INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Telephone +44 (0)204 551 0361
Website www.invinity.com
Twitter
Linkedin
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
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Invinity Offices:
London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
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www.invinity.com
ANNUAL REPORT & FINANCIAL STATEMENTS 2021
CONTENTS
INTRODUCTION
About Invinity
2021 Highlights
Our Mission and Our Technology
Developing the World’s Largest Solar-Powered
Flow Battery
Partners in Innovation: Some of Invinity’s Customers
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Chief Commercial Officer’s Report
Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
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GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the Nomination Committee
Report of the Chairman of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
Independent Auditor’s Report to the Members
of Invinity Energy Systems plc
FINANCIAL STATEMENTS
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Officers and Advisers
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Manufacturing Electrical Technician, David Brown, finalises the assembly of an Invinity battery control panel in Bathgate, UK
The pulp is bleached using an Elemental Chlorine Free process.
This report is printed in the UK using environmental printing
technology and vegetable based inks. Both the manufacturing mill
and the printer are registered to the Environmental Management
System ISO 14001 and are Forest Stewardship Council® chain-of-
custody certified.
Designed and produced by JacksonBone Limited.
Printed in England by Synergy Group.
ABOUT INVINITY
Invinity Energy Systems plc is a global manufacturer
of vanadium flow batteries (VFB), a leading alternative
to lithium-ion technology. Ideally placed to address
the substantial demand for long-duration utility-grade
stationary energy storage solutions, Invinity has deployed its
modular battery systems at over 50 sites across 15 countries,
more than any other company in the space.
Invinity’s flow batteries have been designed from the ground up
to meet the large scale, high-throughput energy requirements
of business, industry and electrical networks around the world,
helping to accelerate global progress towards net zero. Energy
storage systems based on Invinity’s flow batteries are safe,
reliable, durable and economical. They unlock low-cost, low-
carbon renewable energy which can be dispatched to fill in the
“missing hours” when the wind does not blow or the sun does
not shine.
Invinity has operations in the UK, Canada, the USA, Australia and
China. The company is listed on the AIM Market of the London
Stock Exchange (AIM:IES) and on the Aquis Stock Exchange
(AQSE:IES).
www.invinity.com
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Invinity Energy Systems plcAnnual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 2021 HIGHLIGHTS
Financial Highlights
Revenue for the year of £3.2m, a 690% increase vs 2020;
Year-end closed sales backlog of £13.8m;
Year-end inventory of £9.9m, including prepaid inventory;
Year-end cash of £26.4m (2020: £22.0m);
The Group remains debt free, excluding leases.
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Gamesa Electric JDCA
Invinity entered a Joint Development and Commercialisation Agreement (JDCA) with
Gamesa Electric on 11 May 2021 to jointly develop a grid-scale vanadium flow battery (VFB)
based on Invinity’s proven technology and incorporating Gamesa Electric’s advanced
power conversion systems. Gamesa Electric was granted an option for 8.7m shares at
175p approved by Invinity shareholders at the October 2021 AGM.
Invinity and Gamesa Electric have been working
together for over 12 months making good progress
toward the milestones and stage gates set out as
part of the agreed product development roadmap.
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Annual Report and Financial Statements 2021
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2021 Customer Pipeline Progression and Current Status
Date
17 May 2021
(2020 Annual Report)
02 November 2021
(2021 Placing)
25 May 2022
(Current Trading)
% change
(May 2021 to May 2022)
Closed
MWh
19.1
19.1
Base
MWh
10.1
17.1
Advanced
MWh
30.8
Qualified
MWh
232.0
40.1
207.5
28.0
11.6
66.3
608.3
+46.6%
+14.9%
+115.3%
+162.1%
For further commentary on customer pipeline progression including definition of terms used, see the Chief Commercial
Officer’s report (pages 13-14).
Commercial and Operational Highlights
9.34 MWh
Sold January 2021
to June 2022
8.19 MWh
Delivered January 2021
to June 2022
£13.8m
Closed sales backlog
for delivery in 2022
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Four VS3 flow batteries, total capacity 0.8 MWh, operating
at Scottish Water’s waste water treatment site in Perth, UK
– October 2021
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OUR MISSION AND OUR TECHNOLOGY
The energy storage market is forecast to be worth trillions by
2050. Invinity is in a leading position to capitalise on the demand
for long duration energy storage driven by this tremendous
growth.
OUR MISSION
The world is now responding to the climate emergency. Global
energy systems are rapidly decarbonising by shifting to low
carbon but fundamentally intermittent renewable energy
sources. Energy storage is the key to the next phase of the
energy transition. Our vanadium flow batteries unlock low-
cost, low-carbon renewable energy on demand, delivering
clean energy for generations to come.
Invinity was created to address the large and rapidly growing
global market for energy storage solutions. The Company’s safe,
reliable, durable and economical VFB technology addresses
many of the limitations of incumbent battery technologies such
as lithium-ion. Invinity’s batteries are fully recyclable, do not
catch fire and do not contain rare earth or ‘conflict materials’
such as cobalt. The Company holds itself to high standards of
sustainability and looks to make a significant contribution as part
of the ‘Just Transition’ to net zero.
OUR TECHNOLOGY
Invinity’s VS3 flow battery technology has been designed to
operate in high-throughput, heavy cycling applications. This
capability defines “utility-grade” energy storage and gives
our customers the operational freedom to maximise their
return on investment. It also makes the VS3 particularly well
suited for storing and dispatching energy on demand directly
from renewable generation or managing constrained grid
connections on a centralised basis to deliver low-carbon
electricity to the grid over decades of service.
Our product has 4 key attributes that are highly advantageous
for the global stationary energy storage market. They are:
1. Safe – the VS3 has no fire risk (unlike lithium batteries) as
the electrolyte is an aqueous (water-based) solution, meaning
VS3s may be safely deployed anywhere.
2. Durable – the VS3 has unlimited cycling capability and does
not degrade, allowing it to be cycled multiple times per day
over more than 20 years of continuous operation.
3. Economical – the VS3 provides a consistently low cost per
MWh over its lifetime on a Levelised Cost of Storage (LCOS) basis.
4. Proven – the VS3 is already serving a variety of customers in
a range of applications around the world.
With over 33 MWh of VFBs either contracted or deployed
globally, Invinity has a strong commercial foundation that
continues to grow, supported by the global transition to net
zero and the need to install stationary energy storage to
achieve global renewable energy targets.
In 2021, Invinity made the transition from a company working
to refine its product offering to a company shipping a
standardised, modular product to customers across the world.
Although this transition took longer than expected due to the
continued impacts of the COVID pandemic in both 2020 and
2021, the Company is now in a strong position to utilise these
successful commercial VS3 product deployments as reference
sites, accelerating commercial traction for Invinity’s products.
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Vanadium electrolyte in its four stable states – V2, V3, V4, V5.
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DEVELOPING THE WORLD’S LARGEST
SOLAR-POWERED FLOW BATTERY
WITH EDF RENEWABLES AND THE
UK GOVERNMENT
Invinity’s latest commercial flow battery opportunity is the 40
MWh Vanadium Flow Battery Longer-duration Energy Asset
Demonstrator (VFB LEAD) project announced in February
2022. Receiving support from the UK Government, this very
large and exciting project will once again see Invinity working
alongside EDF following the successful deployment of the
UK’s current largest vanadium flow battery, a 5 MWh system,
at the Energy Superhub Oxford (ESO).
VFB LEAD aims to develop and deploy one of the UK’s largest
co-located solar + storage projects, featuring a 40 MWh VFB
hybridised with a lithium-ion battery and connected to a utility-
scale solar PV array. Invinity, alongside Pivot Power (part of EDF
Renewables) and EDF R&D UK, are amongst the five winners
of Phase 1 (Project development stage) in Stream 1 (proven
technologies) of the UK Government’s Longer Duration Energy
Storage (LODES) competition. Run by the Department for
Business, Energy and Industrial Strategy (BEIS), the competition
aims to accelerate the commercialisation of longer-duration
energy storage through large-scale demonstration projects.
At least three of the five Phase 1 winners will be chosen to
proceed to Phase 2 (Construction stage). If successfully chosen
for Phase 2 and once operational, Invinity’s VFB LEAD project
could be the largest of its type worldwide. This competition is
part of the £1bn BEIS “Net Zero Innovation Portfolio” (NZIP),
which is being managed by the UK’s “Science and Innovation for
Climate and Energy Directorate” (SICE).
Winning Phase 1: A case study in multi-partner, cross-
functional collaboration across the energy industry
Invinity has built long-term relationships with key government
departments in core target markets. Within the UK, Invinity’s
business development team has maintained an ongoing
dialogue with government departments and agencies, most
notably BEIS and Innovate UK. Invinity was therefore prepared
for the release of a specifically non-lithium, non-pumped hydro,
longer-duration energy storage grant opportunity in March
2021 when the LODES competition was formally launched by
BEIS. Invinity was able to apply immediately.
Invinity’s London-based business development team, part
of the Company’s Commercial division, led the response.
The business development team is tasked with identifying
new market opportunities for the Company’s products as
well as qualifying and responding to relevant grant funding
opportunities. They work closely with prospective customers
to optimise their business cases for maximum return from their
investment. This insight into how customers look to operate
battery systems provides important feedback for Invinity’s
Product Development, Solutions Engineering and R&D teams
to assist with their strategic decision making.
27 VS3s operating on site at the Energy Superhub Oxford
– May 2022
66
Annual Report and Financial Statements 2021Invinity Energy Systems plcUK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VFB LEAD consortium
The VFB LEAD application process required Invinity’s Commercial,
Product Development, Solutions Engineering, Finance and
Executive teams to coordinate closely. Invinity, encouraged by
the interest from long-standing partners to be part of the project
consortium, chose Pivot Power (part of EDF Renewables), EDF
R&D and Imperial College London. A comprehensive application
was submitted within the timeframe that turned out to be one of
the highest scoring applications received.
Leading a winning consortium towards Phase 2 delivery
EDF and Invinity are working through 2022 on Phase 1 of the
competition, the “ready to build” phase. Down selection for
the Phase 2 winners is expected by BEIS in Q2 2023 and if
successful, the project will progress to the construction phase.
Once commissioned, the project is forecast to avoid up to
27,400 tonnes of CO2 per year.
Prior to the official announcement on 23 February 2022, the
consortium, led by Invinity, worked to conclude the grant funding
agreement with BEIS and the formal collaboration agreements
between the consortium partners.
In the official announcement made by BEIS at the 7th Energy
Storage Summit in London, Energy and Climate Change Minister
Greg Hands MP said:
“Driving forward energy
storage technologies will be
vital in our transition towards
cheap, clean and secure
renewable energy.
Working with BEIS has also led to numerous follow-up
opportunities for Invinity, including a roundtable on longer
duration energy storage with Greg Hands MP alongside other
industry leaders and an invitation to give evidence to the House
of Lords Economic Affairs Committee enquiry into the UK Energy
Supply and Investment on the benefits of Invinity’s technology
for the UK’s energy future.
technologies continue
As a new energy storage asset class, longer-duration, high-
throughput, non-lithium
to gain
prominence in global markets. Invinity’s ability to capitalise
on opportunities such as the LODES competition is a key
competitive advantage. This proven track record of working
with government agencies around the world – BEIS in the UK,
ARENA in Australia and the CEC in the USA – underlines the
commitment of the Invinity team to accelerating the energy
transition by deploying safe, reliable and durable VFBs at scale
as a vital part of the net zero energy system of the future.
Matt Harper addressing the House of Lords Economic Affairs
Committee on UK Energy Security and LDES – May 2022
It will allow us to extract the full benefit from
our home-grown renewable energy sources,
drive down costs and end our reliance on
volatile and expensive fossil fuels. Through
this competition we are making sure the
country’s most innovative scientists and
thinkers have our backing to make this
ambition a reality.”
Greg Hands MP Energy and Climate Change Minister
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7
PARTNERS IN INNOVATION:
SOME OF INVINITY’S CUSTOMERS
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Chappice Lake, Alberta, Canada
Battery:
8.4 MWh VFB coupled with a 21 MWp solar array.
Description: Alleviate network constraints to support the
further rollout of renewable energy generation in Alberta
and ensure excess solar energy is not wasted. The project
aims to reduce CO2 emissions by up to 90,000 tCO2e/year
by 2030.
“DC coupling of Invinity’s battery with our solar PV plant
allows us to maximise project efficiencies in light of grid
interconnection constraints. A DC-coupled architecture
enables us to increase our solar capacity and leverage
fixed project costs, such as interconnection, protection and
control, and inverter station costs, to the greatest extent
possible. This approach also allows the project to utilise
clipped solar generation that would otherwise have been
lost. The net effect of these benefits is a significantly reduced
effective cost per kilowatt-hour delivered.”
Ryan Hanson, Project Director, Elemental Energy
Yadlamalka Energy Project,
South Australia
Battery:
8 MWh VFB coupled with a 6 MWp solar array.
Description: Unlocking low-cost, low-emission energy for the
South Australian grid, making c. 10 GWh of ‘on-demand’ solar
power dispatchable each year as part of a world-first “solar
power-plant” project.
“Yadlamalka Energy Trust is excited about being the first in
Australia to construct a large-scale dispatchable solar power
plant. Through using breakthrough technology in the form
of vanadium flow batteries, we can deliver strong, economic
infrastructure benefit to South Australia and at the same time
support a low carbon economy.”
Andrew Doman, Founder and Chairman,
Yadlamalka Energy Trust
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Annual Report and Financial Statements 2021
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48 VS3 battery modules being
installed at EMEC in Eday, Orkney
– April 2022
European Marine Energy Centre,
Orkney, UK (pictured)
Battery:
1.8 MWh VFB coupled with tidal generation, powering
a hydrogen electrolyser.
Description: The VFB will ‘smooth’ tidal generation to create
continuous, on-demand clean electricity to optimise green
hydrogen production without CO2 emissions.
“EMEC’s core purpose is to demonstrate technologies in new
and inspired ways to decarbonise our energy system. This is
the first time that a flow battery will have been coupled with
tidal energy and hydrogen production, and will support the
development of the innovative energy storage solution being
developed in the Interreg ITEG project.”
Neil Kermode, Managing Director at EMEC
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Energy Superhub Oxford, UK
Battery:
5 MWh VFB (hybridised with a 50 MWh Li-ion
battery), transmission connected.
Description: World-first hybrid battery supports a smarter,
more flexible energy system and provides a blueprint for
urban decarbonisation. The project aims to reduce CO2
emissions by c. 25,000 tCO2e/year by 2032 and support
integration of more renewable generation onto UK grid.
“We cannot carry on with business as usual – we need
urgent solutions to decarbonise every part of society. Energy
storage is the missing piece of this puzzle. Our hybrid battery
combines innovative technology to meet various needs
across the power sector. By underpinning homegrown
renewable energy, Pivot Power is helping the UK to create
a power system that is clean, secure, and able to meet the
demands of the future.”
Matt Allen, CEO, Pivot Power
Scottish Water, Perth, UK
Battery:
0.8 MWh VFB coupled with a 1 MWp solar array.
Description: Allow 94% of generated solar power to be used
on site, support EV charging infrastructure and reduce site
energy costs by c.40%, with the overall benefit of reducing
Scottish Water’s CO2 emissions by c. 160 tCO2e/year.
“We’re excited to have our first battery facility up and running
to help reduce emissions and tackle climate change. The
ability to maximise green energy production as well as store
and release this energy when we need it is a vital part of our
journey to net zero.”
Donald MacBrayne, Business Development Manager,
Scottish Water Horizons
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MOTIVATING REAL CHANGE
Chairman’s Report
The past 12 months in energy have illustrated that only a
crisis can motivate real change. Much of the world now
recognises that the clean energy transition must be a
global priority. Unlocking low-cost, low-carbon electricity
through the widespread adoption of safe and reliable
battery storage has therefore become an urgent necessity.
It is widely recognised that the electricity grids of the future will
require storage to balance out the inherent volatility of solar and
wind generation. According to Bloomberg New Energy Finance
(BNEF), the global energy storage market is expected to grow
eight-fold from 22 GWh installed today to up to 178 GWh installed
annually by the end of the decade. Our growing pipeline of
commercial opportunities confirms that Invinity’s vanadium flow
batteries will play an important part in this market, dispatching
renewable energy into the ‘missing hours’ of wind and solar.
Encouraged by this uptick in demand, I am pleased to note we
have secured major cornerstone projects in each of our core
markets: the UK, North America and Australia. Our largest
flow battery to date at the Energy Superhub Oxford (ESO) has
become a key reference site for the Company. Despite global
supply chain and logistics headwinds, throughout 2021 and early
2022 we delivered approximately 250 of our battery modules
with a combined capacity of more than 8 MWh to customers
across the world. This achievement underlines how Invinity
stands apart from others in the flow battery industry. We will
continue to build on this strong foundation in the years to come.
Our 5 MWh flow battery, an integral part of the ESO project, was
energised in 2021 alongside a lithium-ion battery. This hybrid
system is currently the UK’s largest transmission-connected
battery. To deliver this project, Invinity worked alongside Pivot
Power (part of EDF Renewables), Habitat Energy, Siemens
Gamesa and other leading industry players to provide a
model for urban decarbonisation. I was delighted to note that,
working again with Pivot Power, Invinity received funding in
February of this year from the Longer Duration Energy Storage
Demonstration (LODES) competition toward developing a
project almost ten times the size of ESO. Building relationships
such as this with major players across the industry is core to
our corporate strategy and is intended to result in securing ever
larger orders for our products and support our efforts to reduce
our operating costs still further.
Another key highlight of the year was the commencement of a
Joint Development and Commercialisation Agreement (JDCA)
with Gamesa Electric, part of Siemens Gamesa Renewable
Energy (SGRE), in May 2021. This exciting partnership will
support the development and commercialisation of a new
Invinity battery product specifically targeting grid-scale projects
an order of magnitude larger than the project sizes the Company
currently focuses on.
Neil O’Brien
interviewed by
BBC Scotland
during COP26
at our Bathgate
facility –
November 2021
Looking inward, Invinity has assembled what the Board believes
to be a market-leading team which focuses on winning new
contracts, deploying our product and continuing to develop our
leading-edge technology, whilst improving performance and
reducing costs yet further. In a year which saw the challenges
of COVID and supply chain disruption continue to impact on
our plans, I would like to take this opportunity to thank the
entire Invinity team for their efforts and successes in 2021.
The dedication and diligence of our staff has been exemplary,
especially during the long ISO audit process which resulted in
the recent awarding of three major certifications concurrently.
Finally, I would particularly like to thank all my Board colleagues
for their support and assistance over the year. Our latest
addition to the Board, Kristina Peterson, is already making an
impact with her knowledge of the wider renewable industry and
I am grateful to Rajat Kohli who now leads our newly formed
Environmental, Social & Governance (ESG) Committee.
“The widespread adoption
of safe and reliable battery
storage has therefore become
an urgent necessity. ”
In summary, 2021 saw Invinity continue to close sales for our
products, begin to recognise meaningful revenue as a result of
contract deliveries and raise funds which enable us to scale and
grow in line with expanding global demand for energy storage.
2022 has already seen Invinity making further progress on both
sales and delivery. I look forward to the team converting more
of our pipeline leads into sales contracts throughout 2022 and
continuing to generate long-term value for shareholders.
Energy storage technologies such as vanadium flow batteries
hold the key to the next stage of the global energy transition.
I continue to be extremely optimistic in relation to Invinity’s
position within one of the fastest growing areas in the global
energy market and look forward to further success as we deliver
on this opportunity in 2022 and beyond.
Neil O’Brien
Chairman
27 June 2022
10
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc EXECUTING ON OUR VISION
Chief Executive Officer’s Report
2021 was a year of tremendous accomplishments, some
challenging setbacks, but overall significant progress for
Invinity. I will report to you in three areas: 1) the macro
environment, 2) Invinity’s products, and 3) our strategic growth.
The Macro Environment
The entire world is electrifying. The reasons are many: to
reduce carbon emissions, improve air quality and more recently,
to achieve national energy security. This architectonic shift
toward electrification won’t occur smoothly or consistently, but
the eventual outcome is not in doubt.
During 2021, the market for battery energy storage continued
a year-long shift from potential to actual. The view that battery
energy storage will play an essential part in the energy transition
has become accepted at every level of the energy industry and
especially among government leaders. Our Chief Commercial
Officer, Matt Harper, recently addressed the House of Lords
Economic Affairs Committee on the roles battery energy storage
will play in the years to come. Those roles are: 1) compensating
for shifts in demand and 2) dispatching low-carbon energy
over hours, not minutes. Both needs are becoming more
acute as intermittent renewables sources increasingly form the
foundation of the world’s electricity system.
But which battery technology to use? Lithium, the most
common, has achieved that position without a viable
alternative. Lithium may be ahead today, but it has not won the
race. We are already delivering projects at a scale equivalent
to the largest lithium-ion battery deployments achieved just a
few years ago. The BEIS funded 40 MWh LODES project we
are pursuing with Pivot Power/EDF is just one example.
There are many concerns about lithium batteries; they catch
fire and wear out, and when they do, they leave a legacy of
difficult-to-recycle toxic waste. Their components – lithium
and nickel in particular – are dramatically increasing in price.
Cobalt is sourced from areas of conflict. Recent industry
analyses have concluded that there won’t be enough lithium
produced to come close to meeting the world’s ambitions for
the electrification of mobility, of cars and transport, much less
supply the demand for stationary storage at massive scale to
support the transition to renewable energy. In 10 years, we’re
going to look back and wonder why we put large quantities
of perfectly good lithium, essential for electrifying mobility
and portable uses, into boxes in a field to deteriorate.
For these reasons, the California Energy Commission (CEC)
– charged with setting energy policy for the world’s fifth-
largest economy – recently conducted a day-long workshop
on long-duration non-lithium storage. I was invited to speak
and was proud to not only show photographs of our products
in operation but note that I was the only presenter with a
working product in the field. This brings us to the core of our
business, supplying what we believe to be the world’s most
advanced vanadium flow battery.
Larry Zulch
interviewed
by PI World –
September 2021
Invinity’s Products
Invinity is fundamentally a product company. Our current
product, the VS3, has been installed and is operating at the
Energy Superhub Oxford, Scottish Water Perth, EMEC and
soon in projects in California, at Chappice Lake in Canada and
Yadlamalka in South Australia.
Our product design strategy is three pronged: first and
foremost, our batteries must be safe and reliable. Second, they
must perform; they must efficiently store and discharge energy
on command so that a battery owner can depend on their
reliability. Third, they must be long-lived, a characteristic that is
core to our value proposition.
But these are just table stakes; they are what our customers
expect. The real driver for everything we do and why our
customers buy our products comes down to economics. Our
success will derive from continuing to communicate our superior
capabilities in economic terms, which often translates into a
lower cost per unit of energy stored and discharged during the
life of the battery.
An important component of this calculation is the system cost,
a key focus for Invinity and an area the Company continues
to improve upon. We’re working hard to reduce costs across
all areas for our VS3. In 2021 we had some backward steps,
including supply chain disruptions and skyrocketing shipping
charges. But these challenges have driven us to improve, and I’m
delighted to report that despite a trend towards higher overall
costs, we increased the efficiency of building our cellstack,
reduced manufacturing costs, and qualified better performing
materials across our supply chain. These efforts support our
work on the LODES competition from the UK Government, for
which cost reduction is a key parameter.
A significant step change in our customer-facing economic
proposition is underway through our work with Siemens
Gamesa Renewable Energy (SGRE) and their subsidiary Gamesa
Electric. We are co-developing a grid-scale flow battery that I
firmly believe will be head and shoulders above any other flow
battery ever developed. The development process is complex
and requires everything we know and have learned as one of
the most experienced teams in vanadium flow batteries. Our
joint activities are progressing well and we’re looking forward
to providing product details once we reach the stage where it is
appropriate to do so.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Strategic Growth
We are continuing our focus on three core markets: UK, North
America, and Australia, and expanding our engagement with
them as I discuss below. Our strategy in other important
global markets requires finding a substantial partner who can
represent us and our products by providing sales, installation,
and service support. A template for this strategy is in South
Korea where Hyosung has become our distributor. I can’t
imagine a better partner than Hyosung in South Korea with
their impressive infrastructure and capabilities in what is a
very exciting market for flow batteries.
The United States is an area with much potential for Invinity in
two areas: corporate development and market development,
both aided by our recent announcement that we have
engaged EAS Partners to advance our US presence. EAS’s
initial focus is on increasing the level of US investor activity in
Invinity shares. We’ve brought on Matt Walz as Vice President
of Business Development, whose extensive experience in
energy businesses from AES Corporation to Duke Energy
brings considerable depth to the US Invinity team. Matt’s
work on our US market development includes building on
our relationship with the CEC and pursuing US government
support for energy storage initiatives that were part of
President Biden’s infrastructure bill.
In the UK, we are now admitted to trading on the Aquis Stock
Exchange (AQSE) which has increased liquidity in Invinity’s
shares and facilitated trading in the warrants that were
created as part of our fundraise in late 2021. We’ve hired Peter
Strassheim as director of sales in the UK and EU. Peter will
enhance our commercial capabilities in the UK, building on
work we’ve done with BEIS including the LODES competition,
jointly with Pivot Power, to help advance the commercial
viability of non-lithium energy storage. We’re planning to soon
enhance our senior executive presence in the UK, further
underscoring our commitment to our home market.
In Australia, the Yadlamalka project site is in the process of
being successfully relocated. We’re eager to begin delivery
of the products we’ve built for it. We’re pursuing even larger
projects with ARENA under the leadership of Michael Rutt,
our recently hired Regional Director of Australia Pacific based
in Melbourne. The Australians, blessed with ample sunshine
and wind, are acutely aware of the need to augment their
renewable power with energy storage.
Our activities in the three focus regions are one of three major
areas where we are deploying the funds we raised late in
2021. The other two are advancing the previously discussed
development of a grid-scale battery with SGRE and Gamesa
Electric (which I have discussed earlier in this report) and
delivering on the project commitments we’ve signed and
announced. Our work in these three areas significantly
advances our mission to make our vanadium flow batteries a
commercially viable alternative to lithium storage.
Delivering on our announced project commitments, the
third area, has required significant effort and resources as
we have learned to successfully navigate a world much
different than it was just a few years ago. Every business
with a global supply chain, especially those manufacturing
components in China, as we do, has had to find ways to turn
obstacles into opportunities.
In recognition of our growing sales backlog, which we aim
to deliver and recognise as revenue in 2022 and beyond,
we have taken the strategic decision to expand our capacity
by establishing a manufacturing relationship with long-time
Invinity supporter Suzhou Baojia New Energy Technology
Co. (Baojia). With over 1,000 employees and facilities of over
180,000 square meters located across Asia, Baojia will be an
important partner for Invinity at this exciting stage of growth
and can help us to rapidly achieve greater scale in a rapidly
expanding market. Our current manufacturing partner, BCI,
an early investor in Avalon, one of Invinity’s predecessors,
remains a supportive shareholder as they look to focus their
manufacturing capabilities within the US market.
Our attention to delivery means more than smoothing our
global supply chain and upgrading manufacturing; we must
source vanadium electrolyte from partners around the world
and assist the developers of projects that will be incorporating
our batteries to overcome obstacles. We have deepened our
relationships with global vanadium and vanadium electrolyte
suppliers to reduce our exposure to commodity pricing as
they and we look to much greater quantities in 2022 and yet
greater volume in 2023. Our very capable UK-based solutions
engineering team has been engaging with developers of
projects that plan to use our batteries around the world,
providing crucial assistance as the developers engage with
innovative energy transition opportunities.
“Battery energy storage
will play an essential part in
the energy transition and has
become accepted at every
level of the energy industry.”
Looking to the Future
Although undeniably challenging, 2021 saw the Company
convert record order-flow in 2020 into meaningful revenue
for the first time in its history. In my 2020 report, I noted that
2021 would be the year that Invinity would demonstrate its
capabilities on a wider stage. Despite significant challenges,
I believe we have made important progress on this front.
