Leaders in
green hydrogen
Annual Report and
Accounts 2022
1
Overview Strategic Report Governance Financial Statements
Shareholder Information
Welcome
ITM Power manufactures
integrated hydrogen
energy solutions to enhance
the utilisation of renewable
energy that would
otherwise be wasted.
Overview
1 Welcome
2
FY22 Highlights
Investment Case
Statement from the Chair of the Board
Strategic Report
4
5 REFHYNE
6
8 Chief Executive Officer’s Review
12 Chief Financial Officer’s Review
15 Our Market
17 Our Strategy
18 Our Business Model
19 Our Stakeholders and Section 172(1) Statement
24 Sustainable Energy, Engineered Sustainably
30 Principal Risks and Uncertainties
36 Going Concern
Governance
38
Introduction from the Chair of the Board
39 Summary of Application of the QCA Code
41 Board of Directors
44 Corporate Governance Report
51 Audit Committee Report
55 Remuneration Report
68 Directors’ Report
70 Directors’ Responsibilities Statement
Financial Statements
72
Independent Auditor’s Report
to the Members of ITM Power PLC
78 Financial Statements
Shareholder Information
113 Glossary
114 Officers, Professional Advisors and Useful Contacts
ITM Power PLC Annual Report 2022 2
Overview Strategic Report Governance Financial Statements
Shareholder Information
FY22 Highlights
Green hydrogen
will help lead
the world towards
decarbonisation.
755 MW
Order backlog for our products
(2021: 421 MW)
£(39.8)m
Adjusted EBITDA
(2021: £(21.4) million)
£5.6m
Revenue
(2021: £4.3 million)
£1.4m
Core product research spend,
with a further £7.0 million on
development (2021: £3.5 million
and £1.5 million respectively)
£4.1m
Capital expenditure
invested in the year
£366m
Net cash
(2021: £176 million)
388
Employees at year end
50%
Reduction in RIDDOR incidents
per employee in the last year
(number of RIDDOR incidents:
2022: 1; 2021: 1)
ITM Power PLC Annual Report 2022 3
Overview Strategic Report Governance Financial Statements
Shareholder Information
Strategic
Report
In this section
Investment Case
4
REFHYNE
5
Statement from the Chair of the Board
6
8
Chief Executive Officer’s Review
12 Chief Financial Officer’s Review
15 Our Market
17 Our Strategy
18 Our Business Model
19
24
30 Principal Risks and Uncertainties
36 Going Concern
Our Stakeholders and Section 172(1) Statement
Sustainable Energy, Engineered Sustainably
ITM Power PLC Annual Report 2022 4
Overview Strategic Report Governance Financial Statements
Shareholder Information
Investment Case
An attractive market
A portfolio of products
Reference plant
Net zero is the internationally agreed goal for mitigating global
warming by 2050. Geopolitical uncertainty has accelerated the need
for both energy and food security. Electrolysers, when coupled with
renewable power are the only vehicle through which green
hydrogen can be produced.
We produce three core products. Plug & Play contains everything
needed for small scale green hydrogen production; all a customer
needs to do is connect water and power. For larger projects we
produce a range of stacks, which can be modularised to provide
scale to larger projects.
We have been manufacturing electrolysis equipment for many years
and have deployed plant across the world. Learnings, both by ourselves
and our customers, enhance and improve the future development and
deployment of our electrolysers.
Well capitalised
Scalability
Partnerships
We raised £250 million in November 2021 and at our year end we had
£365 million of net cash on the balance sheet. This capital will enable
us to invest to meet what we expect to be significant demand for our
electrolysers over coming years as the race to decarbonise accelerates.
Our factory at Bessemer Park, Sheffield is one of the largest
electrolyser manufacturing facilities in the world. By early 2023,
capacity will be around 700 MW and future capacity will be increased
to 1.5 GW. The remodelling at Bessemer Park includes process and
equipment enhancements, all of which feed into a blueprint for future
factory openings.
Our partnerships with companies such as Shell, Linde and
ScottishPower have evolved over many years. These partnerships
confirm our leading technologies and capabilities. As the green
hydrogen value chain aligns, we would expect further partnerships
to manifest.
ITM Power Service
EPC through ILE
Our people
Today we provide 24/7 support from our control centre at Bessemer
Park. Collection and collation of performance information and data
enables a virtuous circle of reliability, availability and maintenance
outcomes which in turn provides value to and enhances the
relationship with our customers.
Engineering, Procurement and Construction (EPC) is a vital component
of the hydrogen value chain. Through our joint venture with Linde, ITM
Linde Electrolysis GmbH (ILE), we have access to unrivalled knowledge
and skills which de-risks the design and build out of projects, in
particular, larger projects.
People do not join ITM Power just for a job, they join because they are
passionate about our vision and they are determined to help us make
an everlasting difference to the planet. We have a highly skilled team
working at the cutting edge of technology.
ITM Power PLC Annual Report 2022 5
Overview Strategic Report Governance Financial Statements
Shareholder Information
Case study
REFHYNE
The REFHYNE 10MW
first-of-a-kind installation
and commissioning saw
ITM Power develop a 2 MW
stack module based on the
Company’s MEP stack
platform and then
demonstrate scalability by
integrating five modules
to achieve the 10 MW
nameplate capacity.
“Not only has this project met or
exceeded almost all of the EU 2020
targets – those applying when the
first phase of REFHYNE was designed
and commissioned – but it has in
two key measures achieved or
surpassed the newer EU targets for
2024 by demonstrating current
density of 3.0A/cm2 which meets
the EU target for 2024 and stack
efficiency for current densities up
to 2.2A/cm2 which exceeds the EU
target for 2024.
“This is a fantastic achievement by
the REFHYNE team here in the UK,
in Germany and in Norway and
I congratulate them all.”
The performance data show that
REFHYNE I:
– Achieved market-leading current
density of 3.0A/cm2 (EU 2020
target of 2.2A/cm2)
– Achieved stack efficiency of
52.63kWh/kg at 2.2A/cm2
(EU 2020 target of 55kWh/kg)
– Achieved FCH2 efficiency target
of 52kWh/kg over ~70% of
operational range
– Can project an average stack
efficiency of 49.34kWh/kg at 50%
load (in dynamic operation)
Responding to the data, Dr Graham
Cooley, CEO of ITM Power, said:
“REFHYNE I is demonstrating the
robust performance and efficiency
that we and partner Shell expected.
The data represent an endorsement
of our technology road map and
delivers confidence that we can
scale up our products to address the
next generation of projects in the
hundreds of megawatts.
This project has received funding from the Fuel Cells and Hydrogen 2 Joint Undertaking (now Clean
Hydrogen Partnership) under grant agreement No 779579. This Joint Undertaking receives support from
the European Union’s Horizon 2020 research and innovation programme, Hydrogen Europe and Hydrogen
Europe research.
ITM Power PLC Annual Report 2022 6
Overview Strategic Report Governance Financial Statements
Shareholder Information
Statement from the Chair of the Board
The case for green
hydrogen produced
by electrolysis
strengthened
significantly over
the last year.
Our ambitions today remain as strong as ever but after
careful consideration we have taken the important
decision to review our manufacturing strategy. This
has been brought into even sharper relief by current
geopolitical instability, high inflation and economic
uncertainty.
We have decided to redefine the timing of the
expansion of our capacity. While it remains our
aspiration, we recognise that given cost escalation,
supply constraints, and time delays it might not be
possible to reach 5 GW by the end of 2024. Capital
discipline has to be at the heart of every investment
decision we make and having an explicit capacity target
by a defined date could lead us to capital investment
decisions that are not right for our business.
For the same reasons, we have looked again at our plans
to build a second factory in the UK, at Aviation Park, and
have decided that the timing is not right to proceed
with this in the immediate future. Instead, capacity at
Bessemer Park will be rapidly expanded, with around
700 MW of capacity available by early 2023, followed
by further early expansion of up to a total capacity of
1.5 GW, which can be achieved by around eight months
after the time the expansion decision is made. We
believe this is a much more efficient use of capital, and
a more realistic near-term plan. The CEO’s Review,
which follows, sets this out in a little more detail.
The macro picture
The case for green hydrogen produced by electrolysis
strengthened significantly over the last year. In addition
to global initiatives and commitments to address climate
change, the role of green hydrogen to address energy
security and price volatility has moved up the global
political agenda. The events in Ukraine, and the
subsequent sanctions on Russia have created price
spikes in hydrocarbons and in fertilisers. The cost of
green hydrogen in many parts of the world is now at
parity with the cost of grey hydrogen, which together
with the increased desire for energy security and
independence, should accelerate the replacement of
grey hydrogen by green hydrogen, the only net zero gas,
whilst at the same time, reducing energy cost volatility.
Geopolitical developments have resulted in a further
increase in demand for large scale electrolysis projects
to produce green hydrogen. The Board believes that
the twin drivers of achieving net zero targets and the
increasing need for energy and food security represent
endorsements of our strategy to increase production
capacity.
Scaling for the future
In November 2021, we raised £250 million to expand
our manufacturing capacity to 5 GW by 2024, to develop
our core products and to accelerate our technology
capabilities and to continue investment in organisational
development as we scale towards global manufacturing.
Just like the energy industry, ITM Power is going through
a transition which includes changes to our internal
processes and procedures, which are being enabled by
the recruitment of many highly skilled and experienced
people who will enhance our competencies and
capabilities across all areas of the Group.
ITM Power PLC Annual Report 2022 7
Overview Strategic Report Governance Financial Statements
Shareholder Information
Statement from the Chair of the Board continued
Our products
Our technology continues to develop. Our latest stack
platform, MEP 2.0, increases pressure, efficiency and
output. This technology will be showcased for the first
time through the 24 MW Leuna project. Unfortunately,
delivery of this project has been delayed due to a
number of factors, including supply chain constraints,
changes to Leuna’s site requirements, and both
manufacturing and testing delays. Delays are to some
extent understandable given we are delivering a
first-of-a-kind product into a commercial project.
The impact this had on our results is discussed in
more detail in the CFO’s Review.
Our product range will continue to develop and Linde
announced at its Green Hydrogen webinar in July 2022
the development of a larger system module. This has
been jointly designed and will enable five MEP 2.0 stack
skids to be integrated into a single module that can be
deployed into large projects.
We have also been awarded a contract by The
Department for Business, Energy and Industrial Strategy
(BEIS), under its Net Zero Innovation Portfolio Low
Carbon Hydrogen Supply 2 Competition, to accelerate
the commercial deployment of our next generation
platform and its manufacture. This follows the
publication of a report highlighting the progress made
to date and describing the pathway to a final investment
decision (FID) and commercial operation of a 100 MW
scale electrolyser system powered by offshore wind
in 2025.
Our people
We have continued to build our team and have been
very fortunate to have attracted highly talented
individuals in all departments. Today we employ over
430 people and have a growing apprentice scheme,
which has proven to be a great success.
Dr Graham Cooley has decided to step aside from his
position as CEO after 13 years in post, during which time
he has led the Company through very significant growth
and development. He will remain in position until a
successor is appointed, and thereafter assume a senior
strategic role in the Company, reporting to me and the
new CEO. We wish to place on record our enormous
gratitude and respect for his leadership over the years.
We are delighted that we will continue to benefit
from his immense experience and expertise in the
hydrogen sector.
Tom Rae, the representative of J.C.B. Research, a
significant shareholder in ITM Power, resigned as a
Non-Executive Director in November 2021 following
completion of the fundraise which resulted in J.C.B.
Research’s shareholding falling below the threshold
giving it the right to appoint a Non-Executive Director.
I’m sure I speak for the whole Board when I thank
Tom for his contribution during his year as a
Non-Executive Director.
I am delighted Denise Cockrem agreed to join us as a
Non-Executive Director from 25 July 2022. She combines
a strong history of knowledge and experience of
accounting with valuable experience in the renewable
energy sector. She will bring directly relevant skills to the
governance and future development of the Company.
I look forward to working with her.
Our partners
Our strategic partnerships should enable us to capture
a material share of the global green hydrogen market
as its growth further accelerates over the coming years.
I look forward to updating shareholders on our progress
for what should be another exciting year.
As always, I would like to end by thanking all of our
stakeholders – staff, partners, shareholders and our
communities – for their help, support and enthusiasm
in helping us to create today’s ITM Power, a recognised
world leader in electrolysis technology and a creator of
jobs and value in the UK. Here’s to the future.
Sir Roger Bone
Chair of the Board
ITM Power PLC Annual Report 2022 8
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Executive Officer’s Review
During 2022,
hydrogen has
increasingly
emerged as
the core
component
of world
governments’
energy transition
strategies.
Introduction
During 2022, hydrogen has increasingly emerged as
a core component of world governments’ energy
transition strategies. Green hydrogen produced by
electrolysis from renewable power is pivoting from
demonstration and trial projects to intent and action
as the world seeks to achieve increasingly legislated
net zero targets.
However, in the short term, and across Europe for
example, large projects are being delayed due to a lack
of FIDs. A number of the EU’s ‘important projects of
common European interest’ (IPCEIs) in the hydrogen
sector fall into this large project category and whilst EU
funding is available for such projects, until factors such
as subsidies and incentive schemes are announced,
there remains a risk of further FID delays.
This is a new market, with Proton Exchange Membrane
(PEM) electrolysis at the cutting edge of the solutions to
reach net zero. As such, we have continued to invest in
technology development to address a market that
demands performance and scale. In parallel, we have
sought to increase manufacturing capacity as the
technology is maturing. This dynamic has led to the need
to manage the inherent uncertainty of rapid technology
and production scale-up.
Due, in part, to the tragedy unfolding in Ukraine,
governments are also now recognising that green
hydrogen has a vital role to play in strengthening energy
security, whilst at the same time, given the role that
methane plays in the food value chain, the need to
improve food security has also risen high on the agenda
with increasing demand for green ammonia to produce
fertilisers. Investment in renewables is also accelerating
as governments around the world target an increasing
share of renewables in their energy mix. These factors
are combining to accelerate the demand for
electrolysers.
Performance
We were disappointed that the revenue from the
Leuna project was not recognised in the year, being
delayed into the next financial year. However, the
lessons learned from building this latest generation
of electrolysis equipment will ensure that our future
competencies and capabilities are enhanced. Our gross
loss also widened in the year reflecting increased costs
on committed contracts, much of which was associated
with first-of-a-kind plant or technology improvement.
We have also not yet fully realised the benefit of our
decision to stop undertaking EPC work. More widely,
the lessons learned include the need to consider carefully
introducing any technology development on the critical
path of projects, and as such we will focus in future on
selling validated products, which we see as world-leading.
The focus on recruiting staff to support delivery has
resulted in overheads staying broadly consistent with
the prior year, with the increase in staff being deployed
either to delivery (cost of sales) or future value creation
(product development). Further details are discussed in
the CFO’s Review.
ITM Power PLC Annual Report 2022 9
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Executive Officer’s Review continued
The market for green hydrogen
The green hydrogen market has been propelled onto
centre stage of the global energy market with the
unfortunate events in Ukraine. Nations around the world
are taking action to shift away from expensive and scarce
methane as soon as possible. This is underlined by the
recent REPowerEU energy security plan which aims to
transform Europe’s energy system. The measures in the
plan set a target of 10 million tonnes per annum of
domestic renewable hydrogen production and 10 million
tonnes per annum of imports by 2030 to replace
methane, coal and oil in hard-to-decarbonise industries
and transport sectors. The 20 million tonnes per annum
total is equivalent to 200 GW of electrolysis by 2030.
In the UK, the Government has also responded by
doubling its initial 5 GW of blue and green hydrogen
target to 10 GW of low-carbon hydrogen, of which a
minimum of 5 GW will be green hydrogen. This is good
news for the UK as it looks to bolster energy security,
energy storage and sustainability, and good news for
ITM Power with our technology leadership in PEM
electrolysis.
The US House of Representatives has recently
approved the Inflation Reduction Act of 2022 (US IRA),
a $369 billion package dedicated to decarbonise the
United States. The bill will provide incentives for clean
energy technologies with tax incentives being the
primary mechanism, which should add long-term
certainty to clean energy markets, thereby attracting
significant investment. A tax credit for ‘qualified green
hydrogen’ would pay up to $3 per kilogram depending
on the levels of life cycle emissions and staff wages.
This will have the effect of improving the viability of
a significant number of projects in the US, thereby
accelerating demand for green hydrogen products.
Across the world, more and more countries have
announced hydrogen strategies. According to Bloomberg
New Energy Finance, the 30 countries that have now
announced hydrogen strategies plan to build a total
of 73.8 GW of electrolysers by 2030.
The largest industrial users of grey hydrogen are the oil
refining and fertiliser sectors, accounting for upwards
of 70 million tonnes consumed per annum. With our
24 MW system deploying to Leuna Energy Park (refining),
and this system being replicated for deployment at the
Norwegian Yara Porsgrunn plant (ammonia), we are at
the forefront of the move to decarbonise the most
intensive users of industrial hydrogen. These two
projects will form key reference plants for further
large-scale projects in these sectors globally.
Backlog and pipeline
Work in progress1
Contracts backlog2
September
2022
MW
77
755
September
2021
MW
43
421
% change
79
79
1. Work in progress, contracted backlog.
2. Contracts backlog, contracted backlog and contracts in the final stages of
negotiation and preferred supplier backlog.
As at 1 June 2022, we had a record backlog of 755 MW,
a year-on-year increase of 160%. New orders in the year
included the sale of a 2 MW electrolyser (increased
from the original 1.4 MW sale) to Sumitomo, a strategic
partner, for Tokyo Gas, our first deployment in Japan.
In October 2021, we announced that the REFHYNE II
consortium had been awarded a grant of €32.4 million
by CINEA (the European Climate, Infrastructure and
Environment Executive Agency) for the development of
a 100 MW electrolyser to be sited at Shell’s Energy and
Chemicals Park, Rheinland and which will be used to
produce sustainable aviation fuel. REFHYNE II is the
follow-on project to the successful 10 MW REFHYNE I
project, Europe’s largest PEM hydrogen electrolyser,
which began operations in July 2022. ITM is a key
member of the 100 MW REFHYNE II consortium, and the
project will see an engineering design phase which will
be followed by a FID expected in late 2022 with delivery
then scheduled for 2024.
In November 2021, the Green Hydrogen for Scotland
Consortium, of which we are a member, received UK
Government funding to support investment for the first
phase of development for ScottishPower’s 20 MW
Whitelee Windfarm hydrogen production and storage
facility. Also in November, we announced a 12 MW
electrolyser sale, however the location and customer
identity are restricted due to commercial sensitivities.
This was followed in January 2022 by our first project in
the key ammonia market, the world’s largest consumer
of hydrogen, with the sale of a 24 MW electrolyser to
Linde Engineering to be installed at the Porsgrunn site
operated by Yara, about 140 kilometres southwest of
Oslo. The site covers an area of approximately 1.5 square
kilometres and is the largest industrial site in Norway.
The Porsgrunn site produces three million tonnes of
fertiliser per year and is one of Norway’s largest sources
of CO2 emissions outside the oil and gas industry,
emitting around 800,000 tonnes per year. The
electrolysis plant will provide enough hydrogen to
produce 20,500 tonnes of ammonia per year, which can
be converted to between 60,000 and 80,000 tonnes of
green fertiliser. The hydrogen required for ammonia
production is currently produced from steam methane
reforming (SMR). Yara intends to start replacing this grey
hydrogen with green hydrogen. The 24 MW system
supplying 10,368 kilograms per day of hydrogen will
account for approximately 5% of the plant’s consumption
and serve as a feasibility study for future upscaling.
ITM Power PLC Annual Report 2022
10
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Executive Officer’s Review continued
Also in January 2022, we were pleased to announce that
our wholly-owned subsidiary, ITM Power GmbH, had
been approved for a €1.95 million (approximately
£1.6 million) award for the SINEWAVE project, as part of
the German Federal Ministry of Education and
Research´s (BMBF) hydrogen flagship project H2Giga that
focuses on technology development for series
production and industrialisation of electrolysis systems.
The project runs to March 2025 and is the first time we
have accessed German federal funding. In our trading
update in June, we announced that this project will
support the development of ITM Power Service,
an aftermarket focused customer support business
based in Germany designed to provide full product
life cycle support of deployed electrolyser systems.
All of our existing aftermarket operations, including the
Group’s 24/7 UK Remote Support Centre will be merged
into one focused organisation with new headquarters in
Linden, ideally located in Hessen, which is a recognised
transit state within Germany with excellent motorway
links and local infrastructure. The facility will house spare
parts, including core PEM stack technology, to ensure
high service levels and rapid deployment capability
to systems in Europe. The organisation will be led
by Philip Wilson as Technical Director and Calum
McConnell as Commercial Director, both long-term
ITM Power staff members.
In May 2022, RWE announced that it will be using an ITM
Power 4 MW electrolyser, made up of two of our 3MEP
Cube products, as part of a pilot project at their Lingen
facility. This pilot forms part of RWE’s Growing Green
strategy announced in November 2021, which plans to
create 2 GW of green hydrogen capacity by 2030.
Production capacity strategy
As the Statement from the Chair of the Board reports,
we have decided to amend our ambitions for the timing
of our target to have 5 GW of production capacity and
have reviewed our plans to open a second UK factory at
Aviation Park.
Our ambitions are as strong as they have ever been,
the outlook for the green hydrogen economy has never
looked better and as such these decisions have not been
taken lightly. In the case of the 5 GW target, we need to be
nimble and flexible, and we want to ensure investment
decisions are correct and right for the business and
considered fully before capital is committed.
With regard to Aviation Park, the current business
climate and cost escalation have caused us to review our
original plans. We believe in the near-term that extending
the total capacity at Bessemer Park up to 1.5 GW is a
better use of capital with commensurately improved
near-medium term cash flows.
Available annual capacity at Bessemer Park will be
ramped up to around 700 MW over the next six months.
The factory has been reconfigured such that the final part
of the expansion, to 1.5 GW, is planned to be achieved
within the next two financial years but could be
accelerated to within eight months from the time
we take the expansion decision.
Capital investment at Bessemer Park, which is a
leasehold site, has totalled circa £16 million to 30 April
2022. Over the next two financial years, we expect
further investment of around £13 million, which will
take us up to 1.5 GW of annual capacity. Many of our
manufacturing processes have been reengineered and
we will continue to introduce more automation,
particularly around the core stack product to improve
consistency and reduce waste. Finally, we are working
to identify new testing facilities to allow product
testing and future product validation work to be
significantly upscaled.
Technology
Our technology roadmap is focused on increasing
efficiency, reducing cost (both operational expenditure
and capital expenditure) and expanding production
capacity of our electrolyser products. Product development
at ITM Power is continual and includes, amongst others
things, increased current density, improved membrane
materials, ultra-low catalyst loadings, in-house component
preparation and the adoption of automated assembly.
We have applied technology improvements to the next
generation of 2 MW stack modules, internally known
as MEP 2.0, which are being deployed in the 24 MW
electrolyser for the Leuna Chemical Complex in Germany
and thereafter at the Porsgrunn site operated by Yara.
This latest generation of 2 MW stack modules represents
a step change in performance with a 10% improvement
in efficiency and a 50% increase in operating pressure to
30 bar, reducing both electrolyser operating cost and
energy consumption associated with downstream
hydrogen compression.
Recently, Linde announced the development of a larger
system module, which has been designed in partnership
with ITM Power. This will use MEP 2.0 stacks, configured
into skids of three stacks and then packaged as a
five-skid module thereby creating a 10 MW electrolyser
module. The 10 MW modules will then be deployed in
multiple batches for large projects.
ITM Power PLC Annual Report 2022
11
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Executive Officer’s Review continued
Development of our next generation platform
commenced in 2019 with the completion of a feasibility
study funded by the BEIS Hydrogen Supply Competition.
This was followed by a second phase, also funded by the
BEIS Hydrogen Supply Competition, and covered two
streams: a Front End Engineering Design (FEED) study for
a 100 MW deployment at Phillips66 and Ørsted and the
development and validation of our 5 MW stack platform.
This phase concluded during the year with visits from
project partners Phillips66, Ørsted and Element Energy,
along with the UK Energy Minister and BEIS officials, to
Bessemer Park when we presented our findings and
showcased the first test station and prototype stack.
Shortly after the year end, we announced the award
of a contract by BEIS, under its Net Zero Innovation
Portfolio Low Carbon Hydrogen Supply 2 Competition,
to accelerate the commercial deployment of our next
generation platform and its manufacture. The award
for the project was for £9.3 million.
The development and testing programme for our next
generation platform includes both component level and
full-scale evaluation and will remain ongoing as part of
our technology roadmap and continuous improvement
of our product suite. This platform is larger than our
state-of-the-art MEP system and it will undergo rigorous
testing in representative conditions to validate the
performance through real-world conditions, ensuring
the technology is ready for large-scale commercialisation.
Motive
In March, a strategic partnership agreement was made
with Vitol for wholly-owned subsidiary ITM Motive
Limited (now Motive Fuels Limited), trading as Motive,
to become a 50/50 joint venture between ITM Power
and Vitol.
Vitol is a leader in the energy sector with a presence
across the spectrum: from oil through to gas, power,
renewables and carbon. Vitol will invest up to
£30 million, which will be matched by a similar
investment from ITM Power. Motive owns all UK public
hydrogen refuelling stations constructed by ITM Power.
It was set up as a Group division in 2020 and became a
separate legal entity in May 2021. It operates with its
own board, comprising three directors from ITM Power
and three from Vitol.
