to 30 June 2022;
are properly prepared in accordance with United Kingdom accounting standards, including FRS 102 The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including FRC Ethical Standards. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period").
In our evaluation of the directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period.
Our conclusions based on this work:
we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate; and
we have not identified, and concur with the directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.
IREL SOLAR HOLDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF IREL SOLAR HOLDCO LIMITED
- 5 -
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
enquiring of management as to the Company’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;
reading minutes of meetings of those charged with governance; and
using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of unquoted investments. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.
We performed procedures including:
identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation;
incorporating an element of unpredictability in our audit procedures; and
assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general sector experience and through discussion with management (as required by auditing standards), and discussed with management the policies and procedures regarding compliance with laws and regulations.
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of litigation or impacts on the Company’s ability to operate. We identified company law as being the area most likely to have such an effect. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
IREL SOLAR HOLDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF IREL SOLAR HOLDCO LIMITED
- 6 -
The directors are responsible for the directors' report. Our opinion on the financial statements does not cover that report and we do not express an audit opinion thereon.
Our responsibility is to read the directors' report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:
we have not identified material misstatements in the directors' report;
in our opinion the information given in that report for the financial year is consistent with the financial statements; and
in our opinion that report has been prepared in accordance with the Companies Act 2006.
Matters on which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to take advantage of the small companies exemption from the requirement to prepare a strategic report
We have nothing to report in these respects.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 2, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
IREL SOLAR HOLDCO LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF IREL SOLAR HOLDCO LIMITED
- 7 -
The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's member, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s member those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and its member, as a body, for our audit work, for this report, or for the opinions we have formed.
Barry Ryan (Senior Statutory Auditor)
For and on behalf of KPMG Channel Islands Limited (Statutory Auditor)
Chartered Accountants
Guernsey
31 October 2023
IREL SOLAR HOLDCO LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2022
- 8 -
Period
Year
ended
ended
30 June
31 December
2022
2021
as restated
Notes
£
£
Turnover
3
28,725
-
Administrative expenses
(77,814)
(32,034)
Net gains on financial assets held at fair value through profit or loss
8
4,930,636
2,398,197
Operating profit
4,881,547
2,366,163
Interest receivable and similar income
6
427,438
Interest payable and similar expenses
7
(392,825)
(731,361)
Profit before taxation
4,488,722
2,062,240
Tax on profit
9
Profit for the financial period
4,488,722
2,062,240
Other comprehensive income
Cash flow hedges (loss)/gain arising in the period
(324,444)
706,675
Total comprehensive income for the period
4,164,278
2,768,915
The statement of comprehensive income has been prepared on the basis that all operations are continuing operations.
The notes on pages 12 to 26 form part of these financial statements.
IREL SOLAR HOLDCO LIMITED
STATEMENT OF FINANCIAL POSITION
- 9 -
As at 31 December
2022
2021
as restated
Notes
£
£
£
£
Fixed assets
Financial assets held at fair value through profit or loss
10
29,899,028
25,082,927
Current assets
Debtors
12
48,722
112,879
Cash at bank and in hand
130,931
101,149
179,653
214,028
Creditors: amounts falling due within one year
13
(9,407,122)
(8,341,648)
Net current liabilities
(9,227,469)
(8,127,620)
Total assets less current liabilities
20,671,559
16,955,307
Creditors: amounts falling due after more than one year
14
(8,682,860)
(9,130,886)
Net assets
11,988,699
7,824,421
Capital and reserves
Called up share capital
17
1
1
Hedging reserve
18
(518,471)
(194,027)
Profit and loss reserves
12,507,169
8,018,447
Total equity
11,988,699
7,824,421
The notes on pages 12 to 26 form part of these financial statements.