Invinity ended 2021 in the best position it has ever been in
terms of products, finances, market opportunity, and our
ability to execute. Since then, we’ve made substantial further
progress despite delays in announcing product deliveries and,
not entirely unrelated, delayed announcements of product
sales. With a macro environment extremely favourable for
non-lithium storage, an ability to execute increasing daily,
and a future vision that is compelling, I not only retain my
optimism toward our business, I grow increasingly confident
in our ability to realise our potential. Thank you for your
support of Invinity. We continue to work with everything we
have to merit your confidence.
Larry Zulch
Chief Executive Officer
27 June 2022
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc ADDRESSING VALUE, COST AND PROOF
Chief Commercial Officer’s Report
Vision
Invinity was founded on the belief that success lies in
commercial opportunities where our products deliver more to
our customers – more revenue, more cycles, more profits.
In 2021 the global energy storage market started to recognise
that the grid of the future will need a new asset class – higher-
throughput,
longer-duration, non-lithium storage solutions.
Lithium batteries have been successful delivering minutes to hours
of power at irregular intervals, but to reliably deliver low-cost, low-
carbon energy, renewables need support from energy storage
multiple times per day and for hours at a time. This is where we
believe Invinity’s vanadium flow batteries are without equal.
Current Sales Pipeline
Closed
MWh
Base Advanced Qualified
MWh
MWh
MWh
02 November 2021 (2021 Placing)
25 May 2022 (Current Trading)
19.1
28.0
17.1
11.6
40.1 207.5
66.3 608.3
% Change
+46.6% -32.2% +65.3% +193.2%
This recognition is driving growth in our sales pipeline over the
last six months. We track our sales pipeline in stages: Qualified,
Advanced, Base and Closed. Qualified opportunities have a
solid revenue case, well-established project and site details,
and a reason why Invinity’s batteries are the best possible
solution. Advanced opportunities are those where Invinity has
been selected as the battery supplier and site engineering
and planning are well underway. The Base category contains
projects upon which we base our business: prices have been
agreed, contracts are in process, and we have reserved working
capital and manufacturing production slots to ensure we deliver
on schedule. Closed opportunities are those which we are in the
process of delivering or have already delivered.
The 8.4 MWh project with Elemental Energy announced in
February 2022 increased Closed and decreased Base in 2022
in the table above. Advanced grew mainly from the 40 MWh
project we are developing with our partners at Pivot Power and
EDF Renewables for Phase 2 of the UK’s LODES competition.
Qualified opportunities grew because of the increasing number
of high-quality opportunities in development.
We focus our sales efforts by segmenting opportunities among
our three core markets – the UK, North America and Australia
– and pursue projects outside these markets only when we
have a strong partner such as Hyosung in South Korea. Since
early 2022 we have strengthened our sales team: Michael Rutt
joined our team as Regional Director in Australia, Jan Petrenko
as Regional Manager for North America, and most recently
Peter Strassheim as Regional Director for the UK and Europe.
We focus on customer categories most receptive to our
products’ inherent advantages: behind-the-meter commercial
or industrial customers and front-of-meter project owners or
Matt Harper
interviewed by
STV News during
COP26 at our
Bathgate facility
– November
2021
operators. Helping drive the focus and relationships needed
for success in these segments is Matt Walz, who recently
joined Invinity as Vice President of Business Development,
based in the US.
Progress in 2021
2021 was a year where renewable energy and energy storage
made unprecedented progress in the face of extraordinary
challenges. Solar and wind power are delivering results: for
example, for a few hours in early May 2022 California powered
its electric grid with 100% renewable generation for the first
time ever. 2021 also saw significant headwinds emerging.
Prices for everything from solar PV racking to transformers
were up by 70% or more and shortages of components and
personnel severely impacted the ability to get projects built
and operational. Despite these challenges, the unwavering
support of our employees, customers and suppliers allowed
Invinity to deliver ground-breaking projects at the Energy
Superhub Oxford and to Scottish Water, yielding significant
revenue for the first time.
The past year also saw both progress and challenges to
lithium battery projects. Some of the largest battery arrays
ever conceived have come online, yet developers struggle
with lithium battery price increases of up to 50% driven by
supply chain disruptions and increasing demand. Safety
has come to the forefront following lithium battery fires in
Australia, the US and the UK, triggering tougher standards
(and increased costs) for fire detection, fire suppression and
emergency responder access. Finally, the operational limits
of very large lithium arrays are becoming better understood,
limiting their revenue potential.
Recognition of these challenges is pushing developers to
seek alternatives as reflected in the considerable growth
in the Qualified section of Invinity’s sales pipeline. Similarly,
government agencies like the CEC, BEIS and ARENA and
independent bodies like Breakthrough Energy are funding
broad programmes, such as LODES in the UK, to spur the
growth of non-lithium long-duration storage.
Despite these generally supportive market conditions, individual
deals tend to focus on three factors: value, cost and proof. The
value delivered by our product must be well established, the
cost of our product must align with the market, and the proof
that our products perform must be unassailable.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
The value of longer-duration, higher-throughput batteries is
qualitatively well established, but the market and financial structures
to fully exploit their advantages remain underdeveloped. Multiple
revenue streams in a single project – “stacking” energy trading
and frequency regulation, for instance – don’t fully compensate
for markets designed for hydrocarbon-fuelled peaking plants or
short-duration lithium batteries. Fortunately, we see change on
the horizon.
Cost reduction also comes from refining our product design,
and part of our Phase 1 LODES funding is allocated to reducing
the cost of our current product. Further improvement will come
through our development programme with Siemens Gamesa to
develop and commercialise an Invinity VFB that delivers lower
costs than our competitors at the gigawatt-hour scale of today’s
largest energy storage projects. We have made good progress
on this programme and expect to release details of that product
in the first half of 2023.
The initial cost of purchasing one of Invinity’s VFBs is typically
more than an equivalent lithium battery. However, customers tell
us that the additional safety and siting costs required for lithium
often bring us to cost parity, especially on projects under two
megawatt-hours. We focus on those customers that need high
throughput storage. An example is our project at EMEC, where
four charge and discharge cycles per day mean our batteries
deliver technically and economically superior performance.
Beyond 2022: Increasing Value
The groundwork for regulatory changes that will massively
increase Invinity’s value to our customers is being laid through
pathfinder projects from government agencies like BEIS, the CEC
and ARENA. Our projects with Pivot Power, Elemental Energy
and Yadlamalka Energy will be at the forefront of informing
future policies.
Policymakers value independent analysis such as Aurora Energy
Research’s February 2022 report titled “Long duration electricity
storage in GB” that noted that the UK grid would need up to
24 GW of long duration storage by 2035, saving UK ratepayers
£1.13bn per year while decreasing UK annual CO2 emissions by 10
million tons. Amongst the range of storage solutions analysed,
VFBs were highlighted favourably on factors such as lifetime
cost and durability.
We have been encouraged by policymakers seeking Invinity’s
input on delivering a net zero grid while creating employment
opportunities and improving domestic economies. Invinity
engaged in a CEC workshop on Advancing Non-Lithium-
Ion Long Duration Energy Storage Technologies, presented
evidence to the House of Lords’ Economic Affairs Committee
on UK energy supply and investment, participated in an industry
roundtable with UK Energy Minister the Rt Hon Greg Hands MP,
hosted the Scottish Cabinet Secretary for Net Zero, Michael
Matheson MSP at our facility in Bathgate, and hosted British
Consul General Thomas Codrington at our facility in Vancouver.
In each case, our message was very well received.
Aligning and Accelerating
Despite delays, 2021 saw Invinity start to generate significant
revenue by delivering major contracts, secure important follow-
on opportunities and grow the pipeline of qualified deals.
Invinity’s commercial position, stronger than ever, will become
even more robust as we establish Value, Cost and Proof for our
customers. Taken together, this combination of position and
traction give us tremendous confidence in our future commercial
prospects and makes us excited for the role that Invinity and our
VFBs have to play as a necessary part of our future net zero grid.
Matt Harper
Chief Commercial Officer
27 June 2022
The final factor is proof that our products perform. Historically,
dozens of energy storage companies have attempted to deliver
novel technologies to market, only to fail to navigate the chasm
between the lab bench and a customer’s site. Our customers
know this and rightly insist on seeing proven operation
in comparable projects before committing. Supply chain
challenges in 2021 meant key projects in California, Australia and
the UK were delayed, stalling our ability to demonstrate that our
products deliver. But with our projects at ESO, Scottish Water
and EMEC now delivered and major projects in the US, Canada
and Australia not far behind, proof is at hand.
Early 2022: Enhancing Proof
February 2022 was a remarkable month. We announced an 8.4
MWh DC-coupled solar-plus-storage project, North America’s
largest flow battery, at Chappice Lake, Alberta, Canada alongside
Elemental Energy, a developer, owner and operator of over 800
MW of wind and solar projects. This project is nearly identical to
our project at Yadlamalka, South Australia, demonstrating the
repeatability of our business model.
Later in February, we announced £0.7m of Phase 1 funding
from BEIS as part of their LODES programme. Our joint entry
with ESO partner Pivot Power underscores the strength of our
relationship. Phase 2, if selected – and with five companies vying
for at least three spots, our chances are good – will see us deliver
the UK’s largest flow battery, a 40 MWh Invinity VFB, co-located
with lithium batteries and solar generation to deliver low-carbon
power on demand.
Finally, during April we announced a relationship with Hyosung,
one of Korea’s largest energy storage systems integrators. In
2018 Korea was the single largest global market for storage,
but the large number of lithium battery fires there has curtailed
growth. Hyosung extensively tested Invinity’s batteries and
sees tremendous opportunities in deploying them in Korea and
beyond.
Next in 2022: Reducing Cost
Our growing production volumes will deliver another benefit:
lower costs. The combined 16.4 MWh we will deliver to
Yadlamalka Energy and Elemental Energy more than doubles
Invinity’s total production to date. We will use the expertise
gained in doing so to increase quality and reduce manufacturing
costs at a faster rate than lithium batteries which have already
benefited from decades of high-volume manufacturing.
1414
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc RECOGNISING REVENUE
Chief Financial Officer’s Report
Financial Highlights
Revenue for the year of £3.2m, a 690% increase vs 2020;
Year-end closed sales backlog of £13.8m;
Year-end inventory of £9.9m, including prepaid inventory;
Year-end cash of £26.4m (2020: £22.0m);
May 2022 month-end cash of £18.3m;
The Group remains debt free, excluding leases.
Operational
The four significant operational and financial highlights that
characterised 2021 for the Group were:
1. First revenue recognised from its VS3 battery product;
2. An oversubscribed fundraising of £28.9m before expenses;
3. Submitting Phase 1 of the UK LODES Competition; and
4. Continued supply chain and cost challenges to delivering
contracts.
Peter Dixon-
Clarke on site
in Vancouver
facility
– October 2021
Other items of operating income and expense for the year were
£3.4m (2020: £9.8m), of which £3.8m (2020: £1.1m) relates to the
movement on the provision for onerous contracts. This movement,
along with those on finance costs and foreign exchange, meant
a reduced loss after income tax of £21.4m (2020: £26.4m). As all
of the £4.9m onerous contract provision is expected to unwind in
2022, this will mean a gross loss for the year ended 2022.
2021 was the first year to recognise revenue from the VS3
battery product. Of the total revenue of £3.2m (2020: £0.4m),
most came from the Energy Superhub Oxford (ESO) contract,
with the balance from a number of other contracts, including
pre-VS3 contracts, but particularly from the Scottish Water
contract for its site in Perth.
2021 closed with an inventory balance of £9.9m (2020: £1.9m)
including prepaid inventory of £4.1m (2020: £0.7m). Current
terms of trade mean that most inventory payments are currently
recorded as prepaid inventory within other current assets
because most suppliers require payment prior to physical
delivery. Upon physical receipt, prepaid inventory is transferred
to inventory.
Where contracts are for the delivery of both goods and services,
the revenue on the goods is recognised when control of the
goods transfers, usually on delivery to site, and on the services
when the performance obligation is fulfilled, usually when the
contract is handed over. Both ESO and Scottish Water were
delivered during 2021 with the service element of the revenue
to be recognised in 2022.
Delivering the contracts in 2021 tested every area of the business
and the supply chain in particular. Whilst each challenge was
successfully overcome, there were impacts on the costs of
key inputs which, despite promising signs in late 2020, at best
remained stubbornly high during the year. Particular examples
were evident in the indices for shipping costs, which peaked at
about $20,600 per container during Q3 2021 from about $2,000
in Q1 2020 and steel 10-ton futures contracts which peaked at
about $900 from about $600 over the same period.
Largely as a result of high global input and shipping prices, the
Group’s cost of sales was £6.6m (2020: £1.2m) which was the
key driver of the gross loss for the year of £3.4m (2020: £0.8m).
Administrative costs were £14.4m (2020: £9.6m) of which
£9.0m (2020: £5.8m) related to staff costs, particularly within
our customer facing departments (being Commercial, Solutions
Engineering and Customer Operations) and product facing
departments (being Product Development and Technology).
This increase represents the continued investment in the Group’s
capabilities of much of the cash raised in 2020.
The balance above included the European Marine Energy
Centre (EMEC) contract which has since been delivered, along
with the two CEC contracts, Webcor and Soboba, both due for
delivery in the third quarter 2022. Along with Yadlamalka and
Elemental, these contracts equate to revenue of £13.4m.
Remaining inventory consisted mainly of stacks and balance
of system, along with some electrolyte, which means there
are already sufficient balance of systems, completed or near
complete, to cover the remaining closed sales of Yadlamalka
and Elemental.
Cost Down
Whilst the plan at the outset of 2021 was very much to drive
down costs through a number of measures including increased
output and further supply chain efficiencies, the reality of the
continued COVID-related global disruptions was that almost
all of our input costs increased and almost all of our potential
customers’ project timelines were extended.
2022 will see continued cost down focus on the measures
above, an illustration being our decision to commence the
switch of suppliers of our balance of system from BCI to Baojia
whose sister company (Hong Kong Hao Yuan Shen Trading)
owns 3.08% of the company’s equity. Whilst this transition will
take most of the rest of 2022 to complete, the greater size and
reach of Baojia is already highlighting cost savings in the supply
chain. This will allow us to scale faster when the time comes and
maintain the option to manufacture outside of China should the
current US tariffs make it advantageous.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Furthermore, moving from single sourcing to dual, or multiple,
sourcing will also drive down costs and improve resilience.
Opportunities exist in a number of areas, most notably regarding
sourcing electrolyte where we have qualified one additional
supplier and are well advanced with another. The scale and
access to fixed-price offtake agreements of our new supplier
has already proved its value by insulating us to a degree from
the recent peak in the price of vanadium pentoxide.
As a counterpoint to the cost challenges of 2021, we saw
increasing government support for non-lithium storage solutions
in each of our three key markets, some of which include explicit
financial support for further cost down measures as part of the
programme. The best example being our winning of Phase One
of the UK Government’s LODES competition run by BEIS.
Phase 1 of LODES is worth about £0.7m of reimbursed costs to
Invinity towards the cost of submitting, in conjunction with Pivot
Power (part of EDF Renewables) and EDF R&D UK (both of whom
we also worked with on ESO), a fully engineered and costed
proposal for Phase 2, which is a 40 MWh storage installation co-
located with solar in the UK. Phase 2 has to be delivered at a
material cost down relative to 2021 and therefore encapsulates
our short-term cost down roadmap in much the same way that
our medium-term cost down roadmap is encapsulated within
our JDCA with Siemens Gamesa.
Financial
The Group opened 2021 with £22.0m in cash (2020: £1.2m) and
closed with £26.4m. Outside of the £23.0m (2020: £10.9m) of
cash outflows from operating activities, the two highlights were
a £7.9m increase in combined prepaid inventory and inventory
(2020: £1.4m) and £27.4m (net of expenses) of receipts from the
Q4 fundraising, by way of a placing and open offer.
An analysis of cash flows for 2021 shows:
Loss after income tax
Adjustments for non-cash items
Increase in inventory & prepaid inventory
Other changes in operating assets/liabilities
Investing activities
Financing activities
Movement
Opening cash
Closing cash
£m
(21.4)
2.2
(7.9)
4.2
(0.7)
28.1
4.4
22.0
26.4
As part of the placing and open offer, the company granted
a total of 14.5m short-term and 14.5m long-term warrants.
The exercise prices are 150p and 225p for the short-term and
long-term warrants respectively and the expiry dates are 15
September 2022 and 16 December 2024.
In response to the delays discussed elsewhere and to better align
working capital requirements with expected sales, the Company
is considering a modest extension to the expiry period of the
short-term warrants. Should this occur, the Company will seek
approval from warrant holders at the Company’s next Annual
General Meeting.
Going Concern
The successful winner, or winners, of the second phase of
the UK Government’s LODES competition is expected to be
announced in the first half of 2023. Due to the extensive work
required in preparing for the submission, contracting is expected
to complete soon after the winner is announced, along with the
payment of a material deposit on signing. Similar government
supported opportunities are in progress in both the US and
Australia, though LODES is considered the most advanced of
the three.
Absent the exercise of any warrants, but including a deposit
from the LODES, or similar contract, the latest cash flow
forecasts indicate that provided existing contracts are delivered,
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Eric Thomson, mechanical assembler, installs a stack into an Invinity VS3 flow battery at Bathgate site, UK
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16
Annual Report and Financial Statements 2021
UK / US / CANADA / AUSTRALIA
new contracts are closed and manufacturing costs reduce as
forecast, the existing cash will be sufficient to fund the business
for at least 12 months from the signing of the balance sheet.
The financial statements do not include the adjustments that
would result if the Group were unable to continue as a going
concern.
14.5m short-term warrants were granted in 2021 and should
all, or some, of these warrants be exercised prior to expiry on
15 September 2022 then the Company will receive up to an
additional £21.8m of cash. The Group’s cash balances at the end
of May 2022 totalled £18.1m. Should all of the short-term warrants
be exercised within the next 12 months then the existing cash will
be sufficient to fund the business for at least 12 months from the
signing of the balance sheet. However, the exercise price of the
short-term warrants is 150p and, at the market close on 22 June
2022, the Company’s share price is below this exercise price at
53p. Accordingly there is no certainty that any of the warrants
will be exercised.
A change to the terms of the short-term warrants, such as the
expiry date, is conditional upon the approval of the holders
of the short-term warrants and requires at least 50% of the
subscription rights for such class of warrants to vote in favour at
a General Meeting and there can be no certainty that any such
change in the terms will be approved.
Whilst 2021 demonstrated both the support of the Company’s
investors and the resilience of its organisation, as with many
groups at this stage of development it remains reliant on timely
receipts and closely managed costs. Should insufficient short-
term warrants be exercised, existing contracts be delivered
more than six-months late or the Group fail to win the LODES,
or an equivalent, contract or close it later than the second
quarter of 2023 then, assuming the Group maintains its forecast
operational capacity, it will be necessary to raise further funding
within the next 12 months in order to continue trading and deliver
on the strategic objectives.
The Group’s need to secure receipts from the exercise of the
warrants or through winning new contracts, customers or
additional funding creates a material uncertainty that casts
significant doubt about its ability to continue as a going concern.
Four VS3 flow batteries operating at Scottish Water’s waste
water treatment site in Perth, UK – October 2021
In addition to the issues discussed above, the directors have also
reviewed other varying, and wide-ranging information relating
to both present and future conditions when reaching their
conclusion regarding going concern. These included the:
growing opportunities presented by the emergent energy
storage market;
growing levels of Government engagement and support in
the three key markets;
growing sales pipeline of 686 MWh in May 2022 vs 273 MWh
in May 2021; and
validation of the business provided by the continued
engagement of EDF following the ESO contract in bidding
together for Phase 2 of the LODES contract (following its
winning of Phase 1).
Outlook
Despite the recent lockdowns in China, there are increasing
signs of a return to global normality. Whilst doing so will take
time, the ease of doing business, both internally and externally,
is already improving and allowing us to be more proactive in
pursuing sales and cost down opportunities.
Combining the cost down opportunities with a growing
appreciation of the true value of energy security (in part driven
by geopolitical events such as the war in Ukraine) and the critical
role of a safe, high throughput non-lithium storage alternative,
means that the gap between the sales price and our product
cost should narrow increasingly rapidly and generate the
commensurate revenue growth at a suitable margin.
Peter Dixon-Clarke
Chief Financial Officer
27 June 2022
1717
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Risk Management Report
The Group’s business exposes it to a broad range of risks. Invinity’s approach to managing these risks is to create a system of
internal controls. This system looks to manage, rather than eliminate, risk and, whilst the Group has an Audit & Risk Committee,
it is seen as the responsibility of the entire Board.
Commercial Risk
Detail
Likelihood
Impact
Lithium battery manufacturers
The Group’s position of delivering
High
Medium
currently dominate the stationary
a longer duration, safer and more
battery energy storage system
durable BESS could come under
Risk
trend
>
(BESS) market.
threat if the incumbent providers
rapidly improve their competitive
offering.
Whilst sales contracts are
Whilst Invinity contracts directly
High
High
bilateral, they are usually part of
with the project developer, that
multi-party projects.
same developer is contracting
with a number of other parties as
part of financial close, which may
therefore be delayed for reasons
unrelated to the Invinity contract.
Most near-to-medium term
The relative market penetration
High
High
sales are expected to require an
of flow batteries against lithium
element of grant funding support
means that grants are currently
from the local, regional or national
available but likely to be phased
governments.
out as flow battery technology
becomes more established in
the longer term.
Non-lithium storage projects are
Third party finance, particularly
High
Medium
not yet considered ‘bankable’ by
debt, is slower to engage with
project finance.
developments until technologies
are considered ‘established’,
which can increase the cost
of capital.
Commercialisation of the VS3
With the first VS3 contracts
High
High
product is at an early stage and
delivered in 2021 it means 2022
so may fall short of performance
will be the first opportunity to
obligations.
assess operational performance
in the field for a full year.
Joint Development and
Invinity may be unable to
Medium
High
Commercialisation programme
deliver on the benchmarks for
with Gamesa Electric does not
commercial competitiveness,
achieve commercial release within
as assessed by measures of
the timescales expected.
performance relative to cost, set
out by Gamesa Electric.
>
>
≥
>
>
Mitigation
Focus on markets where
the Group has the largest
advantages, including ultra-high
cycle counts and safety-critical
locations, and deliver projects to
agreed specifications.
Careful up-front screening of
project characteristics along with
a preference for developers with
a good track record.
Continue to develop expertise
in grant applications, prioritise
contracts with a high chance
of qualifying and continue to
drive down costs through value
engineering, scale and supply
chain management.
A bankability study is already
underway, and will be completed
soon, to ensure that the correct
criteria are met as early
as possible.
Strict quality control procedures
during manufacturing and
acceptance tests prior to
shipping combined with real-time
performance reporting from the
field into a dedicated support team.
The Group is fully engaged with
Gamesa Electric and its parent
Siemens Gamesa Renewable
Energy (SGRE) on every element
of the development programme,
with the design itself based on
well-proven smaller scale existing
products, thereby minimising
technology risk.
18
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Operational Risk
Detail
Likelihood
Impact
The supply chain is international
The stacks, wherein resides
High
High
and certain components are sole
the Group’s ‘know how’, are
Risk
trend
≥
sourced.
manufactured in-house in Canada
and Scotland with the balance-
of-system manufactured in China.
Final assembly is in Canada,
Scotland or China, depending on
customer location.
The supply chain is, as yet,
Driving costs down to the levels
High
High
unproven at the scale envisaged.
envisaged will require material
production increases in each of
the coming years.
The levels of key input costs such
The disruptions caused by the
High
High
as steel, electrolyte, labour and
COVID pandemic have caused
transport, can fluctuate, particularly
increases in the costs of transport,
in the current inflationary
steel and vanadium.
environment.
>
≥
Corporate Risk
Detail
Likelihood
The Group is international with
Whilst the VS3 is a single product,
High
primary operations in the UK, US,
employees are separated by
Risk
trend
Impact
Medium ≥
Canada & China.
geography and time zone,
which makes collaboration and
coordination harder.
Shareholder concentration.
Just over 50% of the register is
High
Medium
held by five shareholders.
Failure to meet shareholder
The post-merger fundraises
Medium
High
expectations.
have increased expectations and
poor performance could deter
potential investors from buying
or existing shareholders from
holding.
Competition attracting & retaining
The sector is seeing rapid growth
Medium
Medium
skilled personnel.
and salary inflation. Continuing
to attract and retain skilled
personnel will be required to
ensure development of the
Group’s business.
Cyber risk
The use of internal and external
Medium
Medium
systems across a global operation
is potentially vulnerable to cyber
threats.
>
>
≥
>
Mitigation
Moving away from sole sourcing
where and when possible, such
as manufacturing stacks in both
Canada and Scotland. Moving
the manufacture of the balance
of system to a supplier with
higher capacity and multiple
manufacturing locations.
A full order book and a strong
balance sheet will enable the
Group to build more equitable
relationships with larger suppliers.
The transfer from BCI to Baojia
has also highlighted areas of cost
saving.
Strategic relationships, such as
offtake agreements with suppliers
can reduce short-term price
volatility.
Mitigation
Senior roles have been allocated
on the basis of function rather
than geography to encourage a
group, rather than regional, view.
Continued shareholder
engagement, particularly with
Institutions able to make material
investments.
Regular news flow and trading
updates, particularly where
closed sales are concerned.
The Group has a proactive
remuneration committee with
access to suitable advice.
The Group has an established
security programme that
entrenches good practice,
processes and systems, as well as
regular staff training throughout
the year.
1919
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Financial Risk
Detail
Likelihood
Impact
The Group does not yet generate
The Group is in the early phase
High
High
positive cash flows and therefore
of commercialisation and so is
is expected to require further
not yet generating the product
funding.
margins required to support all
of its costs.
Having multi-jurisdictional
Whilst sales receipts are in a
High
Medium
operations exposes the Group to
range of currencies, the majority
foreign exchange risk, particularly
of the materials costs are settled
against the US $.
in US $ and a material element
of payroll is settled in Canadian $.
Post-merger fundraisings have
all been in GB £.
All contracts contain warranties
A warranty provision for each
Medium
Medium
and some contain extended
sale is provided for in the balance
warranties.
sheet at the time revenue is
recognised but may prove
insufficient over the life of the
warranty.
Having multi-jurisdictional
The Group has manufacturing
High
Low
operations exposes the Group to
operations in the UK, Canada and
cross-border tax risk, particularly
China, along with sales operations
transfer pricing, and tariffs.
in the US. In addition to the tax
issues, the US trade tariffs on
Chinese output are potentially
material.
The merger with a US company
Avalon Battery Corporation is a
Low
Low
exposes the Group to US tax
US registered entity and so may
inversion legislation.
be deemed to be onshore by the
US Internal Revenue Service for
US tax purposes.
Risk
trend
≥
≥
>
>
≥
Mitigation
Continued sales growth and
product standardisation will
allow the Group to drive down
gross costs and improve product
margin.
The Group holds up to
six months of expected
US $ required and converts
Australian $ receipts into
Canadian $.
Maintaining product performance
data, focus on reducing the
need for maintenance and
track ongoing operations &
maintenance costs.
The Group seeks specialist
external advice on tax and tariff
related matters. In the case of
the US tariffs on China, sufficient
content is manufactured in
Canada.
The Group has taken specialist
advice and does not believe this
to be the case under current
legislation, though this could
change should retrospective
legislation be introduced.
Invinity VS3 at a Carrefour hypermarket in Kaohsiung, Taiwan to reduce peak power draw from the grid – Nov 2021
20
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
OUR APPROACH TO THE ESG AGENDA
Sustainability Report
The core activity of Invinity’s business is to accelerate
the global renewable energy transition in pursuit of
net zero targets. As a Company and as individuals, we
are committed to taking action on climate change, but
also understand the importance of a ‘Just Transition’
to a low-carbon economy, with no one left behind. This
underscores our approach to operate responsibly and
sustainably in the pursuit of our corporate goals.