As part of the transaction, Motive has entered into a
framework agreement with ITM Power, under which
Motive appoints ITM Power as its preferred supplier for
up to 240 MW of electrolysis equipment to support
Motive with the development and roll-out of new green
hydrogen refuelling stations. Motive has also appointed
Vitol as its preferred supplier for up to 240 MW of
electricity demand, which will provide green power to
the network of new refuelling stations.
Vitol shares Motive’s belief that the market for hydrogen
in transport is on the cusp of rapid expansion, supported
by government incentives to accelerate transportation
decarbonisation. This partnership will help facilitate the
rapid scaling up of production, distribution and demand
stimulation for hydrogen to transportation. Vitol is
aligned with Motive’s strategy to target the building of
large refuelling stations for heavy duty vehicles, such as
trucks and buses. Over the past 18 months, Motive has
been working to develop deep relationships with a small
number of blue-chip heavy goods users in the UK and
aims to develop standard 4 MW sites around the UK.
Outlook
We are on the verge of a major energy and industrial
step-change. I describe it as the fourth industrial
revolution, one of interconnectivity and automation,
powered by Net Zero, and ITM Power is playing a key
role in supporting this revolution.
It has been a privilege to lead ITM Power through its
transition from an R&D business to a world leading
electrolyser manufacturing company. No CEO can
remain in place indefinitely and now, as we seek to
become a global manufacturing powerhouse, is a good
time for me to step aside and hand over to someone
with more experience in this area.
The whole team at ITM Power has been a pleasure to
work with and I look forward to working with the new
CEO and continuing my involvement with the Group.
Dr Graham Cooley
Chief Executive Officer
ITM Power PLC Annual Report 2022 12
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Financial Officer’s Review
2022 was
another busy
year for ITM
Power, with
manufacturing
ramp up at
Bessemer Park
starting to pick
up in the second
half of the year.
Introduction
FY22 was another busy year for ITM Power, with
manufacturing ramp up at Bessemer Park starting
to pick up in the second half of the financial year.
We also continued to work very closely with all
strategic partners, especially our route to market
for larger projects, Linde Engineering.
In November 2021, we completed a successful equity
fundraise of net £243 million which was well supported
and underpinned our strategy to scale manufacturing
capacity, aligned with demand, in the medium term.
In the near term, the fundraise has enabled us to
invest in accelerating technological development and
organisational capability, start to ramp up production
capability, to enhance our lead times and competitive
positioning. This in turn revealed pressure points within
the supply chain and Bessemer Park manufacturing
processes, which whilst in the process of being resolved
has led to revenue recognition for certain projects, and
most notably the 24 MW Leuna project, being deferred
beyond the year end.
Shortly before the year end, in late March 2022,
we also announced that we had concluded a strategic
partnership agreement with Vitol for our wholly-owned
subsidiary ITM Motive Limited (now Motive Fuels
Limited), trading as Motive, to become a 50/50 joint
venture owned between ITM Power and Vitol. Vitol will
invest up to £30 million in the venture, which will be
matched by a similar investment from ITM Power. This
will allow us to focus on executing our current contracts
and developing core competencies as a manufacturer,
ready for growth as demand is realised. From now on,
the Group will account for its 50% share of profits or
losses from Motive, as it does with its 50% share of ILE.
Further information about the Board’s consideration of
the Motive joint venture is available in Our Stakeholders
and Section 172(1) Statement on page 21.
Finally, we have continued to make significant
investment in both the core technology and in the
manufacturing site, Bessemer Park, as well as our
people, during FY22 to support our future growth
ambitions and retain our position as one of the world’s
leading PEM electrolyser manufacturers.
Key financials
A summary of the Group’s key financials is set out in the
table below:
Year to 30 April
Revenue
Gross loss
Pre-tax loss
Adjusted EBITDA1
Property, plant and
equipment plus
intangible assets
Inventory
Work-in-progress
(WIP)
Net cash
Net assets
2022
£m
5.6
(23.5)
(46.7)
(39.8)
24.7
24.3
7.9
365.9
395.0
2021
£m
4.3
(6.5)
(27.6)
(21.4)
16.8
3.9
2.5
176.1
197.4
2020
£m
3.3
(5.8)
(29.5)
(18.1)
8.7
3.3
1.1
39.9
55.8
1. Adjusted EBITDA in a non-statutory measure. The calculation methodology
is included below.
ITM Power PLC Annual Report 2022 13
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Financial Officer’s Review continued
Non-financial key performance indicators
We also use the following non-financial performance
indicators to consider our performance over time:
Year to 30 April
MW in backlog
MW in WIP
MW output1
2022
680
75
11
2021
290
43
Not
recorded
2020
43
14
Not
recorded
1. MW output has become a key metric considered during the year as the
Group moved towards execution of more projects.
Financial performance
Revenue
The principal ways in which we generate revenue and
income are through product sales, consulting contracts
(FEED and feasibility studies), maintenance contracts and
grant funding.
Revenues of £5.6 million (FY21: £4.3 million) were
generated in the year. Product revenue of £2.0 million
(FY21: £1.7 million) related to delivery of two electrolyser
products in Australia, as well as the progression of our
REFHYNE I project for Shell. Consultancy revenue of
£2.9 million (FY21: £2.1 million) predominantly stemmed
from the design and proof of concept project commissioned
by BEIS for the next generation stack platform.
Fuel sales during the year were £229,000 (FY21: £153,000)
with the comparative period reflecting the effects of last
year’s lockdowns. Following the announced Motive joint
venture with Vitol, the entity will be equity accounted
for going forward.
We had expected to be able to recognise the revenue
from the sale, via Linde, to Leuna of 24 MW of electrolyser
modules, but revenue is now expected to be recognised
in FY23. This delay was attributable to scale-up challenges
presented by the deployment of our MEP 2.0 technology,
coupled with some local supply chain constraints.
In collaboration with Linde, the delivery method for the
modules was amended. As such, under accounting
standard IFRS 15 Revenue from Contracts with Customers,
the product will remain in WIP until later in the product
delivery cycle, when the product is transferred to
the customer.
The Group generated a gross loss of £23.5 million
(FY21: £6.5 million loss). Gross loss was adversely
affected by cost overruns on the REFHYNE I and Leuna
projects. REFHYNE I is a project where we carried out
all of the EPC, a role that is now carried out by Linde
Engineering. The Leuna project is the first to use the
latest MEP 2.0 generation technology. The lessons
learned from both these first-of-a-kind projects have
led to a sharper focus on validation timing, costings,
and testing capability which we expect to improve
as production of MEP 2.0 ramps up.
Losses
The adjusted EBITDA loss1 was £39.8 million
(FY21: £21.4 million). This was impacted by various
factors: the loss at the gross margin level referred to
above, as well as costs associated with production ramp
up at Bessemer Park and the overhead increase, mostly
as a result of recruitment of skills during the year, with an
emphasis on manufacturing and delivery resource.
The loss before tax was £46.7 million (FY21: £27.6 million)
and basic and diluted loss per share of 8.1p (FY21: loss of
5.5p per share).
Cash burn
Cash burn1 increased to £53.3 million (FY21: £37.7 million).
This was principally impacted by £7.0 million of product
development associated with MEP 2.0 and GEP 1.0, a
£25.8 million increase in WIP and inventory build, and
£4.1 million for additional production equipment for
the Bessemer Park factory.
1. Management uses the non-statutory measures adjusted EBITDA and cash
burn to better reflect underlying performance. Cash burn is a non-statutory
measure the directors use to monitor the Group, and is calculated by
deducting from annual cash flow the effects of any equity fund raise after
costs. Adjusted EBITDA is a primary measure used across the business to
provide a consistent measure of trading performance. The adjustment to
EBITDA removes certain non-cash items, such as share based payments, to
provide a key metric to the users of the financial statements as it represents
a useful milestone that is reflective of the performance of the business
resulting from movements in revenue, gross margin and the cash costs of
the business. We have set out below how we calculate adjusted EBITDA
(see also Note 6 for more information).
Loss from operations
Add back:
Depreciation
Impairment
Amortisation
Loss on disposal
Fair value loss on loan notes
Share-based payment charge
(Note 25)
Adjusted EBITDA
2022
£000
(44,736)
2021
£000
(26,657)
2,340
–
849
–
344
2,321
1,713
274
173
–
1,429
(39,774)
799
(21,377)
Financial position: positioned for the future
Current assets increased to £423.6 million
(FY21: £205.5 million). This was principally as a
result of the fundraise of £250 million in November
2021, which resulted in year-end cash of £365.9 million
(FY21: £176.1 million), and an increase in inventories to
£32.2 million (FY21: £6.4 million) as the Group stocked
up on raw materials to deliver its order pipeline and
saw WIP increase ahead of the delivery of the Leuna
and other projects.
Trade and other receivables were £25.5 million
(FY21: £23.0 million) including £10.3 million
(FY21: £4.9 million) of prepayments to suppliers for
long-lead time items required on the Group’s build
projects. Trade and other payables increased to
£34.3 million (FY21: £12.9 million), driven by an
increase of £10.5 million in deferred sales income
principally from the Leuna project.
Fixed assets increased to £34.5 million
(FY21: £23.6 million) reflecting a £2.1 million rise
in property, plant and equipment and £5.8 million
of additional intangible assets, with the rest
from investments.
ITM Power PLC Annual Report 2022 14
Overview Strategic Report Governance Financial Statements
Shareholder Information
Chief Financial Officer’s Review continued
Capitalised development costs increased
significantly during the year, reflecting the Group’s
focus on launching updated or new core products:
the MEP 2.0 and the GEP 1.0. In FY22, the Group
capitalised £6.8 million of additional development
costs (FY21: £1.5 million) resulting in total capitalised
development and know-how costs at year end of
£9.1 million (FY21: £3.2 million).
The Group also recognised an increase in both
payables and provisions. Payables rose to £34.3 million
(FY21: £12.9 million), reflecting an increase in trade
payables of £7.5 million as the Group improved payment
terms with suppliers, and an increase in deferred income,
with sales contracts paid on milestones, reflecting in
particular money on projects in flight, including Leuna.
Provisions increased in the year to £21.8 million
(FY21: £12.3 million). Provisions for contract losses
rose to £12.5 million, (FY21: £4.8 million). This was
due to continuing support for REFHYNE I through site
acceptance testing, and the Leuna project with an
increased cost of parts and increased labour expectations
to fulfil the contract. Additions to warranty provisions
in the year of £2.2 million (2021: £0.2m) reflect both
contract progress in the year and recognition that
first-of-a-kind plant requires additional support in the
field. We retain our long-term expectation that warranty
costs will reduce below 3% of sales price for standard
product, repeat sales.
Events after the balance sheet date
After the balance sheet date, the Group announced that
ITM Power had been awarded a contract by BEIS, under
its Net Zero Innovation Portfolio Low Carbon Hydrogen
Supply 2 Competition to accelerate the commercial
deployment of our next generation platform and its
manufacture. The award for the project is for £9.3 million
and follows initial designs developed through previous
BEIS funding competitions. The award is expected to be
spread over a three-year period and is also expected
to be back-end loaded.
In addition, at the time of the trading update in June,
we announced the development of ITM Power Service,
an aftermarket focused customer support business
based in Germany designed to provide full product life
cycle support of deployed electrolyser systems. All
existing aftermarket operations, including the Group’s
24/7 UK Remote Support Centre, will be merged into
one focused organisation with new headquarters in
Linden in Germany.
In September 2022, we reviewed our plans to open a
second UK factory at Aviation Park, given the current
business climate and general cost escalation. Our
ambitions remain as strong as ever, but we need to be
nimble and flexible, and we want to ensure investment
decisions are correct and right for the business and
considered fully before capital is committed. In the
near-term extending the total capacity at Bessemer
Park up to 1.5 GW is a better use of capital with
commensurately improved near-medium term
cash flows.
In September 2022 Dr Graham Cooley decided to step
aside from his position as CEO of the Company after 13
years in post. The Company has commenced a process
to select a new CEO. Dr Cooley will remain in position
until a successor is appointed, and thereafter assume
a senior strategic role in the Company, reporting to
the Chairman and the new CEO.
Outlook and current trading
We start the new financial year in a strong financial
position and, whilst there are many operational changes
being made within the Group, we expect good sales
momentum, with further investment into our people,
our processes and our assets. We also see the economic
case for green hydrogen projects increasing, with the
macro picture expected only to improve.
In summary we provide the following guidance for FY23:
– Product revenue in the range of £23-28 million
– MW delivered in the range 48-65 MW
– Adjusted EBITDA loss of £45-50 million
– Capital expenditure of £30-40 million, with a focus
on development costs
– Working capital of £40-60 million
– Cash burn of £110-135 million
We have a contracted backlog of 77 MW which
we expect to increase in the coming months as more
projects reach their FID and become contracted. That
said, with lead times stretching within many supply
markets in FY22 as a result of macroeconomic conditions,
the focus in the next financial year will be on delivering
what is already contracted, with 60% to 80% of the MW in
contracted work in progress expected to be recognised
in FY23. We will also continue to utilise working capital
to build products to stock, with 50 MW to 100 MW of
core stack modules being built for products to be
recognised in future years.
Continued investment in capability and capacity will
see losses increase in the near term, with an improved
position in the medium term. The cash on our balance
sheet will enable us to grow capacity, initially through
£10 million to £15 million further investment in Bessemer
Park. Longer term, we will invest to increase capacity
towards 5 GW to enable us to address the large
demand we see in the future.
Andy Allen
Chief Financial Officer
ITM Power PLC Annual Report 2022 15
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Market
“ Governments need to take rapid
actions to lower the barriers that are
holding low-carbon hydrogen back
from faster growth, which will be
important if the world is to have a
chance of reaching net zero emissions
by 2050.”
Ships
Trucks
Synthetic
fuels
Fatih Birol
IEA Executive Director
Steel
Glass
Food
Metallurgy
PRODUCTS
CK FOR
TO
S
D
O
O
F
G
N
TRA
N
SP
O
R
T
PROVISIO
N
O
F
F
U
E
L
F
O
R
Cars
Aviation
Electricity
Peaking
Plants
P
O
W
E
R
I
D
I
V
O
R
C
H
E
P
Fertiliser
M
I
C
A
L
S
Plastic
Fuel refiners
BUILDINGS
PRO V I D I N G H
A T FOR
E
S T R Y
U
D
I N
AI
Aluminium
Steel
Food
Residential &
commercial
Paper
Cement
This stark figure lays bare the reality of how fragile our
food and energy security really are, given both are entirely
dependent on grey, steam methane reformed hydrogen.
In response to the need to decarbonise, some have
turned to blue hydrogen, where the CO2 arising from
its production (from hydrocarbons) is captured at the
production facility and stored separately. However, blue
hydrogen projects have been exposed as not being cost
competitive, and that is before carbon pricing and
carbon capture and storage (CCS) costs are added.
In fact, blue hydrogen projects “are high risk and likely
to become stranded assets” as soon as the end of this
decade, while potentially adding to Europe’s gas crisis,
according to the Institute for Energy Economics and
Financial Analysis (IEEFA).
Governments around the world are experiencing the
real-life impact that being beholden to carbon intensive
natural gas undermines energy security. A scalable,
sustainable, and fit for purpose alternative lies instead
in turning renewable electrons into the only net zero
molecule – green hydrogen.
Hydrogen sits increasingly at the heart of government
strategy. While it could be argued that this has been the
case for some time, the hydrogen value chain has thus
far been dysfunctional. However, over recent months,
there has been a step change in coordination and
cooperation, which is critical to joining up the value
chain. This is laying the vital bedrock needed to build
a green hydrogen economy.
To deliver on rapidly approaching net zero targets, the
world needs to act fast, especially where the reduction
of fossil fuels is concerned.
The continuing crisis in Ukraine has brought into fresh focus
the pressing need to move as quickly as possible away
from methane – which the United Nations Economic
Commission for Europe states as having a 100-year
global warming potential 28 to 34 times that of CO2.
Hydrogen produced using methane as a feedstock plays
a pivotal role in all oil refining and ammonia production.
Combined, these two carbon intensive industries lay claim
to almost 70 million tonnes of industrial hydrogen per
annum, according to the International Energy Agency (IEA).
Global hydrogen demand by sector in the Net Zero
Scenario, 2020-2030
)
t
m
(
n
o
i
l
l
i
M
225
200
175
150
125
100
75
50
25
0
2020
2025
■ Refining ■ Industry ■ Transport ■ Power
■ Ammonia - fuel ■ Synfuels ■ Buildings
■ Grid injection
2030
Source: IEA, Global hydrogen demand by sector in the Net Zero Scenario, 2020-
2030, IEA, Paris https://www.iea.org/data-and-statistics/charts/global-
hydrogen-demand-by-sector-in-the-net-zero-scenario-2020-2030
ITM Power PLC Annual Report 2022
16
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Market continued
UK market
European market
Global market
2021 was a record year in policy action and low-carbon
hydrogen production, with governments around the
world adopting hydrogen strategies. There are currently
more than 75 green hydrogen plans from countries
realising that they need to change, and change quickly.
There has been a number of reports mapping out future
scenarios, the most well-known of which is the IEA
report – Net Zero by 2050 – which states that 322 million
tonnes of electrolytic hydrogen is needed by 2050.
To put it another way, that’s 3,585 GW of electrolysis.
Since our factory was opened in 2021, we have hosted
a number of delegates from governments around the
world, keen to discover more about both green
hydrogen and our electrolysers. This has included His
Excellency Dr Mohamed Shaker, Egypt’s Minister of
Electricity and Renewable Energy, ahead of the
COP27 conference in Egypt later this year.
In August 2021, we welcomed Kwasi Kwarteng, Secretary
of State for Business, Energy and Industrial Strategy, to
officially open our Sheffield-based factory, currently one
of the world’s largest electrolyser production facilitiies.
During his visit, Mr Kwarteng announced the first-ever
UK Hydrogen Strategy, direct from our factory.
Due to the subsequent conflict in Ukraine and the
knock-on effect on methane pricing, the UK Government
has doubled its 2030 hydrogen production target to
10 GW. Crucially, green hydrogen will comprise a
minimum of 5 GW of this target. With government backing
and mounting evidence against pursuing blue hydrogen
projects, it’s no exaggeration to say the future is green.
In March 2022, the European Union announced its new
energy security plan – REPowerEU. This plan builds on
the 2020 EU Hydrogen Roadmap (2 x 40 GW plan), as
well as the 2021 Fit for 55 decarbonisation plan. The
new increased target is for circa 20 million tonnes per
annum by 2030, which will require nearly 200 MW of
electrolysis a year. This, coupled with the Delegated Acts,
incentivises early deployment and puts makers of
electrolysis equipment at the forefront of Europe’s
shift to a low-carbon economy.
ACCELERATE
CLEAN ENERGY
TRANSITION
REPowerEU
PHASE OUT DEPENDENCY
ON RUSSIAN FOSSIL FUELS
DIVERSIFY
ENERGY
SOURCES
SAME
ENERGY
SMART INVESTMENT
National and European plans,
reforms and investments, faster
permitting and innovation
Kwasi Kwarteng, Secretary of State for Business, Energy, and Industrial
Strategy, with Dr Graham Cooley, CEO of ITM Power
His Excellency Dr Mohamed Shaker, Egypt’s Minister of Electricity
and Renewable Energy, touring our Sheffield factory
Net Zero
by 2050 3,585 GW of electrolysis needed
200 MW
of electrolysis needed per year for REPowerEU
ITM Power PLC Annual Report 2022
17
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Strategy
Our vision
We strive for a world that is free
of fossil fuels, where we can all
enjoy the benefits of a net zero
society, and where everyone
around the world can breathe
clean air.
Our mission
Our three-pronged mission
challenges us with building
the best products the industry
has to offer, inspiring our
customers to implement
change, and using our
collective experience and
knowledge to direct global
policy to drive change.
Strategic pillars
We will achieve this through
our five strategic pillars, set out
here, which are:
– Delivered by our people
– Enabled by our business
model
– Measured through our KPIs
1Continual technology development2Scalable manufacturing3Strong partners and relationships4Develop ITM Power Service5Expert knowledgeWhat this meansWe understand that the overriding cost contributor to hydrogen is not the capital expenditure of a customer project, but more significantly the operating costs. It is important that we maintain a competitive advantage with the operating characteristics of the products as well as defining a technology roadmap for the future.What this meansWe recognise that we need appropriate capacity to scale the business as demand increases. This includes maximising Bessemer Park and introducing semi-automated and automated process to improve operations and delivery.What this meansWe have identified a number of strategic partners to scale our impact, industrial reach and market penetration.In October 2019, we announced the completion of a £58.8 million fundraising, including an investment by Linde of £38 million, together with the formation of a joint venture to deliver renewable hydrogen to large-scale industrial projects worldwide.In November 2020, we announced a partnership with Snam, one of the world’s leading energy infrastructure operators.Other partners include Shell, Vitol, Ørsted, and Sumitomo.What this meansWe understand our commitment to our customers does not stop at the factory gates or installation.We offer after sales support services, including preventative maintenance, immediate response packages, as well as 24/7 control room monitoring services, giving customers peace of mind that they are fully supported throughout the life cycle of the product.We continue to develop recycling and refresh services for our products to support ours, and our customers’, environmental, social and governance (ESG) ambitions, maximising the value of the components used.What this meansWe recruit the best talent while seeking to retain key skills.We also own and develop all our own processes, fully controlling the supply chain, inputs and processes to make a product that is truly unique and special to us.Achievements in the period –Continuous development and improvement of MEP 2.0, which is a first-of-a-kind product and is being deployed at Leuna –Showcased prototype of our next generation platform in September 2021Achievements in the period –Upgrade to power supply at Bessemer Park –Moving many core stack processes in-houseAchievements in the period –New partnership with Vitol to co-invest into Motive –Sale to Yara of 24 MW electrolyser system through Linde Engineering –Shell Refhyne II contract signedAchievements in the period –Developed support model with Optimal for AustraliaAchievements in the period –Around 200 new employees in the last 18 months –Appointment of Martin Clay as Operations Director and Chris Yewdall as Projects Director –Academy programme launched –Apprenticeship programme launchedSince the year end and looking ahead –Further efforts to achieve international certification for our products –Adoption of Linde Gas standard requirements –Full integration with the larger system module to unlock large- scale solutions via Linde Engineering –Grant win in May 2022 to support commercial deployment of our next generation platform –Design 2.0 of Plug and Play containers designed and introduced to the marketSince the year end and looking ahead –Further automation –Redesign of elements of Bessemer Park to improve production flow –International factory developmentSince the year end and looking ahead –Funding from BEIS for our next generation platform in May 2022 –Further business development –Further partnership arrangements to deliver new technology, new territories and new factories –Appointment of Tim Calver as Commercial Director to strengthen relationshipsSince the year end and looking ahead –Rebrand of ITM Power GmbH to ITM Power Service –Signed a new lease on a support hub, which will hold after sales spares and staff in Europe –Completion of the Support hub in Europe –Revenue streams to be built with long-term contractsSince the year end and looking ahead –Appointment of Denise Cockrem as a Non-Executive Director in July 2022 –Apprenticeship programme growth –Appointment of Tim Calver as Commercial Director –Equality, diversity and inclusion (EDI) programmeITM Power PLC Annual Report 2022 18
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Business Model
Our unique position
History
ITM Power PLC was
admitted to the AIM
market of the London
Stock Exchange in 2004.
Track record
We have been deploying
electrolysers with long-term
partners for over a decade
and continue to break new
ground. In January 2021,
we received an order for
the world’s then largest
PEM electrolyser system
of 24 MW from Linde. In
October 2021, with Linde,
we announced the
deployment of 100 MW of
electrolyser modules at
Shell’s Rheinland refinery,
following the start-up of
an initial 10 MW facility at
the sites.
Technology
MEP 2.0 operates under
higher pressure, a higher
current density and is
more efficient than
its predecessor.
The joint development with
Linde of a larger system
module will see five MEP 2.0
skids formed into a 10 MW
module. The larger system
module will be able to be
deployed into large projects.
Development and testing
of our next generation
platform remains ongoing.
The stack architecture
has multiple competitive
advantages including
lower capital costs and a
smaller system footprint.
These advantages will
enhance the stack’s ability
to operate under flexible
conditions when coupled
to renewable energy
sources, producing green
hydrogen at low cost.
Partnerships
Our position with ILE and
Linde puts us in a powerful
position to respond to
large and extra-large
demands, using three
years of shared experience
to address the requirements
of customers.
Capacity
We recognise that
customers need to invest
in capability and as such
we have built a factory in
Sheffield with a capacity
planned to reach 1.5 GW
per annum.
We design and innovate
electrolyser technology,
which we have developed
over many years and
continue to improve
and refine
How we
create value
We buy
the raw materials and
components for our
electrolysers as well as
the systems and advice
to support our work
We support
our customers through
the implementation
of their projects
and through our
aftermarket support
We sell
our electrolysers to
customers in Energy,
Industry and Transport
We make
world-class electrolysers
in a range of sizes to suit
our customers’ needs
from 2 MW to projects
in excess of 100 MW
Find out more about
our products here:
https://itm-power.com/
products
Creating value
Through our products,
which respond to the
need for a world that is
free of fossil fuels, we will
create value for
shareholders, customers
and wider stakeholders.
