The directors present the strategic report for the year ended 31 December 2023.
Bio Capital 2 Limited operates in the UK renewable energy sector. It is a platform for ownership and operation of UK based operational Anaerobic Digestion (AD) assets . As at 31 December 2023 the company held a portfolio of two AD assets which it owns and operates.
Investors in the company are investment funds managed through a joint venture by Equitix AD 2 Co Limited and Helios 5 Bio Gas UK 1 LP who have a track record of investment in the renewable energy and infrastructure sectors.
Each asset is held as part of the company’s investment portfolio and is recognised in accordance with the accounting policies adopted by the company. The value to the company is through fair value as part of a directly held basket of investments rather than as a media through which the company conducts its business. The assets, which are subsidiary companies in the group, are accounted for at fair value under FRS 102 and, in accordance with FRS 102 and the Companies Act, the financial statements of Bio Capital 2 Ltd are not consolidated.
A group wide long term strategy is fully developed which sees continued investment in the portfolio to optimise the efficiency and robustness of operations and enhance operational revenue generation through innovation in product development.
The company has placed emphasis on the ongoing improvement in HSEQ across all companies and has received industry recognition for its initiatives in this.
The company’s operating loss for the year, (before interest, depreciation and amortisation) was £0.9m (2022: £0.3m), which the directors consider to be satisfactory. The loss before taxation in the year is £9.3m (2022: £6.0m profit before taxation).
The net current assets as at 31 December 2023 are in line with the previous year at £36.6m and the net liabilities are £3.6m, compared to net assets of £5.7m in the previous year.
The movement in loss/profit before taxation and net liabilities/assets results from the movement in the fair value of the company's investments in the year.
The company has not made any significant donations to charities in the year (2022: £Nil) and did not make any donations to political parties.
The company monitors a range of financial indicators; operating profit and loss, profit before tax and net assets. These results for the year are detailed in the business review.
The company monitors a range of subsidiary company operational KPIs, with the following overall results across group:
The accident frequency rate
The accident frequency rate (AFR) is calculated for all Bio Capital subsidiary companies cumulatively. The AFR shows the number of accidents sustained by all workers for every 1,000,000 hours worked. The AFR has decreased by 25% from the previous year.
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR)
The Company compares its injury incidence rates of reported non-fatal injuries (reported to the HSE under RIDDOR) against various industries.
There were no RIDDOR reportable lost time injury (in excess of 7 days) in the 12 month period. This incidence rate is lower than that reported the waste industry, the oil and gas industry and the all industry average.
Feedstock Processed & Controlled
Total tonnages controlled for the period were 98% of budget and 0% higher than the previous year.
Biogas/biomethane generation
Biogas generated during the period was 112% of budget and 12% higher than the previous year.
Key Cost Metrics
The Company monitors the cost of feedstock and maintenance costs. These KPIs were in line with the budget for the period.
The Company continues to focus on optimising performance to maximise generation opportunity in its operating companies.
The Company and its subsidiary companies face the following risks during the normal course of operations:
Legislative risk
The Company is at risk of loss of revenue and cash generation from changes in legislation which affect the renewable energy sector.
The Company monitors the likelihood and impact of legislative changes through its participation in industry bodies such as Renewable Energy Association (REA) and UK Anaerobic Digestion and Bioresources Association (ABDA).
Price & availability of feedstock risk
The operating facilities of the Group require a consistent supply of suitable feedstock to maintain the biology of the plant and resulting generation. Market pressures, weather, plant issues/capacity can all impact feedstock supply.
This risk is mitigated by maintaining strong contractual relationships with its feedstock suppliers. Market pressures faced in recent years continue to impact feedstock costs and revenues which show a strong correlation to agricultural crop price movements.
Plant operating risk
Failure of key components of an operating plant may lead to reduced generation. This risk is mitigated by scheduled planned maintenance and monitoring alongside a team of experienced engineers and long term maintenance partnerships with experienced and competent maintenance providers for specialist plant.
Regulatory compliance risk
The Company operates within a heavily regulated environment with failure to comply with regulations having the potential to impact operations. The companies across the group operate 1SO9001, ISO 14001 and ISO 45001 with an integrated management system.
Compliance and health and safety are a high priority of the directors and reviewed regularly by the Board. All audits during the year were successfully passed.