As Environmental, Social and Governance (ESG) issues
become ever more important in a world looking to combat
climate change, we work continuously to achieve the highest
standards of sustainability. In June 2022, we formed an ESG
committee to help oversee, inform, and guide our approach
to the ESG agenda. Chaired by Non-Executive Director Rajat
Kohli, the committee will ensure that our ESG performance
creates additional value for our business, shareholders, and
wider stakeholders. The Committee is also charged with the
regular and transparent disclosure of our progress on an
ongoing basis.
ENVIRONMENTAL STEWARDSHIP
A Green Economy Leader
Invinity is proud to have been one of the first recipients of
the London Stock Exchange’s Green Economy Mark, which
recognises companies that derive 50% or more of their total
annual revenues from products and services that contribute
to the global green economy. The underlying methodology
incorporates the Green Revenues data model developed by
FTSE Russell, which helps investors understand the global
industrial transition to a green and low carbon economy with
consistent, transparent data and indexes.
Carbon reduction is at the heart of our business model
Our vanadium flow batteries are being installed at sites across
the world to complement renewable energy generation such as
solar PV, wind turbines and tidal power, creating ‘dispatchable’,
on-demand, clean power. This already delivers significant
carbon savings annually and enables renewables to compete
directly with fossil fuel powered generation for the first time,
accelerating the phase-out of coal and gas from the global
generation mix, without having a destabilising effect on the grid.
Environmental Stewardship —
‘Respecting the environment
on a sustainable basis’
Efficient resource use
Circular economy
Biodiversity
Social
Impact
Social Impact —
‘Contributing socially
where we operate’
Community collaboration
Diversity & inclusion
Safety, health & well-being
ESG Committee — L-R: Raj Kohli, Michael Farrow and Matt Harper
Environmental
Stewardship
ESG
Supporting the work of the ESG Committee are ESG
Champions, appointed from amongst Invinity staff in each of
the Company’s offices. Their responsibilities will include the
promotion and regular reporting on our environmental and
social performance at each location to ensure a consistent
and unified approach to sustainability across the organisation.
Guiding Principles
Through considered discussion, Invinity’s Board has agreed a
defined set of ESG principles – outlined below – that play an
integral role in helping to achieve our commitment to the ESG
agenda:
Accelerate, through our products and services, the global
transition to support national and international net zero
targets;
Champion innovation and thought leadership in all we do;
Be a great place to work;
Work in collaboration with all of our stakeholders;
Engage with local communities to share knowledge capital
and create opportunity.
Responsible
Governance
Responsible Governance —
‘Creating value by exercising
principled leadership’
Integrated risk management
Ethical behaviour
Transparency and trust
Playing our part in the Circular Economy
Invinity’s VFBs are a natural fit for the circular economy as
the key product components consist of easily and widely
recyclable materials. Our batteries do not contain rare
earth or ‘conflict’ minerals such as cobalt and the vanadium
electrolyte does not degrade with use, meaning that nearly
100% of the vanadium itself can be recovered from the
electrolyte for use in other applications. This limits the need
to constantly utilise ‘new’ raw materials during the life of the
battery.
Managing our Impacts
As a fast-growing company that provides solutions which
help avoid and remove emissions, we are fully committed
to taking action to reduce our own carbon footprint. In
recognition of the United Nations Race to Zero Campaign,
Invinity has signed up to the SME Climate Commitment.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
The SME Climate Commitment
Recognising that climate change poses a threat to the economy, nature and society-at-large, our company commits
to take action immediately in order to:
1. Halve our greenhouse gas emissions before 2030
2. Achieve net zero emissions before 2050
3. Disclose our progress on a yearly basis
In doing so, we are proud to be recognised by the United Nations Race to Zero campaign, and join governments,
businesses, cities, regions, and universities around the world that share the same mission.
Our Carbon Footprint
Invinity reports its carbon footprint in compliance with The
Greenhouse Gas Protocol (the world’s most widely used
greenhouse gas reporting framework) and with the SME
Climate Commitment. In line with these requirements, the
Company reports primarily on its direct emissions (Scope
1) and indirect emissions arising from electricity, heat or
steam consumption (Scope 2), using an operational control
accounting approach.
In line with SME Climate Commitment guidelines, Invinity
falls under the category of “fast growing SMEs that provide
solutions which avoid or remove emissions as their core
business”. Therefore, it is considered appropriate for the
Company to report its carbon footprint on an ‘intensity’
basis, using the metric of grammes of CO2 equivalent per £ of
annual revenue.
2021 Group Carbon Intensity:
per £1 of recognised revenue
22.5g CO2e
77%
Reduction in carbon intensity vs 2020
(base year chosen as year of Invinity’s formation)
Supporting the United Nations Sustainable Development
Goals (UN SDGs)
Invinity continues to recognise that the UN SDGs are the
blueprint to achieve a better and more sustainable future for
all. The Company aims to make a meaningful contribution to
all SDGs and is proud of its particular contribution to Goal 7
‘Affordable and Clean Energy’, Goal 11 ‘Sustainable Cities and
Communities’, and Goal 13 ‘Climate Action’.
22
Invinity’s Canadian Internship
Programme
Simon Fraser University
A third year Sustainable Energy Engineering student
joined us as an Energy Storage Intern for the September
2021 four-month term.
The student was primarily involved in supporting early-
stage commercial discussions with clients and working
on compiling energy market research for North America
investigating the potential for long duration energy
storage deployment in various territories. Other work
included a number of small-scale projects carrying out
some techno-economic modelling for clients to help
support the development of their business cases.
This was the student’s first significant experience dealing
with electricity markets and utilities so there was a good
opportunity to learn the fundamentals of the various
energy markets we were investigating as well as gain a
good understanding of the different mechanisms energy
utilities use to charge customers. There was a significant
amount of data processing and analysis which the student
hadn’t done to the same extent previously and it was a
good opportunity to work with a number of energy
modelling tools that we had created in-house to learn how
the analysis process works from start to finish.
University of British Colombia
A second year Engineering Physics student joined us as
a Software Co-op for the January 2022 four-month term.
The focus for the co-op term was to develop real features
into our product. They worked in the software team and
during their term they developed a tool that upgrades our
Firmware in the field.
This was their first co-op experience and they gained
valuable knowledge on software development in a
professional team setting. Taking what they have learned
on engineering development in their degree and applying
it in a professional setting. They focused on learning
to build robust code that is maintainable. It was an
opportunity for them to understand the bigger picture
and impact of developing in a team environment where
their code has real world impact on others development.
They gained firsthand experience and knowledge from
the experienced software engineers in the team.
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Health and Safety statistics on Accidents and Near Misses 2020-2022
UNITED KINGDOM
CANADA
OTHER LOCATIONS
2022
2021
2020
2022
2021
2020
2022
2021
2020
Average No. of employees
68
68
49
72
65
36
Reportable lost time incidents
Minor incidents
Near miss (No injury)
First Aid
0
0
1
0
0
3
8
0
0
0
1 Not reported
in past
0
0
0
0
0
1
2
0
0
1
1 Not reported
in past
14
0
0
0
0
12
0
0
4
8
0
2
0
0 Not reported
in past
CASE STUDY ENERGY SUPERHUB OXFORD
The Energy Superhub Oxford (ESO) project is one of the
most ambitious urban decarbonisation projects to have
been undertaken in the UK to date. The deployment of the
world’s first transmission-connected vanadium-lithium
hybrid battery that will support the electrification of Oxford,
UK, it is a recognised blueprint for other cities to follow as
part of the transition to net zero. ESO is designed to deliver
innovation in smart local energy systems by using cutting
edge energy storage systems.
Invinity’s VFBs were chosen because our technology is able
to perform deep charge/discharge cycles multiple times
each day; safely, reliably and without degradation, helping
to extend the life of the lithium battery. Working closely with
our partners, Invinity successfully delivered, installed and
energised a 5 MWh VFB – the UK’s largest flow battery to
date.
Governance
Invinity’s Board of Directors believes that strong corporate
governance and risk management are key to the delivery
of shareholder value. The business is underpinned by a
comprehensive framework of policies and risk management
systems and the Board has adopted the Quoted Companies
Alliance Corporate Governance Code 2018 (the QCA Code)
as its corporate governance code which it believes provides a
flexible model allowing our corporate governance to evolve as
the business grows.
Further details on the Company’s corporate governance
practice and compliance with the principles of the QCA Code
are provided on pages 26-28 of this Annual Report and on the
website. Details of the risk management systems are provided
on pages 18-20 of this Annual Report.
Rajat Kohli
Chairman, Environmental, Social and Governance Committee
27 June 2022
Research Chemist, Emma Wilson carrying out material testing
at Invinity’s R&D laboratory in Bathgate, UK
Social Impact
We empower our people, partners, and customers to
change the world. Invinity is committed to driving the social
value agenda forward and to making a positive change
through our operations and wider activities. This includes
supporting government-led initiatives as is appropriate to
our business.
Our business growth and development incorporate:
Significant levels of local employment in our offices in
the UK, Canada and the U.S.;
A commitment to being a great place to work by
providing health and wellbeing support for all our staff,
helping our people to remain safe and healthy;
Collaborating with our communities, particularly through
partnerships with the education sector, providing the
opportunity for work experience and internships and
supporting national initiatives such as the UK Government’s
STEM agenda. Four of our interns have been recruited into
full-time positions over the last two years;
Apprenticeships and volunteering are two areas of
positive social impact we are looking to progress in the
near future;
Our commitment to Health and Safety remains non-
negotiable and we retain a zero-tolerance approach to
accidents and injuries. Our commitment is that all our
people should finish their working day as healthily as
they started it.
Invinity also has a clear policy framework to promote Equality,
Diversity, and Inclusion (EDI). We are committed to maintaining
and improving a workplace where everyone can flourish.
Our approach addresses all elements of our operations from
recruitment to promotion, career development and the creation
of an outstanding working environment.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Board of Directors
Neil O’Brien Non-Executive Chairman 59 2C
Neil was appointed Non-Executive Chairman in April 2020,
having first joined the Board as a Non-Executive Director in
September 2016.
Larry Zulch Chief Executive Officer 64 2M
Larry became the CEO in April 2020. He has over 30 years’
experience successfully commercialising advanced technologies
and scaling the companies that deliver those technologies to
market.
Neil’s previous role was as CEO of AIM listed Alkane Energy, an
independent UK power generator (acquired by Infinis in 2018),
which he joined in 2008. Under his leadership, the Company
achieved rapid output increases through a combination of organic
growth and acquisition activity. Alkane expanded its UK portfolio
of baseload power generating sites and established a leading
position in the UK back-up power market covering winter peaking,
National Grid “STOR” programme and the capacity market.
Neil started his career at Coopers & Lybrand in 1985, where he
qualified as a Chartered Accountant, before joining Blue Circle in
1988, holding a number of senior financial and operational roles
in the UK and Europe. He then spent three years as a Group
Management Accountant at Aggregate Industries, before moving
to Speedy Hire as Group Finance Director. Neil read Politics,
Philosophy and Economics at Oriel College, Oxford University.
Prior to Invinity, Larry held a number of senior leadership and
executive management roles including CEO of Avalon Battery,
President & CEO of Dantz Development (acquired by EMC),
President & CEO of Photometics, Chairman of PLCD, CEO
of Cloud Engines, and President & CEO of Savvius (acquired
by LiveAction). He served as VP and Officer at EMC, and as
Executive Chairman of Freerange Communications (acquired by
Sprint via Handmark).
An Executive Director, Larry joined the Board of Invinity in April
2020 and conducts his global responsibilities out of Invinity’s San
Francisco office. He is a member of the Nomination Committee.
Additional External Directorships:
3GO Security Incorporated
Proactive Diagnostic Incorporated
Neil is chairman of the Nomination Committee.
Additional External Directorships:
Mercia Power
South Staffordshire Community Energy
Peter Dixon-Clarke Chief Financial Officer 56
Peter joined Invinity as CFO in August 2020. He has 30 years’
experience in senior finance roles, primarily in the energy sector
as well as in financial services.
Matt Harper Chief Commercial Officer 45 4M
Matt became the CCO of Invinity in April 2020. He is an engineer
and entrepreneur with over 20 years’ experience developing
and commercialising clean energy technologies, including 14
years in energy storage.
During this time, he developed a deep understanding of the
commercial dynamics and opportunities in the energy sector,
having been heavily involved in two $1bn sales, coupled with a
full appreciation of the need for transitionary technologies such
as Invinity’s. Prior to Invinity, his most recent CFO roles were at
Kuwait Energy Company plc, Hotspur Geothermal ltd and AIM-
listed Rockhopper Exploration plc.
Peter qualified at Deloitte as a chartered accountant and
conducts his global responsibilities out of Invinity’s London
office.
Matt co-founded Avalon Battery, which merged with redT
energy to form Invinity. As President of Avalon, he designed
and delivered ground-breaking vanadium flow battery-based
energy storage solutions across the world. Prior to Avalon,
Matt served as VP Products and Services at Prudent Energy
spending time in both Vancouver and Beijing. He holds a Master
of Science degree in Engineering and Management from the
Massachusetts Institute of Technology and is named as the
inventor of seven granted US patents.
He is an Executive Director and he joined the Board of Invinity
in August 2020.
An Executive Director, Matt joined the Board of Invinity in April
2020 and conducts his global responsibilities out of Invinity’s
Vancouver office.
He is a member of the ESG Committee.
24
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Committee compositions
1 Audit & Risk Committee
2 Nomination Committee
3 Remuneration Committee
4 ESG Committee
C Chair
M Member
Jonathan Marren Senior Independent Director 46 1C 3C
Jonathan was appointed Senior Independent Director in May
2021, having been a Non-Executive Director since March 2016.
Prior to this, he was Chief Financial Officer of redT energy
between July 2012 and March 2016, having been an advisor to
the company since early 2006, including on its flotation in April
2006.
He has previously held positions as Deputy Head of Corporate
Finance at Singer Capital Markets, prior to which he was at
Peel Hunt between 2000 and 2010 where he was a Director
in the Corporate Department with responsibility for their new
energy and clean tech franchise where he gained considerable
experience of working with companies in this area.
Michael Farrow Non-Executive Director 68 1M 2M 3C 4M
Michael founded and subsequently sold Consortia Partnership
Ltd, a mid-sized Jersey regulated trust, fund and corporate
administrator company, the latter being the corporate secretary
to the Company. He was the former Group company secretary
of Cater Allen Jersey, a banking, trustee and investment
management group. Having retired, he currently sits on the
boards of a number of listed and substantial private companies
and funds.
Michael has considerable financial and corporate experience
and holds an MSc in Corporate Governance. He is a Fellow of
the Chartered Institute of Secretaries & Administrators and was
formerly a regular British Army Officer.
Jonathan qualified as a Chartered Accountant with Arthur
Andersen in 1999 after obtaining a BSc in Mathematics from
Durham University.
Michael joined the Board of Invinity in March 2006. He is the
Chairman of the Remuneration Committee and also sits on the
Audit & Risk, Nomination and ESG Committees.
Jonathan is Chairman of the Audit & Risk Committee and also
sits on the Nomination and Remuneration Committees.
Additional External Directorships:
Ryde School Construction Limited
West Hill Park School Limited
West Hill School Trust Limited
Additional External Directorships:
STANLIB Funds Limited
Circle Property PLC
Melville Douglas Funds
Urban Infrastructure Real Estate Funds
Reuben Brothers Limited
Rajat (Raj) Kohli Non-Executive Director 58 1M 2M 3M 4C
Raj joined the Board of Invinity in June 2020 and brings over
30 years’ experience in finance and the resources, energy and
infrastructure sectors. In his City career, Raj worked as a mining
and metals analyst at BNP Paribas, subsequently joining HSBC
where he became a Managing Director in the Resources and
Energy Group.
Raj then joined ArcelorMittal as Co-Head of Mergers &
Acquisitions in 2007, returning to banking in 2011 with Standard
Bank as Global Head of Metals and Mining. Since 2015, Raj has
provided strategic consulting services to the natural resources
sector as Principal of Ptolemy Resource Capital.
Raj is the Chair of the newly formed ESG Committee, and is a
member of the Audit & Risk, Remuneration and Nomination
Committees.
Additional External Directorships:
Ptolemy Resource Capital Ltd
Minas de Revuboe Ltd
Talbot Group Investments Pty Ltd
Talbot Group Holdings Pty Ltd
Midrev Mining Mauritius Ltd
Jockeys Financial Ltd
Kristina Peterson Non-Executive Director 58 3M
Kristina joined the Board of Invinity and was appointed Non-
Executive Director in November 2021.
Kristina brings 30 years of experience in energy and
infrastructure, having held senior executive management roles
at Brookfield, EDF Renewables, Suntech, and Greenwood
Energy. She began her career at Citibank and ABN AMRO Bank,
where she arranged over $8.5 billion of project and structured
finance debt transactions in the US, Asia, Middle East and Africa.
She currently serves as Industrial Advisor, EQT Partners, and
CEO, Mayflower Partners, where she provides climate, cleantech
and software investment advisory services.
Kristina received an MBA from the University of Chicago Booth
School of Business and completed graduate coursework in
management at MIT’s Sloan School prior to Booth. She earned
a BS, Business Administration from Boston University School of
Management.
She is a member of the Remuneration Committee.
Additional External Directorships:
Augment Ventures Fund III, L.P.
Mayflower Partners LLC
Coalition for Green Capital
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Governance Report
Introduction on the Governance Report from the
Chairman, Neil O’Brien
Invinity is listed on the AIM Market of the London Stock Exchange
and as such is required to apply a recognised corporate
governance code. The Company’s shares are also dual-listed on
the Apex segment of the Aquis Stock Exchange Growth Market
(AQSE) and the Company’s short-term and long-term warrants
are listed on the Access segment of the Aquis Stock Exchange
Growth Market. The Board has adopted the Quoted Companies
Alliance Corporate Governance Code (the “QCA Code”), which
is designed for small to mid-sized companies and which has
been adopted by many AIM companies. The Board has agreed
that the QCA Code remains the most appropriate corporate
governance code for the Company.
The Board has considered how the Company applies the ten
principles of the QCA Code and the Governance Report includes
the required disclosures and explanations where relevant.
Further details of the Company’s corporate governance
practices are provided on the Company’s website in the
Investors section under Corporate Governance.
Corporate Governance Statement
The Board recognises that good governance helps to
underpin the foundations of a solid and successful business
and delivery of shareholder value. Invinity’s Board, led by
the Chairman, is committed to maintaining high standards of
corporate governance for which the Directors are accountable
to shareholders and other stakeholders and to ensuring that
the Company’s values are communicated and upheld across
the Group. The Board recognises that corporate governance
practices will need to be regularly reviewed as the Company
grows to ensure that they remain appropriate and effective.
During 2021, the Board continued to strengthen the corporate
governance framework with a number of initiatives including:
the appointment of a Senior Independent Director, Jonathan
Marren, to support the Chairman, to act as an intermediary for
Board members and as a point of contact for shareholders;
the appointment of a new Non-Executive Director, Kristina
Peterson, to broaden the Board’s skill set;
the introduction of a Board performance appraisal process;
enhanced Annual Report disclosures in respect of corporate
governance and remuneration policy and practices;
the streamlining of Board processes; and
formalising the risk review process.
Furthermore, since the year end, the Board has established
an ESG Committee to ensure that the Company delivers on its
objective of operating responsibly and sustainably.
Corporate culture
The Company is committed to ensuring that there is a healthy
corporate culture. As such, additional policies and procedures
which are designed to ensure that ethical and transparent
behaviour is recognised and followed across the Group, were
put in place during the financial year. The policies and procedures
currently in place include:
Code of Conduct
Whistleblowing Policy
Equal Opportunities Policy
Share Dealing Code
Anti-Bribery and Corruption Policy
Health and Safety Policy
Modern Slavery Statement
Procurement Policy
Social Impact Policy
Environmental Impact Policy
Biodiversity Policy
Board composition
The Board currently consists of a Non-Executive Chairman, a
Senior Independent Director, three Executive Directors and
three Non-Executive Directors.
During 2021, the Board decided that it would be appropriate to
appoint a Senior Independent Director to provide a sounding
board for the Chairman and to act as an intermediary for Board
members and as a point of contact for shareholders who have
concerns which have not been adequately addressed by the
Chairman or Chief Executive Officer. Accordingly, Jonathan
Marren was appointed as Senior Independent Director with
effect from 1 May 2021. Furthermore, to broaden the skill set
and experience of the Board as well as support the Company’s
commitment to diversity, Kristina Peterson, who has considerable
experience in renewables and project finance in North America,
was appointed as a Non-Executive Director in November 2021.
Other than any shareholdings in the Company and the receipt
of fees for acting as Directors, the Chairman and Non-Executive
Directors have no financial interests in the Company or business
relationships that would interfere with their independent
judgement. Rajat Kohli was originally appointed as a
representative of Bushveld Minerals pursuant to the terms of an
investment agreement with the Company but this arrangement
came to an end in 2021 after Bushveld Minerals disposed of its
shareholding in the Company.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Board composition during the year
Name
Role
Length of service as at 27 June 2022
Date of appointment
Non-Executives
Neil O’Brien
Michael Farrow
Jonathan Marren
Rajat Kohli
Kristina Peterson
Executives
Lawrence Zulch
Matthew Harper
Peter Dixon-Clarke
Non-Executive Chairman
Non-Executive Director
Senior Independent Director
Non-Executive Director
Non-Executive Director
5 years, 9 months
16 years, 3 months*
6 years, 3 months
2 years, 0 months
0 years, 6 months
9 September 2016
16 March 2006
1 March 2016
22 June 2020
2 November 2021
Chief Executive Officer
Chief Commercial Officer
Chief Financial Officer
2 years, 2 months
2 years, 2 months
1 year, 9 months
2 April 2020
2 April 2020
10 August 2020
*See comment below regarding Michael Farrow’s length of tenure/independence
Independence of Directors
The Board considers that the Chairman and all of the Non-
Executive Directors, except Rajat Kohli, were independent
for the whole of the 2021 financial year notwithstanding
indicate otherwise. While
circumstances which could
recognising that Michael Farrow has been a Director for 16 years,
the practicalities of maintaining corporate residency in Jersey
means that it is advantageous to have an actively participative
director located there. Neil O’Brien and Jonathan Marren
have previously held executive positions within the Company.
Notwithstanding the shareholdings disclosed on pages 40-41,
the Board has determined each of these individuals demonstrate
independence of character and judgement and that there are
no circumstances which are likely, or could be perceived to be
likely, to affect their judgement. During 2021, the Board agreed
that Rajat Kohli, who had been the nominated representative
of Bushveld Minerals until the disposal of their shareholding in
the Company, should be invited to remain on the Board as an
independent director.
Role of the Board
The Board is collectively responsible for delivery of the
strategy which is designed to promote the long-term success
of the Company and to deliver shareholder value. The Board is
responsible for formulation and approval of the Company’s long-
term objectives and strategy, approval of budgets, oversight of
operations across the Group, maintenance of internal controls
and risk management systems and approval of Group policies.
The Board may delegate specific responsibilities but there is a
schedule of matters specifically reserved for decision by the
Board to ensure that it exercises control over the key matters
which could impact on delivery of the Company’s strategy.
Board skills and responsibilities
The Directors have a wide range of skills and industry experience
including technical, operational, commercial and financial both
in the UK and internationally. The Chairman and Non-Executive
Directors have held senior management, Board and advisory
positions and bring relevant experience from their current and
previous positions.
A clearly defined organisational structure exists across the
Group, with lines of responsibility and delegation of authority to
executive management.
Board meetings and processes
The Board has around eight scheduled meetings each year
with other meetings held as required. During 2021, the majority
of meetings were held by video conference call due to travel
restrictions related to the COVID-19 pandemic. Informal meetings
also take place between the Chairman and the Non-Executive
Directors without the Executive Directors present.
At each Board meeting, the Board receives an update from the
CEO on key current activities including HSE and considers the
Commercial and Finance Reports and any papers relating to
specific matters requiring consideration or approval.
Non-Executive Directors undertake on joining the Company
that they are able to allocate sufficient time to discharge
effectively their responsibilities and are required to keep
the Board updated of any changes in respect of their other
commitments.
The letters of appointment of the Non-Executive Directors
detail the expected time commitment which is around six Board
meetings, one General Meeting and two meetings in respect of
each of the Audit and Remuneration Committees per annum
and are required to devote to the Company’s business such
additional time as is reasonably necessary by way of preparation
for or follow-up after any meeting. The Non-Executive Directors
may also be asked to participate in other events such as
marketing, social and client functions with this commitment not
exceeding around six days per annum.
Board meeting attendance
Director
Board meetings attended
Neil O’Brien – Chairman
Lawrence Zulch
Matthew Harper
Peter Dixon-Clarke
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson (appointed 2 November 2021)
Total meetings during year
12
12
11
12
12
11
12
2
12
Board performance evaluation
During the year, an internal performance evaluation of the
Board was undertaken. Each Board member completed a
questionnaire which focused on strategy, risks and controls,
Board structure and development, Board processes and the
work and composition of the Board committees. The responses
were collated and summarised by an external company
secretary and the key conclusions tabled at a Board meeting.
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Board induction, training and outside advice
There is no formal induction process but new Directors receive
a briefing on AIM obligations from the Company’s NOMAD,
Canaccord Genuity, as well as an appropriate induction
according to their requirements. The Board supports Directors
who wish to receive ongoing training and education relating to
their duties.
Independent legal advice is available to Directors at the
Group’s expense if external advice is considered necessary and
appropriate.
External directorships and interests
Executive Directors are permitted to engage in other activities
and businesses outside the Group providing that there is no risk
of conflict with their executive duties and subject to full Board
disclosure.
Non-Executive Directors are required to advise the Chairman as
soon as practicable of any proposed Board appointments which
could give rise to a conflict with their position as a Director of the
Company. Details are circulated to other Board members who
are invited to advise the Chairman if they have any concerns
about the proposed appointment.
Conflicts of interest
The Board has in place a procedure for dealing with the
consideration and authorisation of any actual or potential
conflicts of interest. All Directors are aware of the requirement
to advise the Chairman of any situations which could give rise
to a conflict or potential conflict of interest. If requested by the
Chairman, a Director will absent themselves from any Board
discussions and decisions on matters where there is an actual or
perceived conflict of interest.
Company Secretary
The Company Secretary is Oak Secretaries (Jersey) Limited
which is 100% owned by the Oak Group (Jersey) Ltd (Oak
Group), a Jersey-based limited liability company regulated by
the Jersey Financial Services Commission. Michael Farrow was a
director of the Oak Group until his retirement from that company
in May 2019. The Company has also engaged the services of a
qualified Company Secretary to assist with the administration
of the share option scheme and compliance and to provide
corporate governance advice and general support to the Board
and its Committees.
Political and charitable donations
The Group made no charitable or political donations during the
year (2020: £nil).
Communication with shareholders
The Company engages with shareholders in a variety of ways:
Meetings
Executive Directors meet regularly with major shareholders
and the investment community which allows exposure to new
investors, either online or in person. This process includes
presentations, one-to-one meetings and both buy and sell-side
analyst briefings. During 2021, a roadshow was undertaken in
connection with the fundraising. The Chief Executive Officer
regularly briefs the Board on meetings held and relays the views
expressed. Details of analyst research reports, press reports,
share trading and register analyses are shared with Directors
which ensures that they are kept up to date with the views of
the investment community.
Website
The Company’s website is updated regularly and includes a
dedicated Investor Relations section. This includes all direct
shareholder communications, external presentations, Q&As
with Directors and other relevant documentation so that existing
and potential investors have access to up-to-date and relevant
information.
Investor Relations
The Company encourages direct contact from shareholders and
potential investors by providing an email address and telephone
number for investors on the website which is monitored by the
Director of Communications and the Corporate Relations Manager.
This allows investors to address ad hoc queries to the Company.
Announcements
The Company issues announcements via the RNS news service
and as press releases periodically to inform the market of
significant news and developments.
Webinars
The Company hosts regular interactive webinars which give
shareholders the chance to address questions to management.
Annual Report
The Company’s annual report gives a detailed overview of the
Company, its strategy, operations, financial position, risk profile
and remuneration structure and is available in hard copy and on
the website. This ensures that existing and potential investors
are provided with the information that they need to make an
assessment of the Company’s performance and prospects.