The financial statements were approved by the board of directors and authorised for issue on 30 October 2023 and are signed on its behalf by:
N A Wood
Director
Company Registration No. 10327799
IREL SOLAR HOLDCO LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2022
- 10 -
Share capital
Hedging reserve
Profit and loss reserves
Total
£
£
£
£
As restated for the period ended 31 December 2021:
Balance at 1 January 2021
1
(900,702)
(879,851)
(1,780,552)
Effect of change in accounting policy
-
6,836,058
6,836,058
As restated
1
(900,702)
5,956,207
5,055,506
Year ended 31 December 2021:
Profit and total comprehensive income for the year
-
-
2,062,240
2,062,240
Other comprehensive income:
Cash flow hedges gains
-
706,675
-
706,675
Total comprehensive income for the year
-
706,675
2,062,240
2,768,915
Balance at 31 December 2021 (as restated):
1
(194,027)
8,018,447
7,824,421
Period ended 30 June 2022:
Profit for the period
-
-
4,488,722
4,488,722
Other comprehensive income:
Cash flow hedges gains
-
(324,444)
-
(324,444)
Total comprehensive income for the period
-
(324,444)
4,488,722
4,164,278
Balance at 30 June 2022
1
(518,471)
12,507,169
11,988,699
The notes on pages 12 to 26 form part of these financial statements.
IREL SOLAR HOLDCO LIMITED
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2022
- 11 -
2022
2021
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
22
364,290
(1,077,830)
Investing activities
Receipts from investments
8
114,535
1,402,840
Dividends received
400,000
Net cash generated from investing activities
114,535
1,802,840
Financing activities
Repayment of borrowings
(276,394)
(644,401)
Interest paid
(172,649)
(356,039)
Net cash used in financing activities
(449,043)
(1,000,440)
Net increase/(decrease) in cash and cash equivalents
29,782
(275,430)
Cash and cash equivalents at beginning of period
101,149
376,579
Cash and cash equivalents at end of period
130,931
101,149
The notes on pages 12 to 26 form part of these financial statements.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 2022
- 12 -
1
Accounting policies
Company information
IREL Solar HoldCo Limited (The "Company") is a private company limited by shares incorporated in England and Wales. The registered office is 1010 Eskdale Road, Winnersh Triangle, Wokingham, Berkshire, RG41 5TS.
The principal activity of the Company was that of holding investments that operate renewable energy installations ("Renewable Projects") to generate renewable electricity.
1.1
Reporting period
The directors present a shorter period of account from 1 January 2022 to 30 June 2022, due to aligning the year end with other entities in the Bluefield Solar Income Fund Limited group ("the Group"). As such, the comparatives for a whole year are not entirely comparable.
1.2
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of certain financial instruments at fair value. The principal accounting policies adopted are set out below.
The directors have concluded that the Company’s subsidiaries should be excluded from consolidation as the interests in subsidiaries are held as part of an investment portfolio, as defined in paragraph 9.9 (b) of FRS 102 and are measured at fair value with movements in fair value recognised in the Statement of Comprehensive Income in the year in which they arise.
1.3
Going concern
These accounts have been prepared on a going concern basis although the Company is in a net currenttrue liability position. The directors believe this basis is appropriate following the consideration of cashflow forecasts which show the Company is able to meet its liabilities as they fall due for at least 12 months from the date of approval of these financial statements.
At the period end, the Company reported net current liabilities of £9,227,469 (2021: £8,127,620 as restated), as a result of an intra-group loan (see note 13).
The directors have considered the impact which the current conflict in Ukraine could have on the Company. In their view, as the Company has no direct exposure to Ukraine or Russia, the directors do not expect a significant impact on revenue and cash flows of the Company arising from the conflict.
Should any unforeseen circumstances require additional funding, the Company has obtained written confirmation from its intermediate parent that it would provide financial support to meet the Company's liabilities for a period of at least 12 months from the date the financial statements are approved.
1.4
Turnover
Consultancy services fee income is recognised on an accrual basis.
The Company has entered into consultancy agreements with its SPVs for the provision of on-going ad-hoc advisory services in the management, administration and operation of its SPVs. The consultancy services fee income is charged according to plant capacity and agreed from time to time between IREL Solar Holdco Limited and its SPVs.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
1
Accounting policies
(Continued)
- 13 -
1.5
Fixed asset investments (change in accounting policy)
Following the change of ownership and the incorporation of the Company into the group headed by Bluefield Solar Income Fund Limited, the ultimate parent company, the directors have considered the position of the Company and are of the opinion that the Company's investment in its subsidiary ("SPV") is held as part of an investment portfolio. As such, the Company should exclude all its SPVs from consolidation on the grounds set out in FRS 102 paragraph 9.9(b) and the SPV should be measured at fair value recognised in the statement of comprehensive income.