Helping the world reach
net zero by 2050
– Our electrolysers,
powered by renewable
energy, produce green
hydrogen – a clean,
zero-emissions fuel
– Replacing grey hydrogen
in the industrial sector
– currently 70 million
tonnes per annum
globally
Championing sustainable
power and guiding policy
– Helping develop
regulations and
standards – e.g. BSI
Committee PVE/3/8, ISO
Technical Committee
197, and British
Compressed Gases
Association (BCGA)
Code of Practice 41
Supporting our
community through the
ITM Nurture social
engagement programme
– Supporting local
charities championed by
employees – £15,604
contributed in FY22
– Sharing knowledge
and understanding –
including in schools
and universities, as
well as launching
our apprenticeship
programme for 2022
ITM Power PLC Annual Report 2022 19
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Stakeholders and Section 172(1) Statement
Our business model informs and drives discussions for
both executives and the Board. It informs the resources
and relationships required to execute our plan for growth.
We are driven by innovation and continuous
improvement. Engaging with and learning from
workforce, customer and other stakeholder feedback is
an integral part of what we do and how we develop the
business. We actively seek feedback to enable us to
make improvements and changes to our products
and processes.
To help the world reach net zero by 2050, we have to act
beyond our own supply chain. We therefore participate
actively in industry bodies that champion sustainable
power and guide policy, as well as working with schools
and universities to help inspire the next generation
about green hydrogen.
Statement from the Board
During the year, the Board acted in good faith
to promote the long-term success of ITM Power.
In accordance with the directors’ duties set out in
section 172 of the UK Companies Act 2006 (the
Companies Act), the Board supervises the operation and
development of ITM Power to maximise its equity value
over the long term, without regard to the individual
interests of any shareholder.
One of our Non-Executive Directors, Jürgen Nowicki, is
appointed by a major shareholder of ITM Power (Linde).
However, each of the Directors understands his or her
responsibility under the Companies Act to act fairly as
between members of the Company. We acknowledge
that all of our decisions may affect ITM Power’s
shareholders through their impact on the future success
of the business and confirm our due regard in this
respect.
The key stakeholder groups we have identified are those
that have significant interactions with our business
model and that we impact in the course of our business
operations. The relevance of each stakeholder group
may vary depending on the particular decision being
taken. The Board has to balance different, and
sometimes competing, perspectives meaning it is not
always possible to satisfy everyone’s desired outcome
or achieve a positive outcome for all stakeholders.
Ensuring our business operates responsibly is
fundamental to our long-term success. The Board
oversees a corporate governance framework that
enables the right people to take the right decisions at
the right time.
On the next two pages, we have provided
further details of how the Board approached two key
strategic decisions during the year: the capital raise in
November 2021 and the Motive joint venture with Vitol.
We recognise that to deliver our strategy in a sustainable
way, we must consider the commercial, social and
environmental impacts of our business. During the year,
we have monitored, assessed and challenged ITM
Power’s progress against the annual business plan and
targets. Targets include both financial and non-financial
metrics, including ESG metrics.
When taking decisions of strategic importance, we
endeavour to balance the interests of our stakeholders
in ways that are compatible with ITM Power’s long-term,
sustainable growth. The Board gains stakeholder
perspectives to inform its decision making through
direct engagement where feasible, but the number and
distribution of ITM Power’s stakeholders means that
stakeholder engagement often takes place at an
operational level. Where this is the case, the Board
receives insights on stakeholder views through
communication with senior management and
regular reporting.
ITM Power PLC Annual Report 2022 20
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Stakeholders and Section 172(1) Statement continued
You can read more about key aspects of section 172 considerations as follows:
Section 172 factor
The likely consequences of any
decision in the long term
Relevant disclosures
– Our vision and mission on page 17
– Our Strategy and Our Business Model on pages 17 to 18
– CEO’s Review and CFO’s Review on pages 8 to 14
The interests of the Company’s
employees
– Stakeholder engagement: Workforce on page 22
– Sustainable Energy, Engineered Sustainably: Our workforce on pages 28
The need to foster business
relationships with suppliers,
customers and others
The impact of the Company’s
operations on the community and
the environment
The desirability of the Company
maintaining a reputation for high
standards of business conduct
to 29
– Principle 3 at https://itm-power.com/investors/corporate-governance
– https://itm-power.com/careers
– ESG Report 2022: Our social impact at https://itm-power.com/investors/
financial-reports
– Stakeholder engagement: Customers and potential customers on page 22
– Principle 3 at https://itm-power.com/investors/corporate-governance
– Business Partner Code of Conduct at https://itm-power.com/sustainability
– Stakeholder engagement: Local communities on page 23
– Sustainable Energy, Engineered Sustainably: Climate change on pages 26
to 27
– Principle 3 at https://itm-power.com/investors/corporate-governance
– ESG Report 2022: Our environmental impact and Our social impact at
https://itm-power.com/investors/financial-reports
– Sustainable Energy, Engineered Sustainably: Business ethics on page 29
– Code of Ethics at https://itm-power.com/sustainability
– Principle 8 at https://itm-power.com/investors/corporate-governance
– ESG Report 2022: Our governance at https://itm-power.com/investors/
financial-reports
The need to act fairly as between
members of the Company
– Stakeholder engagement: Investors on page 21
– How the Board approached two key strategic decisions during the year on
pages 20 and 21
– Principle 2 at https://itm-power.com/investors/corporate-governance
Capital raise
Context
We saw a significant acceleration in demand for large-scale green hydrogen projects in support of national
hydrogen strategies. To capitalise on our market leadership, the Board decided to carry out a non-pre-emptive
placing of Company shares. The intention was to raise total proceeds of approximately £250 million (before
expenses), with the net proceeds used principally to enable an acceleration of our technology capabilities and to
expand our manufacturing capacity, as well as supporting organisational development.
Consideration of section 172 impacts: key stakeholder groups relevant to and affected by the decision
Investors
We met with both new and existing investors to present the business case for rapid expansion of technology and
manufacturing capabilities. We were keen to ensure an appropriate price was achieved in the funding round to
attract new investors while avoiding excessive dilution of existing and long-term shareholders. We also considered
whether an open offer would be possible to allow retail shareholders to participate. Ultimately, we decided this
was not possible due to the timing of the transaction.
Workforce
£45 million was earmarked for application towards the continued organisation and corporate development to
further enhance our management infrastructure and the expansion of after sales support and training capability.
Strategic partners
Our strategic partnerships, particularly with Linde, provide us with the EPC expertise necessary to deliver large
scale projects in overseas markets. As well as being a strategic partner, Linde is also our largest shareholder,
and subscribed for £20 million of shares as part of the capital raise.
Customers and potential customers
Capital was raised with a view to significantly scaling up and expanding our operations to take advantage
of forecast exponential demand growth in the global electrolyser market. This would build on the customer
relationships we have across multiple global markets. We are also investing to drive down manufacturing costs,
aiming to offer cost-effective hydrogen solutions at scale.
Suppliers
We allocated £50 million to fund technology initiatives, including Platinum Group Metal (PGM) supply
chain optimisation.
ITM Power PLC Annual Report 2022 21
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Stakeholders and Section 172(1) Statement continued
Motive
Context
We believe the market for hydrogen in transport is on the cusp of rapid expansion, supported by government
incentives to accelerate transportation decarbonisation. We sought a partner to help facilitate the rapid scaling
up of production, distribution and demand stimulation for hydrogen to transportation. Vitol was identified as
the chosen joint venture partner for Motive. Both ITM Power and Vitol will invest up to £30m in the venture.
Motive appointed ITM Power as its preferred supplier for up to 240 MW of electrolysis equipment and Vitol as
its preferred supplier for up to 240 MW of electricity demand.
Consideration of section 172 impacts: key stakeholder groups relevant to and affected by the decision
Investors
In the final quarter of the 2020 calendar year, we announced our intention to fund Motive by gearing up to
£30 million of investment with both partnership and government funding. We then looked for the optimum
partner. In Vitol we identified a partner with a shared view of the market and with complementary skills and
capabilities. We see a route to creating greater value for our investors through the joint venture that has been
created through Vitol’s ability to support at scale.
Workforce
During the period of transitioning Motive to the joint venture, we kept employees informed as appropriate and
consulted on the impact of the proposed changes. This included a benchmarking exercise, ensuring equivalence
of incentives in future, as well as ensuring they had the support and awareness to make the transition successful.
Our support has continued after completion of the transaction, with our nominated directors of Motive attending
a town hall day with the whole workforce to ensure open and transparent communication.
Strategic partners
We sought a strategic partner who could help facilitate the rapid scaling up of production, distribution and
demand stimulation for hydrogen use in transportation. Both existing and new strategic partners were considered
against this ambition. It was concluded that Vitol, a leader in the energy sector with a presence across the
spectrum – from oil through to gas, power, renewables and carbon – presented a good solution.
Customers and potential customers
Motive’s strategy is to target building large refuelling stations for heavy duty vehicles, such as trucks and buses.
Over the past 18 months, Motive has been working to develop deep relationships with a small number of
blue-chip heavy goods users in the UK and aims to develop standard 4 MW sites around the UK.
Investors
Investors provide the equity capital for our business.
They hold management and the Board to account,
on operational/commercial performance, financial
performance and key environmental, social and
governance (ESG) matters.
How we engage:
– Led by the CEO, supported by the Investor Relations
team – available to meet current and potential
shareholders
– Board kept appraised of the views of analysts by the
CEO (an update at every regular Board meeting)
and CFO
– Shareholder communication coordinated by the
Investor Relations team with the Company Secretary,
the Company’s nominated advisor (NOMAD), Investec,
and corporate communications consultants, Tavistock
Communications
– Regular meetings with and presentations to fund
managers, retail brokers and analysts
– Price sensitive information shared through London
Stock Exchange’s Regulatory News Service
– Shareholders can attend our Annual General Meeting
(AGM) and any Extraordinary General Meeting (EGM),
which Board members attend
– Report to institutional shareholders twice a year
through roadshows aligned with the full and half year
reports and webinars to coincide with the release of
trading updates
Action taken:
– To accommodate restrictions and preferences as a
result of COVID-19, we provided virtual access to our
2021 AGM and EGM
– We conducted online investor events in response to
COVID-19 and intend to continue this as it enabled
much broader engagement
– We have engaged with some of the larger investors
who have dedicated ESG teams to aid their
understanding of us and obtain their views on our
approach to ESG
Further reading:
– See the Remuneration Report on page 56 for details
of how the Remuneration Committee responded to
feedback about the 2021 Remuneration Report
ITM Power PLC Annual Report 2022 22
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Stakeholders and Section 172(1) Statement continued
Workforce
Our workforce makes, sells and supports our products.
It also develops our products to maintain our market-
leading edge.
It includes employees, contractors and consultants.
How we engage:
– Workforce informed of matters affecting it directly and
on the various factors affecting the performance of
the Group through formal and informal meetings
– Work with nominated employee representatives
to ensure appropriate consultation and information
flows on proposed changes to terms and conditions
– Open-door leadership culture where directors and
senior managers welcome feedback and the
opportunity to discuss business improvement
– Specific employee groups set up to address particular
areas, such as the Health and Safety Committee and
Women in ITM Power
– Conduct engagement and wellbeing surveys, the
results of which are shared with the Board
– Recognising outstanding contributions through
peer-to-peer nominations and support from the CEO
– Regular reporting of key workforce performance
indicators to the Board
Action taken:
– Remit of the ITM Academy agreed
– Regular town hall meetings with employees providing
further opportunities for the workforce to ask
questions and to celebrate success
– Reviewed and benchmarked employee remuneration
to ensure we are competitive in the market and now a
Real Living Wage employer
– Developing the collection and analysis of data about
our workforce to improve our engagement and
understanding, such as employee turnover and leaver
reasons; EDI information
– Ran mental health workshops to build awareness in,
and signpost support for, our workforce
– Launched our values, which guide how we work and
align with our vision and mission; they underpin our
recruitment processes, shape our leadership and
development programmes and form part of our
performance and development review process
Further reading:
– See more information about what we do for our
workforce in Sustainable Energy, Engineered
Sustainably on pages 28 to 29
– See our values on page 28
– See our ESG Report 2022 for more information about
working at ITM Power
Strategic partners
Customers and potential customers
We have identified a number of strategic partners to
scale our impact, industrial reach, and market
penetration.
Include Linde, Shell, Snam and Vitol, among others.
How we engage:
– Regular meetings with our strategic partners’ senior
managers
– Formal meetings of joint venture boards: ILE with
Linde, and Motive with Vitol
– Input from Linde and Snam through the Strategic
Advisory Committee and Technology Management
Committee, which report to the Board
– Secondments of staff from strategic partners to ITM
Power
Customers buy our products, directly or indirectly.
Potential customers offer a pipeline of opportunities
to sell our products.
How we engage:
– Assigned a key contact (ongoing support) and a project
manager (specific project delivery)
– Email feedback reporting system for customers
– Support centre in Sheffield and a 24/7 support service
– Motive customers also benefit from an app providing
locations and availability of refuelling stations
– Communications about our activities and industry
news issued to a significant database of contacts
– Information provided via our website
– Participate in webinars and presentations and in many
– Jürgen Nowicki appointed as the Linde-nominated
industry events every year
Non-Executive Director
Action taken:
– Entered into a joint venture with Vitol in relation to
Motive
– Two sales conferences conducted with Linde
– Our joint ventures, ILE and Motive, also have their own
websites and key account managers assigned to them
– Updates on customer projects provided to the Board
Action taken:
– Customer feedback is built into our lessons learnt
process within our quality system
– Hosted a regional roadshow on the COP26 Science and
Innovation day, with attendees including business
leaders and industry figures
Further reading:
– See our website for information about:
– Our electrolysers and how they work:
https://itm-power.com/products
– Markets we serve:
https://itm-power.com/markets
ITM Power PLC Annual Report 2022 23
Overview Strategic Report Governance Financial Statements
Shareholder Information
Our Stakeholders and Section 172(1) Statement continued
Action taken:
– Enhanced supplier categorisation exercise, considering
aspects such as materiality and risk
– Enhanced stock and supply chain reporting to support
active supply chain management
– Strengthened supplier due diligence processes
– Assessed critical suppliers against ESG criteria and
developed action plans to address any improvements
identified, and commenced assessment of non-critical
suppliers
– Commenced creation of supplier performance
procedure and scorecard to monitor, measure and
define actions with suppliers
Further reading:
– See our Business Partner Code of Conduct on our
website at https://itm-power.com/sustainability
Suppliers
Suppliers provide us with a wide range of commodities
and services such as PGMs, components, power supply
units, capital equipment, renewable energy, buildings,
information technology, telecommunications and
professional advice.
How we engage:
– Seek to establish and maintain long-term relationships
with our suppliers
– Work closely with our suppliers in the deployment of
all projects and provide them with assistance to
improve their adherence to our standards of quality
and ethics
– Due diligence, approval and control programme for
suppliers
– Require suppliers to comply with our Business Partner
Code of Conduct, which covers:
– Business integrity
– Health, safety and security
– Environmental and social performance
– Human rights and modern slavery
– Non-discrimination, grievance processes and
freedom of association
– Bribery, corruption and money laundering
– International trade law
– Protecting confidential and personal information
– Speaking up
– Committed to sourcing our products and services
locally where possible
Regulators and industry bodies
Local communities
Regulators set standards for our products and industry.
Industry bodies work to develop our industry’s future.
We operate within local communities and seek to be
a positive influence around environment, education
and health, together with EDI.
Provide grants for some projects.
How we engage:
– Participate widely in industry bodies
– Work with key committee and standards groups in the
UK, EU and other countries
– Contribute to consultations in the UK and EU through
direct responses and contributions to working groups
– Work with partners through our membership of key
industry associations in a number of territories
– Work closely with organisations such as the European
Union’s Fuel Cells and Hydrogen Joint Undertaking
(FCH JU), Innovate UK and BEIS as funders of our
grant-funded projects
Action taken:
– Hosted a regional roadshow on the COP26 Science and
Innovation day, with attendees including academics
and industry figures
– Won €1.95 million award for the SINEWAVE project, as
part of the German Federal Ministry of Education and
Research’s (BMBF) hydrogen flagship project, H2Giga
How we engage:
– Social engagement programme, ITM Nurture,
monitored by the ESG Committee, which also provides
suggestions for and input into its future development
– Charity Committee, an employee-led forum, gives our
employees the opportunity to have a positive impact
on the community around us in Sheffield through
engagement with local charities
– ITM Academy responsible for delivering our ITM
Nurture programme commitments around Science,
Technology, Engineering and Maths (STEM) activity,
ensuring we are supporting education in the local area
through promoting STEM careers and sustainability
– Regular reporting of key ESG initiatives, including those
with our local communities, provided to the ESG
Committee and the Board
Action taken:
– Launched our ESG strategy: Sustainable Energy,
Engineered Sustainably
– Published our first ESG Report, reflecting the ESG
ambitions set out in our ESG strategy
– Hosted a regional roadshow on the COP26 Science
and Innovation day, with attendees including
local government
Further reading:
– See our ESG Report 2022 for more information about
our social impact
ITM Power PLC Annual Report 2022 24
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably
Our approach
In 2021, we launched our new
ESG strategy: Sustainable Energy,
Engineered Sustainably. This is our
commitment to protect people and
the planet – through both what we
do as a business and how we do it.
The strategy has two parts.
Sustainable Energy addresses our
core business purpose, which is to
help the world reach net zero
through the power of green
hydrogen. Engineered Sustainably
covers our ambition to deliver on
this purpose in a sustainable way
that addresses the most material
ESG issues for our business.
Our first ESG Report was published
in April 2021, covering the 2020
calendar year. Our second ESG
Report covers the period from
1 January 2021 to 30 April 2022,
while future ESG Reports will align
to our financial reporting cycle. Our
ESG Report sets out progress on our
ESG ambitions and strategy. We
have included some highlights here
but invite you to read our full ESG
Report, which is available on our
website: https://itm-power.com/
investors/financial-reports. We
have also included some additional
disclosures here that sit more
comfortably within our Annual
Report.
Our ESG Committee leads the
development of the Group’s ESG
strategy, policies and programmes.
More information about our
governance structures is available in
the Corporate Governance Report,
which starts on page 44.
Areas of focus and activities during the year
Area
Materiality
Highlights during the year
– Conducted our first organisation-wide materiality assessment to identify which ESG issues are
most important to our business performance and where we can have the greatest impact
through what we do
– Engaged a range of internal and external stakeholders to feed into the materiality assessment
Further reading
ESG Report 2022: Our material
issues on page 7, available on our
website at https://itm-power.com/
investors/financial-reports
Environmental
– Established a UKAS-accredited environmental management system to the specifications
outlined in the International Standard ISO 14001:2015
– Initial assessment of our carbon footprint undertaken to help us establish a baseline from
Social
Governance
which to set targets
– Formalised our waste management process and included it within our internal Business
Management System; appointed a single waste broker to manage all on-site waste
– Launched a series of engagement workshops around our values
– Re-launched and developed our intranet platform for engaging with employees
– Achieved ISO 14001:2015 and ISO 45001:2018 accreditation for our health and safety
management system
– Launched ITM Academy, the home for learning and development across ITM Power
– Conducted an employee survey to establish our workforce profile
– Introduced new supplier qualification processes, including a focus on wider social matters as
detailed in our Business Partner Code of Conduct such as environmental, health and safety,
human rights and corruption
– Developed our PGM supply chain policy
– Community engagement through ITM Nurture focused on inspiring careers in STEM in
future generations
– Introduced ESG-linked elements to the variable remuneration for our Executive Directors
– Launched a revised suite of responsible business policies for our employees, contractors and
workers employed by other organisations who work on our behalf, including: Code of Ethics,
Anti-Fraud and Bribery Policy, Speak Up Policy, Conflict Policy, Hospitality and Gifts Policy
– Created a new risk and assurance function with responsibility for risk management and
internal audit
ESG Report 2022: Our environmental
impact on pages 13 to 16, available
on our website at https://itm-power.
com/investors/financial-reports
ESG Report 2022: Our social impact
on pages 17 to 23, available on our
website at https://itm-power.com/
investors/financial-reports
Business Partner Code of Conduct and
PGM Supply Chain Policy Statement
on our website at https://itm-power.
com/sustainability
ESG Report 2022: Our governance
on pages 24 to 28, available on our
website at https://itm-power.com/
investors/financial-reports
Corporate Governance Report from
page 44
Remuneration Report from page 55
ITM Power PLC Annual Report 2022 25
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably continued
UN Sustainable Development
Goals (SDGs)
We have identified the four SDGs
where we can have the greatest
effect as a business, and the specific
targets aligned to these goals that
are most relevant to us and our
activities:
Our material issues
While more information about our
material issues is provided in our
ESG Report, we have identified
some core material issues on which
we provide some additional
information in this Annual Report:
– Climate change
– Our workforce
– Business ethics
Affordable and
Clean Energy
Industry, Innovation
and Infrastructure
Sustainable Cities
and Communities
We aim to cut the commercial cost
of electrolysers over the next three
years and thereby facilitate the
widespread adoption of green
hydrogen.
This will directly contribute to
ensuring access to affordable,
reliable, sustainable, and modern
energy for all, addressing target 7.2:
to substantially increase the share of
renewable energy in the global
energy mix.
By helping to decarbonise industrial
processes through green hydrogen,
our electrolysers support SDG 9 and,
particularly, target 9.4: to upgrade
infrastructure and retrofit industries
to make them sustainable, with
increased resource use efficiency
and greater adoption of clean and
environmentally sound technologies
and industrial processes.
Through Motive, our joint venture
with Vitol, we own hydrogen
refuelling stations, which provide
zero emissions fuel for mass transit
systems. This contributes towards
target 11.2: by 2030, to provide
access to safe, affordable, accessible,
and sustainable transport systems
for all.
Responsible
Consumption
and Production
By helping to replace hydrogen
produced directly from fossil fuels
with green, emission-free hydrogen,
our electrolysers support target
12.2: by 2030, to achieve the
sustainable management and
efficient use of natural resources.
ITM Power PLC Annual Report 2022 26
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably continued
Reporting element
(aligned to TCFD)
Governance
Strategy
Climate change
To achieve net zero global carbon emissions by 2050,
the world needs to transition away from fossil fuels and
towards emission-free fuels, such as green hydrogen.
Offering engineering solutions that contribute to a more
environmentally sustainable economy and reduce global
reliance on fossil fuels is at the core of our mission.
While our products can be part of the solution, we
recognise our own contribution to carbon emissions.
We are working to establish a specific climate strategy
to guide our actions and carbon reduction ambitions.
As we continue to develop this strategy, we recognise the
importance of transparent disclosure and have provided:
– An overview of our current approach in line with the
recommendations set out by Task Force on Climate-
related Financial Disclosures (TCFD)
– Our carbon footprint calculation
Further reading:
– Corporate Governance Report from page 44
– Principal Risks and Uncertainties from page 30
– Our Market from page 15
– GHG emissions on page 27
Risk management
Metrics and targets
Summary of our approach
The Board provides overall leadership and independent oversight. It is primarily responsible for our strategic plan, risk management,
systems of internal control and corporate governance. It retains control of key decisions.
The Board has delegated authority to the ESG Committee for the development of the Group’s ESG strategy, policies and programmes and
associated matters.
Ownership and governance for sustainability-related risks and sustainability commitments are embedded within our business.
Risks in the short term:
– As we scale up our business to respond to the demand for green hydrogen, our impact on the environment will increase and we may
not be able to mitigate this
Risks in the medium and long term:
– Increased severity and frequency of extreme weather events such as cyclones and floods may disrupt or limit our ability to manufacture
our products
– Changing weather and precipitation patterns may impact the cost and/or availability of materials
– Regulation related to greenhouse gas (GHG) emissions may increase costs across our value chain
– Regulation related to water stress or water scarcity may disrupt or restrict our production capability
– Lack of availability of clean water may restrict the effectiveness of our product
Opportunities in the short, medium and long term:
– The increased focus on, and adoption of, green hydrogen provides a significant opportunity for our business
– PEM electrolysers use less water than steam methane reformers (SMRs), which are currently the main source of industrial hydrogen
– Electrolysis is the only fuel that doesn’t deplete oxygen in producing fuel – green hydrogen is the only oxygen and water balanced fuel
– Reduction, reuse and recycling of components within our electrolysers presents an opportunity to reduce our impact on the environment
While it is difficult to accurately estimate the financial impact of any climate-related disruption to our manufacturing operations, a short
interruption to our production capabilities due to extreme weather events could have a significant impact on our business in the future.
Such weather events could also have a significant impact on our supply chain, which could result in supply restrictions and/or increased
costs.
The process for identifying, assessing and responding to climate-related risks is integrated into our risk management processes.
During the year, we undertook an initial assessment of our Scope 1, 2 and 3 GHG emissions for the purposes of establishing a baseline
from which to set climate targets and emissions reduction approach.
ITM Power PLC Annual Report 2022 27
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably continued
Carbon footprint
The calculation of our carbon footprint follows the
methodology set out by the GHG Protocol for corporate
accounting and the output can be found in the table
opposite. As we are not required to comply with the
requirements of Part 7A of Schedule 7 of The Large and
Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (as amended) regarding
disclosure of GHG emissions, we have not provided
all the information required under the regulations.
Carbon footprint (tCO2e)
Scope 1 emissions
Scope 2 (location-based)
Scope 2 (market-based)
Scope 3
Total (location-based)
Total (market-based)
Year ended 30 April 2022
249
754
203
103,843
104,846
104,295
1. Our footprint was calculated using the methodologies set out in the GHG Protocol Corporate Accounting and Reporting Standard. An ‘operational control’ approach has been used to define the emissions boundary.
2. Entities included in the footprint are as follows: ITM Power PLC; ITM Power (Trading) Limited; ITM Power, Inc.; ITM Power GmbH; ITM Power Pty Ltd and Motive Fuels Limited.