Credit risk
The Company mitigates credit risk by obtaining external credit reports for every new customer in conjunction with regularly monitoring customer credit levels.
Interest Rate Risk
The Company has no external debt.
Energy pricing risk
The Company operates in the UK energy market and as such is exposed to movements in wholesale power and gas pricing. Where appropriate, the operating companies within the group have entered into medium term power price agreements to mitigate this risk.
Liquidity risk
the Company monitors and manages the cash flow requirements on a group wide basis with annual budgets and monthly rolling forecasts that are reviewed regularly by the directors. The capital requirements of the Group are met through cash reserves and shareholder loans.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company manages its cash and borrowing requirements in order to maximise interest income and minimise
interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the
business.
Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies
which must fulfil credit rating criteria approved by the Board.
All customers who wish to trade on credit terms are subject to credit verification procedures. Trade debtors are
monitored on an ongoing basis and provision is made for doubtful debts where necessary.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Please refer to note 1.2 to the financial statements. The company has net liabilities as at the balance sheet date. Notwithstanding this, the directors have a reasonable expectation that the company will have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in the financial statements.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Reviewing minutes of meetings of those charged with governance;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations; and
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company's members, as a body, 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 members 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 the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Bio Capital 2 Ltd is a private company limited by shares incorporated in England and Wales. The registered office is The Corn Store, Hyde Hall Farm, Buntingford, Hertfordshire, SG9 0RU.
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 £.
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.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
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.
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.
Basic financial liabilities, including creditors, bank loans, amounts owed to group undertakings and preference shares that are classified as debt, 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.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
Interest income
Interest income is recognised in the statement of comprehensive income and retained earnings using the effective interest method.
Finance costs
Finance costs are charged to statement of comprehensive income over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
The company has taken advantage of the exemption available under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' not to disclose related party transactions with wholly owned subsidiaries within the group.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
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.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
Investments in companies held as part of an investment portfolio are measured at fair value, with changes in fair value recognised in the income statement in accordance with Financial Reporting Standard 102 section 9.9C(a).
In conducting impairment reviews of investments in subsidiaries, the company is also determining whether the amounts receivable from the subsidiaries require impairment or whether a provision against the amounts is required. Determining whether the amounts receivable are impaired is based on the ability of the subsidiaries to generate sufficient cash in the future to enable repayment of the debt. Where expected cash generated is lower than the amounts due to the company, an impairment loss may arise, or a provision may be required to reflect the risk that the full amount is not recovered. After reviewing the business environment and the company's expected future cash flows, management concluded that there was no impairment of amounts due from group undertakings at the current year
end.
The directors conduct valuation reviews of investments in companies held as part of an investment portfolio in accordance with the relevant accounting standards. Fair value movements are recognised in the statement of comprehensive income. The directors review the underlying assets held by the investments and review the performance of the assets and the forecasts prepared to determine the fair value, using a discount rate of 10.00% to 10.50% over a specified period of time.
In conducting the impairment review of investment in the subsidiary, the company is also determining whether the amounts receivable from the subsidiary require impairment or whether a provision against the amounts is required. Determining whether the amounts receivable are impaired is based on the ability of the subsidiary to generate sufficient cash in the future to enable repayment of the debt. Where expected cash generated is lower than the amounts due to the company, an impairment loss may arise, or a provision may be required to reflect the risk that the full amount is not recovered. After reviewing the business environment and the company's expected future cash flows, management concluded that there was no impairment of amounts due from group undertakings at the current year end.
The directors are required to assess the probability of whether unrelieved tax losses will be recovered against the reversal of future taxable profits arising in either the company or re-charged across the wider group. As there is doubt over the timing of when the tax losses will be utilised, the directors have not recognised the deferred tax asset.
The turnover of the company is generated from its principal activity. The directors consider there to be only one geographical market, the United Kingdom.
The actual charge for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
Details of the company's subsidiaries at 31 December 2023 are as follows:
Registered office address:
In the prior year, the company acquired 100% of the share capital of Norfolk AD Ltd and, by extension, Norfolk AD Ltd's wholly-owned subsidiary, Corbiere Renewables Limited.