This change in accounting policy is required to be accounted for retrospectively and the relevant comparative figures have been restated. Please refer to note 24 to the financial statements for more detail on the restatement.
A subsidiary is an entity controlled by the company. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
1.6
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
1.7
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's statement of financial position when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
1
Accounting policies
(Continued)
- 14 -
Financial assets held at fair value through profit or loss
Classification
The Company has been classified as an investment entity and as such its investments in any subsidiaries are held at fair value through profit or loss and measured in accordance with the requirements of FRS 102 (see note 2).
Recognition
Investments made by the Company in its subsidiaries are initially recognised at transaction price on the day the investment is made. Transaction costs arising from the acquisition of the investments that are recurring in nature and that would not be expected to be recovered on a subsequent sale of the investment (such as legal fees relating to due diligence and technical reviews of the wind or solar farms) are expensed to the Statement of Comprehensive Income. However, transaction costs intrinsically linked to the value of the investments (such as legal fees relating to the contract on the construction and maintenance of wind or solar assets, stamp duty costs relating to the leases on the wind or solar farms, insurance during construction and technical due diligence on construction) are included in the cost of the financial assets held at fair value through profit or loss.
Measurement
Subsequent to initial recognition, investments in subsidiaries are measured at each subsequent reporting date at fair value. Gains and losses resulting from the revaluation of investments are recognised in the Statement of Comprehensive Income. The Company has elected to recognise all gains and losses from financial assets held at fair value through profit or loss as a single line in the Statement of Comprehensive Income. Fair value is determined on an unleveraged, discounted cash- flow basis in accordance with The International Private Equity and Venture Capital ("IPEV') Valuation Guidelines recognising any other assets and liabilities of the subsidiary.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in the statement of comprehensive income.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in the statement of comprehensive income.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements 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.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
1
Accounting policies
(Continued)
- 15 -
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans and loans from fellow group companies are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.8
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.9
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 in the income statement, 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 the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
1
Accounting policies
(Continued)
- 16 -
1.10
Non-derivative financial liabilities with fixed or determinable repayments that are not quoted in an active market are classified as loans. Loans are initially recognised at fair value of the consideration received plus directly related transaction costs. They are subsequently measured at amortised cost using the effective interest method. Arrangement fees and interest payable on financial liabilities that are classified as loans, are charged to the statement of comprehensive income.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating the interest payable over the expected life of the liability. The effective interest rate is the rate that exactly discounts estimated future cashflows to the instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable, that are an integral part of the instrument yield and transaction costs. All contractual terms of a financial instrument are considered when estimating future cash flows.
A financial liability is removed from statement of financial position when the obligation is discharged, or cancelled, or expires.
1.11
The Company uses variable to fixed interest rate swaps to manage its exposure to fair value risk on its long term borrowings. These derivatives are measured at fair value at each reporting date.
To the extent the cash flow hedge is effective, movements in fair value are recognised in other comprehensive income and represented in a separate cash flow hedge reserve. Any ineffective portions of those movements are recognised in profit or loss for the year.
1.12
Interest payable and similar expenses
Interest payable and similar expenses are charged to the Statement of Comprehensive Income over the term of the debt so that the amount charged is at a constant rate on the carrying amount. Interest payable and similar expenses include issue costs, which are initially recognised as a reduction in the proceeds of the associated capital instrument.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 17 -
2
Judgements and key sources of estimation uncertainty
The preparation of the financial statements under FRS 102 requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
In preparing these financial statements, the directors have made the following judgements and estimates:
The Board has determined that the Company shall exclude all subsidiaries from consolidation in accordance with FRS 102 paragraph 9.9(b) 'Subsidiaries are held as part of an investment portfolio' as detailed in accounting policy 1.5. This determination involves a degree of judgement due to the complexity within the wider structure of the Group and the investments in the SPVs and the Company's purpose to invest funds solely to return from capital appreciation and investment income. Additionally, as the investments in the SPVs consist of both debt and equity investments, judgement has been applied to the unit of account for the measurement of these investments.