Newsletter
The Company issues regular newsletters for Investors and any
interested parties who have subscribed to receive updates on
the Company’s activities beyond what is issued through the
Regulatory News Service.
AGM
In addition to the formal AGM business, the executive team give
an operational and financial update and shareholders have the
opportunity to address questions to the Board.
Neil O’Brien
Chairman
27 June 2022
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Report of the Chairman
of the Audit & Risk Committee
Introduction by the Audit & Risk Committee Chairman,
Jonathan Marren.
I am pleased to present the report of the Audit & Risk
Committee for the year ended 31 December 2021. The
report includes details of the committee’s activities during
the financial year and since the year end.
Committee composition
The members of the Audit & Risk Committee are Jonathan
Marren as Chairman, Michael Farrow and Rajat Kohli who
replaced Neil O’Brien as a committee member during the
year. The Board is satisfied that at least one member of the
Audit & Risk Committee, Jonathan Marren, has recent and
relevant financial experience.
Meetings
The Audit & Risk Committee met three times during the
year and informal discussions were also held both with and
without management present. The external auditors had
discussions with the Chairman of the committee during the
course of the year and also met the committee members
without management present.
Only members of the committee have the right to attend
the meetings of the committee but the committee can invite
the Executive Directors, members of senior management
and representatives of the external auditors to attend its
meetings.
Details of the meetings attended during the financial year
were as follows:
Director
Non-Executive Directors
Jonathan Marren – Chairman
Michael Farrow
Neil O’Brien (resigned 20 May 2021)
Rajat Kohli (appointed 20 May 2021)
Executive Directors
Lawrence Zulch
Matthew Harper
Peter Dixon-Clarke
Total meetings during year
2 meetings attended as an invitee
1 meeting attended as an invitee
*
**
*** Invitee
Audit & Risk Committee
meetings attended
3
3
*3
**3
***3
***3
***3
3
Role
The core terms of reference of the Audit & Risk Committee
include reviewing and reporting to the Board on matters
relating to:
the audit plans of the external auditors;
the Group’s overall framework for financial reporting and
internal controls;
the Group’s overall framework for risk management;
the accounting policies and practices of the Group;
the annual and interim financial reporting carried out by
the Group; and
the independence and performance of the external
auditor.
The committee is responsible for notifying the Board of
any significant concerns that the external auditors may
have arising from their audit work, any matters which may
materially affect or impair the independence of the external
auditors, any significant deficiencies or material weaknesses
in the design or operation of the Group’s internal controls
and any serious issues of non-compliance. No such concerns
were identified during the financial period.
Key matters considered by the committee
During the year, the issues considered by the committee both
during and outside formal committee meetings included:
Group financial disclosures and accounting matters
relating to the preparation of the financial statements;
audit plan of the external auditors for the 2020 financial
year;
reports of the external auditors concerning its audit and
review of the financial statements of the Group;
2020 Annual Report and Accounts and 2021 interim
financial statements;
external auditors’ fees; and
terms of reference of the committee.
During the year, management reviewed and updated the
risk matrix which identifies and classifies the key commercial,
operational, corporate and financial risks facing the Group
with associated mitigants. The risk matrix is reviewed
regularly by the Board meetings and is updated to reflect
any changes to the Company’s risk profile.
Going concern
As part of the year end reporting process, management
prepares a detailed report including detailed cashflow
forecasts with a number of potential scenarios and sensitivity
assumptions. The committee reviews and challenges
management’s assumptions and conclusions in order that
it can provide comfort to the Board that management’s
assessment has been challenged and is supported and
that it is appropriate to prepare the financial statements on
a going concern basis. Further details of the going concern
assessment process are contained in Note 2 of the Group
financial statements on page 55.
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External auditors
The committee recommends to the Board the appointment
of the external auditors, subject to the approval of the
Company’s shareholders at a general meeting. Shareholders
in a general meeting authorise the Board to fix the
remuneration of the external auditors and the Board has
delegated this responsibility to the committee.
The committee is responsible for the approval of the
provision of all audit services and permitted non-audit
services undertaken by the external auditors.
The committee actively considers the effectiveness and
quality of the external auditors.
Whistleblowing and anti-bribery
The Company is committed to conducting all of its business
dealings in a responsible, honest and ethical manner. All
employees, directors and consultants are required to act
with integrity and to have regard to the Company’s Code
of Conduct in their day-to-day business behaviour. The
Company also has in place an Anti-Bribery and Corruption
Policy and Procedures and arranges training for selected
employees following a risk analysis.
All employees are made aware of the Company’s
whistleblowing policy which includes contact details for
the Company’s internal whistleblowing officer and an
independent whistleblowing charity, Public Concern at Work.
All employees are required to undertake training on the
Market Abuse Regulation in relation to inside information and
unauthorised trading in the Company’s shares.
Jonathan Marren
Chairman, Audit & Risk Committee
27 June 2022
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Report of the Chairman
of the Nomination Committee
Succession planning
The Company is committed to appointing, retaining and
developing an experienced team which can effectively
manage the Company’s objectives and deliver its strategy.
When considering succession planning, the committee will
evaluate the balance of skills and experience on the Board
and make recommendations to the Board on the basis
of what it considers that the Company needs in order to
support delivery of the agreed strategic objectives.
The committee recognises the need for progressive
refreshing of the Board and the benefits of diversity and
the committee will have regard to these when considering
succession planning. When considering new Board
appointments, the committee will be committed to recruiting
on merit measured against objective criteria.
The management of human resources across the Group is
a matter for Executive management but the Non-Executive
Directors are advised in advance of recruitment plans in
respect of senior appointments.
Neil O’Brien
Chairman, Nomination Committee
27 June 2022
Introduction by the Nomination Committee Chairman,
Neil O’Brien.
I am pleased to present the report of the Nomination
Committee for the year ended 31 December 2021.
Committee composition
The committee is chaired by Neil O’Brien with Michael Farrow,
Rajat Kohli, Jonathan Marren and Larry Zulch as its members.
The Board considers all members of the committee, with the
exception of Larry Zulch (CEO), to be independent.
Meetings
The committee met once during 2021.
Details of the meetings attended during the financial year
were as follows:
Director
Neil O’Brien – Chairman
Michael Farrow
Rajat Kohli
Jonathan Marren
Lawrence Zulch
Total meetings during year
Nomination Committeed
meetings attended
1
1
1
—
—
1
Role
The role of the committee is to consider Board member
succession, review the structure and composition of the Board
and its Committees and identify and make recommendations
for any changes to the Board. Any decisions relating to the
appointment of Directors are made by the entire Board
based on the merits of the candidates and the relevance
of their background and experience, measured against
objective criteria, with care taken to ensure that appointees
have enough time to devote to the job.
Key matters considered by the committee
The issues considered by the committee during the financial
year included:
Appointment of Kristina Peterson as a Non-Executive
Director; and
Constitution of Board Committees.
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Report of the Chairman
of the Remuneration Committee
Introduction by the Remuneration Committee Chairman,
Michael Farrow.
I am pleased, on behalf of the Remuneration Committee, to
present the Directors’ Remuneration Report (‘Report’) for
the year ended 31 December 2021.
The Report is divided into two sections:
The Policy report which sets out the current
Remuneration Policy
The Annual Report on Remuneration which sets out
details of the operation of the Remuneration Committee
and details of the Directors’ remuneration packages for
the year ended 31 December 2021. It also sets out details
of the implementation of the Remuneration Policy for
Executive and Non-Executive Directors for the year
ending 31 December 2022.
The effects of COVID weighed heavily over the year with the
overall performance of the Company suffering price increases
and delays both in production and transportation. This, in
turn, put great pressure on the Executives, notwithstanding
the achievement of some of their annual bonus performance
targets. The effort put in by the team is in no doubt and this
led to significant progress towards improved cohesion within
the merged business. The management team has amended
monitoring processes and reporting of all the key metrics,
such as stock control and the production cycle, thus enabling
much improved internal efficiency. It takes time, however, for
the results of these improvements to affect financial results
which was exacerbated by general reticence of potential
buyers to commit to transactions.
In 2021, albeit acknowledging the management’s enormous
efforts, the Remuneration Committee felt obligated to apply
some downward discretion over the final outturn of the
bonus awards. This, in no way, should be interpreted as a
criticism but better aligns shareholder outcomes with the
Company’s management. Executive salaries were increased
for 2022 but remain below the mid-market rates which
reflects the Canadian and US inclination towards a lower fixed
and higher variable pay structure. The long-term incentive
arrangements remain unadjusted from establishment on the
merger in 2020 which we believe to be best practice and
avoids short term distortion of this important alignment of
executive reward and shareholder value.
Key Performance Indicators (“KPI”) have been set for the
2022 bonus which focus on sales, the reduction of costs
and the development of new product and key relationships.
These KPIs are further
interpreted and adjusted for
application down the management structure to ensure the
entire workforce concentrates on the Board’s priorities and
is rewarded for success. The Remuneration Committee spent
time refining high level KPIs which should require less annual
adjustment, while believing that continuity of targets helps
management over a longer horizon.
We recommend our Report to shareholders although do not
seek their formal approval. I would be delighted to discuss
any of the above matters with individual shareholders should
they so wish.
Michael Farrow
Chairman, Remuneration Committee
27 June 2022
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Directors’ Remuneration Report
Remuneration policy
This part of the Report sets out the remuneration policy for the Company. The policy for the Executive Directors is determined
by the Committee and the Committee recommends to the Board any adjustments to salary and bonus awards. The Committee
also makes recommendations to the Board in respect of the remuneration packages of certain members of the senior team
based on recommendations from the Chief Executive Officer. Authority is delegated to the Executive Directors to manage the
remuneration packages of all other employees. Awards of share options to employees under the Company’s Share Option Plan
are the responsibility of the Board which considers recommendations from the Chief Executive Officer in respect of employees.
The aim of the Committee is to ensure that the remuneration packages are sufficiently competitive to attract, retain and motivate
individuals of the quality required to contribute towards the strategic objectives of the Group and thereby enhance shareholder
value. The Committee also aims to ensure that all employees receive rewards that fairly reflect their seniority, level of work and
contribution to the Company.
The Company is committed to promoting equal opportunities in employment with all employees and potential employees receiving
equal treatment.
Executive Director Policy
The summary of the remuneration policy for the Executive Directors is set out below. Full details of the remuneration packages are
given in the Report on Remuneration on pages 33-41.
Salary
Purpose and link to strategy
To provide an appropriate salary level to support retention and recruitment of Executive
Directors.
I
N
T
R
O
D
U
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T
O
N
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T
R
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P
O
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Operation
Executive Directors receive the same annual salary.
Base salaries are reviewed annually on 1 January with regard to the external economic
environment and salary adjustments across the Company.
The salaries of the Chief Executive Officer and Chief Commercial Officer are designated in
sterling but paid in local currencies. The salaries are re-based annually to allow for differentials
arising through foreign exchange.
Opportunity
Salary increases will be awarded taking into account the outcome of the review.
Salary increases will usually be in line with increases awarded to other employees but the
Committee may make additional adjustments where there has been a change in role or
responsibilities or to reflect a gap in market positioning.
Performance metrics
Not applicable for base salaries.
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
I
N
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Pension and Benefits
Purpose and link to strategy
To provide an appropriate range of benefits and pension contributions to assist in the
attraction and retention of the calibre of Executive Directors required for delivery of corporate
and strategic objectives.
Operation
The CEO, based in the US, does not receive any benefits or employer contributions to a
pension plan.
The CFO, based in the UK, has income protection and life assurance cover. Benefits are
administered internally and a review of providers and prices is conducted annually through a
broker to ensure that the level of rates and cover remain competitive. A matching employer
contribution of up to 5% of annual base salary is made to the Group personal pension plan.
The CCO, based in Canada, has private medical and dental insurance and life assurance cover.
He does not receive any employer pension contributions to a pension plan.
Opportunity
The benefits and pension packages, which are tailored to the individual Executive Directors,
are set at a level that the Committee considers is appropriate.
The value of benefits will vary each year according to the cost of provision.
Performance metrics
Not applicable for benefits and pension package.
Annual Bonus
Purpose and link to strategy
To reward the achievement of corporate targets.
Operation
Objectives are set as early as possible in the financial year.
Opportunity
The bonuses may be paid in cash and/or shares after the end of the financial year to which
they relate.
The annual bonus award is determined as a percentage of base salary based on performance
against pre-agreed objectives. When deciding on the level of bonus awards, the Committee
will have regard to the extent to which achievement of the objectives has contributed to
progress against the Company’s strategic drivers.
The bonus is contractual but at the discretion of the Committee.
The maximum bonus potential for Executive Directors is 100% of salary.
Performance metrics
The targets for the Executive Directors comprise the corporate, strategic and financial
objectives agreed by the Board. There are no individual objectives.
The Committee uses its judgement, supported by measurable evidence, to decide the extent
to which the objectives have been achieved and exercises its discretion to decide on the level
of bonus awards to be paid.
The Committee considers whether operations have been completed to acceptable HSE
standards and considers whether there were any HSE incidents when considering the level of
bonus payments.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
Share Option Plan (Option Plan)
Purpose and link to strategy
To support alignment with shareholders through the link to the creation of shareholder value.
Operation
The Option Plan was introduced in 2018 to replace historical long-term incentive arrangements.
The Committee makes awards of options at an exercise price based on the prevailing market
price of the Company’s shares as at the date of grant. The options will vest in equal tranches
after one, two and three years’ further continuous employment subject to leaver provisions.
Opportunity
Option awards are usually made for a three-year term but the Committee has discretion over
the frequency and quantum of awards.
Performance metrics
None.
Further details on the policy
Performance measurement
Annual bonus – the annual bonus is based on a range of corporate and individual objectives that the Board have agreed are key
to progressing and delivering the Company’s strategy. These can be operational, strategic and financial. Performance targets are
designed to be stretching but achievable having regard to the Company’s strategic priorities from time to time.
Option Plan – the Option Plan ensures alignment with shareholders being focussed on share price growth over the medium to long
term. Vesting of equity awards is phased with options vesting in equal tranches in years 1, 2 and 3 after the date of grant. Options
granted in exchange for options in predecessor companies at the time of the Merger vest in accordance with the terms of the
original option grant. The Option Plan for the Executive Directors is the same as that for all other employees.
Remuneration policy for other employees and consultation
The Company’s policy for all employees is to provide remuneration packages that reward them fairly for their contribution and role
within the Company.
All employees are entitled to receive the full range of Company benefits but with different qualifying periods and levels of cover
depending on seniority. The most senior employees below Board level are eligible to receive an annual bonus based on performance
against corporate targets.
All permanent employees have been granted options under the Option Plan on the same terms as the Executive Directors but
proportionate to their employment contracts and their ability to contribute towards the Company’s strategic objectives. This
ensures that an element of remuneration is deliverable through a scheme that aligns participants with shareholders.
The Company does not consult with employees on the effectiveness and appropriateness of the policy but, in considering individual
salary increases, the Committee does have regard to salary increases across the Company.
Recruitment
In the case of recruiting a new Executive Director, the Committee can use all the existing components of remuneration as set out
in the policy table.
The salary of a new appointee will be determined by reference to the experience and skills of the individual, market data, internal
comparatives and the candidate’s current remuneration. New appointees may be entitled to receive the full range of Company
benefits on joining and, if the Committee considers it appropriate, a matching employer contribution of up to 5% of annual base
salary to the Group personal pension plan.
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In relation to any elements of variable pay, the Committee will take the following approach:
Component
Annual Bonus
Approach
Maximum annual opportunity
The annual bonus would operate as
outlined in the Policy for existing Executive
Directors. The relevant maximum will be
pro-rated to reflect the period of employment
over the year. Consideration will be given to
the appropriate performance targets at the
time of joining.
100% of base salary in respect of the
current financial year.
Option Plan
The Option Plan would operate as outlined
in the policy for existing Directors. An award
of options may be granted on joining subject
to the Company being in an open dealing period.
Committee discretion.
Service contracts, exit payments and change of control provisions
The Executive Directors have rolling term service agreements with the Company. Details of the Directors’ service contracts and
appointment dates are as follows:
Executive Directors
Appointment date
Contract date
Employing company
Lawrence Zulch
Matthew Harper
Peter Dixon-Clarke
2 April 2020
2 April 2020
10 August 2020
2 April 2020
2 April 2020
7 August 2020
Invinity Energy Systems (US) Corporation
Invinity Energy Systems (Canada) Corporation
Invinity Energy Systems plc
The Directors’ service contracts are available to view at the Company’s registered office and prior to each Annual General Meeting
at the venue for the meeting.
The notice period for the Executive Directors is six months’ notice in writing by either party. The Company has the right to make
a payment in lieu of notice of six months’ salary and, in the case of the CEO, a reimbursement of certain benefits if relevant. The
Committee will consider termination payments on a case-by-case basis. It will consider the terms of the Director’s contract and the
circumstances of the termination and might consider making an ex-gratia payment where the circumstances and/or a Director’s
contribution to the Company justifies this. If an ex-gratia payment is to be made, the Committee will ensure that it is satisfied that it
is in the best interests of the Company to make such a payment and that there is no “reward for failure”.
The Committee also has discretion to settle any other amounts which it considers are reasonably due to the Director such as
where the parties agree to enter into a settlement agreement and the individual is required to seek independent legal advice.
The Committee can approve new contractual arrangements with a departing Director covering matters such as confidentiality or
restrictive covenants and/or consultancy arrangements where it believes this is in the best interests of the Company.
Treatment of incentives for leavers and following a corporate event
a) Annual bonus
In relation to annual bonuses, a bonus payment will not usually be made if the Director is under notice at the bonus payment date
or has already left.
b) Option Plan
In relation to awards granted under the Option Plan, all unvested options will lapse on cessation of employment. In Good leaver and
Intermediate leaver circumstances (as defined in the Option Plan rules), all vested options will be retained and will be exercisable for
a period of six months after the cessation of employment or 12 months in the case of death. The Committee has discretion to further
extend the exercise period for Intermediate leavers and to allow the vesting of all or part of the unvested portion of an option for
Good leavers.
In the event of change of control of the Company, all vested options will remain exercisable for a period of six months after the
change of control and the Committee has the discretion to allow the vesting of all or part of the unvested portion of an option.
Subject to the agreement of any acquiring company, option holders may be offered the opportunity to exchange their options for
equivalent options over shares in the acquiring company for a period of up to six months from the change of control taking effect.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
The Option Plan rules include malus and clawback provisions whereby the Committee has discretion to reduce the number of
shares subject to an existing Option award in the event that an Option has been granted or has vested on the basis of any incorrect
information relevant to the setting of any performance condition or condition of satisfaction including a material misstatement in the
published financial results or in the event of fraud or misconduct by an Option holder including where an Option holder has been
dismissed for cause. In the case of an Option which has been exercised, the Committee can require the Option holder to repay the
Company an amount equal to the benefit by way of a transfer of shares or cash.
The Board can amend the Option Plan rules at any time provided that an option holder’s existing rights cannot be adversely
affected without the Option holder’s consent.
Non-Executive Director Policy
The Company’s Articles of Association provide that the Board can determine the remuneration of the Directors. The policy for the
Chairman and Non-Executive Directors is as follows:
Fees
Purpose and link to strategy
To provide a competitive level of fee which will attract and retain high calibre directors with the
range of skills and experience required to support the Executive Directors and assist the Company
in delivering its objectives.
Operation
The fees for the Chairman and Non-Executive Directors are determined by the Board as a whole
with directors absenting from discussions regarding their own remuneration.
The Board has regard to level of fees paid to the Non-Executive Directors of other similar sized
companies and the time commitment and responsibilities of the role.
Neither the Chairman nor the Non-Executive Directors participate in any of the Company’s share
schemes.
Opportunity
The current annual fees are:
Chairman: £60,000
Non-Executive Director basic fee:
UK: £30,000
USA: $50,000
Senior Independent Director fee: £5,000
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Committee Chair fee:
UK: £5,000
USA: $10,000 in the event that a/the US Director is appointed to chair a Committee
No additional fees are payable for acting as Chairman of the Nomination Committee or for
membership of a Committee except in the case of a/the US Director who will receive $7,500 for
membership of any Committees other than the Remuneration Committee.
The fee levels will be reviewed on a periodic basis with reference to the time commitment of the
role and fee levels in comparative companies.
No benefits or other remuneration are provided.
Performance metrics
Not applicable to Non-Executive Directors.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Recruitment
The Committee will follow the Non-Executive Director remuneration policy as set out above in relation to the appointment of a new
Non-Executive Director.
Terms of appointment
The Non-Executive Directors serve under letters of appointment. Their appointments can be terminated at any time by either
party giving three months’ notice to the other. The appointments can also be terminated by the Company without notice in certain
circumstances including incapacity for three months in any 12-month period, serious or repeated breach of obligations in connection
with the appointment or unsatisfactory performance as determined by the Board.
Details of the Non-Executive Director appointments are set out below:
Director
Appointment date
Original appointment letter
Revised appointment letter
Neil O’Brien
9 September 2016
8 September 2016
14 March 2019 – in respect
of appointment as Executive
Chairman
13 March 2020 – in respect
of appointment as Non-
Executive Chairman effective
2 April 2020
Michael Farrow
Rajat Kohli
16 March 2006
22 June 2020
16 March 2006
20 June 2020
Jonathan Marren*
1 March 2016
23 February 2016
Kristina Peterson
2 November 2021
30 October 2021
*Jonanthan Marren was Chief Financial Officer from 9 July 2012 to 29 February 2016
—
—
—
—
The Directors’ letters of appointment are available to view at the Company’s registered office and prior to each Annual General
Meeting at the venue for the meeting.
Report on remuneration
Remuneration Committee membership and meetings
As at 31 December 2021, the Committee comprised Michael Farrow as the Committee Chairman, Rajat Kohli, Jonathan Marren and
Kristina Peterson. Neil O’Brien stepped down as a member of the Committee on 20 May 2021 and Rajat Kohli and Kristina Peterson
were appointed as members of the Committee on 20 May and 2 November 2021 respectively.
The Committee met once during the financial period and there were several informal meetings held during the year. Details of the
meetings attended during the financial year were as follows:
Director
Remuneration Committee meetings attended
Michael Farrow
Neil O’Brien (resigned 20 May 2021)
Jonathan Marren
Rajat Kohli (appointed 20 May 2021)
Kristina Peterson (appointed 2 November 2021)
Total meetings during year
1
1
—
—
—
1
During the financial year, the Committee’s main areas of activity included:
Approving bonus awards in respect of the year ended 31 December 2020 and setting the bonus caps for Executive Directors
and the members of the senior team immediately below Board level.
Approving the 2021 KPIs for the executive bonus plan.
Approving the alignment of the base salaries of the senior team immediately below Board level.
Approving the remuneration package for the Chief Operating Officer who moved from a consultancy position to employee.
Considering the timing of awards of options to new permanent employees.
No individual is involved in determining his or her own remuneration.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
External advice
The Committee obtains external legal advice from Fox Williams in relation to employment matters.
The Committee considers that the advice it received during the financial period was objective and independent.
Total remuneration
The table below reports a single figure for total remuneration for each Executive Director:
Salary
£’000(i)
Benefits
£’000(ii)
Annual bonus
£’000(i)
Long-term incentives
£’000 (v)
Pension benefits
£’000
Total
£’000
Directors at
31 December 2021
Lawrence Zulch
(appointed 2 April 2020)
Matt Harper
(appointed 2 April 2020)
Peter Dixon-Clarke
(appointed 10 August 2020)
Former Director
Fraser Welham
(resigned 10 August 2020)
Year
ended
Year
ended
31 Dec 21 31 Dec 20 31 Dec 21 31 Dec 20
Year
ended
Year
ended
Year
ended
Year
ended
31 Dec 21(iii) 31 Dec 20(iv) 31 Dec 21 31 Dec 20
Year
ended
Year
ended
Year
ended
Year
ended
31 Dec 21 31 Dec 20 31 Dec 21 31 Dec 20
Year
ended
Year
ended
164.0
103.9
—
—
72.6
101.1
154.4
106.6
1.9
1.4
72.6
99.0
166.4 63.0
—
—
70.5
50.0
—
—
—
—
—
—
—
— 236.5 205.0
—
— 228.9 207.0
7.5
3.1 244.4
115.6
N/A
88.0
N/A
8.0
N/A
115.0
N/A
—
N/A
5.0 N/A
216.0
(i) Salaries and bonuses of Lawrence Zulch and Matt Harper are designated in sterling but paid in local currencies. Figures for Lawrence Zulch
and Peter Dixon-Clarke include payments of £16,400 each in respect of untaken holiday.
(ii) Represents employer contribution to private medical and dental insurance cover.
(iii) Represents amounts paid in 2022 in respect of bonus awards for the year ended 31 December 2021.
(iv) Represents amounts paid in 2021 in respect of bonus awards for the year ended 31 December 2020.
(v) A number of options vested during the year ended 31 December 2021. The value of the vested options, calculated with reference to the mid-
market price on the various vesting dates less the cost of exercise, was £24,231 for Matt Harper (2020: £11,159) and £17,500 for Peter Dixon-
Clarke (2020: £0). The options had not been exercised as at the date of this report.
The table below reports a single figure for total remuneration for each Non-Executive Director:
Directors at
31 December 2021
Neil O’Brien
Michael Farrow
Rajat Kohli
Jonathan Marren (appointed as SID on 1 May 2021)
Kristina Peterson (appointed 2 November 2021)
Basic Fees £’000
Additional Fees £’000
Total Fees £’000
Year ended
31 Dec 2021
Year ended
31 Dec 2020
Year ended
31 Dec 2021
Year ended
31 Dec 2020
Year ended Year ended
31 Dec 2021 31 Dec 2020
60.0
30.0
30.0
30.0
6.2
60.0
30.0
15.0
30.0
—
—
5.0
—
8.3
—
—
—
—
5.0
—
60.0
35.0
30.0
38.3
6.2
60.0
30.0
15.0
35.0
—
No fees were paid to Non-Executive Directors for membership of a committee or for attending committee meetings nor were there
any contributions paid to any pension schemes.
Additional information in respect of single figure table of remuneration for the year ended 31 December 2021
Annual bonus
In respect of the financial period, the Committee agreed that the Executive Director annual bonus opportunity would be up to
100 per cent of base salary. The Committee had agreed objectives with equal weighting relating to project delivery, signed sales
contracts and development of strategic relationships.
The Committee agreed that the final bonus calculation for 2021 was 47%. The Committee had noted that a higher bonus amount
was justified on the basis of the extent to which the objectives had been achieved but felt it appropriate to scale back the level of
the bonus awards to ensure better alignment with shareholder outcomes.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Awards of share options during the financial year
There were no options granted to Executive Directors during the financial year.
Implementation of Executive Director remuneration policy for 2022
Base salaries
The base salaries of the Executive Directors were increased in the range of 5.8% to 6.7%, the differential being due to foreign
exchange differences, with effect from 1 April 2022.
Annual bonus
For 2022, the Executive Director annual bonus will be determined as a percentage of base salary based on performance against
pre-agreed corporate objectives. The maximum bonus potential is 100% of base salary.
For the financial year ending 31 December 2022, the Committee has agreed objectives with a range of weightings relating to signed
sales contracts, share price performance, achievement of milestones on the joint development program with Gamesa Electric and
production cost reductions.
Option Plan
The Committee does not plan to make any awards of share options to Executive Directors under the Option Plan during the 2022
financial year.
Benefits and pension contributions
The Executive Directors will receive the benefits and pension contributions in line with the policy.
Implementation of Non-Executive Director remuneration policy for 2022
No adjustments to Non-Executive Director fees are planned for the 2022 financial year. The Board has proposed the establishment
of an ESG Committee during 2022. This will be chaired by a Non-Executive Director who will receive an annual fee of £5,000 in line
with the Chairs of the Remuneration and Audit & Risk Committee.