3. In the calculation and preparation of our carbon footprint we have considered a number of relevant sources, including the 2021 Government GHG Conversion Factors for Company Reporting, published by BEIS; the Homeworking Emissions
Whitepaper 2020 published by EcoAct; and Supply Chain Greenhouse Gas Emission Factors for US Industries and Commodities, published by the United States Environmental Protection Agency.
4. Scope 1 emissions are derived from natural gas heating our facilities and fuel consumption within our vehicle fleet. Where natural gas consumption data was unavailable, estimates were made based on spend, historical average and average
consumption figures based on property size and use.
5. Scope 2 emissions are derived from electricity consumed by our facilities.
6. Scope 3 categories included in this calculation include purchased goods and services, fuel and energy-related activities, waste, business travel, employee commuting, upstream leased assets, use of sold goods and investments. Notes on the
calculation methodologies for these categories are as follows:
a. Purchased goods and services: a financial allocation model was used using emission factors provided by the United States Environmental Protection Agency.
b. Fuel- and energy-related activities: BEIS 2021 conversion factors were used to calculate well-to-tank GHG emissions from fuel usage and transmission and distribution losses from purchased electricity and well-to-tank emissions from fuels.
c. Waste: BEIS 2021 conversion factors were used according to mass of waste disposal by destination.
d. Business travel: emissions related to air and rail travel and hotel stays were obtained from our business travel service providers. BEIS 2021 conversion factors were used for mileage for personal cars and taxis.
e. Employee commuting: data comprising employee home postcode, place of work and share of days worked in office was collected by employee survey. National travel survey data together with BEIS 2021 conversation factors were used to
determine commute emissions intensity. Homeworking emissions were calculated on the basis of the methodology set out in the Homeworking Emissions Whitepaper 2020 published by EcoAct.
f. Upstream leased assets: BEIS 2021 conversion factors were used together with the volume of materials consumed to operate leased assets.
g. Use of sold goods: sold goods are considered to be those electrolysers that have completed site acceptance testing during the reporting period. The lifetime energy consumption of these units together with the share of green electricity used
for their operation and grid emission factors was used to calculate lifetime emissions.
h. Investments: data on electricity and district heating consumed by ITM Linde Electrolysis GmbH was collected and converted to emissions using location-specific conversion factors.
ITM Power PLC Annual Report 2022 28
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably continued
Our workforce
The passion, talent and hard work of
our workforce contributes to our
culture and growth. To support our
workforce, we strive to be a
responsible, sustainable and ethical
employer where our values are
central to all aspects of workforce
management.
Our values
During the year we launched our
values. They were developed to
guide how we work and align with
our vision and mission. They are the
foundation of our business and
shape our approach to recruitment,
leadership and development.
Our values
We
Collaborate
We
Care
We
Innovate
We are
Tenacious
We seek
Joy
We share a common vision and
recognise that we all have a part to
play in the ITM Power journey. We
support each other and work
together for this common purpose.
We trust each other, are open and
honest, and are committed to our
collective success. We celebrate
our achievements with each other.
We work as one team, seeking
opportunities to be collaborative.
We care for each other, our
customers, our suppliers, our
environment and future
generations. We have pride in what
we do. We treat people with dignity
and respect, we are a supportive
team that values others. We do
things safely.
We are curious and bold, we think
big. We seek to constantly improve
in all we do. We develop and evolve.
We have a growth mindset which
encourages learning.
We don’t give up easily. We work to
find solutions to problems or difficult
situations. We support each other,
and work together to overcome
challenges. We are driven and
determined. We make decisions
based on facts and insights, even if
those decisions are tough. We are
not frightened of change. We take
accountability for our actions and
learn from our mistakes.
Joy is a flash of emotion, found in
small gestures and in different ways
for each and every one of us. By
seeking joy, we appreciate those
special moments that contribute
towards our happiness and help
develop friendships with our
colleagues and partners. We
recognise that acts of kindness, fun
or laughter go a long way to help
provide a balance to our busy and
sometimes stressful lives. Whilst we
are serious about our work, we don’t
always have to be serious, we look
for ways to seek joy even when
times are challenging.
ITM Power PLC Annual Report 2022 29
Overview Strategic Report Governance Financial Statements
Shareholder Information
Sustainable Energy, Engineered Sustainably continued
Recruitment and benefits
We seek to recruit and retain the best employees in our
sector and recognise the importance of employee
retention. We offer a range of employee benefits
designed to attract employees, support long-term
retention and promote a working environment that
creates strong employee engagement with a wellbeing
focus. We are a Real Living Wage employer.
We have granted share awards under our Long Term
Incentive Plan to all employees and, in the UK, offer a
buy-as-you-earn Share Incentive Plan (SIP), which
enables staff to buy shares on a tax-efficient basis and
receive matching shares from the Company. Around 55%
of eligible employees participate in the SIP.
Benefits vary according to the country of employment
but typically also include childcare vouchers, a cycle
purchase scheme, and an employee assistance
programme. Benefits that are common to all employees,
no matter where they are employed, are participation in
our Long Term Incentive Plan, access to our Employee
Assistance Programme and an additional day’s annual
leave on their birthday.
We do not recognise any unions in the UK and only have
one employee outside the UK covered by a collective
bargaining agreement.
Learning and development
We actively encourage learning and development. The
ITM Academy is the hub for learning and development at
ITM Power and includes a structured induction
programme as well as technical, management and
leadership training. It has developed a clear programme
of professional and competence-based development
areas. We recognise we are at the forefront of a new
technology market with vast knowledge of that
technology within our workforce and so the ITM
Academy aims to become a global centre of excellence
for training our workforce and the partners who work
with us.
We aim to ensure the highest levels of technical
competence and encourage the improvement of this
knowledge by supporting our workforce through training
courses and qualifications, ranging from single day
courses up to Master’s degree-level qualifications and
accredited development programmes. We are also
proud to have a number of apprentices and industrial
placement students representing a significant part of our
workforce, with a range of new apprenticeship
programmes to be introduced in the future. Our plans
for the future also include the development of a
graduate scheme, with the preparatory work being
undertaken in the short to medium term.
Engagement
Details of how we engage with our workforce are
provided in Stakeholder engagement: Workforce on
page 22.
In the next year, we are introducing a bi-annual
engagement and wellbeing survey. Action plans will be
created from this, which will be developed with our
managers and a new employee forum: ITM Voices.
Equity, diversity and inclusion
We are an equal opportunities employer. We make
decisions about recruitment, promotion, training and
other employment matters solely on the grounds of
individual ability, achievement, expertise and conduct.
We don’t discriminate on the basis of gender, gender
identity, sexual orientation, marital status, race, colour,
ethnicity, national origin, cultural heritage, religion, age,
social background, mental or physical ability or disability,
or any other reason not related to job performance or
prohibited by law. More than this, we recognise the
collective benefit of having diverse teams, enriching the
working lives of our workforce and better serving our
global client base.
We encourage recruitment, training, career
development and promotion on the basis of aptitude
and ability, without regard to disability. We are also
committed to retaining employees who become disabled
during the course of their employment. We endeavour
to make reasonable adjustments to the duties and
working environment to support any employee suffering
a disablement during their employment, including
providing retraining as necessary.
We will launch our EDI strategy and implementation plan
in the next year, with key priorities focusing on
encouraging greater gender diversity within our business
and particularly in STEM related areas.
More information on our approach to equity, diversity
and inclusion, including key indicators, is provided in our
ESG Report 2022: Our social impact, available on our
website at https://itm-power.com/investors/financial-
reports.
Business ethics
We are committed to maintaining appropriate standards
for all our business activities:
– We have a Code of Ethics that sets out how we do business
– Our handbook sets out the conduct expected of our
workforce and includes guidance for key issues
– We have a Business Partner Code of Conduct and have
implemented supplier accreditation and due diligence
processes
– Our ESG Committee considers business ethics as part
of its wider consideration of ESG matters
More information about how we ensure we have an
appropriate culture and an ethical approach is provided
in the introduction from the Chair of the Board to the
Corporate Governance Report on page 38.
All employees and, where appropriate, contractors,
whether full-time or part-time, are required to
undertake a variety of training including, among other
topics, covering our Code of Ethics, our approach to
avoiding fraud and bribery and data protection.
We have reviewed the extent to which money
laundering presents a risk to our business and the
policies and procedures we need to address any risk. We
have concluded we do not require a separate anti-money
laundering policy as our Code of Ethics requires us to:
– Do the right thing, for the right reason
– Hold ourselves to a higher standard
– Observe regulations and legislation in all countries of
operation
Nevertheless, in the coming year we intend to provide
training to key personnel to raise awareness of money
laundering offences and what to do if anyone has a concern.
ITM Power PLC Annual Report 2022 30
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties
Our approach to risk
The Board is ultimately responsible for ensuring there
is a robust and effective framework in place for the
Group’s risk management activities, which aims to
underpin better decision making and embed a drive to
continually improve our performance. Through a
refocused risk management approach, and utilising the
three lines of defence model, our capability to assess
risks is continually improving, such that our strategic,
significant and emerging risks are identified and
managed effectively.
Principal risks and uncertainties
The Board has identified those risks which are deemed
principal to its business due to their potential severity
and link to the Group’s strategy, markets and operations,
which are set out below. This is not intended to be an
exhaustive list. Additional risks not presently known to
management, or risks currently deemed to be less
material/strategically important, may also have the
potential to cause an adverse impact on our business.
Risk radar
Heatmap – net risk
al and Regulatory
g
e
L
M
a
r
k
e
t
/
I
n
d
u
s
t
r
y
M
a
n
ufa
cturing
a n c e
F i n
IT and Systems
C
u
s
t
o
m
e
r
n
o
ti
a
s
i
n
a
g
r
l
e
p
o
e
P
,
e
c
n
a
n
er
v
o
G
d O
n
a
P ro cure m ent
Technology
Key
Short Term Strategic <2 years
Medium Term Strategic 2-5 years
Longer Term Emerging >5 years
Associated Principal Risks
Managing market growth/scale up
Market competitiveness
Input costs, supply chain and
business continuity
IP protection
Financial risks
e
c
n
e
r
e
f
e
r
d
o
o
h
i
l
e
k
i
L
5
4
3
2
1
3
2
1
4
5
Key
1 Managing market growth/scale up
2 Market competitiveness
3 Input costs, supply chain and business
continuity
4 IP protection
5 Financial risks
1
Insignificant
2
Minor
3
Moderate
4
Major
5
Catastrophic
Impact narrative
Risks associated with the environment and climate change
Businesses across all industries and markets are facing increasing scrutiny relating to their ESG policies. As a
producer of sustainable energy, ESG is at the core of the Group’s business plan, and the Board is aware that this
could in turn lead to a higher level of scrutiny on the progress and achievement of our sustainability goals and
commitments. The Board’s ESG Committee has oversight of the Group’s ESG activities and has engaged external
consultants to assist in the development of our ESG strategy, as well as the measurement of our own carbon
footprint, which supports our drive to reduce our carbon-intense production areas.
Further details for this aspect of our business can be found in our ESG Report on our website at https://itm-power.
com/investors/financial-reports.
ITM Power PLC Annual Report 2022
31
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties continued
Risk
1
Managing
market growth/
scale up
Link to strategy
Scalable manufacturing
Strong partners and
relationships
Expert knowledge
Risk impact and description
Since the market for green hydrogen is still evolving, it is difficult to predict the size and
growth rate of the market with certainty. However, the publicly announced rapid
acceleration of numerous governmental green hydrogen targets, leading to an
expansion of our target markets and business, will place additional demands on our
technical, sales, engineering and logistics systems. The Group’s success depends also
on its strategic partnerships and other arrangements with third parties. If any of our
current strategic partners were to terminate any of their agreements with the Group,
or if other sub-contractors were to fail to perform to expected standards, it could have
a negative impact on the development and commercialisation of the Group’s products
and the operation of its business.
The Group faces risks associated with its current dependence on a single
manufacturing facility. Although our plans include the intention to develop new
manufacturing facilities, until additional facilities are deployed the Group will remain
highly dependent on the factory at Bessemer Park.
We rely on individuals across our organisation with key knowledge, skills and
experience gained over a number of years working within ITM Power. Losing such key
individuals could disrupt the operational activities of the business in the short to
medium term.
Mitigation
ITM Power is at the forefront of the green hydrogen sector and has
in place ambitious plans to ensure it remains a leading player in the
market, as the increasing acceleration in the sector continues to
2030 and beyond.
Change
To support our growth strategy, ITM Power has entered into
contractually binding strategic partnerships to cover key aspects
of its business including supply chain, technical design and
development and EPC services for large industrial projects. In
conjunction with these, the Group is also building its own business
development relationships globally.
We also continue to undertake homologation exercises with Linde
Engineering and Linde Gas to ensure its products are applicable to
the widest possible markets to mitigate the risk of traction in
limited geographies.
Our systems are also being prepared for scale, with a new
enterprise resource planning (ERP) system currently being
implemented across the business to support our product’s life
cycle management and after sales service offering. Our strong
recruitment and ITM Academy team, ensure we are able to
resource and develop key talent to help drive the Group forward.
The Board has a succession plan.
We also keep our disaster recovery plans under constant review,
which, combined with comprehensive insurance and the
monitoring of actual and projected volumes of our Bessemer
Park factory, ensures we understand the critical path for adding
increased manufacturing capacity to both our Bessemer Park
factory and any new sites.
ITM Power PLC Annual Report 2022 32
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties continued
Risk
2
Market
competitiveness
Link to strategy
Continual technology
development
Strong partners and
relationships
Develop ITM Power
Service
Risk impact and description
There is a risk that we fail to deliver products that are competitive in terms of
performance, cost or delivery.
As we are developing new technologies it is very likely that unforeseen difficulties and
obstacles to development will arise which may result in the product not performing as
expected (especially when first introduced), failure of products to perform, damage to
our reputation, delayed or lost revenue, product returns, diverted development
resources and increased development, service and warranty costs and potential
product liability claims.
This risk could also result in not realising the cost benefits anticipated or not being
capable of realisation at all. Where the development can be realised, there is no
guarantee that the development will be completed in the time periods which the
Group currently anticipates.
The Group currently faces and will continue to face competition from other developers
and manufacturers of electrolyser products and technologies, as well as developers
and manufacturers of existing power technologies and other alternative power
technologies. If we are unable to compete effectively against our competitors, this will
impact its ability to gain market share or market acceptance for its products.
Mitigation
ITM Power has created a technology centre, containing world
class facilities, which enables us to undertake extensive testing
of core components of our products, as we seek to provide the
solutions and meet the challenge of the global net zero targets
being announced.
Change
We also continue to enhance our processes and procedures to
support systematic and routine validations of current and new
technology being developed. This is supported through extensive
data collection from our control room, which gives us a live
connection to products both under testing and those operating
in the field.
Our vertically integrated technology approach allows product
evolution carry overs and provides us with the capability to
rapidly adapt to changing market needs. We also undertake value
engineering exercises to reduce product complexity, increase
performance and durability in the field, as well as reduce cost.
As the market matures and the size of required systems becomes
larger, working with our strategic partners provides us with a
competitive edge when tendering for green hydrogen projects. We
also seek to create partnerships, frameworks and preferred
supplier status with key customers wherever possible, creating
additional channels to market. Our partnership with Linde also
allows for early engagement with prospective customers, as we
seek to provide the best solution for their needs.
ITM Power PLC Annual Report 2022 33
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties continued
Risk
3
Input costs,
supply chain
and business
continuity
Link to strategy
Scalable manufacturing
Strong partners and
relationships
Continual technology
development
Change
Risk impact and description
Due to a combination of post COVID-19 recovery and global geo-political instability
(including the crisis in Ukraine and subsequent sanctions on Russia), global supply
chains have been severely disrupted on a never-before-seen scale, driving up costs of
key materials and reducing availability in the process.
In addition, our pace of growth also poses risks with our existing supply chain, to
supplier capability, quality, scalability, and working capital management.
We rely on third-party suppliers to provide raw materials and components for its
products, including electrical, stainless steel and some PGMs, that are critical to the
manufacturing process. In some cases, this is through a single supplier.
There are also specific risks around the price volatility of precious metals used within
the Group’s core technology. This could lead to costs of projects being underestimated.
Furthermore, there is a risk that the ability to deliver expected yields from recycling
differ to those expected, which may lead to cost variation on project and product life
cycle.
A new or existing supplier’s failure to provide materials or components in a timely
manner, or to provide materials and components that meet the Group’s quality,
quantity or cost requirements, or the Group’s inability to obtain substitute sources for
these materials and components in a timely manner or on acceptable terms, may harm
its ability to manufacture products cost-effectively or at all and may damage our
reputation and could also result in penalties for the Group under its customer
contracts.
An IT system failure or non-availability, cyber-attack or breach of system security could
disrupt our operations, cause the loss of, destruction of, or unauthorised access to
sensitive, confidential or personal data or information or expose us to regulatory
investigation, litigation or contractual penalties. If any of these events took place, it
could have a negative impact on our business, financial condition, results of operations,
prospects and reputation.
Mitigation
We are in the process of evaluating a sourcing strategy for each
of our key components, with approaches differing by component
type. Where we rely on a single supplier, we seek to enter into
appropriate contracts with these suppliers or a future strategy to
source different product portfolios with different suppliers where
appropriate. For other materials, we employ a multi-sourcing
strategy. The Group continues to review opportunities to bring
processes in-house to address potential intellectual property (IP),
quality and security of supply risks.
We also have an appropriately resourced procurement
department, which is based on a category structure to build
appropriate local and specialist knowledge and an understanding
of key markets. A strategic supplier development and performance
management infrastructure is also in construction, to maintain the
quality and security of supply of key raw materials.
Timely and accurate forecasting models and approaches have also
been adopted to provide better visibility of volume requirements
over time and to drive action plans ahead of requirement for
supply chain readiness.
The Group seeks to mitigate exposure to precious metal risk
through operating back-to-back contracts, having continued
dialogue with suppliers and managing larger transactions on a
no-risk basis where possible.
The Group undertakes regular reviews, testing and invests in
robust and effective security policies, controls and technologies to
protect commercial and sensitive data and to ensure the overall
system protection in place remains appropriate and proportionate.
This also includes a continual review of the latest threats and
trends in information security and governance to ensure our
protection is always current and effective.
ITM Power PLC Annual Report 2022 34
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties continued
Risk
4
IP protection
Link to strategy
Continual technology
development
Strong partners and
relationships
Risk impact and description
The Group depends on its IP and failure to protect that IP could reduce its ability to
prevent others from using its technology and therefore adversely affect our future
growth and success.
Mitigation
We rely on a combination of patent, trade secret, trademark and
copyright laws to protect its IP and seeks legal and other third-
party specialist advice where appropriate.
Change
PEM electrolysis systems as a whole cannot be patented or otherwise legally protected
because some of the technologies underpinning their operation are based on other
proven and mature technologies and are generally know-how based. Also, while it is
the case that various components and processes developed by the Group have been or
are assessed to have the potential to be patented, we only pursue patents when they
are expected to be of high value, because patent applications include risks stemming
from publication of detailed component and process descriptions.
The Group has entered into agreements with customers and partners, including its
joint venture with Linde, that involve shared IP rights and an increased risk to us of the
disclosure of trade secrets and proprietary technology. Any developments made under
these agreements will be available for future commercial use by all parties to the
agreement, which may make it more difficult for us to control third-party usage and
protect its shared IP in the future.
It is also the case that there is a potential risk for the Group in its losing certain
freedoms to operate due to the complexity and growth of PEM electrolysis technology.
The choice of territories and jurisdictions the Group serves
includes an evaluation of inherent IP risk. Freedom-to-operate
(FTO) searches are also undertaken where it is deemed
appropriate.
We have an agreed IP management policy and seek to protect
our proprietary IP through contracts including, when possible,
confidentiality agreements and inventors’ rights agreements with
our customers and employees. If necessary or desirable, we may
seek licences under the patents or other IP rights of others.
Secure file sharing practices are also employed to provide technical
mitigation and we have an ongoing training plan for staff to
support this aim.
ITM Power PLC Annual Report 2022 35
Overview Strategic Report Governance Financial Statements
Shareholder Information
Principal Risks and Uncertainties continued
Risk
5
Financial risks
Link to strategy
Scalable manufacturing
Risk impact and description
In addition to the potential financial impact as detailed within the other principal risks
and uncertainties, specific financial risks also exist.
Mitigation
Through a number of successful shareholder fundraises, ITM
Power has a strong and healthy balance sheet with £336 million
funds available to it at year end.
Change
A comprehensive monthly governance process is in place to
monitor key risks versus our financial targets and develop actions
to effectively mitigate against them.
Foreign exchange transaction risk is managed through a Treasury
Policy, hedging for all committed transactions and a range of
forecasted transactions, thereby mitigating the effects on UK
import costs.
As a result of the cost and time required for our research and development activities,
we have not yet achieved profitability, and it may fail to do so in the future. To increase
revenues and achieve profitability, we must successfully execute its growth strategy,
which includes, among other things, leveraging strategic partnerships to secure a
global competitive advantage and building capacity ahead of anticipated demand.
Furthermore, the length and variability of the sales cycles for our products makes it
difficult to accurately forecast the timing and amount of specific sales and
corresponding revenue recognition. Due to the complexity and capital value of the
projects in which our products and technologies are used, the evaluation process can
result in a sales cycle of several months or more, and, after evaluations, a potential
customer may not purchase our product at all.
As the Group sells its products internationally, general economic conditions in the
countries in which the Group seeks to operate could have an adverse effect on Group
earnings from operations in those countries.
Our plans include investment in our product development as well as scaling up our
manufacturing capabilities, leading to cash outflows. These are likely to increase
through building products to stock before positive cash flow is generated from sales. If
we fail to generate planned positive cash flows, we may require further funding.
ITM Power PLC Annual Report 2022 36
Overview Strategic Report Governance Financial Statements
Shareholder Information
Going Concern
The Directors have prepared a cash flow forecast for
the period ending 30 September 2023. This forecast
indicates that the Group and parent company would
expect to remain cash positive without the requirement
for further fundraising based on delivering the existing
pipeline, for a period of at least 12 months from the date
of approval of these financial statements.
By the end of the period analysed, the Group will still
hold significant cash reserves. This should give the
business sufficient funds to trade for the next 12 months
if the business continues with its medium-term
business plan.
The business remains in a development phase, and
continues in a cash outflow position, using funding
generated from previous fundraises. As such, this cash
flow forecast has also been stress-tested. As a worst-
case scenario, if all payments had to continue as forecast
while receipts were not received at all, the business
would remain cash positive for the full 12 months from
the date of approval of these financial statements.
The accounts have therefore been prepared on a going
concern basis.
The Strategic Report set out on pages 4 to 36 was
approved by the Board on 14 September 2022 and
signed on its behalf by
Andy Allen
Chief Financial Officer
ITM Power PLC Annual Report 2022 37
Overview Strategic Report Governance Financial Statements
Shareholder Information
Governance
In this section
38
Introduction from the Chair of the Board
39 Summary of Application of the QCA Code
41 Board of Directors
44 Corporate Governance Report
51 Audit Committee Report
55 Remuneration Report
68 Directors’ Report
70 Directors’ Responsibilities Statement
ITM Power PLC Annual Report 2022 38
Overview Strategic Report Governance Financial Statements
Shareholder Information
Introduction from the Chair of the Board
My fellow Board
members and I
firmly believe that
excellent corporate
governance is
vital to creating
a sustainable,
growing business.
Dear shareholder
I am pleased to present our Governance Report for the
year. My fellow Board members and I firmly believe that
excellent corporate governance is vital to creating a
sustainable, growing business. We aim for our
governance to be best in class in the AIM Top 50.
As Chair of the Board, it is my responsibility to ensure
the effective working of the Board through a sound
governance framework that supports and enables the
Board. I am supported in this work by my fellow Board
members and the Company Secretary, who work to
ensure ITM Power is managed for the long-term benefit
of all shareholders, having regard to other stakeholders’
interests where appropriate.
Our governance framework is summarised on page 44.
The Board has chosen to apply The Quoted Companies
Alliance Corporate Governance Code 2018 (QCA Code).
We have set out a summary of ITM Power’s application
of each of the 10 principles of the QCA Code on the
following pages, with links to where you can find further
information in this Annual Report and on our website.
We have historically published our statement of compliance
with the QCA Code on our website in the first quarter of the
calendar year. We will from now on publish the relevant
information in our Annual Report and on our website at
the same time as the Annual Report is published.
Culture
It is important to ensure our culture is embedded and
supports our strategy and business model. It is integral
to our development together as one ITM Power. As a
rapidly growing business, this has been an area of
particular focus this year. We ran our first engagement
survey shortly after the end of the financial year and will
use this to inform discussions on culture going forward.
The intention is to run this at regular intervals so we can
monitor our culture and how it is changing over time.
Our values
We launched our values during the year. These guide
how we work and align with our vision and mission.
They underpin our recruitment processes, shape our
leadership and development programmes and form part
of our performance and development review process.
Doing the right thing
Our Code of Ethics was introduced last year. This sets out
how we do business and we have produced supporting
guidance for our workforce. We choose to operate with
honesty and integrity in all we do. We do the right thing
for the right reason throughout our work.
We provide mechanisms for our workforce to speak up
when they see evidence of possible wrongdoing, fraud
or unethical behaviour. We listen to concerns that are
raised; we investigate and where possible we provide an
explanation of the outcome; and we protect and support
people who do the right thing. While the speak up
mechanisms have previously been completely internal to
ITM Power, we now also provide a third-party independent
whistleblowing service in the event someone feels
unable to speak to anyone internally. Training in the
Code of Ethics is now available for all employees. There
were no whistleblowing matters raised during the year.