Included in other debtors falling due within one year is £425,329 (2022: £Nil) owed by a shareholder to the company. This amount is unsecured, interest bearing at 2.02% per annum and has a final repayment date within 12 months of the balance sheet date.
Amounts owed by group undertakings are unsecured and interest bearing at 10% per annum and have a final repayment date for capital and all accrued, unpaid interest of January 2051. Interest payable is calculated on a quarterly basis and compounded quarterly, where unpaid. Repayments of both unpaid interest and capital are at the discretion of the borrower, subject to the final repayment date of January 2051. At the balance sheet date, the capital outstanding was £33,850,289.38 (2022: £34,494,487).
Corporation tax losses of approximately £3,515,000 (2022: £1,285,000) were carried forward at the balance sheet date. The directors have not recognised a deferred tax asset in relation to these losses as they do not expect them to be utilised for the foreseeable future.
Other borrowings relate to loans provided by shareholders which are listed as Eurobond loan notes on The International Stock Exchange. These loans are unsecured and interest bearing at 10% per annum and have a final repayment date for capital and all accrued, unpaid interest of January 2051. Interest payable is calculated on a quarterly basis and compounded quarterly, where unpaid. Repayments of both unpaid interest and capital are at the discretion of the company, subject to the final repayment date of January 2051. At the balance sheet date, the capital outstanding was £49,991,498 (2022: £49,991,498).
Loans from related parties are unsecured and interest bearing at 10% per annum and have a final repayment date for capital and all accrued, unpaid interest of January 2051. Interest payable is calculated on a quarterly basis and compounded quarterly, where unpaid. Repayments of both unpaid interest and capital are at the discretion of the company, subject to the final repayment date of January 2051. At the balance sheet date, the capital outstanding was £49,991,498 (2022: £49,991,498).
The long-term loans due to shareholders are unsecured.
A ordinary shares carry no voting rights.
B ordinary shares grant the holders a right to vote.
Both classes of shares grant the holders the right to receive dividend and a distribution of assets on a liquidation of the company on a pro-rata basis.
Retained earnings includes all current and prior period retained profits and losses.
The company had no financial commitments, guarantees or contingent liabilities at the balance sheet date (2022: £Nil).
Bio Capital Limited
In the year to 31 December 2023, £Nil (2022: £152,004) was paid to Bio Capital Limited, a related party.
As at 31 December 2023, an amount of £3,000 (2022: £147,582) was due to Bio Capital Limited, a related party, and is included in amounts owed to related parties due within one year.
Helios 5 Biogas UK 2 LP
As at 31 December 2023, deferred distribution of £425,000 (2022: £Nil) was due to Helios 5 Biogas UK 2 LP, a shareholder of the company. This amount is included in other creditors falling due within one year.
As at 31 December 2023, an amount of £27,380,499 (2022: £25,920,293) was due to Helios 5 Biogas UK 2 LP, a shareholder of the company. This amount is included in amounts falling due in more than one year. An interest charge of £2,648,206 (2022: £1,198,123) on the shareholder loan is included in other interest payable and similar expenses in the statement of comprehensive income for the year to 31 December 2023.
As at 31 December 2023, an amount of £425,329 (2022: £Nil) was due by Helios 5 Biogas UK 2 LP, a shareholder of the company. This amount is included in amounts falling due within one year. Included in other interest receivable and similar income in the statement of comprehensive income is interest receivable of £329 (2022: Nil) on the shareholder loan.
Equitix AD Co Limited
As at 31 December 2023, deferred distribution of £425,000 (2022: £Nil) was due to Equitix AD Co Limited, a shareholder of the company. This amount is included in other creditors falling due within one year.
As at 31 December 2023, an amount of £27,378,784 (2022: £25,918,740) was due to Equitix AD Co Limited, a shareholder of the company. This amount is included in amounts falling due in more than one year. An interest charge of £2,648,044 (2022: £1,884,883) on the shareholder loan is included in other interest payable and similar expenses in the statement of comprehensive income for the year to 31 December 2023.
In the current year, the directors identified that amounts owed by group undertakings due after more than one year as previously reported relates to loans from related parties due after more than one year. As a result, an amount of £51,893,033 is now shown as loans from related parties in the comparative information presented in these financial statements whereas it was previously reported as amounts owed to group undertakings.