The current fees are set out in the table below:
Role
Chairman
Type of fee
Total fee
£60,000
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Other Non-Executive Directors
Basic fee
£30,000 (UK) $50,000 (USA)
Chair of Committees with exception
of Nomination Committee
Senior Independent Director
£5,000
£5,000
Statement of directors’ shareholdings
The table below summarises the interests of the Directors in office at 31 December 2021 in the Company’s shares:
Ordinary shares of €0.50 each
at 31 December 2021
Percentage of issued share capital
at 31 December 2021
Neil O’Brien
Lawrence Zulch
Matt Harper
Peter Dixon-Clarke
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson (appointed 2 November 2021)
87,500
2,258,949
1,597,845
12,000
9,224
—
155,876
—
0.08
1.95
1.38
0.01
0.01
—
0.13
—
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
In line with other investors, the directors who participated in the Placing announced in November 2021 acquired one short-term warrant
and one long-term warrant for every two Ordinary Shares purchased. The table below summarises the interests of the Directors in office
at 31 December 2021 in warrants to subscribe for shares:
Short-term warrants
over Ordinary Shares
of €0.50 each with
an exercise price of
150p exercisable
until 15 September 2022
% of short
term warrants
31 December 2021
Long-term warrants
over Ordinary Shares
of €0.50 each with
an exercise price
of 225p exercisable
until 16 December 2024
% of
long-term warrants at
31 December 2021
Neil O’Brien
Lawrence Zulch
Matt Harper
Peter Dixon-Clarke
Michael Farrow
Rajat Kohli
Jonathan Marren
Kristina Peterson (appointed 2nd November 2021)
—
6,000
—
6,000
—
—
—
—
Outstanding awards under the Option Plan
—
0.04
—
0.04
—
—
—
—
—
6,000
—
6,000
—
—
—
—
—
0.04
—
0.04
—
—
—
—
Director
Date of grant
Exercise
Options held at
price 31 December 2020
Lapsed/Relinquished/
exercised during year
Vested
during year
Options held
31 December 2021
Earliest
vesting date
Matt Harper
1 April 2020* £0.0434
263,034
—
—
263,034
(revised)
Matt Harper
1 April 2020* £0.0434
73,065
—
8,524
73,065
(revised)
Matt Harper
26 August 2020
£1.13
300,000
—
100,000
300,000
Peter Dixon-Clarke 26 August 2020
£1.13
500,000
—
166,666
500,000
Options fully
vested as at
15 July 2019
Options fully
vested as at
1 July 2021
26 August 2021
(options vest in equal
instalments at the end
of years 1, 2 and 3
following date of grant)
26 August 2021
(options vest in equal
instalments at the end
of years 1, 2 and 3
following date of grant)
* Following the merger between redT Energy PLC and Avalon Battery Corporation, the Company granted new options in substitution
and cancellation of options held under the Avalon Battery Corporation 2013 Equity Incentive Plan which had original dates of grant of
21 November 2014 and 7 July 2016. The options have retained the original vesting dates.
Share price movements during year ended 31 December 2021
The mid-market closing price of the Company’s shares at 31 December 2021 was 92.5 pence. The range of the trading price of the
Company’s shares during 2021 was between 73 pence and 236 pence per share.
Michael Farrow
Chairman of the Remuneration Committee
27 June 2022
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAGOVERNANCEInvinity Energy Systems plc
Directors’ Report
Principal activity
The principal activity of the Group is the production and
selling of vanadium flow batteries for the energy storage
market.
prices and expiry dates of the short- and long-term warrants
are 150 pence and 15 September 2022 and 225 pence and 16
December 2024 respectively. No other financial instruments
were held, outside of cash and receivables.
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Results and dividends
The trading results for the year, and the Group’s financial
position at the end of the period, are shown in the attached
financial statements. The Directors have not recommended
a dividend for the year (year ended 31 December 2020: £nil).
Major shareholders
At 21 June 2022, the Company had been notified of the
following interests of three percent or more of the Company’s
voting rights.
Shareholder/Fund Manager
Schroders plc
GSR Ventures
Number
of shares
% of issued
share capital
28,585,917
24.63%
8,495,506
7.32%
Amati Global Investors Limited
6,800,000
5.86%
Fidelity International Limited
6,732,535
5.80%
Johnson Chiang
6,019,612
5.19%
Brantingham & Carroll International
4,969,026
4.28%
Hong Kong Hao Yuan Shen Trading
3,579,276
3.08%
Financial risk management policies are disclosed in note 28
to the financial statements.
Political and charitable contributions
The Group made no charitable donations (year ended
31 December 2019: £nil) and no political donations (2020:
£nil) during the year.
Creditor payment policy
The Group does not follow any specific code or standard
on payment practice. However, it is the policy of the Group
to ensure that all of its suppliers of goods and services are
paid promptly and in accordance with contractual and legal
obligations. Average creditor days for the year were 12 days
(year ended 31 December 2020: 37 days), on the basis of
accounts payable as a percentage of amounts invoiced
during the year.
Directors’ and Officers’ insurance
The Group maintained directors’ and officers’ liability
insurance cover throughout the period. The Directors are
also able to obtain independent legal advice at the expense
of the Group, as necessary, in their capacity as Directors.
Directors
The present members of the Board are as listed in the Board
composition section of the Governance Report. The interests
of the Directors in office at the year-end in the share capital
of the Company are shown in the Directors’ Remuneration
Report along with details of their service contracts and terms
of appointment.
Employees
The Group had 149 employees at the year end, three of whom
are Executive Directors. The Group seeks to employ people
on the basis of merit and ability to perform the required roles.
The Group does not discriminate on any grounds including
race, gender, religion, age, nationality or sexual orientation.
Post balance sheet events
Post balance sheet events are disclosed in note 31.
Going Concern
Going concern is disclosed in the Chief Financial Officer’s
report along with note 2.
Relations with shareholders
The company provides shareholders and stakeholders
with relevant information in a timely and balanced manner.
We understand and respect the rights of shareholders,
will convene Annual General Meetings in full consideration
of these rights and encourage full participation of both
institutional and private investors.
Principal risks and uncertainties
Information relating to the principal risks and uncertainties
facing the Group is set out in the Risk Management Report
on pages 18-20 of the Strategic Report.
Auditor
A resolution for the re-appointment of Pricewaterhouse
Coopers LLP as auditor of the company will be proposed at
the forthcoming Annual General Meeting.
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Related party transactions
Related party transactions are disclosed in note 29.
Peter Dixon-Clarke
Chief Financial Officer
27 June 2022
Financial instruments
During the period under review the Company granted
14.5m short-term warrants and 14.5m long-term warrants
in conjunction with its placing and open offer. The exercise
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA GOVERNANCEInvinity Energy Systems plc
Statement of Directors’ Responsibilities
in Respect of the Financial Statements
The directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulation.
Directors’ confirmations
In the case of each director in office at the date the Directors’
report is approved:
The Companies (Jersey) Law, 1991 requires the directors to
prepare financial statements for each financial year. Under that
law the directors have prepared the Group financial statements
in accordance with International Financial Reporting Standards
(IFRS) as adopted in the European Union.
Under The Companies (Jersey) Law, 1991, directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group
and of the profit or loss of the Group for that period. In preparing
the financial statements, the directors are required to:
select suitable accounting policies and then apply them
consistently;
state whether applicable IFRS as adopted in the
European Union have been followed, subject to any
material departures disclosed and explained in the
financial statements;
make judgements and accounting estimates that are
reasonable and prudent; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business.
The directors are also responsible for safeguarding the assets
of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for keeping proper accounting
records that 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 Law (Jersey), 1991.
The directors are responsible for the maintenance and
integrity of the Group’s website. Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
so far as the Director is aware, there is no relevant audit
information of which the Group’s auditors are unaware;
and
they have taken all the steps that they ought to have
taken as a director in order to make themselves aware
of any relevant audit information and to establish that
the Group’s auditors are aware of that information.
Peter Dixon-Clarke
Chief Financial Officer
27 June 2022
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Independent Auditors’ Report to the
Members of Invinity Energy Systems plc
Report on the audit of the financial statements
Opinion
In our opinion, Invinity Energy Systems Plc’s Group financial statements:
give a true and fair view of the state of the Group’s affairs as at 31 December 2021 and of its loss and cash flows for the year
then ended;
have been properly prepared in accordance with International Financial Reporting Standards as adopted in the European
Union; and
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included within the Annual Report and Financial Statements 2021 (the “Annual Report”),
which comprise: the consolidated statement of financial position as at 31 December 2021; the consolidated statement of profit
and loss, the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated
statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of
the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section
of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure
made in note 2 to the financial statements concerning the Group’s ability to continue as a going concern. Whilst the group has
secured £29 million additional funding during the year through a placing and open offer, the appropriateness of the going concern
assessment of the Group is dependent on existing contracts being delivered, new contracts being closed, and manufacturing
costs reducing in line with forecast. If these conditions are not met, the Group is forecasted to require additional funding in order
to continue trading and delivering on its strategic objectives. Also, there is no certainty that short-term warrants, which are due
to expire in September 2022 and which may provide additional funding, will be exercised. These conditions, along with the other
matters explained in note 2 to the financial statements, indicate the existence of a material uncertainty which may cast significant
doubt about the Group’s ability to continue as a going concern. The financial statements do not include the adjustments that would
result if the Group were unable to continue as a 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.
Our evaluation of the directors’ assessment of the Group’s ability to continue to adopt the going concern basis of accounting included:
obtaining future cash flow forecasts, covering base case and a severe but plausible downside case, for a period of at least
12 months from the date of approval of the financial statements. We assessed the forecast assumptions used in the base and
severe but plausible downside scenarios;
review of past forecasting accuracy by the directors;
testing the mathematical accuracy of the forecasts;
corroborating the forecast budgeted revenue with confirmed sales orders or revenue pipeline of the Group;
comparing the assumptions used within the going concern model to the board approved budgets and business plans;
reviewing and evaluating management’s sensitivities and performing additional sensitivity analysis over key assumptions in
the model in order to assess the potential impact of a range of possible outcomes; and
reading the disclosures in the financial statements and checking these were consistent with the Group’s plans for future
fundraising and the group’s current funding position.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
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Our audit approach
Context
Invinity Energy Systems plc is an independent, Jersey incorporated company. Its key subsidiaries are based in the UK, Canada
and United States of America. The principal activities of the company and its subsidiaries relate to the manufacture and sale of
vanadium flow battery systems plus associated installation, warranty and other services. Its manufacturing and assembly sites are
located in the UK and Canada.
Overview
Audit scope
We conducted full scope audits on four components and the audit of specified balances and classes of transactions on
one component. The scope of work at each component was determined by its contribution to the group’s overall financial
performance and its risk profile.
We engaged our network firm in Canada to perform the audit procedures for components based in the United States of
America and Canada. The work on the other components was performed by us.
The components where audit work was performed accounted for approximately 97% of total assets.
Key audit matters
Material uncertainty related to going concern
Revenue Recognition
Onerous Contracts Provision and Inventory Valuation
Warranty Provision
Impairment of goodwill
Materiality
Overall materiality: £650,000 (2020: £500,000) based on 1% of total assets.
Performance materiality: £487,500 (2020: £375,000).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the
results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we determined the
matters described below to be the key audit matters to be communicated in our report. This is not a complete list of all risks
identified by our audit.
Revenue Recognition, Onerous Contract Provision and Inventory Valuation and Warranty Provision are new key audit matters
this year. Accounting for acquisition and purchase price allocation of Avalon Battery Corporation (Note 7) and COVID-19 risks and
uncertainties (Note 2), which were key audit matters last year, are no longer included because of their nature being specific to the
2020 financial year end. Otherwise, the key audit matters below are consistent with last year.
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Key audit matter
How our audit addressed the key audit matter
Revenue Recognition
The Group recognised revenue totalling £3.2m for the year
(2020: £0.4m). A total of £2.8m of this related to two contracts in
the UK; Energy Superhub Oxford (ESO) and Scottish Water. The
Group has identified 4 performance obligations under IFRS 15.
We focused on this area due to the greater magnitude of revenue
being recognised in the current year and the complexities
associated with IFRS 15 when selling under contract. (Note 4)
Onerous Contracts Provision and Inventory Valuation
At the balance sheet date the Group has inventory of £5.8m and
an onerous contract provision of £4.9m. The onerous contract
provision relates to 8 contracts.
We have focused on the completeness of this provision and
valuation of inventory as determining the appropriate provision
for contracts that are, or are expected to become, loss making
requires a significant level of judgement. The calculation of the
provision will require identification of the costs expected to be
incurred and the benefits expected to be derived from individual
contracts.
Further, the assessment of inventory valuation is inherently
subjective and requires the exercise of judgment in determining
the appropriate amount of provision. (Note 21)
We obtained and assessed management’s IFRS 15 revenue
recognition paper including the identification of the different
performance obligations. We agreed with management’s
conclusion on performance obligations when considered
against IFRS 15’s concept of transfer of control. A key factor
being that a customer has control of the battery system once
delivered on site but not yet installed.
For all contracts where a material amount of revenue was
recognised in the current year we performed the following
testing:
obtained the underlying contract;
tested management’s recognition of revenue against the
performance obligations outlined in their accounting policy
agreeing that point in time recognition is appropriate;
corroborated the amount and allocation of the transaction
price against the contract and the performance obligations;
and
corroborated transfer of control for the battery systems by
reference to supporting evidence including goods delivery
notes and shipping documentation.
Based on our work performed we believe revenue recognition
is correctly applied.
In testing the completeness of the onerous contract provision
and valuation of inventory we performed the following:
obtained the complete list of contracts signed with
customers to check if an onerous contract provision had
been recognised or at least considered for each one;
obtained management’s onerous contract provision
calculation and tested the constituent parts to
management’s assumptions and corroborating evidence.
Part of this test was to assess whether or not what was
recognised was sufficient in light of the evidence obtained;
considered losses made on contracts to date and
compared this to the calculated forecasted losses on
contracts to identify any inconsistencies; and
tested the recoverability of inventory taking into account
whether the costs of raw materials and finished goods
would be recovered through future sales based on current
contracts as an indicator.
Based on work performed we identified no indicators that would
suggest management’s assessment was materially misstated.
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Key audit matter
How our audit addressed the key audit matter
Warranty Provision
At the balance sheet date the Group has total warranty
provisions of £1.1m including £0.9m related to legacy products.
In testing the completeness of the warranty provision we
performed the following testing:
The assessment of future costs is inherently subjective and
requires the exercise of judgment in determining the appropriate
amount of provision that may be required and as such we have
focused on the completeness of this provision. (Note 21)
Impairment of goodwill
The Group holds goodwill of £23.9m. IAS 36 Impairment of
assets requires an annual impairment assessment to be carried
out for all indefinite life intangibles (goodwill) and whenever
there are any indications of impairment for all other assets.
We focused on this area due to the material nature of the
goodwill and given that the Group is currently incurring losses,
there is a risk that the value of goodwill may not be recoverable.
Management has determined the recoverable amount of the
relevant cash generating unit as at 31 December 2021 based
on fair value less costs of disposal (in line with the approach
adopted in 31 December 2020). (Note 15)
obtained management’s warranty provision calculation and
tested key inputs such as warranty period and number of
stacks for each contract included under warranty;
tested management’s fail rate calculation using supporting
evidence of stacks failed to date; and
tested management’s estimates of stack costs and labour
costs to supporting evidence.
We noted no issues from the above testing.
The specific provisions in place relating to the legacy products
have been in place since last year. We tested the build up of the
costs for the specific provision and concluded these as being
reasonable. Based on the work performed, we determined
that the assumptions used, and the approach taken, were
reasonable.
In auditing the impairment assessment we performed the
following:
we considered the appropriateness of using the fair value
less costs to sell approach;
we corroborated the share price at the balance sheet date
and checked the accuracy of the market capitalisation
calculation;
assessed the inclusion of all appropriate assets and liabilities
in the cash generating unit carrying value calculation and
agreed that all relevant balances had been included; and
verified the adequacy of relevant disclosures in the group
financial statements.
Based on the work performed, we determined that the
assumptions used, and the approach taken, were reasonable.
The recoverability of the goodwill is interlinked with the going
concern assumption therefore the recoverability of the asset is
at risk should the Group not continue as a going concern.
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How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group, the accounting processes and controls, and the industry in
which it operates.
The Group has one segment and cash generating unit. Following the acquisition of Avalon Battery Corporation, the Group has two
manufacturing and assembly locations in the UK and Canada. The accounting and financial reporting functions are also based in
these two regions.
Our group scoping was based on total assets within each component. We identified four components (the Company, Invinity Energy
(UK) Limited, Invinity Energy Systems (Canada) Corporation and Invinity Energy Systems (US) Corporation) which comprised a high
proportion of total Group assets which required an audit of their complete financial information. One other component was subject
to procedures over the provisions and contract liabilities financial statement line item level to obtain sufficient coverage.
The audit work was performed by the group engagement team based in the UK and component auditors based in Canada. We
maintained regular communication and conducted formal interim and year-end conference calls with component team, as well as
reviewing the audit work and reports to us.
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Together the above scoping gave appropriate coverage of all material balances at a Group level. On a consolidated basis, these
provided coverage of 98% of total assets.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our
audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both
individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall Group materiality
£650,000 (2020: £500,000).
How we determined it
1% of total assets
Rationale for benchmark applied
We believe that total assets are an appropriate measure for the Group given the current
stage of development of the business and products.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The
range of materiality allocated across components was between £224,000 and £550,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to £487,500 (2020:
£375,000) for the group financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls – and concluded that an amount in the middle of our normal range was
appropriate.
We agreed with those charged with governance that we would report to them misstatements identified during our audit above
£32,500 (2020: £25,000) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the
other information and, accordingly, we do not express an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We have nothing to report based on these responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of the Directors’ Responsibilities in Respect of the Financial Statements, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The directors are also responsible for 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.
In preparing the financial statements, the directors are responsible for assessing the Group’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 Group or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
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 auditors’ 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.
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Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to Companies (Jersey) Law 1991, tax legislation and employment legislation, and we considered the extent
to which non-compliance might have a material effect on the financial statements. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that
the principal risks were related to manipulation of financial results (such as revenue) and potential management bias in accounting
estimates to improve the performance of the Group. The group engagement team shared this risk assessment with the component
auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed
by the group engagement team and/or component auditors included:
Evaluation of the design effectiveness of management’s controls designed to prevent and detect irregularities;
Inquiries with the Board of Directors and Chief Financial Officer, including consideration of known or suspected instances of
tax matters, employment regulations and non-compliance with laws and regulations and fraud;
Review of board minutes;
Challenging assumptions made by management in its significant accounting estimates, in particular in relation to impairment
of intangible assets, provision for warranty, inventory and onerous contracts; and
Identifying and testing the validity of journal entries, in particular any journal entries posted with unusual revenue account
combinations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-
compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements.
Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with
Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
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Other required reporting
Companies (Jersey) Law 1991 exception reporting
Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit;
We have no exceptions to report arising from this responsibility.
Paul Cheshire
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants
Edinburgh
27 June 2022
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FINANCIAL STATEMENTS CONTENTS
FINANCIAL STATEMENTS
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
51
51
52
53
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
55
1 General Information
55
2 Summary of significant accounting policies
60
3 Accounting policies
4 Revenue from contracts with customers and income
from government grants
5 Cost of sales
6 Administrative expenses
7 Auditors’ Remuneration
8 Staff costs and headcount
9 Share based payments
10 Other items of operating income and expense
11 Net finance income and costs
12 Income tax expense
13 Loss per share
14 Cash flows from operating activities
15 Goodwill and other intangible assets
16 Property, plant and equipment
17 Right-of-use assets
18 Deferred tax balances
19 Inventory
20 Other current assets
21 Contract related balances
22 Trade and other receivables
23 Cash and cash equivalents
24 Trade and other payables
25 Lease liabilities
26 Issued share capital and reserves
27 Financial assets and liabilities
28 Financial risk management
29 Related parties
30 Group entities
31 Events occurring after the report period
Officers and Advisers
68
69
69
69
70
71
73
74
74
75
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81
81
83
83
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA Invinity Energy Systems plc Consolidated Statement of Profit and Loss
For the year ended 31 December 2021
Continuing operations
Revenue
Cost of sales
Gross loss
Operating costs
Administrative expenses
Other items of operating income and expense
Loss from operations
Finance income
Finance costs
(Loss)/gain on foreign currency transactions
Net finance costs
Loss before income tax
Income tax expense
Loss for the year
Loss per ordinary share in pence
Basic
Diluted
Note
4
5
6
10
11
11
11
11
12
13
13
2021
£’000
3,185
(6,622)
(3,437)
(14,439)
(3,388)
(21,264)
—
(45)
(63)
2020
£’000
406
(1,221)
(815)
(9,593)
(9,822)
(20,230)
1
(2,298)
(1,744)
(108)
(4,041)
(21,372)
(24,271)
—
(21,372)
—
(24,271)
(24.1)
(24.1)
(41.0)
(41.0)
The above consolidated statement of profit and loss should be read in conjunction with the accompanying notes.
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2021
Continuing operations
Loss for the year
Other comprehensive income/(expense)
Exchange differences on the translation of foreign operations
Total comprehensive loss for the year
2021
£’000
2020
£’000
(21,372)
(24,271)
10
(2,162)
(21,362)
(26,433)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
51
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Consolidated Statement of Financial Position
At 31 December 2021
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Right-of-use assets
Total non-current assets
Current assets
Inventory
Other current assets
Contract assets
Trade receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Provisions
Total current liabilities
Net current assets
Non-current liabilities
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Share-based payment reserve
Accumulated losses
Currency translation reserve
Other reserves
Total equity
Note
15
16
17
19
20
21
22
23
24
21
25
21
25
26
26
26
26
26
26
2021
£’000
2020
£’000
24,097
1,130
975
24,127
695
1,014
26,202
25,836
5,797
6,280
324
1,683
26,355
40,439
66,641
905
1,414
5
33
21,953
24,310
50,146
(3,513)
(5,142)
(350)
(5,976)
(2,468)
(2,644)
(161)
(1,927)
(14,981)
(7,200)
25,458
17,110
(420)
(420)
(595)
(595)
(15,401)
(7,795)
51,240
42,351
50,690
140,445
5,293
(143,557)
(1,670)
39
37,870
124,545
3,762
(122,185)
(1,680)
39
51,240
42,351
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
The financial statements on pages 51 to 91 were authorised by the board of directors and authorised for issue on
27 June 2022 and were signed on its behalf by:
Michael Farrow
Director
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Called-up
share
capital
£’000
Share-based
Share
premium
£’000
payment Accumulated
losses
£’000
reserve
£’000
Currency
translation
reserve
£’000
Other
reserves
£’000
Total
£’000
At 1 January 2021
37,870 124,545
3,762
(122,185)
(1,680)
39 42,351
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total comprehensive loss for the year
—
—
—
—
—
—
—
(21,372)
—
—
—
(21,372)
Transaction with owners in their capacity as owners
Contribution of equity, net of transaction costs
Exercise of share options
Share-based payments
12,286
534
—
15,148
752
—
—
(296)
1,827
Total contributions by owners
12,820
15,900
1,531
—
—
—
—
—
10
10
—
—
—
—
— (21,372)
—
10
— (21,362)
— 27,434
990
—
1,827
—
— 30,251
At 31 December 2021
50,690 140,445
5,293
(143,557)
(1,670)
39 51,240
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Called-up
share
capital
£’000
Share
premium
£’000
Share-based
payment
reserve
£’000
Accumulated
losses
£’000
Currency
translation
reserve
£’000
Other
reserves
£’000
Total
£’000
At 1 January 2020
8,157
101,035
2,250
(97,914)
482
(1,422)
12,588
Loss for the year
Other comprehensive loss
Foreign currency translation differences
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Contribution of equity, net of transaction costs
Issue of ordinary shares as a consideration for
a business combination, net of transaction costs
Exercise of share options
Share-based payments
Fair value realised on note conversion
Total contributions by owners
—
—
—
—
—
—
11,704 20,030
17,980
29
—
—
3,423
57
—
—
29,713
23,510
—
—
—
—
—
—
1,512
—
1,512
(24,271)
—
—
(24,271)
—
(2,162)
—
(2,162)
(24,271)
(2,162)
— (26,433)
—
—
—
—
—
—
—
—
—
—
—
—
—
31,734
— 21,403
86
—
1,512
—
1,461
1,461
1,461 56,196
At 31 December 2020
37,870
124,545
3,762
(122,185)
(1,680)
39 42,351
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Cash flows from operating activities
Cash used in operations
Interest received
Interest paid
Net cash outflow from operating activities
Cash flows from investing activities
Acquisition of intangible assets
Acquisition of property, plant and equipment
Net cash outflows from investing activities
Cash flows from financing activities
Payment of lease liabilities
Proceeds from the issue of share capital, net of transaction costs
Proceeds from the issue of convertible notes, net of transaction costs
Acquisition of cash through business combination
Proceeds from the exercise of share options and warrants
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Note
14
15
16
25
2021
£’000
2020
£’000
(22,964)
—
—
(10,885)
1
(32)
(22,964)
(10,916)
(18)
(733)
(751)
(9)
(349)
(358)
(320)
27,434
—
—
990
(163)
28,915
1,944
1,264
37
28,104
31,997
4,389
21,953
13
20,723
1,243
(13)
26,355
21,953
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
1 General Information
Invinity Energy Systems plc (the ‘Company’) is a public company limited by shares incorporated and domiciled in Jersey. The
registered office address is Third Floor, IFC5, Castle Street, St. Helier, JE2 3BY, Jersey.
The Company is listed on the Alternative Investment Market of the London Stock Exchange with the ticker symbol IES.L.
The principal activities of the Company and its subsidiaries (together the ‘Group’) relate to the manufacture and sale of vanadium
flow battery systems and associated installation, warranty and other services.
2 Summary of significant accounting policies
Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as
adopted by the European Union, the associated interpretations issued by the IFRS Interpretations Committee (together ‘IFRS’) and
in accordance with the Companies (Jersey) Law 1991.
Separate presentation of the parent company financial statements is not required by the Companies (Jersey) Law 1991 and,
accordingly, such statements have not been included in this report.
The significant accounting policies applied in preparing these consolidated financial statements are set out below. These policies
have been consistently applied throughout the period and to each subsidiary within the Group.
The financial statements have been prepared under the historical cost convention except where stated.
Going concern
The successful winner, or winners, of the second phase of the UK Government’s LODES competition is expected to be announced
in the first half of 2023. Due to the extensive work required in preparing for the submission, contracting is expected to complete
soon after the winner is announced, along with the payment of a material deposit on signing. Similar government supported
opportunities are in progress in both the US and Australia, though LODES is considered the most advanced of the three.
Absent the exercise of any warrants as described below, but including a deposit from the LODES, or similar contract, the latest cash
flow forecasts indicate that provided existing contracts are delivered, new contracts are closed and manufacturing costs reduce as
forecast, the existing cash will be sufficient to fund the business for at least 12 months from the signing of the balance sheet.
14.5m short-term warrants were granted in 2021 and should all, or some, of these warrants be exercised prior to expiry on
15 September 2022 then the Company will receive up to an additional £21.8m of cash. The Group’s cash balances at the end of May
2022 totalled £18.1m. Should all of the short-term warrants be exercised within the next 12 months then the existing cash will be
sufficient to fund the business for at least 12 months from the signing of the balance sheet.
However, the exercise price of the short-term warrants is 150p and, at the market close on 22 June 2022, the Company’s share price
is below this exercise price at 53p. Accordingly there is no certainty that any of the warrants will be exercised.
A change to the terms of the short-term warrants, such as the expiry date, is conditional upon the approval of the holders of the
short-term warrants and requires at least 50% of the subscription rights for such class of warrants to vote in favour at a General
Meeting and there can be no certainty that any such change in the terms will be approved.
Whilst 2021 demonstrated both the support of the Company’s investors and the resilience of its organisation, as with many groups
at this stage of development it remains reliant on timely receipts and closely managed costs. Should insufficient short-term warrants
be exercised, existing contracts be delivered more than six-months late or the Group fail to win the LODES, or an equivalent,
contract or close it later than the second quarter of 2023 then, assuming the Group maintains its forecast operational capacity, it will
be necessary to raise further funding within the next 12 months in order to continue trading and deliver on the strategic objectives.