Management is developing a series of key performance
indicators to measure how our Code of Ethics is
embedded and applied.
Leadership
Visible leadership is key to our values, ethics and culture.
Our leaders set expectations for behaviour and
demonstrate these expectations through their own
behaviour. This approach is based on an open,
collaborative team culture. The culture is promoted
through an open-door policy for access to senior
managers and leaders, a flat structure, and close team
working. Understanding more about how our culture is
perceived by managers and employees is addressed
through engagement surveys.
Sir Roger Bone
Chair of the Board
14 September 2022
Our values:
We
Collaborate
We
Care
We are
Tenacious
We
Innovate
We seek
Joy
Our ethical principles:
Always safety first
Always act in accordance with laws and regulations
Always act with integrity to deliver excellence
One team: always committed to work well together
Always respectful
ITM Power PLC Annual Report 2022 39
Overview Strategic Report Governance Financial Statements
Shareholder Information
Summary of Application of the QCA Code
Principle
1.
Establish a strategy
and business model
which promote
long-term value for
shareholders
2.
Seek to understand
and meet
shareholder needs
and expectations
Application and key actions during the year
– Our vision, mission, strategy and business model
respond to a growing demand and need for net
zero carbon emissions
– We have a product offering that is scalable
– Our competitive advantage is the efficient
manufacture and supply of best-in-class PEM
electrolysers
– We work strategically with partners to scale our
impact, industrial reach and market penetration
– The CEO and CFO brief the Board on the views of
major shareholders
– We communicate with shareholders through
meetings, presentations, online events,
announcements and general meetings
– We completed a fundraise of £250 million in
November 2021
– We engaged with shareholders to discuss their
concerns and reasons behind the 28.70% vote
against the approval of our Remuneration Report
and published our response on our website
Further reading
– Our vision and mission on page 17
– Our Strategy and Our Business
Model on pages 17 to 18
– Stakeholder engagement:
Investors on page 21
– Remuneration Report on page 56
– https://itm-power.com/investors/
shareholder-documents
3.
Take into account
wider stakeholder
and social
responsibilities and
their implications
for long-term
success
– The ESG Committee supports our commitment
– Stakeholders and Section 172(1)
to be a sustainable business
Statement from page 19
– We have identified our key stakeholders and
– Sustainable Energy, Engineered
ensure appropriate engagement with them takes
place: workforce, strategic partners, customers
and potential customers, suppliers, regulators and
industry bodies, and local communities
Sustainably from page 24
– ESG Report 2022 at https://
itm-power.com/investors/
financial-reports
Principle
4.
Embed effective risk
management,
considering both
opportunities and
threats, throughout
the organisation
5.
Maintain the board
as a well-
functioning,
balanced team led
by the chair
Application and key actions during the year
– We maintain a risk register and risk management is
Further reading
– Principal Risks and Uncertainties
overseen by the Audit Committee
– We have a framework of internal financial controls,
overseen by the Board, the Audit Committee and
the Executive Committee
– Our framework of non-financial controls is
overseen by the Board
– We have quality and HSE management systems
in place
– Our Code of Ethics and handbook set out the
ethical and conduct expectations of our workforce
– During the year, we created a Risk and Assurance
function with responsibility for risk management
and internal audit
– All the Board members have the same duties,
including to act in the best interests of the
Company as a whole, but they have different roles,
which contribute to the effective operation of
the Board
– We created a separate, stand-alone role for the
Company Secretary and recruited a governance
professional into the role
from page 30
– Audit Committee Report from
page 51
– See also principle 8
– Roles and responsibilities on the
Board on page 45
ITM Power PLC Annual Report 2022 40
Overview Strategic Report Governance Financial Statements
Shareholder Information
Summary of application of the QCA Code continued
Summary of Application of the QCA Code continued
Principle
6.
Ensure that
between them the
directors have the
necessary
up-to-date
experience, skills
and capabilities
7.
Evaluate board
performance based
on clear and
relevant objectives,
seeking continuous
improvement
8.
Promote a
corporate culture
that is based on
ethical values and
behaviours
Further reading
– Board biographies on pages 41 to
42
– Balance on the Board on page 43
– Induction and training on page 45
Application and key actions during the year
– Board members have an appropriate balance of
skills, experience, personal qualities and
capabilities to support our strategy and business
model
– The Board committed to achieving 33% female
Board membership at the earliest possible date
and to increasing the ethnic diversity of its
members
– An induction programme is provided for new
Board members
– The NOMAD, Company Secretary, Ernst & Young
LLP (remuneration consultants), Good Business
(ESG consultants) and other advisors are available
to the Board
– We conduct a periodic evaluation (every 18-24
– Board evaluation on page 47
months) of the Board’s performance
– The outcomes from the evaluation process are
reported in the next annual report
– We conducted an evaluation in early 2022
– Our Code of Ethics sets out how we do business
– We provide mechanisms for our workforce to
speak up
– Visible leadership is key
– We are an equal opportunities employer
– We are clear about our expectations of
our workforce
– During the year, we launched the values that
guide how we work to drive forward our vision
and mission
– Our vision and mission on page 17
– Our values on page 28
– Sustainable Energy, Engineered
Sustainably: Business ethics on
page 29
– ESG Report 2022 at https://
itm-power.com/investors/
financial-reports
– Code of Ethics at https://
itm-power.com/sustainability
Principle
9.
Maintain
governance
structures and
processes that are
fit for purpose and
support good
decision-making by
the board
10.
Communicate how
the company is
governed and is
performing by
maintaining a
dialogue with
shareholders and
other relevant
stakeholders
Application and key actions during the year
– The Board retains control of key decisions
– Certain matters are delegated to Committees
– The CEO manages the day-to-day business with
the Executive Committee
– Decisions are made in accordance with
delegated authorities
Further reading
– Governance framework on page
44
– Roles and responsibilities on the
Board on page 45
– We engage with shareholders and stakeholders
– We publish the outcome of all general meeting
votes through London Stock Exchange’s Regulatory
News Service
– Stakeholders and Section 172(1)
Statement from page 19
– See also principles 2 and 3
ITM Power PLC Annual Report 2022 41
Overview Strategic Report Governance Financial Statements
Shareholder Information
Board of Directors
Key
A Audit Committee
E ESG Committee
N Nomination Committee
R Remuneration Committee
S Strategic Advisory Committee
T Technology Management Committee
Chair of the Committee
Sir Roger Bone
Chair of the Board
Dr Graham Cooley
CEO
Andy Allen
CFO
Dr Simon Bourne
Chief Technology Officer
Dr Rachel Smith
Services Director
Appointed to the Board: June 2014
Appointed to the Board: June 2009
Appointed to the Board: May 2018
Appointed to the Board: November 2009
Appointed to the Board: September 2015
Independent: Yes
A N
Key skills/experience:
– Senior leadership of international and
manufacturing/industrial organisations
– Broad range of financial experience
– Risk management
– Significant service within UK Government
– Fellow of the Institution of Engineering
Designers
Previous appointments include:
– Boeing UK – President
– Foreign & Colonial Investment Trust plc –
Senior Independent Director
– National Centre for Universities and
Business (NCUB) – Non-Executive Director
and trustee
– Honorary Ambassador for British business
– British Ambassador to Brazil and Sweden
– Royal United Services Institute – trustee
Key external commitments:
– Chairman of Over-C Limited
– Joint Chairman of Motive (nominated
by ITM Power)
Independent: No
E N
Key skills/experience:
– Power sector
– Understanding of financial markets
– Leading growth businesses
– PhD in physics
– MBA
– Fellow of the Institute of Metals, Minerals
and Mining
– Fellow of the Energy Institute
– Fellow of The Institution of Engineering
and Technology
Previous appointments include:
– National Power plc – Business
Development Manager
– International Power plc – Business
Development Manager
– Sensortec Ltd – CEO
– Metalysis Ltd – founding CEO
– Antenova Ltd – founding CEO
Independent: No
Independent: No
T
Key skills/experience:
– Chartered accountant
– Extensive experience auditing
manufacturing companies
– Understanding of financial markets
Key skills/experience:
– Design and development of electrolysers
– PhD regarding hydrophilic polymers
Independent: No
E S
Key skills/experience:
– Material and electrochemical cells
– Environmental science
– Energy conservation
– EngD regarding carbon fibre composites
Previous appointments include:
– None
Previous appointments include:
– Sonatest PLC – Project Engineer
– Ministry of Defence – Researcher
Previous appointments include:
– Research Scientist
Key external commitments:
– Member of the UK Hydrogen Advisory
Key external commitments:
– None
Key external commitments:
– None
Key external commitments:
– None
Council
– Non-Executive Director of Renewable UK
Association
ITM Power PLC Annual Report 2022 42
Overview Strategic Report Governance Financial Statements
Shareholder Information
Board of Directors continued
Key
A Audit Committee
E ESG Committee
N Nomination Committee
R Remuneration Committee
S Strategic Advisory Committee
T Technology Management Committee
Chair of the Committee
Denise Cockrem
Non-Executive Director
Martin Green
Non-Executive Director
Jürgen Nowicki
Non-Executive Director
Katherine Roe
Non-Executive Director
Appointed to the Board: July 2022
Appointed to the Board: September 2019
Appointed to the Board: November 2019
Appointed to the Board: May 2020
Board members that stepped down during
the year:
– Tom Rae resigned effective
16 November 2021
Independent: Yes
A
Key skills/experience:
– Chartered accountant
– Financial planning and analysis
– Performance reporting and forecasting
– Financial controls
– Internal audit and risk management
– Strategic planning
– Regulatory compliance
Previous appointments include:
– Good Energy Group plc – Chief Financial
Officer
– RSA Insurance Group – UK and Western
Europe Finance Director, Deputy UK
Finance Director, Group Director of
Financial Planning and Analysis, Group
Financial Controller
– Direct Line – Finance Director of Direct
Line Retail Division
– Royal Bank of Scotland – Head of Finance,
Corporate Banking and Financial Markets
Key external commitments:
– Benefact Group and Ecclesiastical
Insurance Office plc – Group Chief
Financial Officer
Independent: Yes
A R S
Key skills/experience:
– Battery, fuel cell and hydrogen
technologies
– Senior leadership of international and
manufacturing/industrial organisations
– Broad range of financial experience
– Risk management
– Business-to-business customer and supply
chain management
– Strategy development and implementation
– Scaling growth businesses
– Mergers and acquisitions experience
Previous appointments include:
– Johnson Matthey plc – various positions
over 30 years, latterly as group strategy
director
Independent: No
S T
Key skills/experience:
– Engineering sector
– Accountant
– Internal audit
– Understanding of financial markets
– Risk management
– Business-to-business customer and supply
chain management
– Senior leadership of international
organisations
– Strategic planning
Previous appointments include:
– Linde Gas North America – CFO
– Linde Group – Head of Finance and Control
– Linde Engineering – Senior Vice President,
Commercial
Independent: Yes
E N R
Key skills/experience:
– Energy sector
– Finance
– Capital markets
– Risk management
– Senior leadership of international
organisations
– Remuneration
– Marketing/PR
– Corporate development
– Strategic planning
– ESG expertise
Previous appointments include:
– Morgan Stanley – investment banking
– Panmure Gordon – Director within
investment banking, headed the energy
team
– Wentworth Resources plc – CFO
Key external commitments:
– The Henry Royce Institute for Advanced
Materials – Non-Executive Director
– LeydenJar Technologies BV – Non-
Key external commitments:
– Linde plc – Executive Vice President,
Managing Director of Linde Engineering
Key external commitments:
– Wentworth Resources plc – CEO
– Longboard Energy plc – Non-Executive
Director and Audit Committee Chair
– MacIntyre Academies Trust – Independent
Executive Director
Member
– Anaphite Limited – Non-Executive Director
ITM Power PLC Annual Report 2022 43
Overview Strategic Report Governance Financial Statements
Shareholder Information
Board of Directors continued
Balance on the Board
The Board is satisfied that its members possess an appropriate balance of skills, experience, personal qualities, and
capabilities. It has identified the skills and experience below as being of key importance to support our future plans.
It has also identified supporting skills and experience where it feels it is appropriate to rely on the support of specialists
within senior management and external advisors, including technology/IT, marketing/PR, lobbying/political/regulatory
and legal. The Board is pleased to have improved the balance and diversity on the Board since the publication of the
last Annual Report.
Women on the Board
3 of 9
(2 of 9 at the time of the 2021 AGM)
Independent Directors on the Board
(including the Chair of the Board)
4 of 9
(3 of 9 at the time of the 2021 AGM)
Directors’ skills and experience
10
8
6
4
2
5
4
6
2
5
5
4
1
0
Supplier m anage m ent
Business-to-business custo m ers
O ur m arket/
M anufacturing/industrial
industry
9
9
■ Core capability
■ Supplemental capability
7
6
6¹
6
6
6
5
4
3
3
3
3
3
0
Strategy
Financial m arkets
Audit/finance
0
Risk
Leadership
People
Succession planning
Re m uneration
1
ESG
1. Of our Directors with audit/finance experience, only two were members of the Audit Committee during the year. While having a broad range of financial
experience, these two Directors do not have specific audit or accounting expertise. The addition of Denise Cockrem with effect from 25 July 2022, has enhanced
this experience on the Board and, in particular, on the Audit Committee.
Executive/Non-Executive Directors on the Board
Age profile of the Board
Executive
Non-Executive1
1. Including the Chair of the Board.
4
5
Up to 40
41 – 50
51 – 65
Over 65
1
3
4
1
Tenure profile of the Board: Executive1
Tenure profile of the Board: Non-Executive1
Executive
1
1
2
Non-
Executive2
1
3
Ethnicity
12
9 of 9
White European
<1 year
1 – 3 years
3 – 6 years
6 – 9 years
>9 years
1. As at 14 September 2022.
2. Including the Chair of the Board.
ITM Power PLC Annual Report 2022
44
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate
Governance Report
In this report we provide more detail
regarding how we apply the
principles of the QCA Code.
Governance framework
Our governance framework is
summarised here:
Further reading:
– Board activities during the year on
page 46
– Board Committees from page 47
– Audit Committee Report from
page 51
– Sustainable Energy, Engineered
Sustainably from page 24
– Remuneration Report from
page 55
Stakeholders
including our workforce, strategic partners, customers and potential customers, suppliers, regulators and industry bodies, and local communities
Licence to operate Delegation Accountability and reporting
Board
Provides overall leadership,
independent oversight of
performance and works to ensure
that ITM Power PLC and its wider
business group (the Group) is
managed for the long-term benefit
of all shareholders.
Primarily responsible for our
strategic plan, risk management,
systems of internal control and
corporate governance to ensure
the long-term success of the
Group.
Retains control of key decisions,
including: strategic decisions,
annual and long-term business
plans, changes to our principal
activities, material contracts,
mergers, acquisitions and
disposals.
s
n
o
ti
a
d
n
e
m
m
o
c
e
r
d
n
a
g
n
ti
r
o
p
e
R
n
o
ti
a
g
e
e
D
l
e
c
i
v
d
A
Audit Committee
Primary responsibilities are to: monitor the integrity of the Group’s financial statements and financial announcements; monitor the quality and
effectiveness of internal controls and risk management systems; review arrangements for speaking up, detecting fraud and managing bribery risks;
monitor internal audit or alternative arrangements; and manage the external auditor relationship.
ESG Committee
Leads the development of the Group’s ESG strategy, policies and programmes. Responsible for the Group’s short- and long-term ESG objectives and
reporting of key metrics. Oversees compliance with relevant laws and regulations, including principles of good corporate governance and ethical
behaviour.
Nomination Committee
Leads the process for Board appointments and succession planning, including considering
the composition of the Board and its future requirements.
Remuneration Committee
Determines the remuneration policy for the Chair of the Board and Executive Directors, aiming to support the strategy and long-term success of the
Company. Sets the performance conditions for awards granted under the terms of the ITM Power PLC Long Term Incentive Plan (LTIP). Approves the
remuneration packages of the Executive Directors, including grants of LTIP awards.
Strategic Advisory Committee
Advises the Board on key business development matters.
Technology Management Committee
Primary responsibilities are to: review the Group’s product portfolio and development plans; review the suitability of the portfolio, manufacturing
capacity and planned developments to satisfy anticipated market developments; review requirements to meet the Group’s technology goal to be
best-in-class.
Values Strategy Delegation Accountability and reporting
Executive Committee
The CEO manages the day-to-day business with the Executive Committee.
The Executive Directors together with other senior management meet regularly to consider business development, technology development, project performance,
the financial performance of the Group and other management issues.
Values Strategy Delegation Accountability and reporting
Our people
ITM Power PLC Annual Report 2022
45
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
Roles and responsibilities on the Board
All the Board members have the same duties, including to act in the best interests of the Company as a whole, but
they have different roles:
Role
Chair of the
Board
Held by
Sir Roger Bone (independent)
CEO
Graham Cooley
Non-
Executive
Directors
(NEDs)
Executive
Directors
Denise Cockrem (independent)
effective 25 July 2022
Martin Green (independent)
Jürgen Nowicki (shareholder
nominee)
Katherine Roe (independent)
Andy Allen (CFO)
Simon Bourne
(Chief Technology Officer)
Rachel Smith (Services Director)
Responsibilities
– Effective working of the Board
– Leads and manages the business of the Board
– Sets the agenda for Board discussions
– Promotes effective and constructive debate
– Supports a sound decision-making process
– Plus the responsibilities of Non-Executive Directors
– Available to shareholders
– Executive management of the business day-to-day,
including leading the Executive Committee
– Implementing the strategy
– Leading operational matters
– Performance (financial and non-financial)
– Available to shareholders
– Provide constructive challenge, strategic guidance,
external insight and specialist advice
– Hold management to account
– Available to shareholders on request
– Operational matters, within areas of specific
responsibility
– Performance, within areas of specific responsibility
– Available to shareholders on request
Board meetings are scheduled in advance, with ad hoc
meetings arranged to suit business needs. Meetings
were largely held virtually during the year as a result of
the continuing impact of the COVID-19 pandemic. We
aim to return to face-to-face meetings over the course
of the next year.
The Chair of the Board commits around five to six days a
month to his duties and is paid a fee. The other NEDs are
expected to provide around three days a month of their
time and, with the exception of Jürgen Nowicki, receive
only fees. Jürgen receives no remuneration from us for
his service – he is remunerated by Linde. The Board
considers the other demands on the time of any
proposed NED before their appointment and satisfies
itself that their other commitments will not interfere
with their ability to perform their duties effectively.
The Executive Directors are full-time employees
and officers of the Company. They receive salaries,
performance-related remuneration and benefits.
More details can be found in the Remuneration Report.
Directors are subject to election at the first AGM of the
Company following their appointment. Thereafter, they
are subject to re-election every three years or, if they
have been in office for nine years or more, annually.
Balance and diversity
The Board is comfortable that it is balanced, both
numerically and in experience. Nevertheless, it remains
aware of the need to keep this under review. Details
of individual Directors’ skills and experience plus an
overview of the skills and experience on the Board
are provided on page 43.
The Board is also cognisant of the need to ensure
appropriate diversity of thought, which aids good
decision making. This is driven by many factors in Directors’
backgrounds, including gender and ethnicity. The Board
committed to achieving 33% female Board membership at
the earliest possible date, which it met with the appointment
of Denise Cockrem in July 2022. It is also committed to
increasing the ethnic diversity of its members.
Induction and training
It is important to ensure all Board members are given
the right access to information to enable them to
discharge their duties. The Company Secretary works
to ensure the Board and its Committees have full and
timely access to relevant information. This includes
provision of an induction programme to new Board
members and circulation of papers in advance
of meetings.
The revised induction programme (see Board evaluation on
page 47) includes a suite of induction materials explaining:
– Their legal duties and responsibilities, including in
relation to section 172 of the Companies Act
– The calendar of Board and Committee meetings
– Governance documents, policies and procedures
– Committee terms of reference
– Our Code of Ethics and share dealing code
– Background information about ITM Power
– Meetings with members of the Board and the
Executive Committee and a visit to our factory are
also arranged.
Training is arranged to address specific development
needs or areas of focus. Annual training is provided by
the Company’s NOMAD, Investec, on the AIM rules and
the Market Abuse Regulation.
ITM Power PLC Annual Report 2022 46
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
Board activities during the year
The key areas of focus for the Board’s activities and topics discussed during the year were as follows:
Scheduled meeting attendance1
Strategic/governance pillar
Strategic: continual technology
development
Strategic: scalable manufacturing
Strategic: strong partners and
relationships
Strategic: develop ITM Power
Service
Strategic: expert knowledge
Governance: financial
Governance: operations
Governance: best in class
Discussion topics
– PGM strategy
– Technology, research and development
– Production updates
– Performance forecasts
– Motive joint venture with Vitol
– £250 million capital fundraise
– Procurement strategy and key procurement contracts
– Marketing and communications strategy
– Employee engagement, including the creation and cascade of shared
objectives
– Significant customer projects
– Recruitment of key personnel including Operations Director and Projects
Director
– Budget approval
– The Group’s banking facilities
– Approval of full year results and Annual Report for FY21
– Approval of half year results for the six months ended 31 October 2021
– Views of investors and analysts
– Approvals of capital spend above the threshold set by the Board
– Workforce performance indicators including senior management and
wider recruitment, analysis of workforce composition
– Health and safety performance
– Updates on ESG action plan progress
– Approval of the notice of AGM
– Training on AIM and Market Abuse Regulation rules and obligations
– QCA Code compliance
– Board evaluation
– Review of the terms of reference of the Nomination Committee and
appointment of Katherine Roe to the Nomination Committee
– Group risks
Chair of the Board
Sir Roger Bone
Executive Directors
Graham Cooley
Andy Allen
Simon Bourne
Rachel Smith
Non-Executive
Directors
Martin Green
Jürgen Nowicki
Tom Rae2
Katherine Roe
Board3
Audit
Committee
ESG
Committee
Nomination
Committee
Remuneration
Committee
Strategic
Advisory
Committee5
Technology
Management
Committee6
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
4 (5)
4 (5)
1 (2)
5 (5)
6 (6)
n/a
n/a
n/a
n/a
6 (6)
n/a
n/a
n/a
n/a
2 (2)
n/a
n/a
2 (2)
n/a
n/a
n/a
2 (2)
2 (2)
2 (2)
n/a
n/a
n/a
n/a
n/a
n/a
1 (1)4
n/a
n/a
n/a
n/a
n/a
4 (4)
n/a
n/a
4 (4)
n/a
n/a
n/a
n/a
2 (2)
2 (2)
2 (2)
1 (1)
n/a
n/a
n/a
n/a
3 (3)
n/a
n/a
3 (3)
3 (3)
n/a
1. The maximum number of scheduled meetings in the period during which the individual was a Board or Committee member is shown in brackets.
2. Tom Rae resigned from the Board on 16 November 2021.
3. A number of additional ad hoc meetings of the Board were held during the year to consider specific matters as they arose.
4. Katherine Roe joined the Nomination Committee from 6 December 2021.
5. Cosma Panzacchi, a representative of Snam, was also a member of the Strategic Advisory Committee, but not the Board. He attended two meetings during the
year and was eligible to attend two meetings.
6. Marco Chiesa, a representative of Snam, is also a member of the Technology Management Committee, but not the Board. He attended three meetings during
the year and was eligible to attend three meetings.
7. Denise Cockrem was appointed with effect from 25 July 2022 so did not attend any meetings during the year.
ITM Power PLC Annual Report 2022 47
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
Board evaluation
To ensure its continued effectiveness, the Board undertakes a periodic evaluation of its performance and that of its
Committees. It is committed to doing so every 18 to 24 months.
The last evaluation was undertaken in January 2022. The Chair of the Board led the process, with the support of the
Company Secretary. A questionnaire was issued and the Chair of the Board then conducted an interview with each
Board member. A qualitative assessment of key matters was performed, covering Board responsibilities, composition
of the Board, engagement and input, strategy, information flows and meeting administration, performance
monitoring, delegations, stakeholders and risk. The Board considered the outcomes and developed an action
plan to address any improvements identified, which will be implemented during FY23.
Board Committees
There are six Committees of the Board. The work of the
Audit and Remuneration Committees is discussed in the
Audit Committee Report and the Remuneration Report
respectively. The remit of each Committee is
summarised below, with some additional detail provided
about areas of focus during the year.
Audit Committee
Key duties and responsibilities
– Monitors the integrity of the Group’s financial
statements and financial announcements
Members
– Martin Green (Chair)
– Sir Roger Bone
– Denise Cockrem effective 25 July 2022
Supported by (by invitation)
– CEO
– CFO, Group Financial Controller and other members of
the Finance team
– Risk and Assurance function – risk management and
internal audit
– Other senior management including the Company
– Monitors the quality and effectiveness of internal
Secretary
It is expected the Company will conduct an externally facilitated process in due course.