An assessment of the possible impairment of assets takes place biannually, whereby the directors calculate the fair value on a discounted cash flow basis in accordance with IPEV Valuation Guidelines. This value is then compared to that within the financial statements at which point, if there are signs of impairment, this is then accounted for.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
3
Turnover
All turnover arose within the United Kingdom from the provision of consultancy services in the current period (2021: no turnover).
4
Auditor's remuneration
2022
2021
Fees payable to the company's auditor and associates:
£
£
For audit services
Audit of the financial statements of the company
3,000
3,500
5
Employees
The Company had no employees (2021 - Nil) other than its directors, who did not receive any remuneration (2021 - Nil).
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 18 -
6
Interest receivable and similar income
2022
2021
as restated
£
£
Interest income
Interest receivable from group companies
27,438
Income from fixed asset investments
Income from shares in group undertakings
400,000
Total income
427,438
Investment income includes the following:
Interest on financial assets not measured at fair value through profit or loss
27,438
7
Interest payable and similar expenses
2022
2021
as restated
£
£
Interest on financial liabilities measured at amortised cost:
Interest payable to group undertakings
392,825
731,361
8
Analysis of net gains on financial assets held at fair value through profit or loss
2022
2021
as restated
£
£
Changes in fair value of financial assets held at fair value through profit or loss
4,816,101
995,357
Receipts from SPV investments held at fair value through profit or loss
114,535
1,402,840
4,930,636
2,398,197
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 19 -
9
Taxation
The actual charge for the period can be reconciled to the expected charge for the period based on the profit or loss and the standard rate of tax as follows:
2022
2021
as restated
£
£
Profit before taxation
4,488,722
2,062,240
Expected tax charge based on the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%)
852,857
391,826
Tax effect of expenses that are not deductible in determining taxable profit
1,876
Tax effect of income not taxable in determining taxable profit
(76,000)
Gains not taxable
(899,311)
(384,887)
Group relief
46,454
67,185
Taxation charge for the period
-
-
An increase in the rate of corporation tax from 19% to 25% has been substantively enacted at the time of the approval of these financial statements. The increase will be effective from 1 April 2023 and will impact the Company's future tax charges on its taxable profits accordingly.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 20 -
10
Financial assets held at fair value through profit or loss
2022
2021
as restated
Notes
£
£
At 1 January
11
25,082,927
24,087,570
Change in fair value of financial assets held at fair value through profit or loss
4,816,101
995,357
At 30 June and 31 December
29,899,028
25,082,927
Valuation methodology and process
The directors base the fair value of the investments in the SPVs held by the Company on information received from the Investment Adviser. Fair value is calculated on discounted cash-flow basis in accordance with the IPE Valuation Guidelines adjusted for other relevant asset and liabilities of the SPVs. The Investment Adviser produces fair value calculations on a semi-annual basis as at 30 June and 31 December each year.
Financial assets held at fair value through profit or loss
Solar plants under construction and not yet operational are valued at cost and exclude acquisition costs which are expensed in the period in which they are incurred, whilst investments that are operational are valued on a DCF basis over the life of the asset (typically more than 25 years) and, under willing buyer-willing seller' methodology, prudently benchmarked on a £/MWp basis against comparable transactions for large scale portfolios.
Each investment is subject to full UK corporate taxation at the prevailing rate with the tax shield being limited to the applicable capital allowances from the Company's SPV investments.
The key inputs to a DCF based approach are: the equity discount rate, the cost of debt (influenced by interest rate, gearing level and length of debt), power price forecasts, long term inflation rates, irradiation forecasts, operational costs and taxation.
Given discount rates are a product of not only the factors listed previously but also regulatory support, perceived sector risk and competitive tensions, it is not unusual for discount rates to change over time. Evidence of this is shown by way of the revisions to the original discount rates applied between the first UK solar or wind investments and those witnessed in the past twelve months.
Given discount rates are subjective, there is sensitivity within these to the interpretation of factors outlined above.