The Group’s need to secure receipts from the exercise of the warrants or through winning new contracts, customers or additional
funding creates a material uncertainty that casts significant doubt about its ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the Group were unable to continue as a going concern.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
In addition to the issues discussed above, the directors have also reviewed other varying, and wide-ranging information relating to
both present and future conditions when reaching their conclusion regarding going concern. These included the:
growing opportunities presented by the emergent energy storage market;
growing levels of Government engagement and support in the three key markets;
growing sales pipeline of 686 MWh in May 2022 vs 273 MWh in May 2021; and
validation of the business provided by the continued engagement of EDF following the ESO contract in bidding together for
Phase 2 of the LODES contract (following its winning of Phase 1).
Foreign currency
Presentation currency
The consolidated financial statements are presented in Great British Pounds (GBP) rounded to the nearest thousand (£000), except
where otherwise indicated.
Functional currency
Items included in the financial information of the individual companies that comprise the Group are measured using the currency of
the primary economic environment in which each subsidiary operates (its functional currency).
Whilst Jersey uses the Jersey Pound as its currency, Jersey is in a currency union with the United Kingdom and so the functional
currency of the parent company of the Group has been determined to be GBP.
Foreign currency transactions
Transactions in currencies other than an entity’s functional currency (foreign currencies) are translated using the exchange rate
on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of transactions denominated in a
foreign currency are translated into GBP using the relevant exchange rate at the date of the transaction.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at
the balance sheet date of monetary assets and liabilities denominated in foreign currencies, are recognised in the consolidated
statement of comprehensive loss within gains/ (losses) on foreign currency transactions.
Foreign currency gains/(losses) realised on the retranslation of subsidiaries as part of the year-end consolidation are recorded in the
translation reserve that forms a part of shareholders’ funds in the consolidated financial statements of the Group.
Consolidation of subsidiaries
Subsidiaries are all entities over which the Company has control. The Company controls an entity when it is exposed to, or has rights
over, variable returns from its involvement with the entity and can affect those returns through its ability to exercise control over the
entity. Subsidiaries are consolidated in the Group financial statements from the date at which control is transferred to the Company.
Subsidiaries are deconsolidated from the date that control ceases. The ability to control an entity may cease because of the sale of
a subsidiary or other change in the Company’s shareholding in that subsidiary, voting rights or board representation.
Foreign operations
Subsidiaries of the Company that are based in countries other than the UK or Jersey may have functional currencies that are
different from that of the Company. In addition, the Group financial statements are presented in GBP. The assets and liabilities
of foreign subsidiaries consolidated into these financial statements are translated into the Group’s presentational currency using
exchange rates prevailing at the end of the reporting period. Income and expense items are similarly translated using the month-
end rate for each month during the year. The exchange rates on the actual dates of transactions are used where exchange rates
fluctuate significantly within a month. Exchange differences arising on consolidation are recognised in other comprehensive income
and are accumulated as part of shareholder’s equity.
Investments in associates and joint arrangements
Associates are entities where the Company can exert significant influence but is not able to exercise control.
Joint arrangements may be incorporated, where an entity exists, or may be unincorporated, where the venture or joint operation is
governed by contract or other arrangement between two or more parties. The Company is not currently party to any unincorporated
joint arrangements.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
The Group accounts for its interests in associates and incorporated joint ventures using the equity method of accounting where the
relevant investment is initially recorded at the cost to acquire the interest. After initial recognition, the Group recognises its share in
the post-acquisition income and expenses of the associate in the statement of profit and loss with a corresponding increase (for
income) or decrease (for losses) in the carrying value of the investment in the associate.
Dividends received by the Company from an associate are treated as a reduction in the carrying value of the associate (as its net
assets have reduced by it giving the dividend) and income for the Group (as its net assets have increased by receiving the dividend).
The Group assesses the carrying value of associates for impairment at each reporting period end or at any other time where there
is an indication that an impairment may exist. Where there is an indication of impairment of an investment, the Group assesses if an
actual impairment loss exists by comparing the carrying value of the investment to its recoverable amount which is the lower of its
fair value less cost to sell or its value in use.
Fair value less costs to sell is determined by reference to the proceeds that could be expected to be received should the interest in
the associate be sold less the costs of doing so. Value-in-use is typically calculated by reference to the value of the discounted cash
flows expected to be received from the associate.
Where there is a deficit of recoverable value as compared to the carrying value of the investment then an impairment loss is
recognised in the consolidated statement of profit and loss in the amount of the calculated deficit. The carrying value of the
investment in the associate is also reduced by a corresponding amount.
Acquisitions
The Group allocates the purchase consideration given in respect of the acquisition of a subsidiary to the assets acquired and
liabilities assumed based on an assessment of their individual fair values at the date of acquisition. Any excess of the cost of the
acquisition over the fair value of assets acquired and liabilities assumed in the business combination is recognised as goodwill.
The assessment of fair value is made by comparing the discounted value of the future cash flows expected to be generated from
the CGU to which the goodwill has been allocated to the net book value of the assets and liabilities of that CGU including the
allocated goodwill. Where a deficit of discounted cash flows compared to the carrying value of the CGU’s net assets and allocated
goodwill exists, the goodwill is reduced to its recoverable amount with a corresponding amount recognised as an impairment
charge in profit or loss. A corresponding reduction is made to the carrying value of goodwill and then to the net assets of the CGU if
goodwill is insufficient to absorb the loss. Goodwill may also be tested for impairment under the fair value less costs to sell method
where the recorded value of goodwill is compared to the market or value of the Company calculated by reference to its share price.
Any such impairment loss is recognised in profit and loss in the period in which it is identified. Impairment losses related to goodwill
cannot be reversed in future years.
Transaction between entities within the Group
Transactions and balances between companies forming part of the Group together with any unrealised income and expenses
arising from intra-group transactions are eliminated in the preparation of the consolidated financial statements of the Group.
Discontinued operations
A discontinued operation is a component of the Company’s business that represents a separate major line of business or
geographical area of operations that has been disposed of or is held for sale. Classification as a discontinued operation occurs on
actual disposal or earlier if the operation meets the criteria to be held for sale. When an operation is classified as a discontinued
operation, the comparative consolidated statement of profit and loss is restated as if the operation had been discontinued from the
start of the comparative period.
Disposal of subsidiaries
Transactions that result in the loss of control of a subsidiary are accounted for as disposals. The previously consolidated assets
and liabilities and the carrying amount of any non-controlling interests in the subsidiary are derecognised. Any retained interest
in the former subsidiary is recognised at its fair value at the date when control is lost. A gain or loss on disposal is recognised as
the difference between the fair value of the consideration received together with the fair value adjustment made in respect of any
retained interest in the subsidiary as offset by the carrying value of the assets and liabilities derecognised. Any gains or losses of the
disposed entity that were previously recognised in other comprehensive income or loss and that require to be recycled to profit or
loss also form part of the gain or loss on disposal.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
New standards, amendments and interpretations effective and adopted by the Group in 2021
No new standards became effective for the preparation of financial statements in accordance with IFRS for the year ended 31
December 2021.
Amendments to existing standards previously issued by the IASB with effective dates during the year ended 31 December 2021 are
summarised below. There was no effect on the Group’s consolidated financial statements for the year ended 31 December 2021 as
a result of the adoption of these amendments.
Amendment to ‘IAS 37 Provisions, contingent liabilities and contingent assets’
An amendment to IAS 37 was published in May 2020 and requires the provision in respect of an onerous contract to also include
an assessment of the indirect costs, such as production overhead or indirect labour, that are expected to be incurred in servicing
a contract considered to be onerous.
The Company elected to early adopt the amendment as of 1 January 2020.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting
periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the
entity in the current or future reporting periods or on foreseeable future transactions.
Amendment to ‘IFRS 16 Leases’
IFRS 16 was issued by the IASB in January 2016 with an effective date of 1 January 2019 and introduced a single lease model
requiring the recognition of right-of-use assets for all leases with a term greater than 12 months together with a corresponding lease
liability. There is no longer any distinction between the accounting treatment for lease contracts that were previously classified as
either operating leases or finance leases. IFRS 16 was adopted by the Group in its 2019 annual report and financial statements, as
required by the standard.
On 28 May 2020, the IASB issued an amendment to the standard related to the treatment of rent concessions given by lessors in
relation to COVID-19. The Group did not receive any rent concessions related to COVID-19 that would require consideration of the
amendment to IFRS 16 and, accordingly, the amendment had no impact on the consolidated financial statements for the years
ended 31 December 2020 or 2021.
Amendments to ‘IFRS 9 Financial Instruments’, ‘IAS 39 Financial Instruments: Recognition and Measurement’ and ‘IFRS 7
Financial Instruments: Disclosures’
On 26 September 2019, the IASB issued ‘Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)’ related
to potential effects of the IBOR reform on financial reporting related to hedging instruments. The amendment was effective for
accounting periods starting on or after 1 January 2020. The Company does not currently use hedges or other purchased derivative
instruments and therefore there is no impact on the Group financial statements for the year ended 31 December 2021.
A second amendment related to the IBOR reform was issued on 27 August 2020 with an effective date of 1 January 2021. This
amendment is similarly not expected to have an impact on the financial reporting for the Group.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the financial statements in conformity with generally accepted accounting practice (GAAP) requires management
to make estimates and judgments. Those estimates and judgments can affect the reported values for assets and liabilities as well as
the disclosure of contingent assets and liabilities at the balance sheet date.
Management is also required to make estimates and judgments related to the reported amounts of revenues and expenses and
related to the timing of the recognition of those revenues and expenses.
Judgments made and estimates applied are based on historical experience and other factors including management’s expectations
of future events that are considered relevant. Actual results may differ from these estimates. The estimates, judgments and
underlying assumptions made are reviewed on an ongoing basis and specifically in the preparation of the interim and annual
published financial information.
Revisions to accounting estimates are recognised in the period in which the estimate is revised and applied consistently in future
periods subject to the ongoing reassessment of estimates.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
Critical judgments for the year under review
Going concern
The directors are required to assess whether it is appropriate to prepare the financial statements on a going concern basis. In
making this assessment the directors need to be satisfied that the Group can meet its obligations as they fall due and will remain
cash-positive for a period of at least 12 months from the date of approval of the financial statements. Potential additional funding
that is not yet committed at the date of approval of the financial statements cannot be anticipated in making the assessment of
going concern.
The directors make their assessment based on a cash flow model prepared by management and based on its expectation of cash
flows for the 18-month period from the date of approval of the financial statements. The extended period in the model provides
additional comfort that the 12-month solvency requirement can be met when making the assessment of going concern.
In preparing the cash flow model, assumptions have been made regarding the timing of cash collection from customers based on
the expected cash receipt under contracts that require milestone payments to be made by customers. The timing of the receipt of
milestone payments may not always align with or precede the costs incurred by the Company in performing its obligations under
a contract.
Downside sensitivities have been applied to the cash flows primarily related to the delay of customer receipts, from existing or
expected sales contracts, and fluctuations in the price of input materials, particularly electrolyte. Refer to ‘Basis of preparation’ for
details of the going concern analysis performed and the directors’ conclusions regarding going concern.
Notwithstanding the material uncertainty articulated in relation to the basis of preparation, the directors expect that the business
will continue to be viable throughout the model period and, accordingly, the financial statements have been prepared on a going
concern basis.
Revenue recognition
Sales contracts are assessed in accordance with the Group accounting policy for revenue recognition. The policy requires the
separate performance obligations, or promises, under the contract to be identified. Revenue is recognised only when a distinct
performance obligation under a contract is satisfied.
Some performance obligations are satisfied separately – for instance, the delivery of equipment, other obligations may be satisfied
in conjunction with other contract promises or where a contract calls for equipment sold under the contract to be integrated into a
larger project before formal acceptance is notified by the customer.
Where the ability of a customer to benefit from a product or service is dependent on the satisfaction of other performance
obligations, more than one promise may need to be bundled together as a combined performance obligation that must be satisfied
before the revenue related to each element can be recognised.
Identifying where equipment or, more likely, services are readily available from other providers is a key determinant as to whether
a contract promise represents a separate performance obligation or if it should be bundled with other promises that, together,
represent a single performance obligation.
The assessment of what constitutes a performance obligation can be complex and requires judgment. Revenue is only recognised
for each performance obligation under a contract when that performance obligation, bundled or otherwise, is satisfied. The
requirement to bundle combinations of goods and/or services together as a single performance obligation could delay the timing
of revenue recognition where the separate promises comprising the performance obligation are delivered sequentially.
Key sources of estimation uncertainty for the year under review
Warranty provision
The Company provides time-limited standard warranties in its contracts for sale of battery systems. In addition, customers may elect
to purchase separate, standalone extended warranties. Extended warranties are for periods greater than the standard warranties
that are provided with the purchase of all battery systems.
Estimating the costs that may be incurred by the Company in servicing warranty agreements requires management to estimate
the number of expected claims in relation to the total number of battery systems sold. In addition, an estimate of costs that the
Company could expect to incur to remedy each warranty claim should also be made to determine the amount of the total provision
that should be recorded for warranties.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
Provisions made in respect of expected warranty obligations are reassessed and remeasured where actual experience indicates
the claim rate may be higher or lower than initially expected or where costs to remedy warranty claims differ from the assumptions
used in calculating the provision. The release of an over-provision of warranty costs results in other operating income being
recognised in the period whereas an additional provision for warranties results in a charge being recognised.
Refer to note 21, contract related balances.
Provision for legacy products
Management has elected to provide ongoing maintenance for certain legacy contracts not otherwise covered under warranty.
Management has determined that it is necessary to provide for the costs of this ongoing maintenance or to provide for outright
decommissioning.
Refer to note 21, contract related balances.
Provision for onerous contracts
A contract is onerous when the unavoidable costs of meeting the Company’s obligations under the contract are expected to
be greater than the revenue earned under that contract. Previously, assessment of the unavoidable costs under a contract only
required direct costs such as parts and labour to be considered.
An amendment to ‘IAS 37 Provisions, contingent liabilities and contingent assets’ was published in May 2020 and requires the
provision in respect of an onerous contract to also include an assessment of the indirect costs, such as production overhead or
indirect labour, that are expected to be incurred in servicing a warranty claim. The Company elected to early adopt the amendment
as of 1 January 2020.
The assessment of future costs is inherently subjective and requires the exercise of judgment in determining the appropriate
amount of provision that may be required.
Refer to note 21, contract related balances.
Share based payments, warrants and employee options
The Company determines the fair value of share-based payments and employee options using a Black-Scholes methodology.
Black-Scholes uses certain assumptions to determine fair value including measures of share price volatility, expected conversion or
exercise rates and levels of employee retention, among others.
In estimating the value of future share price volatility, a key input of the Black-Scholes methodology, the Company uses historic
data relating to its share price. As the short and long-term warrants are listed, and therefore can be publicly traded, this provides an
alternative arms-length determination of fair value.
Operating segments
The Group is organised internally to report to the Executive Directors as a whole. The Executive Directors comprise the Chief
Executive Officer, the Chief Commercial Officer and the Chief Financial Officer. The Executive Directors, as a group, have been
determined, collectively, to prosecute the role of chief operating decision maker of the Group.
The chief operating decision maker is ultimately responsible for entity-wide resource allocation decisions, the evaluation of the
financial, operating and ESG performance of the Group.
The Group’s activities have been determined to represent a single operating segment being the provision of vanadium flow batteries
and ancillary services, principally comprising installation and integration services, and the provision of extended warranties for
battery units sold.
3 Accounting policies
Revenue
The Group measures revenue based on the consideration specified in the contracts for sale with customers. Revenue is recognised
when a performance obligation is satisfied by transferring control over a good or service to a customer. Control is usually considered
to have transferred to a customer on delivery of equipment to the customer’s site of operations. Revenue excludes any taxes such
as sales taxes, value added tax or other levies that are invoiced and collected on behalf of third parties, such as government tax
authorities.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
The Group generates revenue from the sale of battery storage systems and related hardware and services. The main portion of
sales is derived from contractual arrangements with customers that have multiple elements (or performance obligations), those
elements usually being the sale of battery systems, system related options, installation, and extended warranties. The sales
contracts do not include a general right of return.
For contracts that contain multiple elements or promises, the Group accounts for individual goods and services separately if they
are distinct. A product or service is distinct if it is separately identifiable from other items in the agreement and where a customer
can benefit from the good or service on its own or together with other resources that are readily available.
The consideration paid for each performance obligation is typically fixed. A significant portion of the aggregate payment due
under a contract for sale is normally due before delivery or completion of the service. The total consideration under the contract
is allocated between the distinct performance obligations contained in the contract based on their stand-alone selling prices. The
stand-alone selling price is estimated using an adjusted market assessment approach that looks to industry benchmarks or pricing
surveys for certain standalone products or services.
In addition, under the terms of its contracts for sale, the Group may be responsible for delivering battery systems to its customers.
When this is the case, the Group will invoice the relevant customer for, and will recognise as revenue, any charges incurred together
with any associated handling costs. The related costs incurred by the Group for shipping and handling services are recognised as
cost of sales concurrent with the recognition of the associated revenue.
Grant income
Government and other grants received are recognised in the consolidated statement of profit and loss in the period that the related
expenditure is incurred. Grant income received in respect of costs incurred is presented net within the associated cost category.
Capital grants are similarly netted against the relevant asset acquired or constructed.
Grant income received in advance of the associated expenditure is presented as deferred income within contract liabilities and
released to profit and loss as the associated expenditure is incurred. Grant income receivable is presented as accrued income within
contract assets until such time as it can be claimed or is received.
Finance income and costs
Finance income comprises interest on cash deposits, foreign currency gains and the unwind of discount on any assets that are
carried at amortised cost. Interest income is recognised as it accrues using the effective interest rate method.
Finance costs include foreign currency losses and the unwind of the discount on any liabilities held at amortised cost, such as lease
liabilities arising from lease contracts.
Employee benefits
Short-term benefits
Benefits provided to employees that are short-term in nature are recognised as expenses in the statement of profit and loss as the
related service is provided. The principal short-term benefits given to employees are salaries, associated holiday pay and other
periodic benefits such as healthcare and pension contributions made by the Company for the benefit of the employee. A liability is
recognised for the amount expected to be paid under short-term cash bonus plans if there is either a present legal or constructive
obligation to pay the amount and the amount can be reliably estimated.
Share based payments
The Group operates equity-settled share-based compensation plans, under which it compensates employees for services rendered
through the issue of equity instruments, deferred share awards or options to subscribe for ordinary shares of the Company. The fair
value of the employee services received in exchange for the grant of the equity instruments, shares or options is recognised as an
expense. The total amount to be expensed is determined by reference to the fair value of the options granted:
including any market conditions (for example, the Company’s share price)
excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth
targets, and the requirement to remain as an employee of the Group over a specified period)
including the impact of any non-vesting conditions (for example, the requirement for an employee to save)
Non-market performance and service conditions are included in the assumptions regarding the number of options that are
expected to vest. The total expense is recognised over the vesting period, which is the period over which all the specified vesting
conditions are to be satisfied.
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Notes
(forming part of the consolidated historical financial information)
In some circumstances, employees may provide services in advance of the grant date and therefore the grant date fair value is
estimated for the purposes of recognising the expense during the period between service commencement and the grant date.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on
the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated statement
of profit and loss, with a corresponding adjustment to equity.
Any social security contributions payable in connection with the grant of the share options is considered an integral part of the grant
itself, and the charge will be treated as a cash-settled transaction.
Taxes
The total tax charge or credit recognised in the statement of profit and loss comprises both current and deferred taxes.
Taxation is recognised in the consolidated statement of profit and loss except to the extent that it relates to a business combination
or items recognised directly in equity or other comprehensive income.
Current tax
The current tax charge is based on the taxable profit for the year. Taxable profit or loss is different from the profit or loss reported
in the statement of profit and loss as it excludes items of income and/or expense that are taxable or deductible in other years
(temporary differences) and it further excludes items that are never taxable nor deductible (permanent differences).
Deferred tax
Deferred tax is the tax that is expected to be payable or recoverable on differences between the carrying value of assets and
liabilities in the financial statements and the corresponding value of those assets and liabilities used to calculate taxable profit or loss.
Deferred tax assets are recognised as deductible temporary differences only where it is probable that taxable profits will be
generated against which the carrying value of the deferred tax asset can be recovered. Deductible temporary differences exist
where there is a difference in the timing of the recognition of an item of income or expense between the statement of profit and
loss and the calculation of taxable profit or loss (a temporary difference).
Deferred tax assets and liabilities are recognised using the liability method for all taxable temporary differences, except in respect
of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint operations. Where
the timing of the reversal of temporary difference arising from such investment related assets and liabilities can be controlled and
it is probable that the temporary difference will not reverse in the foreseeable future then the Group does not recognise deferred
tax liabilities on these items.
A deferred tax asset or liability is not recognised if a temporary difference arises on initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss.
Current and deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance
sheet date.
Earnings per share
The Group presents basic and diluted earnings per share (“EPS”) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the year.
Diluted EPS is determined by adjusting the weighted average number of ordinary shares outstanding used in the EPS calculation to
include all potentially dilutive ordinary shares, which, in the case of the Company, represents additional shares that could be issued
in relation to ‘in-the-money’ convertible notes, warrants or share options.
The effects of anti-dilutive potential ordinary shares are ignored in calculating diluted EPS. Anti-dilution is when an increase in
earnings per share or a reduction in loss per share would result from the exercise of such options, warrants or convertible instruments.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
Intangible assets
Goodwill
The Group allocates the fair value of the purchase consideration on the acquisition of a subsidiary to the assets acquired and
liabilities assumed based on an assessment of fair value at the acquisition date. Any excess of purchase consideration is recognised
as goodwill. Where goodwill is recognised, it is allocated to the cash generating units (CGUs) in a systematic manner reflective of
how the Group expects to recover the value of the goodwill.
Goodwill arising is recognised as an intangible asset in the balance sheet and is subject to annual reviews for impairment. Goodwill
is written off where circumstances indicate that the recoverable amount of the underlying CGU may no longer support the carrying
value of the goodwill. An impairment charge is recognised in the statement of profit and loss for the period in which it is determined
the goodwill is no longer recoverable. Impairment losses related to goodwill cannot be reversed in future periods.
In testing for impairment, goodwill recognised on business combinations is allocated to the Group of CGUs representing the lowest
level at which it will be monitored. Because the Group has been determined to consist of a single business unit, the carrying value
of goodwill is tested for impairment based on the recoverable value of the Group as a whole.
The recoverable amount of a CGU or a group of CGUs is based on the higher of its assessed fair value less costs of disposal or
its value-in-use. Value-in-use is calculated by reference to the expected future cash flows from the CGU, after discounting to take
account of the time value of money. Fair value less costs to sell can be based on a similar cash flow measure adjusted for disposal
costs or can be estimated by reference to similar comparable reference transactions.
Because the Company is listed, fair value can also be assessed by reference to the Company’s market capitalisation. Where cash
flows are used, they are risk weighted to reflect an assessment of future commercial success.
The key assumptions in assessing cash flows relate to the ability of the Company to develop existing markets and applications and
to establish new markets and applications for the sale and use of its battery systems. Prospective cash flows are also sensitive to
the Company’s ability to realise economies of scale as market penetration grows.
Internally generated intangible assets – research and development costs
Research
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Research activities are aimed
at creating new knowledge or the use of existing knowledge in new or creative ways to generate new concepts. Research activity
does not typically have a defined commercial objective at the outset.
Development
Where projects evolve toward commerciality or are related to a specific commercial objective they are assessed to determine
whether the activity constitutes development that is associated with a commercial objective or practical application.
The associated costs represent development costs and can be capitalised if, and only if, the following conditions can be
demonstrated:
the technical feasibility of completing the intangible asset so that it can be made available for use or sale;
the intention to complete the intangible asset for use or sale;
the availability of adequate technical, financial and other resources to complete the development and to use or sell it;
an asset is created that can be separately identified for use or sale;
it is probable that the asset created will generate future economic benefits; and
the development cost of the asset can be measured reliably.
Development work undertaken by the Group typically relates to the refinement of design, materials selection, construction
techniques, firmware and control systems to enhance battery system performance over successive generations. Where
development costs are capitalised, they are amortised over the expected period to the introduction of the next generation of
battery system.
Amortisation is recorded over that period on a straight-line basis with the corresponding amortisation charge recognised in the
statement of profit and loss as a component of administrative expenses.
Four years has historically been the typical cycle time between successive generations of battery system design.
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Notes
(forming part of the consolidated historical financial information)
Other intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at their historical cost of acquisition less accumulated
amortisation and any impairment losses.
Software and purchased domain names
Third-party software is initially capitalised at its cost of purchase. Amortisation is charged to administrative expenses over the
expected useful life of the software which has been assessed as three years from the date of acquisition.
Acquired domain names are initially capitalised at cost of purchase. Amortisation is charged to administrative expenses over the
expected useful life of the domain name which has been assessed as ten years from the date of acquisition.
Patents and certifications
Patent rights and certifications are initially capitalised at the cost of applying for relevant patent rights and other protections, and
certifications. Amortisation is charged to administrative expenses over the expected useful life of the patents and certifications
which has been assessed as five years from the date of acquisition.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less accumulated depreciation and any impairment losses.
Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent expenditure is only
included in the asset’s carrying amount or recognised as a separate asset, as appropriate, when it is probable that future economic
benefits associated with that item will flow to the Group.
Costs that do not enhance the value of an asset such as repair and maintenance costs are charged to the statement of profit and
loss in the period in which they are incurred.
Depreciation is charged to write off the cost of assets over their estimated useful lives on a straight-line basis. Depreciation
commences on the date the asset is brought into use. Work-in-progress assets are not depreciated until they are brought into use
and transferred to the appropriate category of property, plant and equipment.
Estimated useful lives for property, plant and equipment are:
Category
Computer and office equipment
Leasehold improvements
Vehicles
Manufacturing equipment and tooling
R&D Equipment
Software and purchased domain names
Patents and certifications
Period (years)
3-5
Shorter of lease
term or useful life
3
3-20
5-10
3
10
Recognition in
statement of
profit and loss
Administrative expenses
Administrative expenses/
Cost of sales
Administrative expenses
Cost of sales
Administrative expenses
Administrative expenses
Administrative expenses
Depreciation methods, useful lives and residual values of assets are reviewed, and adjusted prospectively as appropriate, at each
reporting date.
Where an asset is disposed of, the corresponding gain or loss on disposal is determined by comparing the sales proceeds received
with the carrying amount of that asset at the date of disposal. Gains or losses on disposal of fixed assets are included within other
items of operating income and expense in the statement of profit and loss.
Impairment of tangible and intangible assets
The Group reviews the carrying values of its tangible and intangible assets, other than goodwill, at each balance sheet date to
determine if any indicators exist that could mean those assets are impaired. Where an indicator of impairment exists the recoverable
amount of the relevant asset (or CGU) is estimated to determine the amount of any potential impairment loss.
Recoverable amounts are determined using a discounted cash flow model related to each asset or CGU being assessed. The
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
discount rate applied to the cash flows in the model is a pre-tax discount rate that reflects market assessment of the time value of
money and risks specific to the Company or the groups of assets being considered.
If the recoverable value estimated in the cash flow model for a specific asset (or CGU) is lower than the carrying value, then the
carrying value of the asset is reduced to its estimated recoverable value with a corresponding charge immediately recognised in
the statement of profit and loss.
Where the condition that gave rise to an impairment loss reverses in a subsequent period, the impairment loss is similarly reversed
and the carrying value of the asset increased to the revised estimate of its recoverable value. The carrying value of an asset
immediately following the reversal of an impairment cannot exceed the carrying value that the asset would have had if the original
impairment had not been made and the asset was depreciated as normal.
A reversal of an impairment loss is recognised immediately in profit or loss.
The value of any impairment (or reversal of impairment) of an asset is recorded in the same financial statement line item where
depreciation or amortisation of the asset would normally be shown.
Where it is impractical to meaningfully assess recoverable amount using a discounted cash flow model, for instance where near
term cash flows are low or negative, an assessment of the fair value adjusted for the costs that would be incurred in the disposal
of an asset or operation is used. This is typically the case for development stage assets, operations or associated intangible assets
(including goodwill) where the underlying products or technologies have not yet been commercialised.