2022 Board evaluation findings and actions
Findings
Board composition
Consider future
experience
requirements on the
Board
Committee remit
Technology
Management
Committee could be
refocused to support
future needs better
Induction
Induction processes
curtailed during the
COVID-19 pandemic
Actions taken
– Develop a skills
matrix recording
current skills and
experience to help
identify potential
gaps
– Recruit a NED with
strong accounting
experience
– Review the remit of
the Technology
Management
Committee to
ensure it addresses
our future needs
– Develop a more
formal induction
programme for
NEDs (see Induction
and training on page
45)
– External Auditor – Grant Thornton UK LLP
Read more:
– Audit Committee Report from page 51
– Anti-fraud and bribery policy on our website at
https://itm-power.com/sustainability
Governance
Authorities and
delegations are in
place and understood
but are not kept in a
single, easily referable
repository
– Consolidate
authorities and
delegations in a
single repository
controls and risk management systems
– Reviews arrangements for speaking up, detecting fraud
and managing bribery risks
– Monitors internal audit or alternative arrangements
– Manages the external auditor relationship
Areas of focus during the year
– Full year results and Annual Report for FY21
– Half year results for the six months ended 31 October
2021
– External auditor: 2021 audit plan, effectiveness,
independence, reappointment
– Risk management: risk register review, deep dives on
key risks, creation of risk management function
– Internal audit: reviews of key controls and monitoring
actions arising therefrom, creation of internal audit
function
– Review of anti-fraud and bribery controls, including
speak-up arrangements and the approach to
hospitality, gifts and potential conflicts
ITM Power PLC Annual Report 2022 48
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
ESG Committee
Key duties and responsibilities
– Leads the development of the Group’s ESG strategy,
policies and programmes
– Responsible for the Group’s short- and long-term ESG
objectives and reporting of key metrics
– Oversees compliance with relevant laws and
regulations, including principles of good governance
Areas of focus during the year
– ESG strategy, actions and objectives
– ESG Report
Members
– Katherine Roe (Chair)
– Graham Cooley
– Rachel Smith
Supported by (by invitation)
– Senior management including the Company Secretary,
Head of HR and Head of Investor Relations
– Good Business, a consultancy with more than two
decades’ sustainability experience
Read more:
– Sustainable Energy, Engineered Sustainably from
page 24
– ESG Report 2022 at
https://itm-power.com/investors/financial-reports
Nomination Committee
Key duties and responsibilities
– Leads the process for Board appointments and
succession planning, including considering the
composition of the Board and its future requirements
Areas of focus during the year
– Succession planning for members of the Executive
Committee and the Chair of the Board
– Skills and experience needed on the Board in the
future
– Recruitment of an additional NED
– Reviewed its terms of reference and recommended
changes to the Board
– Framework agreed for Committee activities
Members
– Sir Roger Bone (Chair)
– Graham Cooley
– Katherine Roe effective 6 December 2021
Supported by (by invitation)
– Russell Reynolds Associates, an executive search and
leadership firm
– Company Secretary
Committee membership
Recognising the importance of independent oversight of
Board appointments, the Nomination Committee
recommended to the Board that Katherine Roe be
invited to join the Nomination Committee as a member
from 6 December 2021. The Board and Katherine
supported this recommendation and Katherine joined
the Nomination Committee.
Succession planning
We believe maintaining a well-balanced Board with the
right mix of skills and experience is important to ensure
our future success. This needs regular review to ensure:
– The skills and experience on the Board are the right
ones to oversee and guide the delivery of our current
and future strategy
– There is a plan to respond to any vacancy that may
arise – whether anticipated or unexpected
To support this, and as an action from the Board
evaluation process, a matrix was developed to identify
the skills and experience needed to support our future
plans. The Nomination Committee reviewed the matrix
in light of the skills and experience on the Board, within
the Group and available externally. It concluded that the
Board was balanced with a good mix of skills and
experience, with appropriate support from specialists
within senior management and external advisors. It
nevertheless identified some areas for consideration in
any future recruitment activity. Feedback received as
part of the Board evaluation process was also taken into
consideration in developing the matrix and identifying
future requirements. An overview of the skills and
experience identified through this process is provided on
page 43.
The Nomination Committee reviewed the succession
plans for the members of the Executive Committee and
the Chair of the Board during the year. It considered and
agreed the plans for succession in an emergency
situation as well as over the mid term and long term.
NED recruitment
With the departure of Tom Rae from the Board, the
Nomination Committee considered the future needs of
the Board. It consulted other members of the Board for
their input and concluded it would be appropriate to
appoint a further independent NED. A tender process
was conducted to identify an external firm to support
the recruitment process and Russell Reynolds Associates
was chosen.
A candidate specification was drawn up with Russell
Reynolds Associates, feeding in the input from other
members of the Board. It was agreed there should be a
focus on appointing someone with strong accounting
and broader financial skills and experience as well as
considering the Board’s commitment to increasing its
gender and ethnic diversity. From the initial list of
potential candidates identified by Russell Reynolds
Associates, a shortlist was identified for interview by
members of the Nomination Committee. They were
assessed objectively against the candidate specification
and further shortlisted for interview by the CEO and
CFO. The feedback from all the interviews was
considered and, from a strong field, a preferred
candidate identified.
ITM Power PLC Annual Report 2022 49
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
Denise Cockrem was appointed to the Board with effect
from 25 July 2022 and was also appointed as a member
of the Audit Committee. Denise brings to the Board a
wealth of accounting and financial experience,
encompassing financial planning and analysis,
performance reporting and forecasting, financial
controls, internal audit and risk management, from her
current role as Chief Financial Officer of Ecclesiastical
Insurance Office plc and previous finance roles in Good
Energy Group plc, RSA Insurance Group, Direct Line –
Retail Division and Royal Bank of Scotland. The
Nomination Committee considered the other
commitments of Denise and is satisfied they will not
impair her ability to serve as an effective member of the
Board and Audit Committee.
Russell Reynolds Associates provides no other services
to ITM Power, but has been retained by Motive to
support the search for new members of the senior
management team. It is a founding member of the UK’s
Standard Voluntary Code of Conduct for Executive
Search Firms and is one of the firms accredited under
the Enhanced Code for its leading work on promoting
board diversity.
Remuneration Committee
Key duties and responsibilities
– Determines the remuneration policy for the Chair of
the Board and Executive Directors, aiming to support
the strategy and long-term success of the Company
– Sets the performance conditions for awards granted
under the terms of the LTIP
– Approves the remuneration packages of the Executive
Members
– Katherine Roe (Chair)
– Martin Green
Supported by (by invitation)
– Chair of the Board
– CEO and CFO
– Other senior management including the
Directors, including grants of LTIP awards.
Company Secretary
– Ernst & Young LLP provides independent advice
to the Remuneration Committee
Read more:
– Remuneration Report on page 55
Areas of focus during the year
– Bonus pay outs for the Executive Directors for FY21
– Benchmarking Executive Directors’ remuneration and
revising salaries
– Setting performance targets for the annual bonus and
for LTIP awards granted in the year
– Remuneration Report for FY21
– LTIP grants to Executive Directors
– Remuneration consultant review
– Review of leaver treatments under the Company’s
share plans
Strategic Advisory Committee
Key duties and responsibilities
– Advises the Board on key business development
matters
Areas of focus during the year
– Anti-trust considerations
– ITM Power strategy and market environment
– Competitor landscape and positioning
Members
– Martin Green (Chair)
– Jürgen Nowicki
– Comsa Panzacchi to 1 July 2022/Piero Ercoli from
1 July 2022 (Snam representative)
– Rachel Smith
Supported by (by invitation)
– CEO, CTO and other senior management
– Linde, ILE and Snam provide market intelligence and
competitor analysis to the Strategic Advisory
Committee
– Company Secretary
Read more:
– Our Strategy and Our Business Model on pages 17
to 18
– Our Market from page 15
– Markets we serve: https://itm-power.com/markets
ITM Power PLC Annual Report 2022 50
Overview Strategic Report Governance Financial Statements
Shareholder Information
Corporate Governance Report continued
Technology Management Committee
Key duties and responsibilities
– Reviews the Group’s product portfolio and
development plans
Supported by (by invitation)
– Senior management representing research and
development and product management teams
– ILE and Snam:
– Reviews the suitability of the portfolio, manufacturing
– Provide information to the Technology Management
capacity and planned developments to satisfy
anticipated market developments
– Reviews requirements to meet the Group’s technology
goal to be best-in-class
Areas of focus during the year
– Product and innovation roadmap
– Research and development focus areas
– Standardisation and homologation requirements
– Focus areas for value engineering
Members
– Jürgen Nowicki (Chair)
– Simon Bourne
– Marco Chiesa (Snam representative)
Committee about how ITM Power’s technology
compares to competitor technologies
– Recommend enhancements, product standardisation
and product homologation requirements emerging
in the market
– Company Secretary
Read more:
– Our Business Model on page 18
– Our electrolysers and how they work:
https://itm-power.com/products
Where to find additional disclosures
Disclosure
How we seek to engage
shareholders
Outcomes of votes at general
meetings
Response to significant proportion
of votes against a resolution at any
general meeting
Historical annual reports
Notices of general meetings
Articles of Association
Admission documents
Information required to comply
with AIM Rule 26
Location
Stakeholders and Section 172 Statement from page 19
Regulatory news announcements on our website:
https://itm-power.com/investors/news
Shareholder documents, under Notices and circulars, on our website:
https://itm-power.com/investors/shareholder-documents
Financial and ESG reports on our website:
https://itm-power.com/investors/financial-reports
Shareholder documents, under Notices and circulars, on our website:
https://itm-power.com/investors/shareholder-documents
Shareholder documents, under Articles of Association, on our website:
https://itm-power.com/investors/shareholder-documents
Shareholder documents, under Admission documents, on our website:
https://itm-power.com/investors/shareholder-documents
AIM Rule 26 on our website:
https://itm-power.com/investors/aim-rule-26
ITM Power PLC Annual Report 2022 51
Overview Strategic Report Governance Financial Statements
Shareholder Information
Audit Committee Report
Introduction from the
Chair of the Audit Committee
Our focus during
the year was on
supporting the
Board’s approval
of the financial
statements and
overseeing the
services provided
by the external
auditor in relation
to those financial
statements.
Dear shareholder
As Chair of the Audit Committee, I am pleased to present
the Audit Committee’s report for FY22. This report is
intended to explain how the Committee has met its
responsibilities throughout the year.
Committee members, meetings and support
We were grateful for the support of the Nomination
Committee in identifying Denise Cockrem to join the
Board and the Audit Committee in July 2022. Denise’s
expertise in accounting and finance will further enhance
our experience and support our work.
The Audit Committee’s full membership is provided on
page 47 along with details of those that supported the
Audit Committee during the year.
Attendance at scheduled meetings during the year is
provided on page 46.
Areas of focus during the year
Our focus during the year was on supporting the Board’s
approval of the financial statements and overseeing the
services provided by the external auditor in relation to
those financial statements. The Audit Committee also
performed certain risk management and internal audit
functions. We also reviewed the anti-fraud and bribery
controls, including speak-up arrangements and the
approach to hospitality, gifts and potential conflicts.
Given the increasing scale, diversity and complexity of
ITM Power, we identified the importance of enhancing
the risk management processes within the organisation.
We also agreed with management the time was right to
create an internal audit function. It was agreed a new
Risk and Assurance function would be created, with
responsibility for risk management and internal audit.
More information is provided later in the Audit
Committee Report.
Availability to shareholders
I am available to shareholders to answer any questions
on the work of the Audit Committee.
Martin Green
Chair of the Audit Committee
14 September 2022
ITM Power PLC Annual Report 2022 52
Overview Strategic Report Governance Financial Statements
Shareholder Information
Audit Committee Report continued
Composition of the Audit Committee
In line with best practice, the Board is satisfied that all
members of the Audit Committee are independent.
Denise Cockrem has a particular expertise in accounting
and finance, as demonstrated through her career. Her
current role as Chief Financial Officer of Ecclesiastical
Insurance Office plc and previous finance roles in Good
Energy Group plc, RSA Insurance Group, Direct Line –
Retail Division and Royal Bank of Scotland have enabled
her to develop skills and experience encompassing
financial planning and analysis, performance reporting
and forecasting, financial controls, internal audit and risk
management.
Both Martin Green and Sir Roger Bone are considered to
have a broad range of financial experience. Martin
previously had responsibility for the financial
performance of a portfolio of Johnson Matthey
businesses, while Sir Roger previously acted as a
Non-Executive Director, Senior Independent Director
and member of the Audit Committee of the F&C
Investment Trust, which has a portfolio of over £4 billion.
Significant accounting judgements and estimates
The Audit Committee considered the significant
accounting judgements and estimates ahead of each
market announcement regarding ITM Power’s results.
The areas in which the Audit Committee was required
to exercise significant judgement during the year were:
Accounting
area
Stock
obsolescence
Key financial impact(s)
No material difference
Depreciation
Losses reduced by £0.5 million
Contract
accounting
and provisions
Provisions for contract loss
increased in year from £4.82 million
to £12.5 million (see Note 22 to the
Consolidated Financial Statements)
Audit Committee considerations
The Audit Committee considered and approved a change
in stock obsolescence accounting to better reflect the
status of stock. We now review on a part-by-part basis
whether or not there is demand for a stock item (for
example, in our products, for product development, or
for maintenance purposes). Where there is no forecast
demand, the item is provided for in full.
On the recommendation of management, the Audit
Committee considered the nature of the equipment
being bought (especially for Bessemer Park) and the
maturity of products and agreed a revised approach
that would allow for a longer economic life of deployed
capital items.
The Audit Committee considered management’s
forecasting of costs to complete projects. It agreed
with management’s approach of basing provisions
on the best estimates of management aligned with
information known at the time to ensure the forecast
cost to completion is appropriate. It reviewed and
challenged management’s estimates during the year.
Any expected losses are recognised immediately
through profit and loss.
Annual Report for FY22
The Audit Committee reviewed the Annual Report and
provided feedback. It considered whether ITM Power’s
position, strategic approach and performance during
the year were portrayed fairly and in a balanced way
throughout the Annual Report and aligned with the
financial statements. The Audit Committee had regard
to the findings and judgements of the external auditors.
External audit
The Audit Committee has responsibility and oversight of
the Group’s relationship with its external auditor, Grant
Thornton UK LLP, and for assessing the effectiveness of
the external audit process. Grant Thornton UK LLP was
appointed as the external auditor in 2017 and the lead
audit partner is David White.
The Audit Committee agreed the approach and scope
of the audit work to be undertaken by Grant Thornton
UK LLP for the financial year. It also reviewed Grant
Thornton UK LLP’s terms of engagement and the fees
payable in respect of audit and non-audit services to
ensure they are appropriate and reflect performance.
Details of the amounts paid to the external auditor
are provided in Note 7 to the Consolidated Financial
Statements.
Grant Thornton UK LLP provided the Audit Committee
with regular reports on the status of the audit, its
assessment of the agreed areas of audit focus and
findings, and conclusions to date.
The Audit Committee reviewed the experience and
expertise of the audit team, the fulfilment of the agreed
audit plan and any variations to it, feedback from ITM
Power’s management and the contents of the external
audit report.
ITM Power PLC Annual Report 2022 53
Overview Strategic Report Governance Financial Statements
Shareholder Information
Audit Committee Report continued
The Audit Committee confirmed its satisfaction with the
effectiveness of the external auditor.
Audit quality review
During the year, an Audit Quality Review Team (AQRT)
from the Financial Reporting Council undertook an
inspection of Grant Thornton UK LLP’s audit of the
financial statements for FY21. As part of that process,
the Chair of the Audit Committee spoke with the AQRT
to share the Audit Committee’s perspective on the
quality of Grant Thornton UK LLP’s audit. On completion
of the review, the Audit Committee received the AQRT’s
final report on its inspection and the Chair of the Audit
Committee discussed it with the audit partner. The
report gave the Audit Committee no concerns over the
quality, objectivity or independence of the audit.
External auditor independence
The continued independence of the external auditor is
important for an effective audit. The Audit Committee
has a policy regarding the use of the external auditor for
non-audit services. The external auditor may only be
engaged for non-audit services exceptionally and only
with the approval of the Audit Committee. The external
auditor may not undertake any work that may
compromise its independence or is otherwise prohibited
by any law or regulation.
The Audit Committee received a statement of
independence from Grant Thornton UK LLP in
September 2022 confirming that, in its professional
judgement, it is independent and has complied with the
relevant ethical requirements regarding independence
in the provision of its services. The report described
Grant Thornton UK LLP’s arrangements to identify,
manage and safeguard against conflicts of interest.
Reappointment of the external auditor
The Audit Committee has responsibility for making
a recommendation to the Board regarding the
reappointment of the external auditor. As part of its
review process, the Audit Committee typically considers
auditor rotation at least every five years, unless the
annual performance review identifies a reason to
rotate earlier.
The Audit Committee reviewed the scope of the
non-audit services undertaken by Grant Thornton UK
LLP during the year, to ensure there was no impairment
of judgement or objectivity, and monitored the
non-audit work performed to ensure it remained within
the agreed policy guidelines. It also considered the
extent of non-audit services provided to ITM Power.
Non-audit fees paid to Grant Thornton UK LLP were for
interim agreed upon procedures/review work and
assurance work for the capital fundraise, both of which
it was appropriate for the external auditor to undertake
given its knowledge of the Group and the need for
independent assurance. They represented 51%
(£180,000) of the total audit and non-audit fees
paid (£350,000). The Audit Committee determined,
based on its evaluation, that the external auditor
was independent.
Based on its continued satisfaction with the audit work
performed to date and Grant Thornton UK LLP’s continued
independence, the Audit Committee has recommended
to the Board, and the Board has approved, that Grant
Thornton UK LLP be proposed for reappointment by
shareholders as ITM Power’s external auditor at the
2022 AGM.
Internal audit
In accordance with its terms of reference, the Audit
Committee has considered annually whether there is
a need for an internal audit function. During the year, it
agreed with management that the growth of ITM Power,
and the scale, diversity and complexity of its activities,
warranted the creation of an internal audit function.
A Head of Risk and Assurance was appointed to lead the risk
management and internal audit functions with preparatory
plans for their implementation being developed.
The Audit Committee therefore undertook certain
assurance activities around critical risks and key controls
during the year, in the absence of an internal audit function.
This included presentations from management at Audit
Committee meetings, and in-depth reviews with
management outside Audit Committee meetings.
The outcomes of the reviews were discussed at
Audit Committee meetings and, where appropriate,
recommendations were made to management.
Implementation of those recommendations was then
monitored.
A handover of responsibilities from the Audit Committee
to the internal audit function will take place during the
next financial year. The Audit Committee’s role will then
be to:
– Monitor and review the effectiveness of the internal
audit function
– Approve the appointment and removal of the head of
the internal audit function
– Consider and approve the remit of the internal audit
function and ensure it has adequate resources and
appropriate access to information
– Ensure the internal audit function has adequate
standing and is free from management or other
restrictions
– Review and approve the annual internal audit plan
– Review promptly all reports from the internal auditors
– Review and monitor management’s responsiveness to
the findings and recommendations of the internal
auditors
Internal control and risk management
A key role of the Audit Committee is to monitor the
effectiveness of the internal financial controls and the
internal controls and risk management systems.
The Board, on the recommendation of the Audit
Committee, considers that the internal controls in place
are appropriate for our size, complexity and risk profile.
Given our rapid growth, this remains under active review.
ITM Power PLC Annual Report 2022 54
Overview Strategic Report Governance Financial Statements
Shareholder Information
Audit Committee Report continued
Internal financial controls
We have an established framework of internal financial
controls, the effectiveness of which is periodically
reviewed by each of the Board and the Executive
Committee, as well as the Audit Committee. There are
procedures in place for budgeting and forecasting; for
monitoring and reporting business performance against
those budgets and forecasts; and for projecting
expected performance over the financial year.
Responsibilities are separate and defined:
– The Board is responsible for reviewing and approving
our overall strategy, corporate objectives, financial
strategy, the annual budget, and capital fundraising.
It receives periodic financial reports, tracking budget
and forecasts.
– The Audit Committee reviews key financial controls
throughout the year. It has responsibility for
monitoring the integrity of the financial reporting of
the Company and for ensuring internal financial
controls are sufficiently robust and appropriate.
– The Executive Committee retains day-to-day
responsibility for financial performance and has
internal financial reporting processes in place.
– The Group’s Financial Controller oversees budgeting,
cash flow forecasts and financial statements and the
operation of the Group’s financial systems, working
with ITM Power’s auditors. Internal controls and
financial systems transformation are the responsibility
of other members of the Finance team.
Non-financial controls
We recognise that maintaining sound controls and
discipline are critical to managing the risks to our
strategy. The Board has ultimate responsibility for the
Group’s system of internal control and for reviewing its
effectiveness.
The CFO has day-to-day responsibility for ensuring
internal controls remain appropriate. He reports to the
Executive Committee on operational changes required.
Day-to-day activities are closely managed by the
Executive Directors. There is detailed monthly reporting
of performance against our corporate objectives, project
schedules, budget, risks and expected performance, and
operational needs. These are key to the success of the
internal management and control system.
Recommendations were made to management where
considered appropriate and developments were
monitored.
During the year, it agreed with management that ITM
Power had reached a stage of development where it was
appropriate to create a risk management function. A
Head of Risk and Assurance was appointed to lead the
risk management and internal audit functions with
preparatory plans for their implementation being
developed.
A handover of responsibilities from the Audit Committee
to the risk management function will take place during
the next financial year. The Audit Committee’s role will
then be to:
– Review the effectiveness of the risk management
systems
When someone speaks up, an initial assessment is
carried out to determine the scope of any investigation.
Where appropriate, a full investigation is instigated. If
appropriate, subject matter experts are used to support
the investigation. In particularly serious cases, the
matter may be escalated to the Chair of the Audit
Committee, the Chair of the Board, or our external
auditor.
Anyone who raises an honest concern, even if they turn
out to be mistaken, is protected from retaliation and
detrimental treatment.
The Audit Committee receives and considers reports
from management and, in future, Safecall regarding
concerns raised and provides the Board with key
information for its consideration as appropriate. There
were no whistleblowing matters raised during the year.
We continue to increase our commercial operations,
including investing in new manufacturing facilities.
– Conduct a formal review into risk management
– Review and approve the statements included in the
Where to find additional disclosures
We also continue to make appropriate senior
appointments to support our business plan and address
the resulting operational needs and risks.
Risk management
The Audit Committee is also required under its terms of
reference to conduct an annual formal review into risk
management and review the effectiveness of risk
management systems. In the absence of a separate risk
management function, it has performed certain risk
management activities. These included detailed reviews
of the most significant risks and oversight of the risk
register as well as input into and approval of risk
disclosures included in the Annual Report.
Annual Report regarding risk
Speaking up
The Audit Committee is responsible for reviewing
arrangements for employees and third parties to raise
concerns, in confidence, about possible wrongdoing in
financial reporting or other matters.
There are established ways to raise concerns. These
include options to contact a line manager, the Legal
Compliance Manager, the Risk and Assurance team or
the Company Secretary. As of June 2022, we also offer a
service via a third party, Safecall, through which
confidential, anonymous reporting is available.
Disclosure
Attendance at
Audit Committee
meetings
External auditor’s
report
Fees paid to the
external auditor
Location
Meeting attendance table in the
Corporate Governance Report
on page 46
Independent Auditor’s Report
to the Members of ITM Power
PLC on pages 72 to 77
Note 7 to the Consolidated
Financial Statements
ITM Power PLC Annual Report 2022 55
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report
Introduction from the
Chair of the Remuneration Committee
The focus of the
Remuneration
Committee during
the year was
on setting the
appropriate
remuneration
levels for the
Executive
Directors.
Dear shareholder
As Chair of the Remuneration Committee, I am pleased
to present the Remuneration Report for FY22. This
report is intended to explain how the Remuneration
Committee has met its responsibilities throughout the
year and to provide information about the remuneration
received by Directors.
As a company admitted to trading on AIM, our directors’
remuneration report does not have to comply with the
requirements of Schedule 8 of The Large and Medium-
sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended). Nevertheless, we have
aligned our remuneration reporting with these
requirements as far as possible, but we may not provide
all the information required under the regulations.
Committee members, meetings and support
The Remuneration Committee’s full membership is
provided on page 49 along with details of those that
supported the Remuneration Committee during the
year.
Attendance at scheduled meetings during the year is
provided on page 46.
Remuneration principles
The overarching principles we apply in our approach to
remuneration are:
– To ensure overall remuneration is set at a competitive
level against our peer group enabling us to attract and
retain high-calibre employees with the required skills
to execute our strategy.
– Take into account all factors to:
– Ensure executive remuneration is aligned to the
Group’s purpose and values, clearly linked to the
successful delivery of the Group’s long-term strategy,
and that enable the use of discretion to override
formulaic outcomes and to adjust sums or awards
under appropriate specified circumstances.
– Attract, retain and motivate the executive
management of the Group without inappropriate
financial burden on the Group.
– Consider the requirements for clarity, transparency,
risk mitigation, predictability, proportionality and
alignment to culture.
Performance during the year
The Remuneration Committee’s decisions for the year
were made against the following backdrop:
– Revenues that were lower than expected for the year.
The Group had expected to be able to recognise the
revenue from the sale, via Linde to Leuna, of 24 MW of
electrolyser products, but this was delayed.
– Cost overruns on both the REFHYNE I and Leuna
projects adversely affected gross margin. This, along
with additional investments to enable production ramp
up at Bessemer Park, led to an increased loss before
tax.
– Cash burn that increased compared to the prior year.
This reflected increased product development spend,
an increase in inventory build and additional
production equipment to support the production ramp
up at Bessemer Park.
Full details are provided in the CFO’s Review on page 12.
ITM Power PLC Annual Report 2022 56
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Areas of focus during the year
The focus of the Remuneration Committee during the
year was on setting the appropriate remuneration levels
for the Executive Directors. This included reviewing their
base salaries as well as setting award levels and
performance targets for the annual bonus and awards
granted under the terms of the LTIP. The CEO and Chair
of the Board also reviewed the fees paid to the
Non-Executive Directors.