Judgement is used by the Board in determining the weighted average discount rate of 6.75% as at 30 June 2022 with two key factors that have impacted the adoption of this rate outlined below:
Transaction values have remained consistent at c.£1.25-1.45/MW for large scale portfolios and which the Board have used to determine that an effective price of £1.38m/MW is an appropriate basis for the valuation of the BSIF portfolio as at 30 June 2022;
Inclusion of the latest long term power forecasts from the Company’s three providers;
In order to smooth the sensitivity of the valuation to forecast timing or opinion taken by a single forecast, the Board continues to adopt the application of a blended power curve from leading forecasters.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 21 -
11
Subsidiaries
Details of the company's subsidiaries at 30 June 2022 are as follows:
Name of undertaking
Registered office
Nature of business
Class of
% Held
shares held
Direct
Nanteague Solar Limited
1010 Eskdale Road, Winnersh Triangle, Wokingham, United Kingdom, RG41 5TS
Solar power generation
Ordinary
100.00
Sandys Moor Solar Limited
1010 Eskdale Road, Winnersh Triangle, Wokingham, United Kingdom, RG41 5TS
Solar power generation
Ordinary
100.00
Whitton Solar Limited
1010 Eskdale Road, Winnersh Triangle, Wokingham, United Kingdom, RG41 5TS
Solar power generation
Ordinary
100.00
12
Debtors
2022
2021
as restated
Amounts falling due within one year:
£
£
Other debtors
1,151
4,055
2022
2021
Amounts falling due after more than one year:
£
£
Other debtors
47,571
108,824
Total debtors
48,722
112,879
13
Creditors: amounts falling due within one year
2022
2021
Notes
£
£
Other borrowings
15
455,362
276,394
Trade creditors
6,902
24,326
Amounts owed to group undertakings
8,280,035
7,729,990
Other creditors
605,859
279,188
Accruals and deferred income
58,964
31,750
9,407,122
8,341,648
Included within amounts owed to group undertakings are loans of £8,260,585 (2021: £7,728,138). The loans are repayable on demand and bear interest at 7.00% per annum, which compounds annually on 30 June.
Included within other creditors are derivative liabilities of £518,471 (2021: £194,028) that the Company has entered into for hedging its external loans as disclosed in note 18.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 22 -
14
Creditors: amounts falling due after more than one year
2022
2021
Notes
£
£
Other borrowings
15
8,682,860
9,130,886
15
Loans and overdrafts
2022
2021
£
£
Other loans
9,138,222
9,407,280
Payable within one year
455,362
276,394
Payable after one year
8,682,860
9,130,886
Other loans are secured debts with Bayerische Landesbank. The loans are repayable in instalments and are secured by way of fixed and floating charges covering all the property or undertaking of the Company and its subsidiaries. The loans are stated net of amortised loan transaction costs of £134,632 (2021: £142,094). The loan bears interest at margins over base rate of between 2.28-3.23% per annum, which compounds annually on 30 June and repayments are due every 30 June and 31 December, maturing in June 2034.
16
Financial instruments
2022
2021
£
£
Carrying amount of financial assets
Financial assets measured at amortised cost
47,572
108,825
Financial assets measured at fair value through profit or loss
29,899,028
25,082,927
Carrying amount of financial liabilities
Derivative instruments measured at fair value through other comprehensive income
518,471
194,028
Financial liabilities measured at amortised cost
17,571,511
17,278,506
Financial assets measured at amortised cost comprise other debtors.
Financial assets measured at fair value through profit or loss comprise investments in group undertakings.
Derivatives measured at fair value through other comprehensive income comprise the closing position of the interest rate swap hedge.
Financial liabilities measured at amortised cost comprise trade and other creditors excluding derivatives, accruals, amounts owed to group undertakings and other loans.
17
Share capital
2022
2021
2022
2021
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary of £1 each
1
1
1
1
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
17
Share capital
(Continued)
- 23 -
The Company has one class of Ordinary share, which has attached to it full voting, dividend and capital distribution rights (including on a winding up). The share does not confer any rights of redemption.
18
Hedging reserve
2022
2021
£
£
At the beginning of the period
(194,027)
(900,702)
Gains and losses on cash flow hedges
(324,444)
706,675
At the end of the period
(518,471)
(194,027)
The hedging reserve account represents the movement in fair value of the interest rate swap.
19
Events after the reporting date
There have been no significant events affecting the Company since the period end.
20
Related party transactions
The Company has taken advantage of the exemption available in Section 33.1A of FRS102 whereby it has not disclosed transactions with the ultimate parent company or any wholly owned subsidiary undertakings of the parent company's group.