Provisions
Provisions are established when the Group has a present legal or constructive obligation because of past events, it is probable that
an outflow of resources will be required to settle the obligation and the amount of that outflow can be reliably estimated.
Provisions are measured at the present value of the expenditures that are expected to be incurred in settling the obligation using a
pre-tax discount rate that reflects current market assessment of the time value of money and the risks related to the obligation. The
initial recognition of a provision results in a corresponding charge to profit or loss.
The increase in a provision as the discount rate unwinds due to the passage of time, is recognised in the statement of profit and loss
as other items of operating income and expense.
Leases
Group entities only participate in lease contracts as the lessee. Lease contracts typically relate to vehicles and facilities.
On inception of a contract, the Group assesses whether it contains a lease. A contract is, or contains, a lease if it conveys the right to
control the use of an identified asset for a period of time in exchange for consideration. The right to control the use of an identified
asset is determined based on whether the Group has the right to obtain substantially all the economic benefits from the use of the
asset throughout the period of use, and if the Group has the right to direct the use of the asset.
Obligations under a lease are recognised as a liability with a corresponding right-of-use asset, these are recognised at the
commencement date of the lease.
The lease liability is initially measured at the present value of the lease payments that have not yet been paid at the inception of the
lease, discounted using the interest rate implicit in the lease contract. Where the interest rate implicit in the lease contract cannot be
readily determined, the Group’s incremental borrowing rate is used.
Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability. The lease
liability is measured at amortised cost using the effective interest rate method.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when:
there is a change in future lease payments arising from a change in an index or rate;
there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee; or
the Group changes its assessment of whether it will exercise a purchase, extension or termination option.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
When a lease liability is remeasured under one of these scenarios, a corresponding adjustment is made to the carrying value of the
right-of-use asset or in profit and loss when the carrying amount of the asset has already been reduced to zero.
The corresponding right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability plus any
lease payments made at or before the commencement date, any initial direct costs incurred and an estimate of the costs required
to remove or restore the underlying asset, less any lease incentives received. The right-of-use asset is amortised over the shorter
of the asset’s useful life and the lease term on a straight-line basis.
The Group has elected not to recognise right-of-use assets and corresponding lease liabilities for short-term leases, those existing
leases with a remaining lease term of less than 12 months at 1 January 2021 and leases related to low value assets with an annual
lease cost of £3,500 or less.
The Group recognises these lease payments as an expense on a straight-line basis over the lease term.
Inventory
Inventory is stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in bringing the inventories to their current location and condition. Cost is
calculated using the first-in, first-out method.
Net realisable value is calculated as the estimated selling price for an item of inventory less estimated costs of completion and the
costs that would be incurred in the marketing, selling and distribution of an item of inventory.
Prepaid inventory
Prepaid inventory is recognised on inventory payments where physical delivery of that inventory has not yet been taken by the
Group and is stated at the lower of cost and net realisable value.
Financial instruments
Financial assets and liabilities are recognised by the Group and recorded in the statement of financial position when the Group is
contractually bound to the terms of the financial instrument. Financial assets and liabilities are derecognised when the Group is no
longer bound by the terms of the financial instrument through settlement or expiry.
Financial assets
The classification of financial assets to which the Group is a party is determined by the nature of the underlying financial instrument
and the characteristics of the contractual cash flows expected to be received under the terms of instrument.
Financial assets are not reclassified after their initial recognition unless there is a contractual change in the nature of the cash flows
under the instrument or the business purpose of the instrument has changed.
A financial asset is recorded at amortised cost where it is expected to be held to maturity and the objective of the Group is to collect the
contractual cash flows under the financial instrument based on specified contractual terms, including the timing of receipt of cash flows.
Financial assets that the Group is party to are classified and measured as follows:
Financial asset
Trade receivables and accrued income
Other current assets
Contract assets
Cash and cash equivalents
Measurement basis
Amortised cost
Amortised cost
Amortised cost
Amortised cost
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
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(forming part of the consolidated historical financial information)
Amortised cost
On initial recognition, the Group measures amortised cost for financial assets based on the fair value of each financial asset together
with any transaction costs that are directly attributable to the financial asset.
After initial recognition, amortised cost is measured for each financial asset held using the effective interest rate method less any
impairment loss identified. Interest income is recognised for all financial assets, other than those that are classified as short-term, by
applying the effective interest rate for the instrument. Interest income on short-term financial assets is not considered to be material.
Short-term financial instruments are determined as those that have contractual terms of 12-months or less at inception.
Interest income, foreign exchange gains and losses, impairment, and any gain or loss on derecognition are recognised in profit or loss.
Impairment of financial assets
A loss allowance for financial assets is determined based on the lifetime expected credit losses for financial assets. Lifetime expected
credit losses are estimated based on factors including the Group’s experience of collection, the number and value of delayed
payments past the average credit periods across the Group’s financial assets. The Group will also consider factors such as changes
in national or local economic conditions that correlate with default on receivables and financial difficulties being experienced by the
counterparty.
Financial assets are impaired in full and a corresponding charge is recognised in profit or loss where there is no reasonable
expectation of recovery.
Financial liabilities
The classification of financial liabilities is determined at initial recognition. Financial liabilities are classified and measured as follows:
Financial liability
Trade and other payables
Borrowings
Lease liabilities
Measurement basis
Amortised cost
Amortised cost
Amortised cost
Amortised cost
At initial recognition, the Group measures financial liabilities at amortised cost using the fair value of the underlying instrument less
transaction costs directly attributable to the acquisition of the financial liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when the Groups obligations under the relevant instrument are discharged, expired or
cancelled.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with financial institutions that can be called on demand together with
other short-term, highly liquid investments with maturities of three months or less and are readily convertible to known amounts of
cash.
Equity instruments
Instruments are classified as equity instruments if the substance of the relative contract arrangements evidences a residual interest
in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded as proceeds
received, net of direct issue costs not charged to income.
Offsetting
A financial asset and a financial liability are offset and the net amount presented in the statement of financial position when, and
only when, the Group:
1. has a legally enforceable right to set off the recognised amounts; and
2. intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
4 Revenue from contracts with customers and income from government grants
Segment information
The Group derives revenue from a single business segment, being the manufacture and sale of vanadium flow battery systems and
related hardware together with the provision of services directly related to battery systems sold to customers.
The Group is organised internally to report on its financial and operational performance to its chief operating decision maker, which
has been identified as the three executive directors as a group.
All revenues in 2021 were derived from continuing operations.
Revenue from contracts with customers
Battery systems and associated control systems
Integration and commissioning
Other services
Total revenue in the consolidated statement of profit and loss
Analysed as:
Revenue recognised at a point in time
Revenue recognised over time
Total revenue in the consolidated statement of profit and loss
2021
£000
2,481
701
3
3,185
3,182
3
3,185
Geographic analysis of revenue
The Group’s revenue from contracts with customers was derived from the following geographic regions:
Geographic analysis of revenue
United Kingdom
Asia
United States of America
Other
Total revenue in the consolidated statement of profit and loss
2021
£000
2,796
273
116
—
3,185
2020
£000
369
34
3
406
369
37
406
2020
£000
15
206
167
18
406
The Group maintains its principal production and assembly facilities in Bathgate, Scotland and Vancouver, Canada. These facilities
include office space for design, sales and administrative teams. The Group also has offices, operations and management based in
London, England and Oakland, California.
The Group does not consider that the locations of its operations constitute geographic segments as they are managed centrally
by the executive management team. The location of the manufacturing plants and business development activity is a function of
time-zone when servicing customers both pre-sale and during product delivery. The geographic location of offices, facilities and
management is not related to distinct markets or customer characteristics at the present time.
Significant customers and concentration of revenue
Revenue from contracts with customers was derived from two (2020: four) customers who each accounted for more than 10% of
total revenue as follows:
Significant customers and concentration of revenue
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
68
2021
£000
2,300
495
—
—
—
—
2020
£000
—
—
127
82
81
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
Grant income other than revenue
The Group receives grant income to help fund certain projects that are eligible for support, typically in the form of innovation grants.
The Group also received grant income related to operating costs under government subsidy programmes as part of national
COVID response efforts. The total grant income that was received in the year was as follows:
Grant income received
Business support grants against cost of sales – COVID-19
Business support grants against employee costs – COVID-19
Grants for research and development
Economic and social development
Total government grants
5 Cost of sales
Movement in inventories of finished battery systems
Production costs
Depreciation of production facilities, equipment and amortisation of intangibles
Movement in provisions for warranty costs
Total cost of sales
6 Administrative expenses
Staff costs
Research and development costs
Professional fees
Sales and marketing costs
Facilities and office costs
Other administrative costs
Total administrative expenses
No development costs were capitalised in the period (2020: £nil).
7 Auditors’ Remuneration
Fees payable to the Company’s associates for the audit of the parent
company and consolidated financial statements
Audit of financial statements of subsidiaries pursuant to legislation
Fees payable to the Company’s auditor for other services:
— Tax compliance services
— Other assurance related services including Reporting Accountant services
associated with readmission to AIM
2021
£000
—
156
302
—
458
2021
£000
5,240
826
116
440
6,622
2021
£000
8,980
1,792
1,950
249
655
813
14,439
2021
£000
172
21
9
—
202
2020
£000
17
240
203
35
495
2020
£000
436
374
107
304
1,221
2020
£000
5,811
1,099
960
96
787
840
9,593
2020
£000
213
20
8
597
838
The Group has a policy in place related to the commissioning of non-audit service from its auditors where all such work requires
pre-approval by the audit committee before the commencement of any non-audit work.
Audit fees are discussed with and approved by the audit committee.
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
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(forming part of the consolidated historical financial information)
8 Staff costs and headcount
Staff costs
Wages and salaries
Employer payroll taxes
Other benefits
Share-based payments
Total staff costs
2021
£000
7,617
625
508
1,827
10,577
2020
£000
5,053
365
225
854
6,497
Administrative staff costs in the year were £8,979,790 (2020: £5,810,887) and staff costs included in cost of sales were £1,596,839
(2020: £687,585).
Average headcount
United Kingdom
Canada
United States of America
South Africa
Total
2021
Number
2020
Number
60
55
7
2
124
52
33
6
2
93
Increases in staff costs are due to hiring for expansion in operating activity and the delivery of key projects to customers.
Key management compensation
From 1 April 2020, the key management of the Group has been determined to comprise the members of the senior leadership team.
Key management compensation
Short-term employee benefits
Post-employment benefits
Termination benefits
Total key management compensation
2021
£000
1,590
—
—
1,590
2020
£000
1,410
14
75
1,499
The Group made contributions to the defined contribution schemes of key management in the year of £12,917 (2020: £3,000).
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Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
9 Share based payments
Since its incorporation, the Company has operated various share-based incentive plans. The purpose of each of the schemes has
been to incentivise directors and employees related to improving company performance and building shareholder value.
Set out below is a summary of the option awards in issue at 31 December 2021. The comparative figures for both number of awards
outstanding at the end of 2020 and their respective exercise prices have been adjusted to reflect the 50:1 share consolidation that
took place on 1 April 2020 (as rounded down to the nearest whole share).
Standard
redT 2015 plan
redT 2018 plan
redT 2018 plan
redT 2018 plan
Invinity Energy 2018 ESOP
Invinity Energy 2018 Consultant SOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Invinity Energy 2018 ESOP
Grant date
07 Dec 2015
18 May 2018
18 May 2018
29 Nov 2018
01 Apr 2020
01 Apr 2020
01 Apr 2020
01 Apr 2020
26 Aug 2020
28 Jan 2021
04 Mar 2021
15 Apr 2021
03 Aug 2021
29 Oct 2021
20 Dec 2021
Final
Expiry date
Exercise
price
2021
Restated
2020
07 Jan 2020
18 May 2023
18 May 2023
29 Nov 2023
12 Mar 2030
12 Mar 2030
07 Jul 2026
08 May 2029
26 Aug 2030
28 Jan 2031
04 Mar 2031
15 Apr 2031
03 Aug 2031
29 Oct 2031
20 Dec 2031
58.95 €c
352.50 p
295.00 p
350.00 p
82.50 p
82.50 P
4.34 p
6.84 p
113.00 p
204.00 p
152.00 p
151.00 p
134.50 p
111.50 p
91.00 p
137,602
3,888
—
—
185,143
378,000
1,429,812
661,237
2,505,000
480,000
222,000
126,000
455,000
359,000
135,000
206,911
3,888
60,000
40,000
202,000
378,000
1,666,055
697,769
2,619,0000
—
—
—
—
—
—
7,077,682
5,873,623
Non-standard
Grant date
Expiry date
Price
2021
2020
Long-term incentive plan
Camco 2006 Executive Share Plan
redT 2018 plan
8 Dec 2009
30 Jul 2013
30 May 2018
30 Jul 2023
30 Jul 2023
30 Jul 2023
50.00 €c
50.00 €c
400.00 p
15,000
68,127
70,000
15,000
68,127
70,000
Total
153,127
153,127
7,230,809
6,026,750
Weighted average remaining contractual life of options outstanding at the end of the year
8.82
9.32
* Prior year comparatives have been restated to account for late notification of lapses and the mis-categorisation of certain awards. The net change in the reported prior year comparatives is
a reduction of 3,152 share options.
A total of 332,481 options were exercised during the year with a weighted average exercise price of 15.33p per share.
The grant-date fair value of share options issued is calculated using a Black-Scholes methodology at the date of grant. Key inputs
to the model include the share price at the date of grant, the option exercise price, the term of the award, share price volatility, the
risk-free interest rate (by reference to government bond yields) and the expected dividend yield rate, which has historically been
and continues to be zero, reflective of the development-stage nature of the Company.
The Long-term Incentive Plan, Camco 2006 Executive Share Plan and the redT 2015 Plan are now closed. No further options option
awards will be made under either of these plans.
71
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
The aggregate number of options granted, vested, exercised and forfeited during the year under the plans are summarised and
analysed between unvested and vested awards as follows:
At 1 January 2021
Granted
Paralleled
Forfeited
Vested
Exercised
At 31 December 2021
At 1 January 2020
Granted
Paralleled
Forfeited
Vested
Exercised
At 31 December 2020
Unvested
Unvested
Vested
Vested
4,034,591
2,015,000
—
(378,460)
(1,301,543)
—
4,369,588
98.84p
149.64p
—
134.35p
87.15p
—
1,839,032
1,301,543
—
(100,000)
—
(332,481)
113.47p
2,708,094
29.09p
87.15p
—
317.00p
—
15.33p
35.26p
Unvested
Unvested
Vested
Vested
500,172
4,363,757
(124,815)
(358,578)
(345,945)
—
4,034,591
284.81p
86.31p
330.21p
138.59p
82.68p
—
98.84p
263,725
1,431,214
(30,259)
(100,542)
345,945
(71,051)
1,839,032
143.79p
4.77p
342.46p
318.56p
82.68p
52.32p
29.09p
Plans with non-standard performance conditions
Long-term incentive plan (LTIP)
The LTIP for directors and employees was approved by the board in 2008 and entitled directors and employees to receive equity
settled payments annually based on the achievement of certain market and non-market performance conditions.
The LTIP is now closed. At the end of the year, there were 15,000 (2020: 15,000) options vested and exercisable at €0.5 per share
under the LTIP.
CAMCO 2006 executive share plan (the plan)
The plan was established in 2017 to make awards of shares up to an aggregate of 10% of the share capital of the Company over a
period of ten years.
The plan is now closed. At the end of the year there were 68,127 (2020: 68,127) options that had vested and were exercisable at
€0.50 per share.
2018 plan
Options with non-standard performance conditions were also issued under the 2018 plan. At the end of the year 70,000 (2020:
70,000) options under the 2018 plan had vested and are exercisable at 400p per share.
Plans with standard performance conditions
The primary share plan that remains outstanding at 31 December 2021 is the 2018 plan. The 2018 plan was adopted by the board on
14 May 2018 and introduced HMRC scheme rules related to certain non-taxable option grants. The plan contains provision to issue
options as CSOP, EMI or unapproved awards.
In the year ended 31 December 2020 the board approved the expansion of awards to be made under the 2018 plan with grants expected
to be made more frequently going forward and to a potentially wider group of employees. The intention of the increase in frequency
and quantity of employee share options granted was to incentivise and to better align employee compensation with shareholder return.
Options issued to legacy Avalon employees at the merger date
Following the merger transaction, 1,432,000 options were granted to legacy Avalon employees to replace options held by them in
the former Avalon employee share plan. A total of 2,670,492 options are vested and exercisable under the 2018 plan at 31 December
2021 with a further 4,269,588 unvested share options outstanding.
72
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
Parallel options issued
In addition, certain legacy redT options were reissued as they were considered by the board to be sufficiently ‘out-of-the-money’
such that they no longer provided a performance incentive to the holders of the options. As a mechanism to adjust the terms of
the unfavourable options, new parallel options were issued on a one-for-one basis with the same terms as the original awards
excepting that they were issued with a lower exercise price.
Both the original and parallel option schemes remain in existence. However, the exercise by an employee of a single option from either
pool (original or parallel) allocated to them will cause the equivalent value in the other pool to be forfeited. Accordingly, the number of
options disclosed above has been adjusted to remove the number of options that is equivalent to the number of parallel options issued.
Other options
On 10 May 2021, the Company granted an option for 8,672,273 shares to Gamesa Electric S.A. Unipersonal (GaE), a wholly-owned
subsidiary of Siemens Gamesa Renewable Energy S.A. The options were granted to GaE in consideration of its entering into a joint
development and commercialisation agreement with Invinity Energy Nexus Limited, a wholly-owned subsidiary of the Company.
The exercise price of the options is 175 pence and upon exercise of those options then for as long as GaE holds at least 5% of the
issued share capital of the Company it shall be entitled, subject to certain conditions, to nominate one non-executive director to the
board of the Company.
Warrants issued in the period
Short-term and long-term equity warrants
In December 2021, the Company issued 14,464,571 ‘placing units’ comprised of one share, one short-term warrant and one long-
term warrant.
Each short-term warrant gives the holder the right to subscribe for one new Ordinary Share at a price of 150 pence per Ordinary
Share at any time from Second Admission until 15 September 2022. Each long-term warrant gives the holder the right to subscribe
for one new Ordinary Share at a price of 225 pence per Ordinary Share at any time from Second Admission until 16 December 2024.
The warrants were admitted to trading on the Aquis Stock Exchange (AQSE) on 9 March 2022. There was no adjustment to the
issue price in respect of the attached warrants and they have been deemed to have no fair value based on the price at which they
are currently being quoted.
10 Other items of operating income and expense
The following items are Included in other comprehensive loss:
Income
Gain on disposal of scrap inventory and equipment
Expense
Merger transaction costs
Provision for onerous contracts, net of amounts used
Impairment of inventory to net realisable value
Accelerated amortisation of development costs
Impairment of property, plant and equipment
Reversal of impairment of obsolete inventory and disposal of scrap inventory
Abnormal unabsorbed production overhead costs
Profit on disposal of subsidiary
Gain on curtailment of right-of-use asset
Total other operating income and expenses (net)
2021
£000
—
—
3,762
—
—
60
(390)
—
(15)
(29)
3,388
2020
£000
(27)
1,412
1,064
1,019
6,138
56
8
152
—
—
9,822
73
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
11 Net finance income and costs
Finance income
Interest on bank deposits and money market funds
Finance costs
Interest on borrowings
Fair value adjustment on convertible loan notes
Finance charges for loan financing
Finance charges for lease liabilities held at fair value
Finance charges for liabilities held at amortised cost
Losses on foreign currency transactions
Net finance costs/(income)
12 Income tax expense
Current tax
Current tax on profits for the year
Total current tax expense
Reconciliation of income tax expense calculated using statutory tax rate
Loss before tax
Tax at the Jersey rate of nil%
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Non-taxable gains and expenses not deductible for tax
Differences in overseas tax rates
Unrelieved tax losses carried forward
Origination and reversal of timing differences not recognised
Tax income tax expense
2021
£000
—
—
—
—
45
—
63
108
2021
£000
—
—
2021
£000
(21,372)
—
(113)
(3,942)
3,109
946
—
2020
£000
(1)
422
1,162
682
27
5
1,744
4,041
2020
£000
—
—
2020
£000
(24,271)
—
(12)
(2,775)
2,684
103
—
74
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
13 Loss per share
Basic loss per share
From continuing operations
From continuing and discontinued operations
Diluted loss per share
From continuing operations
From continuing and discontinued operations
Loss used in calculation of basic and diluted loss per share
From continuing operations
From continuing and discontinued operations
2021
£000
(24.1)
(24.1)
2021
£000
(24.1)
(24.1)
2021
£000
(21,372)
(21,372)
2020
£000
(41.0)
(41.0)
2020
£000
(41.0)
(41.0)
2020
£000
(24,271)
(24,271)
All operational activity in the years ended 31 December 2020 and 2021 relate to continuing operations.
Earnings per share in respect of the year ended 31 December 2020 have been restated to give effect to the 50:1 share consolidation
that took place in 2020 and to aid comparability.
Weighted average number of shares used in calculation
Basic
Diluted
2021
Number
2020
Number
88,768,750
119,792,519
59,206,588
59,637,677
Additional potential shares used in the calculation of diluted earnings per share primarily relate to potential shares outstanding at 31
December 2021 that may be issued in satisfaction of ‘in-the-money’ employee share options. Potentially dilutive shares related to
outstanding warrants to subscribe for ordinary shares in the Company are also included in calculating diluted earnings per share.
Where additional potential shares have an anti-dilutive impact on the calculation of loss per share calculation, such potential shares
are excluded from the weighted average number of shares used in the calculation.
Weighted average number of shares used in loss per share calculation – basic and diluted
In issue at 1 January
Shares issued in the year – weighted average
Weighted average shares in issue 31 December
2021
Number
2020
Number
85,900,616
2,868,134
19,025,799
40,180,789
88,768,750
59,206,588
Effect of employee share options and other warrants not exercised
31,023,769
431,089
Weighted average number of diluted shares in issue 31 December
119,792,519
59,637,677
Additional potential shares are anti-dilutive where their inclusion in the calculation of loss per share results in a lower loss per share.
The weighted average number of shares not included in the diluted loss per share calculation because they had an anti-dilutive
effect on the calculation was 2,094,626 (2020: 5,475,305).
75
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
14 Cash flows from operating activities
Loss after income tax
Adjustments for:
Depreciation and amortisation
Impairment of property, plant and equipment
Accelerated amortisation of intangible asset
Gain on disposal of property, plant and equipment
Impairment of inventory
Loss on disposal of scrap inventory
Share-based payments charge
Equity settled share-based payment expenses
Equity issued in lieu of service
Equity settled transaction costs on acquisition of subsidiary
Equity settled interest and transaction costs on convertible notes
Fair value adjustment on convertible notes and warrants
Net finance costs
Net foreign exchange differences
Change in operating assets & liabilities
(Increase) in inventory
(Increase)/decrease in contract assets
(Increase)/decrease in trade receivables and other receivables
(Increase) in other current assets and prepaid inventory
Increase in trade and other payables
Increase/(decrease) in warranty provision
Increase in onerous contract provision
Increase in contract liabilities
2021
£000
2020
£000
(21,372)
(24,271)
727
—
—
—
(390)
—
1,827
—
—
—
—
—
—
(27)
577
56
6,138
(6)
1,027
27
—
707
68
(456)
(592)
300
2,297
(1,220)
(19,235)
(15,348)
(4,487)
(319)
(1,650)
(4,866)
1,046
293
3,756
2,498
(3,729)
(1,359)
53
115
(750)
3,348
(380)
1,060
2,376
(402)
Cash used in operations
(22,964)
(10,885)
76
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
15 Goodwill and other intangible assets
Goodwill
£000
Development
costs
£000
Patents and
certifications
£000
Software and
domain names
£000
Cost
At 1 January 2021
Additions
At 31 December 2021
Accumulated amortisation
At 1 January 2021
Amortisation charge
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
23,944
—
23,944
—
—
—
23,944
23,944
—
—
—
—
—
—
—
—
203
—
203
(30)
(41)
(71)
173
132
10
21
24,127
24,097
Goodwill
£000
Development
costs
£000
Patents and
certifications
£000
Software and
domain names
£000
Cost
At 1 January 2020
Acquisitions of subsidiaries
Additions
Disposals
Foreign currency exchange differences
6,971
18,206
—
—
(1,233)
5,818
—
—
(6,138)
320
At 31 December 2020
23,944
—
Accumulated amortisation
At 1 January 2020
Amortisation charge
Accelerated amortisation charge
Disposals
Foreign currency exchange differences
At 31 December 2020
Net book value
At 1 January 2020
At 31 December 2020
—
—
—
—
—
—
—
—
(6,138)
6,138
—
—
6,971
23,944
5,818
—
—
203
—
—
—
203
—
(30)
—
—
—
(30)
—
173
Total
£000
24,176
18
24,194
(49)
(48)
(97)
Total
£000
12,789
18,411
9
(6,138)
(895)
24,176
—
(32)
(6,138)
6,138
(17)
(49)
29
18
47
(19)
(7)
(26)
—
2
9
—
18
29
—
(2)
—
—
(17)
(19)
—
10
12,789
24,127
Goodwill
All goodwill is tested annually for impairment. At 31 December 2021, goodwill was tested for impairment using a fair value less costs
of disposal methodology by reference to the Company’s quoted market capitalisation using the price of 92.5 pence per share
at that date. No impairment loss was identified in relation to goodwill. The closing share price on 22 June 2022 was 53p, giving a
market capitalisation of £61.5m which may indicate a potential impairment.
Patents and certifications
There have been no events or circumstances that would indicate that the carrying value of patents and certifications may be
impaired at 31 December 2021.
77
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
16 Property, plant and equipment
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
Cost
At 1 January 2021
Additions
Disposals
Foreign currency exchange differences
At 31 December 2021
Depreciation
At 1 January 2021
Depreciation charge
Disposals
Foreign currency exchange differences
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
Cost
At 1 January 2020
Acquisition of subsidiaries
Additions
Disposals
Foreign currency exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Depreciation charge
Impairment
Foreign currency exchange differences
At 31 December 2020
Net book value
At 1 January 2020
At 31 December 2020
748
158
(123)
(3)
780
(694)
(85)
123
3
(653)
54
127
513
169
—
(1)
681
(357)
(71)
—
1
(427)
156
254
753
406
—
6
1,165
(268)
(145)
—
(3)
(416)
485
749
Computer and office
equipment
£000
Leasehold
improvements
£000
Vehicles and
equipment
£000
747
22
20
(6)
(35)
748
(595)
(136)
—
37
(694)
152
54
302
86
90
—
35
513
(242)
(79)
—
(36)
(357)
60
156
105
364
239
—
45
753
(63)
(103)
(56)
(46)
(268)
42
485
Total
£000
2,014
733
(123)
2
2,626
(1,319)
(301)
123
1
(1,496)
695
1,130
Total
£000
1,156
472
349
(6)
45
2,014
(900)
(318)
(56)
(45)
(1,319)
254
695
The Group has no assets pledged as security. No amounts of interest have been capitalised within property, plant and equipment
at 31 December 2021 (2020: £nil).
78
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
17 Right-of-use assets
Cost
At 1 January 2021
Additions
Curtailments1
Foreign currency exchange differences
At 31 December 2021
Depreciation
At 1 January 2021
Depreciation charge
Foreign currency exchange differences
At 31 December 2021
Net book value
At 1 January 2021
At 31 December 2021
Offices and facilities
£000
Vehicles and equipment
£000
Total
£000
1,572
627
(294)
(60)
1,845
(576)
(369)
66
(879)
996
966
28
—
—
—
28
(10)
(9)
—
(19)
18
9
1,600
627
(294)
(60)
1,873
(586)
(378)
66
(898)
1,014
975
1 A lease on a right-of-use asset in Canada has been curtailed in 2021, with the termination date changing from June 2027 to June 2023. There is a corresponding decrease in the
outstanding lease creditor and a gain on curtailment recognised in the consolidated statement of profit and loss.