Following a benchmarking exercise conducted in June
2021, the Remuneration Committee decided to increase
the base salaries of the Executive Directors. A similar
benchmarking exercise was conducted in June 2022,
which the Remuneration Committee fed into its
considerations of remuneration packages for the
Executive Directors. Taking into account the significant
increases to base salary implemented for Executive
Directors from 1 July 2021, the performance of the
business and the approach taken to pay rises in the
wider workforce, the Remuneration Committee decided
not to increase salaries in the summer of 2022. More
information is provided later in the Remuneration
Report.
The Remuneration Report for FY21 was put to an
advisory vote at our 2021 AGM. Following the 28.70%
vote against its approval, as well as shareholder feedback
received, we engaged with shareholders to discuss their
concerns. The majority of the concerns related to the
increases to Executive Director base salaries and the
exceptional incentive awards granted during the year.
The Remuneration Committee noted the feedback from
shareholders and responded to those shareholders who
raised concerns with further details regarding the
approach taken. It confirmed it did not expect to grant
further exceptional incentive awards in recognition of
future fundraising exercises. It will continue to consult
with shareholders and take their views into account. The
views of our shareholders will continue to be an
important factor in informing the decisions of the
Remuneration Committee and the Remuneration
Committee will balance these views against the need to
retain and motivate the current executive team, who
have been instrumental in the Company’s performance
to date.
Annual bonus outcomes
The Remuneration Committee carefully reviewed the
formulaic outcome of the annual bonus and then
whether the formulaic outcome was aligned to the
underlying strength of results, the execution of strategic
priorities, pay practices and outcomes for the wider
workforce, and the returns to investors during the year.
Overall, it was concluded that it was appropriate to
recognise the achievements of the Executive Directors
and so the Remuneration Committee made no
adjustment to the formulaic outcome, which equated
to a pay out of 16% of the maximum opportunity. More
detail of the Remuneration Committee’s assessment is
provided on page 63.
Availability to shareholders
I am available to shareholders to answer any questions
on the work of the Remuneration Committee. On behalf
of the Remuneration Committee, I would like to place on
record our appreciation to our shareholders for their
constructive input throughout the year.
Katherine Roe
Chair of the Remuneration Committee
14 September 2022
ITM Power PLC Annual Report 2022
57
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Overview of the Executive Director remuneration policy
Remuneration
element
Fixed pay
Base salary
Purpose and link to
our strategy
Operation
To ensure we can
recruit and retain
high-calibre
executives.
Paid monthly in arrears by bank transfer.
No recovery provisions apply to base salary.
Pension
provisions
To attract and retain
talent through the
provision of
attractive
retirement benefits.
Monthly payments into a defined contribution or similar pension scheme or, in agreed
circumstances, a cash allowance in lieu of pension contributions.
No recovery provisions apply to pensions.
Maximum
opportunity
No maximum.
A contribution into
the Group’s defined
contribution pension
arrangement no
higher than that
offered to the wider
workforce.
No maximum for any
cash allowance.
Benefits
To assist in
attracting and
retaining employees
in a cost-effective
way.
May include private medical insurance, sick pay, a fully expensed car (or equivalent
cash allowance), disability and life assurance cover. Some benefits may be provided in
the case of relocation, such as removal expenses and, in the case of international
relocation, might also include items such as cost of accommodation, children’s
schooling, home leave, tax equalisation and professional advice.
Not applicable.
Not applicable.
The tax payable (grossed up) on any business expenses captured as taxable benefits
may also be reimbursed.
No recovery provisions apply to benefits.
Performance
framework
Implementation
2021/22
2022/23
A number of factors
are considered when
setting base salary
levels, including
market rates,
benchmarking to
peers, individual
Director’s experience,
responsibilities and
performance.
Not applicable.
Executive Directors
received pay rises with
effect from 1 July 2021
taking their base
salaries to:
Graham Cooley –
£420,000
Andy Allen – £300,000
Simon Bourne –
£300,000
Rachel Smith – £230,000
Graham Cooley – cash
allowance in lieu of
pension.
Other Executive
Directors –
contributions to their
pensions equivalent to
5% of base salary
(before any salary
exchange).
No Executive Directors
received taxable
benefits.
No proposed changes.
Graham Cooley – no
proposed changes.
Other Executive
Directors – from
1 July 2022, contributions
to their pensions
equivalent to 7% of
base salary (before any
salary exchange).
No proposed changes.
ITM Power PLC Annual Report 2022 58
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Purpose and link to
our strategy
Operation
Maximum
opportunity
Performance
framework
Implementation
2021/22
2022/23
Remuneration
element
Variable pay
Annual bonus
To incentivise
Executive Directors
to deliver strategic
and financial
success.
An annual bonus scheme with measures and performance targets set by the
Remuneration Committee.
Paid in cash. Pay out determined after the end of the financial year following the
Remuneration Committee’s assessment of performance relative to targets and
objectives.
Annual bonus payments do not form part of pensionable earnings and are non-
contractual.
Capped at 100% of
base salary for the
CEO and 60% of base
salary for other
Executive Directors.
Specific annual
targets based on clear
and measurable
objectives that
underpin, and are key
to the achievement
of, the Group’s
strategy.
Executive Directors
received the following
bonus payments:
Graham Cooley –
£67,200
(16% of base salary)
Andy Allen – £28,800
(9.6% of base salary)
Simon Bourne –
£28,800
(9.6% of base salary)
Rachel Smith – £22,080
(9.6% of base salary)
No change to 2021/22
award levels.
Executive Directors have
the following bonus
opportunities, as a
percentage of salary:
Graham Cooley – 100%
Andy Allen – 60%
Simon Bourne – 60%
Rachel Smith – 60%
LTIP
To align the
long-term interests
of shareholders and
management and
reward
achievement of
stretching long-term
targets.
The Remuneration Committee retains discretion in exceptional circumstances to
adjust the targets and/or set different measures and alter weightings if certain events
occur that cause it to determine they are no longer appropriate. The Remuneration
Committee will ensure any revisions to targets are not materially less difficult to
satisfy.
All payments are at the ultimate discretion of the Remuneration Committee and it
retains an overriding ability to ensure that overall bonus payments are appropriate
and reflect corporate performance.
Any awards granted are subject to a three-year vesting period and stretching
performance targets.
All vesting is at the ultimate discretion of the Remuneration Committee and the
Remuneration Committee retains an overriding ability to ensure that vesting reflects
its view of corporate performance over the set period.
The Remuneration Committee retains discretion in exceptional circumstances to
adjust the targets and/or set different measures and alter weightings if certain events
occur that cause it to determine they are no longer appropriate. The Remuneration
Committee will ensure any revisions to targets are not materially less difficult to
satisfy.
Malus and clawback provisions apply in cases of material financial misstatement,
conduct that results (or is reasonably likely to result) in significant reputational damage
to the Company, negligence or misconduct, or fraud.
Capped at 100% of
base salary plus an
uplift to cover
Employer’s National
Insurance
Contributions, which
are passed on to the
participant as
permitted under
UK legislation.
Specific targets based
on clear, stretching
and measurable
objectives that
underpin, and are key
to the achievement
of, the Group’s
long-term strategy.
All Executive Directors
were granted an award
equivalent to 100% of
base salary, uplifted to
reflect the payment by
the recipient of
Employer’s National
Insurance
Contributions.
All Executive Directors
are expected to be
granted an award
equivalent to a maximum
of 100% of base salary,
uplifted to reflect the
payment by the recipient
of Employer’s National
Insurance Contributions.
ITM Power PLC Annual Report 2022 59
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Purpose and link to
our strategy
Operation
Maximum
opportunity
Performance
framework
Implementation
2021/22
2022/23
Remuneration
element
Share ownership
All-employee
share plans
To encourage share
ownership across
the organisation.
Executive Directors can participate in the UK Buy As You Earn plan (BAYE) on the same
basis as other employees in the organisation.
Not applicable.
The Company offered
the BAYE throughout
the year.
All Executive Directors
participated in the BAYE
at the maximum level
throughout the year.
Not applicable.
All Executive Directors
met the shareholding
guideline.
The Company intends to
offer the BAYE
throughout the year.
All Executive Directors
are expected to
continue their
participation in the BAYE
at the maximum level
throughout the year.
All Executive Directors
are expected to
continue to meet the
shareholding guideline.
Executive Directors
are subject to the
same maximums as
all other employees
who participate in
the BAYE.
Executive Directors
are expected to build
and maintain a
minimum
shareholding
equivalent to 100% of
base salary.
Share ownership
guidelines/
requirements
To build and
maintain a
shareholding to
align their interests
with those of
shareholders.
Levels are set in relation to earnings and according to the post held in the Group.
It is expected that Executive Directors will build up to the required level over a period
of time, usually five years, through retaining shares received under the Group’s
incentive arrangements, net of sales to settle tax and other deductions, and/or shares
purchased in their own right.
Vested but unexercised options are included in the shareholding total at the date of
vesting, adjusted for the exercise price, tax and any other deductions. When the
options are exercised, the vesting calculation is reversed and the shares retained on
exercise are included instead.
Alignment with the wider workforce
The remuneration policy for the Executive Directors is
informed by the structure operated for the broader
employee population. Pay levels and components vary
by organisational level but the broad themes and
philosophy remain consistent across the Group.
All staff may be considered for awards under the LTIP
and all UK staff may participate in the BAYE after
completing six months’ qualifying service. This is
intended to encourage share ownership in the Company
and align the management team and all staff with the
strategic business plan.
Until June 2022, a contribution of 5% of base salary
was available to the majority of the UK workforce. From
July 2022 this was increased to 7% of base salary for all
eligible employees, including the Executive Directors.
Salaries are reviewed annually with regard to the same
factors as those considered for Executive Directors.
Pay rises for the wider workforce, excluding the
Executive Directors, were implemented with effect from
1 July 2022 at a rate of £2,000 plus 0.8% of base salary.
Eligibility for and provision of benefits and allowances
varies by level and local market practice.
ITM Power PLC Annual Report 2022 60
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Overview of the Chair of the Board and Non-Executive Director remuneration policy
Remuneration
element
Fees
Purpose and link to
our strategy
To ensure we can
attract and retain
experienced and
skilled Non-
Executive Directors
able to advise and
assist with
establishing and
monitoring the
strategic objectives.
Operation
Paid monthly in arrears by bank transfer.
Fees for the Chair of the Board are determined by the Remuneration Committee.
Fees for other NEDs are determined by the CEO and Chair of the Board.
Any Director representing a shareholder on the Board is paid by the shareholder,
not the Group.
Maximum
opportunity
Fee increases for
NEDs will not
normally exceed
average base
salary increases
across the Group.
Performance
framework
The Remuneration
Committee considers
a number of factors,
including market
rates, benchmarking
to peers and the
time commitment
expected.
Expenses
Not applicable.
Reasonable expenses are reimbursed.
Not applicable.
Not applicable.
Implementation
2021/22
Chair of the Board:
£150,000.
NED base fee: £51,000.
Additional fee for
chairing the Audit, ESG,
Remuneration or
Strategic Advisory
Committees: £10,000
per Committee chaired.
Tom Rae and Jürgen
Nowicki received no
fees.
Not applicable.
2022/23
No proposed changes.
Not applicable.
The tax payable (grossed up) on any business expenses captured as taxable benefits may
also be reimbursed.
Expenses incurred for advice in respect of UK tax returns for non-UK NEDs may be
reimbursed.
NEDs are encouraged to build and maintain a shareholding.
Not applicable.
Not applicable.
Not applicable.
Not applicable.
Share ownership
guidelines/
requirements
To build and
maintain a
shareholding to
align their interests
with those of
shareholders.
ITM Power PLC Annual Report 2022 61
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Annual report on remuneration
Single total figure of remuneration for each Director
Remuneration outcomes for FY22
The following pages set out details of the remuneration
received by Directors for FY22. Prior year figures have
also been shown. The Remuneration Report has not
been audited.
Executive Directors
Graham Cooley, CEO
The Directors’ remuneration in the year was awarded in
line with the remuneration policy.
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, Services Director
Non-Executive Directors
Sir Roger Bone, Chair
Martin Green
Jürgen Nowicki1
Tom Rae1,2
Katherine Roe
Year ended
30 April
Base salary
and fees
(£)
Pension-related
benefits
(£)
Annual
bonus
(£)
Long-term
incentive awards
(£)
Total
(£)
Total fixed
remuneration
(£)
Total variable
remuneration
(£)
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
376,639
285,0533
275,988
149,1883
288,393
222,4383
216,439
149,1823
139,167
82,500
68,333
53,333
–
–
–
–
68,333
52,814
28,000
28,000
13,799
7,4593
14,420
11,1223
10,822
7,4593
67,200
248,861
28,800
82,640
28,800
145,127
22,080
82,540
3,938,000
2,600,0003
1,312,669
866,6663
2,297,169
1,516,6663
1,640,839
1,083,3323
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,409,839
3,161,914
1,631,256
1,105,953
2,628,782
1,895,353
1,890,180
1,322,513
139,167
82,500
68,333
53,333
–
–
–
–
68,333
52,814
404,639
313,053
289,787
156,647
302,813
233,560
227,261
156,641
139,167
82,500
68,333
53,333
–
–
–
–
68,333
52,814
4,005,200
2,848,861
1,341,469
949,306
2,325,969
1,661,793
1,662,919
1,165,872
–
–
–
–
–
–
–
–
–
–
1. Shareholder nominated Directors receive no fees from the Company.
2. Tom Rae was appointed effective 3 December 2020 and resigned effective 16 November 2021.
3. Base salary and pension-related benefits from the prior financial year have been restated to reflect corrected data. Long-term incentive awards from the prior financial year have been restated on the basis of awards that vested in the year
instead of awards that were exercised in the year (more detail is provided in the notes below).
ITM Power PLC Annual Report 2022 62
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Notes to the single figure table for Executive Directors
Base salary
Base salary refers to salary before any salary exchange (for example, for pension contributions or BAYE participation).
A benchmarking exercise was conducted in June 2021, which reconfirmed the output of the benchmarking
conducted in 2020, showing that executive remuneration was positioned below the lower quartile of comparably-
sized organisations. The Remuneration Committee considered this alongside other factors and ultimately agreed to
accelerate the planned base salary increases from a three-year to a two-year period.
A similar benchmarking exercise was conducted in June 2022. The Remuneration Committee considered the
benchmarking alongside the following factors in considering the remuneration of the Executive Directors:
– That shareholders would expect care and discretion to be used in judging to what extent, and over what timeframe,
adjustments should be made, recognising that significant increases had been implemented in the prior year
– Its remuneration principles, including the need to ensure its policy remains competitive and retains key talent
– The performance of the Executive Directors
– The approach taken to remuneration in the wider workforce
Base salaries for the Executive Directors will therefore remain unchanged from 1 July 2022:
Name
Graham Cooley, CEO
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, Services Director
Base salary
from 1 July
2021
£420,000
£300,000
£300,000
£230,000
Base salary
from 1 July
2022
£420,000
£300,000
£300,000
£230,000
Pension
During the year, the Group paid contributions to the pensions of Andy Allen, Simon Bourne and Rachel Smith
equivalent to 5% of base salary (before any salary exchange). The value stated represents the value of the Group’s
contribution and does not reflect any contribution made by the individual concerned through salary exchange. From
1 July 2022, pension contributions were increased to 7% of base salary (before any salary exchange) in line with the
wider workforce.
Graham Cooley received a cash allowance in lieu of pension contributions of £28,000. The Group has a contractual
agreement with him that this payment relieves the Group of any liability for pension provision for him.
Annual bonus
The annual bonus is the cash value of the annual bonus paid in respect of the year. It is based on the annual base
salary (before any salary exchange) as at 1 July in the relevant financial year.
The Remuneration Committee’s assessment of performance in FY22 is set out overleaf.
The Remuneration Committee takes into consideration wider performance before approving the formulaic outcomes
from the incentive plans and applies its judgement by exercising upwards or downwards discretion when appropriate
to do so. To assist it in determining whether adjustments are necessary, the Remuneration Committee applies a
framework which considers performance from multiple perspectives including the underlying strength of results, the
execution of strategic priorities, pay practices and outcomes for the wider workforce, and the returns to investors
during the year.
In the year under review, the business demonstrated its resilience as the economy started to recover from the
pandemic. In particular, the Committee noted the success in securing the Motive partnership with Vitol. Following a
holistic review of performance, the Committee was satisfied that the bonus outcomes were appropriate and that no
adjustment to the formulaic outcome was necessary.
Annual bonuses payable to the Executive Directors for FY22 were paid fully in cash as follows:
Name
Graham Cooley, CEO
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, Services Director
Maximum
potential %
of base salary
100%
60%
60%
60%
% of base
salary
achieved
16%
9.6%
9.6%
9.6%
Cash
payment
£67,200
£28,800
£28,800
£22,080
ITM Power PLC Annual Report 2022 63
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
The annual bonus for FY23 will operate on similar terms to the prior year. The performance target categories (and
associated weightings) are: financial (50%), technology and operational (20%), business development (20%) and ESG
(10%). The performance targets are measurable, challenging and subject to rigorous review by the Remuneration
Committee. Subject to commercial sensitivity, we intend to provide an overview of the Remuneration Committee’s
assessment of performance against the underlying targets in next year’s report.
Category
ESG
Metric
ESG, health
and safety
Weighting
15%
Target
See
performance
assessment
Assessment of performance for FY22 bonus
Category
Financial
Metric
Sales
Weighting
15%
Target
Performance assessment
£31.97m Revenue was £5.6 million and so this target
Pay out
0%
Pay out
10%
Performance assessment
The ESG Committee provided a qualitative
review of ESG performance during the year.
Good progress was made on embedding ESG
activities and implementing structures to
support future work. Our website was
improved significantly during the year,
improving our communication with
stakeholders including investors, and
our first ESG Report was well-received.
We achieved ISO 9001, ISO 45001 and
ISO 14001 accreditation during the year, but
work continues to embed a behavioural
approach to health and safety.
Business
development
Total
Order intake
20%
223 MW A target was set to generate orders that would
drive sales in the next financial year. This target
was partially met.
3%
Total 16%
Gross margin
Overheads
15%
10%
Cash burn
10%
was not met.
£1.78m As the Group made a loss, this target was
not met.
£24.34m A target of £24.34 million net overheads was
set at the beginning of the year. We changed
the way we recharged overheads during the
year. The Remuneration Committee therefore
measured the net overheads on the same basis
on which recharges were being calculated at
the start of the year, and on which basis the
target had been set. This target was not met.
£39.07m A cash burn target of £39.07 million was set.
Strategy
Production,
supply chain,
product and
markets
15%
See
performance
assessment
As cash burn was £53.3 million, this target
was not met.
Targets associated with the following were not
met:
– Securing new factory space
– Implementing additional automation
– Securing certain accreditations for products
outside the UK and Europe
Work to address supply chain risks connected
to key components within our products was
partially completed in the year.
0%
0%
0%
3%
ITM Power PLC Annual Report 2022 64
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Long-term incentive awards
ITM Power PLC Share Option Plan: EMI and Unapproved (SOP)
The SOP was introduced in 2010. Options were granted under the SOP as follows:
– EMI options granted under the SOP vested in three equal instalments on the first, second and third anniversaries
of the date of grant and may be exercised up to the tenth anniversary of the date of grant
– Unapproved options granted under the SOP before 2019 vested in three equal instalments on the first, second
and third anniversaries of the date of grant and may be exercised up to the tenth anniversary of the date of grant
– Unapproved options granted under the SOP in 2019 vest on the third anniversary of the date of grant and may be
exercised up to the tenth anniversary of the date of grant
There are no performance conditions for EMI options or unapproved options granted under the SOP.
No consideration is payable for the grant of awards under the SOP. The exercise price is the mid-market price of shares
on AIM at the close of trading on the day before the grant of options.
No further awards will be granted under this plan.
The long-term incentive award value shown in the Single total figure of remuneration for each Director relates to the
value of awards granted under the terms of the SOP that vested in the year. The stated value is calculated based on the
number of shares that vested multiplied by the mid-market closing price for a share on the date of vesting. As explained
in the note to the table, the value for FY21 has been restated. The FY21 value is now based on the options that vested
during the year, rather than the value of options that were exercised during the year. The values in the table for both
FY21 and FY22 reflect (i) the value of one third of the total share award granted in 2018, when our share price was
significantly lower (around 30 pence per share), and (ii) the fact that the options were not subject to performance
conditions.
Details of outstanding options granted under the SOP are provided in the Statement of directors’ shareholding and share
interests on page 66.
LTIP
The LTIP was introduced in 2020, when use of the SOP was discontinued. Vesting of awards occurs on the third
anniversary of the date of grant, subject to continued employment and satisfaction of performance conditions.
Performance conditions are set by the Remuneration Committee and awards granted to the wider workforce are
subject to the same performance conditions as those applied to the Executive Directors. The performance conditions
set stretching targets to drive future performance, aligned with our long-term strategy.
The Remuneration Committee may, in its discretion, adjust downwards the extent to which an award shall vest
(including to zero) where overall Company performance over the duration of the performance period has not been
deemed to be satisfactory.
Shares granted to Executive Directors under the terms of the LTIP are subject to a two-year holding period from the
vesting date to the fifth anniversary of the date of grant. The holding period does not apply to the wider workforce.
Executive Directors were granted a LTIP award of 100% of base salary during the year plus an uplift to cover Employer’s
National Insurance Contributions, which are passed on to the participant as permitted under UK legislation. No
consideration is payable for the grant of awards under the LTIP, which are structured as nominal cost options meaning
the exercise price is £0.05 per share. The number of shares awarded was calculated using a share price of £3.94, being
the volume weighted average price for the last five days of trading prior to the date of grant.
ITM Power PLC Annual Report 2022 65
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Awards granted during the year are subject to the following stretching performance conditions over a performance
period from 1 May 2021 to 30 April 2024:
Description of
performance condition
Company TSR compared to Index*
TSR
Less than Index* TSR
Equal to Index* TSR
Between Index* TSR and Index*
TSR plus 15 percentage points
Equal to Index* TSR plus 15
percentage points
* The index of companies known as the AIM 50.
AAA rating.
% of this part of the award that vests
0
25
Pro rata between 25 and 100 on a
straight-line basis
100
% of LTIP
award
subject to
performance
condition
60
20
10
10
Performance
condition
Total
Shareholder
Return (TSR)
over the
performance
period
MSCI ESG rating
at the end of the
performance
period
Cumulative
revenue over the
performance
period
Cumulative gross
margin over the
performance
period
Subject to commercial sensitivity, we intend to provide an overview of the
Remuneration Committee’s assessment of performance against the underlying
targets after the performance period has ended.
Chair of a
Committee
Subject to commercial sensitivity, we intend to provide an overview of the
Remuneration Committee’s assessment of performance against the underlying
targets after the performance period has ended.
Payments to past Directors
There were no payments to past Directors during the year.
Payments for loss of office
There were no payments for loss of office during the year.
It is expected that awards will be granted to Executive Directors in FY23 on the same basis as in prior years.
This means they are expected to be granted an award equivalent to a maximum of 100% of base salary, uplifted
to reflect the payment by the recipient of Employer’s National Insurance Contributions. The awards will be subject
to stretching performance conditions. The share price used to determine the number of shares awarded will be set
at the time of the grant and will take into account, among other things, recent share price performance.
Details of outstanding options granted under the LTIP are provided in the Statement of directors’ shareholding and
share interests on page 66.
Notes to the single figure table for Non-Executive Directors
Fees
The fees paid to Non-Executive Directors were reviewed during 2021. Following the review, it was considered
appropriate to increase the base fee to align with the lower quartile of the market. The Chair of the Board’s fee was
also increased to reflect his role chairing the board of directors of Motive. The additional fee paid for chairing the
Board Committees was not adjusted. No changes were made to fees when they were reviewed by the Chair of
the Board and the CEO in the summer of 2022.
Fees paid to the Non-Executive Directors with effect from 1 July 2021 were:
Role
Chair of the Board
Base fee
Independent Non-Executive Director
Shareholder nominated Non-Executive Director
Audit, ESG, Remuneration and Strategic Advisory Committees
Nomination and Technology Management Committees
Current fees
£150,000
£51,000
–
£10,000
–
ITM Power PLC Annual Report 2022 66
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Statement of directors’ shareholding and share interests
Directors’ share awards and long-term incentive awards
Name
Graham Cooley, CEO
Plan name
SOP1
Award date
14/08/18
Shares under option
at 01/05/21
3,000,000
Granted
–
Exercised
–
Lapsed
–
Shares under option
at 30/04/22
3,000,000
Exercise price
£0.30
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, Services Director
SOP1
LTIP
LTIP
LTIP
Total
SOP1
SOP1
LTIP
LTIP
LTIP
Total
SOP1
SOP1
LTIP
LTIP
LTIP
Total
SOP1
SOP1
LTIP
LTIP
LTIP
Total
24/10/19
22/10/20
13/11/20
16/12/21
14/08/18
24/10/19
22/10/20
13/11/20
16/12/21
14/08/18
24/10/19
22/10/20
13/11/20
16/12/21
14/08/18
24/10/19
22/10/20
13/11/20
16/12/21
307,500
100,912
88,298
–
3,496,710
666,667
47,250
52,478
45,919
–
812,314
1,166,667
159,750
77,530
67,839
–
1,471,786
833,334
72,000
52,415
45,863
–
1,003,612
–
–
–
121,310
121,310
–
–
–
–
86,650
86,650
–
–
–
–
86,650
86,650
–
–
–
–
66,431
66,431
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
307,500
100,912
88,298
121,310
3,618,020
666,667
47,250
52,478
45,919
86,650
898,964
1,166,667
159,750
77,530
67,839
86,650
1,558,436
833,334
72,000
52,415
45,863
66,431
1,070,043
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
£0.30
£0.48
£0.05
£0.05
£0.05
1. SOP awards described here are all unapproved options granted under a plan adopted in 2010, when our share price was significantly lower. Unlike awards granted under the terms of the LTIP, they are not subject to performance conditions.