21
Ultimate controlling party
At 30 June 2022, the immediate parent company was New Road Solar Limited registered at 2nd Floor, 2 City Place, Beehive Ring Road, Gatwick, West Sussex, England, RH6 0PA.
The ultimate parent company and controlling party is Bluefield Solar Income Fund Limited, which is incorporated in Guernsey.
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 24 -
22
Cash generated from/(absorbed by) operations
2022
2021
£
£
Profit for the period after tax
4,488,722
2,062,240
Adjustments for:
Finance costs
392,825
731,361
Investment income
(427,438)
Amortisation of loan arrangement fees
7,462
15,048
Other gains and losses
(4,930,636)
(2,398,197)
Movements in working capital:
Decrease/(increase) in debtors
64,158
(89,113)
Increase/(decrease) in creditors
341,759
(971,731)
Cash generated from/(absorbed by) operations
364,290
(1,077,830)
23
Analysis of changes in net debt
1 January 2022
Cash flows
Other non-cash changes
30 June 2022
£
£
£
£
Cash at bank and in hand
101,149
29,782
-
130,931
Borrowings excluding overdrafts
(9,407,280)
449,044
(179,986)
(9,138,222)
Amounts owed to group undertakings
(7,728,138)
-
(532,447)
(8,260,585)
(17,034,269)
478,826
(712,433)
(17,267,876)
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
- 25 -
24
Prior period adjustment
Following the change of ownership and the incorporation of the Company into the group headed by Bluefield Solar Income Fund Limited, the ultimate parent company, the directors have considered the position of the Company and are of the opinion that the Company's investment in its subsidiary ("SPV") is held as part of an investment portfolio. As such, the Company should exclude all its SPVs from consolidation on the grounds set out in FRS 102 paragraph 9.9(b) and the SPV should be measured at fair value recognised in profit or loss.
This change in accounting policy is required to be accounted for retrospectively and the relevant comparative figures have been restated.
The change resulted in the following restatements to the comparative figures:
Changes to the statement of financial position
As previously reported
Adjustment
As restated at 31 Dec 2021
£
£
£
Fixed assets
Investments
9,624,592
(9,624,592)
-
Financial assets at fair value through profit or loss
25,082,927
25,082,927
Current assets
Debtors due within one year
6,709,438
(6,596,559)
112,879
Cash at bank and in hand
101,149
-
101,149
Creditors due within one year
Loans and overdrafts
(276,394)
-
(276,394)
Other creditors
(8,065,254)
-
(8,065,254)
Creditors due after one year
Loans and overdrafts
(9,130,886)
-
(9,130,886)
Net (liabilities)/assets
(1,037,355)
8,861,776
7,824,421
Capital and reserves
Share capital
1
-
1
Hedging reserve
(194,027)
-
(194,027)
Profit and loss reserves
(843,329)
8,861,776
8,018,447
Total equity
(1,037,355)
8,861,776
7,824,421
IREL SOLAR HOLDCO LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD ENDED 30 JUNE 2022
24
Prior period adjustment
(Continued)
- 26 -
Changes to the income statement
As previously reported
Adjustment
As restated
Period ended 31 December 2021
£
£
£
Administrative expenses
(32,034)
-
(32,034)
Net gains on financial assets held at fair value through profit or loss
-
2,398,197
2,398,197
Operating (loss)/profit
(32,034)
2,398,197
2,366,163
Income from shares in group undertakings
400,000
-
400,000
Interest receivable and similar income
399,917
(372,479)
27,438
Interest payable and similar expenses
(731,361)
(731,361)
Profit before taxation
36,522
2,025,718
2,062,240
Reconciliation of changes in equity
1 January
31 December
2021
2021
£
£
Adjustments to prior period
Fair value adjustment
6,836,058
8,861,776
Equity as previously reported
(1,780,552)
(1,037,355)
Equity as adjusted
5,055,506
7,824,421
Analysis of the effect upon equity
Profit and loss reserves
6,836,058
8,861,776
Reconciliation of changes in profit for the previous financial period
2021
£
Adjustments to prior period
Fair value adjustment
2,025,718
Profit as previously reported
36,522
Profit as adjusted
2,062,240
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