Cost
At 1 January 2020
Acquisition of subsidiaries
Additions
Foreign currency exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Depreciation charge
Foreign currency exchange differences
At 31 December 2020
Net book value
At 1 January 2020
At 31 December 2020
Offices and facilities
£000
Vehicles and equipment
£000
161
1,135
34
242
1,572
(90)
(223)
(263)
(576)
71
996
—
25
—
3
28
—
(4)
(6)
(10)
—
18
Total
£000
161
1,160
34
245
1,600
(90)
(227)
(269)
(586)
71
1,014
Right-of-use assets relate to buildings, vehicles and equipment held under leases with third-party lessors. A right-of-use asset
represents the Company’s right to use a leased asset over the term of the lease. The Company’s rights to use specific buildings,
items of equipment or specific vehicles under lease arrangements represent assets to the Group.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is
generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes
in financing conditions since third party financing was received;
uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases;
held by the Group, which does not have recent third party financing; and
makes adjustments specific to the lease, e.g. term, country, currency and security.
79
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
18 Deferred tax balances
Timing differences and tax losses on which deferred tax is not recognised:
Accelerated capital allowances
Share options
Accrued liabilities
Reserves and other
Tax losses
Total deferred tax assets
2021
£’000
2020
£’000
450
1,576
477
4,161
70,880
77,544
221
3,704
462
600
56,225
61,212
Tax losses
The Company’s subsidiaries carry on business in other tax regimes where the corporation tax rate is not zero. At 31 December 2021,
the Group had the following tax losses carried forward available for use in future periods:
United Kingdom
Canada
United States of America
Ireland
Total potential tax benefit
2021
£’000
40,530
3,799
9,994
16,557
70,880
2020
£’000
34,699
11,067
7,657
2,802
56,225
Under current tax legislation tax losses in the United Kingdom and Ireland can be carried forward indefinitely and be offset against
future profits arising from the same activities at the tax rate prevailing at that time. There is a portion of the tax losses in the United
States of America that will begin to expire in 2035, whereas the majority can be carried forward indefinitely. The tax losses in
Canada can be carried forward 20 years. Tax losses in Canada will begin to expire in 2025.
Due to the uncertainty regarding the timing and extent of future profits within these subsidiaries, no deferred tax assets have been
recognised in respect of these tax losses. Deferred tax is also not recognised on the timing differences between accounting and tax
treatment in these subsidiaries given the offsetting tax losses on which no deferred tax has been recognised.
In March 2021, the UK Government announced that the rate of Corporation Tax will increase from 19% to 25% on profits of over
£250,000. Profits below £50,000 will continue to be chargeable to Corporation Tax at 19% and profits between the two thresholds
charged at the marginal rate of 26.5%. In computing the UK deferred tax asset, management has assumed that as neither the
deferred tax assets nor the deferred tax liabilities will crystallise in the immediate future, then calculations based on 19% are
appropriate.
19 Inventory
Raw materials and consumables
Work in progress
Finished goods
2021
£000
1,897
3,900
—
5,797
2020
£000
698
207
—
905
Inventory recognised as an expense within cost of sales during the current year amounted to £5,239,682 (2020: £436,461).
There was a net reversal of inventory write-downs in 2021 amounting to £389,808 (2020: write-down of £1,045,232). These were
recognised as an expense and included in other items of operating income and expense.
80
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
20 Other current assets
Prepayments and deposits
Prepaid inventory
Tax credits – recoverable
Due from joint venture
Other receivables
Total other current assets
2021
£000
533
4,112
247
—
1,388
6,280
2020
£000
417
691
127
168
11
1,414
Prepaid inventory is recognised on inventory payments where physical delivery of that inventory has not yet been taken by
the Group and is stated at the lower of cost and net realisable value.
21 Contract related balances
The Group has recognised the following assets and liabilities related to revenue from contracts with customers that are in progress
at the respective year-ends:
Amounts due from customer contracts included in trade receivables
Contract assets (accrued income for work done not yet invoiced)
Contract liabilities (deferred revenue related to advances on customer contracts)
Net position of sales contracts
2021
£000
1,683
324
(5,142)
(3,135)
2020
£000
33
5
(2,644)
(2,606)
The amount of revenue recognised in the year that was included in contract liabilities at the end of the prior year was £2,231,000
(2020: £nil).
The aggregate position on customer contracts included in the statement of financial position will change according to the number
and size of contracts in progress at a given year-end as well as the status of payment milestones made by customers toward
servicing those contracts. The Group structures payment milestones in its customer contracts to cover upfront expenditure for
parts and materials and other working capital requirements associated with the delivery of promises under customer contracts to
better manage group cash flow.
The timing of revenue recognition is based on the satisfaction of individual performance obligations within a contract and is not
based on the timing of advances received. Customer advances are recognised as contract liabilities in the statement of financial
position and are released to income progressively as individual performance obligations are met. The difference in timing between
the receipt of contract advances and the timing of the satisfaction of performance obligations for revenue recognition can cause
values to remain in deferred income. The amount of such deferrals is related to both the overall size of the underlying contract and
the planned pace of delivery in the related work schedule. This is expected to occur where satisfaction of performance obligations
is evidenced by customer acceptance of the good or service that is the subject of the performance obligation.
81
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
Provisions related to contracts with customers
At 1 January 2021
Charges to profit or loss:
— Provided in the year
— Unused amounts reversed
Amounts used in the year
At 31 December 2021
At 1 January 2020
Acquisition of subsidiaries
Charges to profit or loss:
— Provided in the year
— Unused amounts reversed
Amounts used in the year
At 31 December 2020
Warranty
provision
£000
Legacy products
provision
£000
Provision for
contract losses
£000
—
257
—
—
257
824
36
—
—
860
1,103
4,028
(51)
(221)
4,859
Restated
Warranty
provision
£000
Restated
Legacy products
provision
£000
Provision for
contract losses
£000
—
—
—
—
—
—
95
1,011
340
(51)
(571)
824
—
39
1,084
—
(20)
1,103
Total
£000
1,927
4,321
(51)
(221)
5,976
Total
£000
95
1,050
1,424
(51)
(591)
1,927
Warranty provision
The warranty provision represents management’s best estimate of the costs anticipated to be incurred related to warranty claims,
both current and future, from customers in respect of goods and services sold that remain within their warranty period. The estimate
of future warranty costs is updated periodically based on the Company’s actual experience of warranty claims from customers.
The element of the provision related to potential future claims is based on management’s experience and is judgmental in nature.
As for any product warranty, there is an inherent uncertainty around the likelihood and timing of a fault occurring that would cause
further work to be undertaken or the replacement of equipment parts.
A standard warranty of up to two years from the date of commissioning is provided to all customers on goods and services sold
and is included in the original cost of the product. Customers are also able to purchase extended warranties that extend the
warranty period for up to a total of ten years.
Provision for legacy products
Where it is considered of commercial value, management has elected to provide ongoing maintenance for certain legacy products
not otherwise covered under warranty. Management has determined that it is necessary to provide for the costs of this ongoing
maintenance or to provide for outright decommissioning. The prior year presentation has been re-stated to reflect this.
Provisions in respect of legacy products are expected to unwind over the next two years when maintenance is either terminated
or the products are decommissioned.
Provision for contract losses
A provision is established for contract losses when it becomes known that a customer contract has become onerous. A contract is onerous
when the unavoidable costs of fulfilling the Group’s obligations under a contract are greater than the revenue that will be earned from it.
The unavoidable costs of fulfilling contract obligations will include both direct and indirect costs.
The creation of an additional provision is recognised immediately in profit and loss. The provision is used to offset subsequent costs
incurred as the contract moves to completion.
82
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
In determining the amount to be provided, management has evaluated the likelihood of input costs continuing to rise against a
backdrop of inflation and instability due to current macro-economic factors such as the global response to Covid-19, the increasing
price of oil feeding through to production and shipping costs and continuing supply chain issues.
Provisions in respect of contract losses relate to contracts which are expected to be delivered in 2022 and will therefore unwind
during that year.
22 Trade and other receivables
Total trade and other receivables
2021
£000
1,683
2020
£000
33
All trade and other receivables relate to receivables arising from contracts with customers.
Trade receivables are amounts due from customers for sales of vanadium flow battery systems in the ordinary course of business.
Trade receivables do not bear interest and generally have 30-day payment terms and therefore are all classified as current.
The actual credit loss over 2021 was determined to be 0% of total sales (2020: 0%). No allowance for potential credit loses has been
recognised in either period presented.
23 Cash and cash equivalents
Cash at bank and in hand
Short-term investments
Total cash and cash equivalents
2021
£000
26,355
—
26,355
2020
£000
21,760
193
21,953
Short term investments
Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are
repayable with 24 hours’ notice with no loss of interest.
24 Trade and other payables
Trade payables
Other payables
Accrued liabilities
Accrued employee compensation
Government remittances payable
Total trade and other payables
2021
£000
1,484
456
1,013
505
55
3,513
2020
£000
498
—
653
1,010
307
2,468
Trade payables are unsecured and are usually paid within 30 days.
The carrying amounts of trade and other payables are the same as their fair values due to the short-term nature of the underlying
obligation representing the liability to pay.
83
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
25 Lease liabilities
The Group’s obligations under lease contracts are presented as follows:
At 31 December
Current – due within 12 months
Non-current – due after 12 months
Total lease liabilities
Payments of lease principal and interest in the period to 31 December were:
At 31 December
Payments of lease principal
Payments of interest
Total payments under leases
The contractual undiscounted cash flows for lease obligations at each period end were:
At 31 December
Less than one year
One to five years
More than five years
Total lease liabilities
2021
£000
350
420
770
2021
£000
275
45
320
2021
£000
379
448
—
827
2020
£000
161
595
756
2020
£000
163
26
189
2020
£000
190
493
155
838
Lease liabilities represent the present value of the minimum lease payments the Group is obliged to make to lessors under contracts
for the lease of assets that are presented as right-of-use assets.
26 Issued share capital and reserves
Authorised at 31 December
Issued and fully paid
At 1 January
Issued in the year
At 31 December
2021
No: 000
120,000
2021
£000
—
2020
No: 000
120,000
85,900
30,148
37,870
12,820
19,025
66,875
116,048
50,690
85,900
2020
£000
—
8,157
29,713
37,870
During the year, 30,148,145 new shares were issued with a nominal value of £12,819,729. The total gross proceeds were £30,216,444
with the balance credited to the share premium account. Total costs of issuance were £1,496,412 and these costs were charged
directly to the share premium account.
On 1 April 2020, the Company consolidated each ordinary share of €0.01 nominal value on a 50 to 1 basis, such that every 50
ordinary shares consolidated into one ordinary share of €0.50. The closing balance of shares at 31 December 2020 equated to
19,025,008 consolidated shares.
The holders of ordinary shares are entitled to receive dividends as may be declared from time to time and are entitled to one vote
per share at meetings of the Company.
84
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
In the year ended 31 December 2021, Yorkville Advisors exercised 909,090 warrants at 107 pence to subscribe for ordinary shares
in the Company. A total of 909,090 new ordinary shares were issued to Yorkville Advisors in return for total subscription proceeds
of £972,726.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
Share-based payment reserve
The share-based payment reserve comprises the equity component of the Company’s share-based payments charges.
Currency translation reserve
The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign
operations.
Other reserve
Other reserve comprises the portion of the consideration paid for redT energy Holdings (Ireland) Limited’s minority interests over
the fair value of the shares purchased.
27 Financial assets and liabilities
All financial assets are held at amortised cost. There were no financial assets measured at fair value through other comprehensive
income nor through profit and loss in either period presented.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of financial asset presented
above. The carrying value of the financial assets approximate their fair values due to the short-term maturities of these instruments.
The Group does not currently use derivative instruments for managing financial risk. All financial liabilities are held at amortised cost.
Recognised fair value measurements
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1:
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading
securities) is based on quoted market prices at the end of the reporting period.
The battery systems manufactured by the Company use vanadium metal as a key component in the
electrolyte. Vanadium is an actively traded commodity for which quoted market prices are available.
The Company does not currently hold inventories of vanadium. Vanadium purchased from third parties is
solely for the use in electrolyte and open purchase contracts are not accounted for as derivatives.
Level 2:
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques that maximise the use of observable market data and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair value instrument are
observable, the instrument is included in Level 2. The Group did not hold any financial assets or liabilities that
were required to be valued using level 2 inputs (2020: none)
Level 3:
If one or more of the significant inputs is not based on observable market data the instrument is included in
Level 3.
The Group did not hold any financial assets or liabilities that were required to be valued using level 3 inputs
at 31 December 2021. At 31 December 2020, the warrant deed remained outstanding. No other financial
instruments were outstanding at the period end that required to be valued using a methodology that uses
Level 1, 2 or 3 inputs.
85
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc Notes
(forming part of the consolidated historical financial information)
28 Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial performance.
Current year profit and loss information has been included where relevant to add further context.
Risk
Exposure arising from
Measurement
Management
Market risk –
foreign exchange
Future commercial
transactions
Recognised financial assets
and liabilities not denominated
in GBP
Cash flow forecasting
Sensitivity analysis
Market risk –
commodity price risk
Purchases of vanadium to be Quoted market prices
used in the battery electrolyte
for vanadium
Credit risk
Cash and cash equivalents,
trade receivables and
contract assets
Ageing analysis
Credit ratings
Liquidity risk
Borrowings and other liabilities Rolling cash flow forecasts
Cash is held in GBP until
non-GBP requirements
for up to the next
six-months are established,
at which point the GBP
is sold in favour of the required
currency, which is then remitted
to the relevant Group entity
Strategic supply
arrangements with
multiple pre-qualified
suppliers
Monitoring accumulation
of bank balances
Credit risk assessment for
customers and pre-agreed
deposits and interim payments
within customer contracts
Access to capital markets for
equity or debt funding
Market risk – foreign exchange risk
The Group is primarily exposed to foreign exchange risk related to bank deposits, receivables or payables balances and other
monetary working capital items that are denominated in a currency other than the Company’s functional currency which has been
determined to be GBP.
The Group does not speculate on foreign exchange and aims to mitigate its overall foreign exchange risk by holding currency in line
with forecast regional operating expenses, providing an element of natural hedge against adverse foreign exchange movement.
The Group’s exposure to foreign exchange risk at the end of the reporting period, expressed in GBP, was as follows:
31 December 2021
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Lease liabilities
Net exposure
31 December 2021 (continued)
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Lease liabilities
Net exposure
86
Sterling
£000
24,141
1,288
2,985
(1,438)
(356)
26,220
Euro
£000
96
23
278
(382)
—
15
Chinese
Yuan
£000
South African
rand
£000
—
—
—
—
—
—
28
—
10
(4)
(13)
21
Canadian
dollar
£000
284
223
2,113
(1,229)
(299)
1,092
Australian
dollar
£000
632
—
—
—
—
632
US
dollar
£000
1,174
150
345
(460)
(102)
1,107
Total
£000
26,355
1,684
5,731
(3,513)
(770)
29,487
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
31 December 2020
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Lease liabilities
Net exposure
31 December 2020 (continued)
Cash and cash equivalents
Trade receivables
Other current assets
Trade and other payables
Lease liabilities
Net exposure
Sterling
£000
19,536
4
10
(933)
—
18,617
Euro
£000
136
—
63
(208)
—
(9)
Chinese
Yuan
£000
South African
rand
£000
82
—
—
—
—
82
8
—
5
(7)
(30)
(24)
Canadian
dollar
£000
1,122
—
9
(424)
(548)
159
Australian
dollar
£000
140
—
—
(146)
—
(6)
US
dollar
£000
929
29
26
(750)
(178)
56
Total
£000
21,953
33
113
(2,468)
(756)
18,875
Sensitivity – exchange rates
The sensitivity of profit or loss to changes in quoted exchange rates for currencies to which the Group is exposed is as follows,
based on each relevant exchange rate strengthening (or weakening) by 5%.
There is no impact on other components of equity as the Group is not party to any derivative financial instruments, such as hedging
instruments, where currency gains and losses would be recognised in other comprehensive loss.
At 31 December +/- 5%
Euro
Canadian dollar
US dollar
Chinese yuan
South African rand
2021
£000
(5)
(14)
(56)
(1)
(30)
(106)
2020
£000
4
(8)
(3)
(4)
2
(9)
Market risk – commodity price risk
The Group’s batteries use vanadium as the key component of their electrolyte. Vanadium is an elemental metal and is used primarily
to toughen steel, particularly for the construction industry.
Whilst it is not a mature market traded commodity, such that one can buy forward or derivative contracts, market prices for
vanadium pentoxide (V2O5) at 98% purity are quoted in US dollars per pound.
Vanadium forms about two-thirds of the value of the electrolyte, which in turn forms about a quarter of the landed cost of a battery,
and so a fluctuation in the price of vanadium will impact the profitability of battery sales. An increase or decrease in the market price
of vanadium of 5% would cause the value of the electrolyte component of a battery to increase or decrease by approximately 3%.
Credit risk – cash held on deposit with banks
Credit risk arises from cash and cash equivalents and deposits with banks and other financial institutions.
Credit risk related to holdings with financial institutions is managed by only maintaining bank accounts with reputable financial
institutions. The Group aims only to place funds on deposit with institutions with a minimum credit rating of B2 Moody’s.
87
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
The Group’s cash at bank and short-term deposits are held with institutions with credit ratings as follows:
At 31 December
Aa2
A1
A2
Ba2
B2
2021
£000
1,087
25,240
—
28
—
26,355
2020
£000
1,531
—
20,221
8
193
21,953
Credit risk – trade and other receivables
Past due but not impaired
The Group’s credit risk from receivables encompasses the default risk of its customers and other counterparties.
Its exposure to credit risk is influenced mainly by the individual characteristics of each customer or counterparty. The creditworthiness
of potential and existing customers is assessed prior to entering each new transaction. A credit analysis is performed, and
appropriate payment terms implemented that may include increased level of upfront deposits for the purchase of battery units.
Notwithstanding the above, the Group’s standard terms of trade provide that up to 90% of the sales price of a battery unit is paid
prior to delivery.
Receivables are considered for impairment on a case-by-case basis when they are past due or where there is objective evidence that the
customer or counter party may be a default risk. The Group takes into consideration the customer or counter party payment history, its
credit worthiness together with the prevailing economic environment in which it operates to assess the potential impairment of receivables.
On an ongoing basis, receivable balances attributable to each customer or other counterparty are monitored and appropriate
action is taken when the relevant balance becomes or is considered likely to become overdue. The maximum exposure to loss
arising from receivables is equal to invoiced value.
The ageing of trade receivable balances was:
At 31 December
Current
Past due – less than 30 days
Past due – more than 30 days
Total trade and other receivables
2021
£000
249
—
1,434
1,683
2020
£000
—
—
33
33
Of the past due amounts at 31 December 2021, £nil was considered to be impaired and related to eight customers (2020: £nil, three
customers).
Liquidity risk
Liquidity risk relates to the Group’s ability to meet its obligations as they fall due.
The Group generates cash from its operations that are principally related to the manufacture and installation of vanadium flow
batteries. The market for reliable and flexible grid-scale storage solutions for energy generated from renewable sources is growing
and the technology continues to develop.
The development of new and enhanced storage technologies can be capital intensive and the Group has historically funded
development and early-stage commercial activity primarily from equity investment but also using cash from operations and loan
funding.
The Group forecasts cash generation using a comprehensive company financial model and monitors the timing and amount of its
payment obligations.
88
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
The following table shows the Group’s financial liabilities by relevant maturity grouping based on contractual maturities. The
amounts included in the analysis are contractual, undiscounted cashflows.
31 December 2021
Trade and other payables
Lease liabilities
Total financial liabilities
31 December 2020
Trade and other payables
Lease liabilities
Total financial liabilities
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
3,513
379
3,892
—
331
331
—
117
117
—
—
—
Carrying
amount
£000
3,513
770
3,513
827
4,340
4,283
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Over
five years
£000
Total contracted
cash flows
£000
2,468
190
2,658
—
179
179
—
314
314
—
155
155
2,468
838
3,306
Carrying
amount
£000
2,468
756
3,224
Capital management
The Group currently has no debt and is funded by proceeds raised through equity placings during 2021 and proceeds from the
conversion of warrants in 2021.
The board regularly reviews the Group’s cash requirements and future projections to monitor cash usage and assess the need for
additional funding. At 30 April 2021, the Group had £20.8 million of cash on hand.
29 Related parties
The only related parties of the Company are the key management of the Group. Key management has been determined as the
CEO and his direct reports.
Invinity Energy Systems plc purchased a total of 24,000 100p shares in the latest fundraising on behalf of two directors. 12,000
shares were purchased on behalf of Larry Zulch and 12,000 on behalf of Peter Dixon-Clarke. At 31 December 2021 the £12,000
owed by Peter Dixon-Clarke in respect of the shares had been settled. The £12,000 owed by Larry Zulch has since been settled.
Key management compensation is disclosed in note 8, Staff costs and headcount.
89
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
30 Group entities
Direct subsidiary
undertakings
Country of
incorporation
Camco Holdings UK Limited England
Camco Services (UK) Limited England
Camco (Mauritius) Limited Mauritius
Invinity Energy Systems
(US) Corporation
United States
of America
Invinity Energy Nexus
Limited
England
Indirect subsidiary
undertakings
Country of
incorporation
redT Energy Holdings (UK) England
Limited
Re-Fuel Technology Limited England
Invinity Energy (UK) Limited England
redT Energy Holdings
(Ireland) Limited
Ireland
Invinity Energy Systems
(Ireland) Limited
Ireland
redT energy (Australia)
(Pty) Ltd
Australia
Invinity Energy
(South Africa) (Pty) Ltd
South Africa
90
Registered office
Principal activity
Ownership %
2021
2020
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
24 Dr Joseph Rivière Street
1st Floor, Felix House
Port Lewis, Mauritius
1201 Orange St. #600
Wilmington, DE
USA 19899
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
Holding company
100%
100%
Support services
100%
100%
Holding company
100%
100%
Energy storage
100% —
Energy storage
100%
100%
Registered office
Principal activity
Ownership %
2021
2020
100%
100%
Research and
consultancy
Energy storage
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Energy storage
99%
99%
Business Services
100%
100%
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
22 Northumberland Road
Ballsbridge,
Dublin 4
22 Northumberland Road
Ballsbridge,
Dublin 4
RSK Advisory, Level 2, Suite 7
66 Victoria Crescent
Narre Warren, Victoria 3805
Australia
1st Floor, Kiepersol House
Stonemill Office Park
300 Acacia Road
Darrenwood
Randburg 2194
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA INTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Notes
(forming part of the consolidated historical financial information)
Indirect subsidiary
undertakings
Invinity Energy Systems
(Canada) Corporation
Country of
incorporation
Canada
Registered office
Principal activity
Ownership %
2021
2020
2900-550 Burrard Street
Vancouver, BC
Canada V6C 0A3
Energy storage
100% —
Suzhou Avalon Battery
Company Limited
The People’s
Republic of China no.11888 East Taihu Avenue,
1809 Building 4
Business Services
100% —
Songling Town,
Wujiang District, Suzhou City
Associates
Vanadium Electrolyte
Rental Limited
Country of
incorporation
England
Registered office
Principal activity
Unit 4.12 Clerkenwell Workshops
27-31 Clerkenwell Close
London EC1R 0AT
United Kingdom
Vanadium
procurement
Ownership %
2021
2020
50% —
The following entity was a subsidiary undertaking at 1 January 2021 but was wound up during 2021:
Direct subsidiary
undertakings
Country of
incorporation
Registered office
Principal activity
Camco International
Carbon Asset Information
Consulting (Beijing)
Co. Limited
The People’s
Republic of China Lucky Tower, No.3 North Road
Room 1408, Tower A,
Business Services
East Third Ring
Chaoyang District
PRC, Beijing
31 Events occurring after the report period
On 3 February 2022, the Company announced its largest North American energy storage sale to date, an 8.4 MWh VS3 flow
battery to be co-located with a 21 MWp solar array in Alberta, Canada to be constructed by Elemental Energy. The contract with
Elemental was signed on 31 December 2021 subject to two conditions precedent, both of which were satisfied by 2 February 2022.
On 23 February 2022, Invinity was awarded £708,271 of funding under Phase 1 of the Longer Duration Energy Storage (LODES)
demonstration competition.
On 9 March 2022, the Company’s shares were dual-listed on the Aquis Stock Exchange, in addition to the AIM Market, alongside
the short-term and long-term warrants, which were simultaneously listed on Aquis.
On 8 April 2022, the Company announced the conclusion of a successful test and validation program of its energy storage system
by Hyosung Heavy Industries and a subsequent signing of a non-binding Memorandum of Understanding for a global partnership
with an exclusive relationship in Korea.
On 19 April 2022, the Company was certified as compliant with ISO standards for Quality Management (ISO 9001), Environmental
Management (ISO 14001) and Health & Safety Management (ISO 45001) following an extensive audit process.
The ongoing events in Ukraine have led to international macro-economic instability. The impact on sterling has fed through to
increased input costs and these are expected to continue while the situation remains unresolved.
91
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIAINTRODUCTIONSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSInvinity Energy Systems plc
Officers and Advisers
Officers
Neil O’Brien
Larry Zulch
Matt Harper
Peter Dixon-Clarke
Jonathan Marren
Rajat Kohli
Michael Farrow
Kristina Peterson
Registered Address
Investor Relations
Joe Worthington
Ralph Anderson
Non-Executive Chairman
Chief Executive Officer
Chief Commercial Officer
Chief Financial Officer
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Director of Communications
Corporate Relations Manager
To contact Investor Relations,
email IR@invinity.com or call +44 204 551 0361
Jersey Company Number
92432
Advisors
Nominated Adviser and Joint Broker
Joint Broker
US Corporate Advisers
Registrar
Company Secretary
92
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
VSA Capital Limited
Park House House
16-18 Finsbury Circus
London
EC2M 7EB
EAS Advisors LLC
750 Lexington Avenue
New York
NY 10022
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St. Helier
Jersey
JE1 1ES
Oak Secretaries (Jersey) Limited
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Annual Report and Financial Statements 2021UK / US / CANADA / AUSTRALIA Invinity Energy Systems plc
CONTENTS
INTRODUCTION
About Invinity
2021 Highlights
Our Mission and Our Technology
Developing the World’s Largest Solar-Powered
Flow Battery
Partners in Innovation: Some of Invinity’s Customers
STRATEGIC REPORT
Chairman’s Report
Chief Executive Officer’s Report
Chief Commercial Officer’s Report
Chief Financial Officer’s Report
Risk Management Report
Sustainability Report
1
2
4
6
8
10
1 1
13
15
18
21
GOVERNANCE
The Board of Directors
Governance Report
Report of the Chairman of the Audit & Risk Committee
Report of the Chairman of the Nomination Committee
Report of the Chairman of the Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities in Respect
of the Financial Statements
Independent Auditor’s Report to the Members
of Invinity Energy Systems plc
FINANCIAL STATEMENTS
Consolidated Statement of Profit and Loss
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Officers and Advisers
24
26
29
31
32
33
42
43
44
51
51
52
53
54
55
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Manufacturing Electrical Technician, David Brown, finalises the assembly of an Invinity battery control panel in Bathgate, UK
The pulp is bleached using an Elemental Chlorine Free process.
This report is printed in the UK using environmental printing
technology and vegetable based inks. Both the manufacturing mill
and the printer are registered to the Environmental Management
System ISO 14001 and are Forest Stewardship Council® chain-of-
custody certified.
Designed and produced by JacksonBone Limited.
Printed in England by Synergy Group.
INVINITY ENERGY SYSTEMS PLC
Third Floor, IFC5
Castle Street
St. Helier
Jersey
JE2 3BY
Telephone +44 (0)204 551 0361
Website www.invinity.com
Twitter
Linkedin
@InvinityEnergy
linkedin.com/invinity-energy-systems
Jersey registered 92432
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Invinity Offices:
London, United Kingdom
Bathgate, United Kingdom
Vancouver, Canada
San Francisco, USA
Melbourne, Australia
St Helier, Jersey
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ANNUAL REPORT & FINANCIAL STATEMENTS 2021