Vesting date
1/3: 14/08/19
1/3: 14/08/20
1/3: 14/08/21
24/10/22
22/10/23
13/11/22
16/12/24
1/2: 14/08/20
1/2: 14/08/21
24/10/22
22/10/23
13/11/22
16/12/24
1/2: 14/08/20
1/2: 14/08/21
24/10/22
22/10/23
13/11/22
16/12/24
1/2: 14/08/20
1/2: 14/08/21
24/10/22
24/10/22
22/10/23
13/11/22
Expiry date
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
14/08/28
24/10/29
22/10/30
13/11/30
16/12/31
16/12/24
ITM Power PLC Annual Report 2022 67
Overview Strategic Report Governance Financial Statements
Shareholder Information
Remuneration Report continued
Directors’ interests in shares of the Company
Executive Directors
Graham Cooley, CEO
Andy Allen, CFO
Simon Bourne, CTO
Rachel Smith, Services Director
Non-Executive Directors
Sir Roger Bone, Chair
Martin Green
Jürgen Nowicki
Tom Rae3
Katherine Roe
Shares
beneficially
owned at
30 April 2022
Options
vested
but not
exercised
Shareholding
as a
percentage of
base salary1
770,5862
67,6102
93,9712
464,5462
286,236
64,319
–
N/A
12,659
3,000,000
666,667
1,166,667
833,334
N/A
N/A
N/A
N/A
N/A
672%
286%
448%
427%
N/A
N/A
N/A
N/A
N/A
1. Base salary is as at 30 April 2022. Shares are valued as follows:
– Shares that are beneficially owned are valued at the price at which they were acquired.
– Options that have vested but not been exercised are valued at the mid-market closing price of the shares on the date of vesting, less the exercise price and
deductions for tax and social security contributions. Once they are exercised, they are included in the shares beneficially owned and valued at the share price
on the date of exercise.
2. Includes shares held in the BAYE. Each Executive Director participates in the BAYE. As at 30 April 2022, each of them held 852 shares they had purchased and 852
matching shares awarded to them by the Company. Shares acquired through the BAYE are held in a trust until a request is received to withdraw them or a
participant leaves the Group’s employment. Matching shares are forfeited if the participant leaves or withdraws the associated purchased shares from the trust
within three years of the matching shares being acquired, except in specific leaving circumstances.
3. Tom Rae resigned effective 16 November 2021.
4. Denise Cockrem was appointed effective 25 July 2021.
Currently, new issue shares are used to satisfy options granted under the terms of the SOP and the LTIP when they
are exercised.
Executive Directors’ service contracts
Each Executive Director has a signed service contract that terminates on 12 months’ notice.
The Directors’ service contracts are available to view at the Company’s registered office and prior to each AGM at the
venue for the meeting.
The contracts contain restrictive covenants for periods of up to six months post-employment relating to non-
competition and non-solicitation of the Group’s customers, suppliers and employees and indefinitely with respect to
confidential information. In addition, they provide for the Group to own any intellectual property rights created by
the Directors in the course of their employment.
Each Executive Director’s service contract includes a right for the Group to terminate the agreement and make a
payment of base salary in lieu of the notice period. There are no contractual rights to additional compensation
at termination.
Advisors to the Committee
During the year, the Remuneration Committee was supported by Ernst & Young LLP. Ernst & Young LLP received fees
of £26,000 in connection with its advice to the Remuneration Committee. Ernst & Young LLP also provided legal
advice to the Group regarding the operation of its share plans. The Remuneration Committee reviewed Ernst & Young
LLP’s performance during the year and agreed to retain Ernst & Young LLP as its advisor.
The Remuneration Committee also receives advice from the Company Secretary.
Where to find additional disclosures
Dilution
SOP and LTIP awards can be satisfied using new issue shares, shares held in treasury or market purchase shares. The
Remuneration Committee reviews the dilution position of the Company prior to granting share awards.
Disclosure
Attendance at Remuneration Committee meetings
In line with best practice, the Remuneration Committee ensures that the number of new ordinary shares issued in
any 10-year period does not exceed 10% of the Company’s issued share capital under all the Company’s share plans
and does not exceed 5% under the SOP and the LTIP in aggregate.
Detailed assumptions used in calculating the fair value
of options
Location
Meeting attendance table in the Corporate Governance
Report on page 46
Note 25 to the Consolidated Financial Statements
ITM Power PLC Annual Report 2022 68
Overview Strategic Report Governance Financial Statements
Shareholder Information
Directors’ Report
The Directors of the Company present their report, together with the audited Consolidated Financial Statements,
for FY22.
Dividend
The Directors do not recommend payment of a dividend.
This Directors’ Report has been prepared in accordance with the Companies Act. Additional information and
disclosures, as required by the Companies Act, are included elsewhere in this Annual Report and are incorporated
into this Directors’ Report by reference in the following table:
Disclosure
Names of Directors during the year
Review of likely future developments
Post-balance sheet events
Workforce engagement
Information on the employment and training
of disabled people
Business relationships with suppliers, customers
and others
GHG emissions
Corporate governance arrangements
Financial instruments and financial risk
management
Related party transactions
Disclosure of information to the external auditor
Location
Board of Directors
CEO’s Review
CFO’s Review
CFO’s Review
Note 33 to the Consolidated Financial Statements
Our Stakeholders and Section 172(1) Statement
Sustainable Energy, Engineered Sustainably
Sustainable Energy, Engineered Sustainably
Page(s)
41 to 42
8 to 11
12 to 14
14
105
22
28 to 29
29
Our Stakeholders and Section 172(1) Statement
19 to 23
Sustainable Energy, Engineered Sustainably
Corporate Governance Report
Audit Committee Report
Remuneration Report
Note 30 to the Consolidated Financial Statements
27
44 to 50
51 to 54
55 to 67
103 to 105
Note 31 to the Consolidated Financial Statements
Directors’ Responsibilities Statement
105
70
Directors’ indemnity arrangements
Qualifying third-party indemnities were in place throughout FY22, and remain in place as at the date of this Annual
Report. Under these indemnities, the Company has agreed to indemnify the Directors of the Company, to the extent
permitted by law, against losses and liabilities that may be incurred in executing the powers and duties of their office.
Political donations
The Group made no political donations or contributions during the year (2021: nil). It is our policy not to make political
donations or incur political expenditure.
Research and development (R&D)
During the year the Group incurred core product research spend of £1.4 million (2021: £3.5 million), with a further
£7.0 million on development (2021: £1.5 million). The Group’s R&D is focused on achieving four main aims: (1) new
manufacturing processes for cost cutting and mass production; (2) improving cell efficiency; (3) improving stack life
and reducing degradation; and (4) scale up and product life cycle.
Domicile
The Company was incorporated in England and Wales under the Companies Act. It is registered at Companies House
under number 5059407.
Shares
Share capital
As at the date of this Annual Report, the Company’s share capital consists of 613,158,155 issued and fully paid
ordinary shares of 5 pence each. The shares are admitted to trading on AIM. Shares may be held in certificated or
uncertificated form. Further details of the Company’s issued share capital, including changes during the year, can be
found in Note 24 to the Consolidated Financial Statements on page 100.
Rights and obligations attaching to shares
The rights and obligations attaching to the Company’s ordinary shares are contained in the Company’s Articles
of Association and the Companies Act. In summary:
– The ordinary shares allow holders to receive dividends and to exercise one vote on a poll per ordinary share
for every holder present in person or by proxy at general meetings of the Company
– Shares held in treasury are not entitled to vote or receive dividends
There is no ownership ceiling.
ITM Power PLC Annual Report 2022 69
Overview Strategic Report Governance Financial Statements
Shareholder Information
Directors’ Report continued
Restrictions on transfer of securities
There are no restrictions on the transfer or sale of ordinary shares and no requirements for prior approval of any
transfers, except:
– Under the Company’s Articles of Association, the Directors have the power to suspend voting rights and the
right to receive dividends in respect of ordinary shares and to refuse to register a transfer of ordinary shares in
circumstances where the holder of those shares fails to comply with a notice issued under section 793 of the
Companies Act
– The Directors also have the power to refuse to register any transfer of certificated shares that does not satisfy the
conditions set out in the Articles of Association
The Directors have been notified that 16.61% of the shares in issue were not in public hands as at 30 April 2022 and
16.62% of the shares in issue are not in public hands as at the date of this Annual Report.
Share buy-backs
The Directors have not sought authority to buy-back the Company’s shares and the Company has not purchased any
of its own shares. No shares are held in treasury.
External auditor
Grant Thornton UK LLP has expressed its willingness to continue in office as auditor. The Directors intend to
recommend a resolution to reappoint Grant Thornton UK LLP at the Company’s next Annual General Meeting.
The Company is not aware of any agreements between shareholders that might result in the restriction of transfer
or voting rights in relation to the shares held by such shareholders.
Approved by the Board and signed on its behalf by:
Employee share schemes
Shares issued under the Company’s employee share schemes rank pari passu with the existing shares of the
Company. Voting rights attached to shares held on trust on behalf of participants in the BAYE are exercised by
the trustee as directed by the participants.
Andy Allen
Chief Financial Officer
14 September 2022
Significant shareholdings
Notification has been received of the following interests of significant shareholders that equal or exceed a 3% interest
in the issued share capital of the Company:
Investor
Linde UK Holdings No.2 Limited
JCB Research
Hargreaves Lansdown
DWP Bank
Mr Peter Hargreaves
Capital Group
Interactive Investor Trading
Fidelity
At 30 April 2022
At 14 September 2022
Number of
ordinary
shares
100,000,000
48,485,764
33,556,979
28,019,927
27,686,070
21,983,340
N/A
19,296,154
% of issued
share capital
16.31%
7.91%
5.47%
4.57%
4.52%
3.59%
<3%
3.15%
Number of
ordinary
shares
100,000,000
42,823,778
34,415,268
34,325,117
27,686,070
N/A
19,553,928
N/A
% of issued
share capital
16.31%
6.98%
5.61%
5.50%
4.52%
<3%
3.19%
<3%
ITM Power PLC Annual Report 2022 70
Overview Strategic Report Governance Financial Statements
Shareholder Information
Directors’ Responsibilities
Statement
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial
year. Under that law, the Directors have prepared the financial statements in accordance with UK-adopted
international accounting standards and with the requirements of the Companies Act as applicable to companies
reporting under those standards. They have elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), including FRS 101 Reduced Disclosure Framework.
The Directors, whose names and functions are set out on pages 41 to 42, confirm that:
– So far as each Director is aware, there is no relevant audit information of which the Group’s external auditor
is unaware
– The Directors have each taken all the steps they ought to have taken as a Director to make themselves aware of any
relevant audit information and to establish that the Group’s auditor is aware of that information
Approved by the Board and signed on its behalf by:
Under company law, the Directors must not approve the financial statements unless they are satisfied they give a
true and fair view of the state of affairs and profit or loss of the Company and the Group for that period.
Andy Allen
Chief Financial Officer
14 September 2022
In preparing these financial statements, the Directors are required to:
– Select suitable accounting policies and then apply them consistently
– Make judgements and accounting estimates that are reasonable and prudent
– State whether applicable international accounting standards in conformity with the requirements of the Companies
Act have been followed, subject to any material departures disclosed and explained in the financial statements
– Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
and/or Group will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s and the Group’s transactions and disclose with reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure that the financial statements comply with the Companies
Act. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for the maintenance and integrity of the corporate and financial information
included on the Group’s website.
Legislation, regulation and practice in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
ITM Power PLC Annual Report 2022 71
Overview Strategic Report Governance Financial Statements Shareholder Information
Financial
Statements
In this section
72
Independent Auditor’s Report
to the Members of ITM Power PLC
78 Consolidated Income Statement and
Other Comprehensive Income
79 Consolidated Balance Sheet
80 Consolidated Statement of Changes in Equity
81 Consolidated Cash Flow Statement
82 Notes to the Consolidated
Financial Statements
106 Company Statement of Changes in Equity
107 Company Balance Sheet
108 Notes to the Company Financial Statements
ITM Power PLC Annual Report 2022 72
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC
Opinion
Our opinion on the financial statements is unmodified.
We have audited the financial statements of ITM Power PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 30 April 2022 which comprise the Consolidated Income Statement and Other Comprehensive Income, Consolidated Balance
Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement, Company Statement of Changes in Equity,
Company Balance Sheet and notes to the financial statements, including a summary of significant accounting policies. The financial
reporting framework that has been applied in the preparation of the group financial statements is applicable law and UK-adopted
international accounting standards. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard
101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the group’s and the parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we
are required to draw attention in our report to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify the auditor’s opinion. Our conclusions are based on the audit evidence obtained up to the date of our report.
However, future events or conditions may cause the group or the parent company to cease to continue as a going concern.
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern
basis of accounting included obtaining management’s base case and sensitised cashflow forecasts to 30 September 2023, along with
challenge and assessment of the inputs into the forecasts.
In our opinion:
– the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 April 2022
and of the group’s loss for the year then ended;
– the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
– the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Management’s going concern assessment is based on the expected costs compared to the cash held. We evaluated management’s
reverse stress test to check the extent of overspend required to eliminate all headroom in the base forecast, as well as the available
mitigations to avoid such a scenario occurring. We inspected capital and lease commitments entered into and costs expected to be
incurred to check that these have been appropriately incorporated into the forecasts and that there was sufficient cash in hand to
cover these costs for the going concern period.
Accounting Practice; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We assessed the projected cash flows in management’s forecasts for the going concern assessment period by reference to our
expectations formed from the audit work performed on contracts and by comparing forecast cash costs to those incurred in
previous years. We have confirmed the cash held by the group at 30 April 2022 and compared this to the cash requirements
indicated in management’s forecasts, noting that the balance held is significantly higher than forecasted costs.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent
company’s business model including effects arising from macro-economic uncertainties such as Covid-19, we assessed and
challenged the reasonableness of estimates made by the directors and the related disclosures and analysed how those risks might
affect the group’s and the parent company’s financial resources or ability to continue operations over the going concern period.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
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.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial
statements’ section of this report.
ITM Power PLC Annual Report 2022
73
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC continued
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £2,335,000, which represents 5% of the group’s loss
before tax.
Parent company: £2,100,000, which represents 0.4% of the
parent company’s total assets.
Key audit matters for the group were identified as:
– Inappropriate recognition of revenue – Same as previous year;
– Incomplete recognition of the loss provision in relation to
contract accounting – Same as previous year
No additional key audit matters were identified in respect of the
parent company.
Our auditor’s report for the year ended 30 April 2021 included
one key audit matter that has not been reported as a key audit
matter in our current year’s report. Inappropriate recognition
of grant income is no longer considered a key audit matter, as
the level of grant income recognised in the current period
has reduced.
Scoping has been determined to ensure appropriate coverage
of the group significant risks, and key financial statement line
items. The coverage of key financial statement line items
identified as significant components were:
– Revenue 95% (2021: 98%)
– Loss before tax 93% (2021: 94%)
Materiality
Key Audit
matters
Scoping
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our 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) that we identified. These matters included
those that 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 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 the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
DescriptionDisclosuresAudit responseKey observations/Our resultsKAMHighExtent of management judgementLow● Key audit matter ● Significant risk ● Other riskLowPotentialfinancialstatementimpactHighGoingconcernParent only –InvestmentsTrade and grantreceivablesGrantincomeOtherprovisionsShare basedpaymentsInventory andwork in progressIncompleterecognitionof the lossprovisionin relationto contractaccountingManagementoverride ofcontrolInappropriaterecognitionof revenueITM Power PLC Annual Report 2022
74
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC continued
Key Audit Matter – Group
Inappropriate recognition of revenue
We identified the inclusion of fraudulent transactions within
revenue, including completeness of deferred income, as one of
the most significant assessed risks of material misstatement.
Revenue recorded in the financial statements is £5,627,000
(2021: £4,275,000).
There is a significant risk of fraudulent reporting due to the
judgemental nature of assessing revenue recognised, using the
‘over time’ principles in IFRS 15 ‘Revenue from Contracts with
Customers’ (IFRS 15) and the motivation to meet market
expectations. Management’s assessment includes a number
of estimates:
– Estimated total contract costs;
– Estimated stage of completion derived from the total contact
costs; and
– Forecasted margin which is also derived from total
contract costs.
Relevant disclosures in the Annual Report and Accounts 2022
– Financial statements: Note 5, Revenue, Operating Segments &
Income from Government Grants
– Financial statements: Note 4, Critical accounting judgements
and key sources of estimation uncertainty
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the
following audit procedures:
– Assessed whether the group’s accounting policies for revenue
from contracts are in accordance with the financial reporting
framework, IFRS 15;
– Tested a sample of contracts to original signed agreements;
– Performed procedures over management’s contract forecast
models, testing mathematical accuracy and agreeing amounts
and terms to underlying contracts;
– For a sample of contracts, recalculated revenue recognised
over time using the input method of costs incurred to date as
a percentage of forecast costs;
– Challenged management’s estimate of total expected costs to
assess whether revenue had been properly recognised. We
did this by comparing costs expected with post year end
results and testing a sample of forecasted costs to supporting
evidence such as purchase orders and supplier quotations;
– Made enquires of the individual project managers to obtain
an understanding of their process for estimating cost to
complete. This was compared to the current progress of the
contract.
– For deferred contract income, using the sample selected
through our revenue testing, we confirmed that there was a
deferred income balance based on contractual terms,
recalculated the deferred income balance and agreed inputs
to supporting documentation, such as invoices raised and
cash received; and
– For performance obligations recognised at a point in time, we
tested a sample to evidence of completion of those
performance obligations.
Our results
Based on our audit work addressing the risk of improper
recognition of revenue, we are satisfied that the assumptions
made by management in recognising revenue were appropriate
and in accordance with, the financial reporting framework,
including IFRS 15, and we did not identify any material
misstatements in the revenue recognised.
Key Audit Matter – Group
Incomplete recognition of the loss provision in relation to
contract accounting
We identified incomplete recognition of the loss provision in
relation to contract accounting as one of the most significant
assessed risks of material misstatement due to error. This is
because of the judgement needed to assess the contract
provisions.
The contract loss provision provided in the financial statements
is £12,493,000 (2021: £4,820,000).
The majority of contracts that ITM Power have entered into
have been loss making. There is a significant level of judgment
in calculating future expected costs on the contracts as the
contracts have been bespoke in nature. The impact of incorrect
assessment of these costs is the potential for immediate
recognition of future losses. As these are typically multi-year
projects, the estimate around forecasting losses is sensitive and
has the potential for material error.
Relevant disclosures in the Annual Report and Accounts 2022
– Financial statements: Note 22, Provisions
– Financial statements: Note 4, Critical accounting judgements
and key sources of estimation uncertainty
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the
following audit procedures:
– Obtained management’s schedule of contract loss provisions;
– Identified on-going contracts at the year end where no loss
provision was recognised and challenged whether this was
appropriate by testing material costs to complete and
comparing to contracted revenue amounts;
– Made enquiries of the specific project managers to obtain an
understanding of their process and methods of estimating
costs to complete. We looked for indicators of management
bias in their assumptions and corroborated estimates based
on prior experience to historic data;
– Obtained post year end schedules for total expected costs to
identify whether the costs used in assessing contract losses
were appropriate. We did this by assessing if the forecast
costs to complete had increased significantly and where they
did, corroborating management’s explanations for the
changes;
– Compared the total expected costs by contract from the year
end to the previous year end and to costs incurred post year
end, obtaining explanations for movements in order to test
the historical accuracy of forecasting;
– Obtained supporting evidence, such as purchase orders and
supplier quotations for a sample of forecast costs to
complete; and
– Assessed and challenged the appropriateness of the financial
statement disclosures.
Key observations
When assessing contract costs incurred post year end, we
identified a number of contracts where additional costs had
been incurred which had not been included in the forecasts.
Management subsequently recalculated the forecast contract
costs and the resulting loss provision.
Based on our audit work addressing the risk of incomplete
recognition of the loss provision, we are satisfied that
assumptions made by management in recording the loss
provision are appropriate, and its recognition is in accordance
with the financial reporting framework, including IAS 37
‘Provisions, Contingent Liabilities and Contingent Assets’
and IFRS 15.
No key audit matters were identified in respect of the parent company.
ITM Power PLC Annual Report 2022 75
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC continued
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the
auditor’s report.
Materiality measure
Specific materiality
Materiality was determined as follows:
Materiality measure
Materiality for financial
statements as a whole
Group
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Parent company
Materiality threshold
£2,335,000, which is 5% of loss before tax.
£2,100,000, which is 0.4% of total assets.
Significant judgements made
by auditor in determining
materiality
In determining materiality, we made the
following significant judgements:
– The shareholder perception that the value
of the group is derived from the potential
of the products being developed and the
value that can be derived from these
assets; and
– Materiality for the current year is higher
than the level that we determined for the
year ended 30 April 2021 to reflect the
increase in absolute loss realised in 2022.
In determining materiality, we made the
following significant judgements:
– Identifying the primary objective of the parent
company, which is to hold the investments in
the group undertakings, as well as to provide
financing to use as an appropriate benchmark;
and
– Materiality for the current year is higher than
the level that we determined for the year
ended 30 April 2021 to reflect the increase in
assets held at 30 April 2022.
Performance materiality
used to drive the extent
of our testing
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the financial
statements as a whole.
Performance materiality
threshold
£1,400,000, which is 60% of financial
statement materiality.
£1,260,000, which is 60% of financial statement
materiality.
Significant judgements made
by auditor in determining
performance materiality
In determining performance materiality, we
made the following significant judgements:
– Our risk assessment procedures identified
some changes and additional complexity in
the group’s business activities. In addition,
based on our experience of auditing the
financial statements of the group,
adjustments have not been made to the
group’s financial statements in prior years.
In determining performance materiality, we
made the following significant judgements:
– Our experience of auditing the financial
statements of the company, adjustments have
not been made to the company’s financial
statements in prior years.
Group
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Parent company
Specific materiality
We determined a lower level of specific
materiality for Related party transactions
and directors remuneration.
We determined a lower level of specific
materiality for Related party transactions and
directors remuneration.
Communication of
misstatements to the audit
committee
Threshold for communication
We determine a threshold for reporting unadjusted differences to the audit committee.
£117,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£105,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Loss before tax:
£46.7m
FSM
£2.3m, 5%
PM
£1.4m, 60%
TFPUM
£0.9m, 40%
Total assets:
£506.0m
FSM
£2.1m, 0.4%
PM
£1.3m, 60%
TFPUM
£0.8m, 40%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
ITM Power PLC Annual Report 2022 76
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC continued
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular
matters related to:
Understanding the group, its components, and their environments, including group-wide controls
– the engagement team obtained an understanding of the group and its environment, including group-wide controls, and assessed
the risks of material misstatement at the group level; and
– the engagement team obtained an understanding of the effect of the group organisational structure on the scope of the audit,
for example, the level of centralisation of the group control function and the use of service organisations.
Identifying significant components
– the engagement team evaluated the identified components to assess their significance and determined the planned audit
response based on a measure of materiality. Significance was determined as a percentage of the group’s revenue and loss before
tax and qualitative factors, such as component’s specific nature or circumstances.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual
Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion 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 such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in 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 in this regard.
Type of work to be performed on financial information of parent and other components (including how it addressed the key
audit matters)
– the key audit matters identified in the key audit matter section of our audit report were addressed with the audit of the significant
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
scoped locations. There were no key audit matters that related individually to the parent company, ITM Power PLC.
prepared is consistent with the financial statements; and
Audit approach
Audit of component financial information
Audit of specific financial statement line items
Analytical procedures
Total
No. of
components
2
2
3
7
% coverage
revenue
73
22
5
100
% coverage loss
before tax
88
9
3
100
Performance of our audit
– for the audit of specifical financial statement line items, specific procedures were primarily designed to audit the key audit matters
but additional procedures were performed on cash balances and operating costs as well, depending on the quantum of these items;
and
– the primary team performed audit procedures across all components in line with the approach described. There were no
component teams engaged to support the primary team.
Changes in approach from previous period
– there is an additional component compared to last year as ITM Power PLC set up a new subsidiary in the year, which was partially
disposed in March 2022. This component has been included in the table above as an audit of specific financial statement line items.
– the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
– the parent company financial statements are not in agreement with the accounting records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
ITM Power PLC Annual Report 2022 77
Overview Strategic Report Governance Financial Statements Shareholder Information
Independent auditor’s report to the members of ITM Power PLC continued
Auditor’s 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 auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent
limitations of an audit, there is an unavoidable risk that material misstatements in the financial statements may not be detected,
even though the audit is properly planned and performed in accordance with ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below:
– We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the
most significant are those related to the reporting frameworks (UK-adopted international accounting standards, United Kingdom
Generally Accepted Accounting Practice, and the Companies Act 2006), as well as the relevant tax regulations, health and safety
law, employment law and data protection laws.
– We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur, by
evaluating management’s incentives and opportunities for manipulation of the financial statements. This included the evaluation
of the risk of management override of controls. We determined that the principal risks were in relation to:
– journal entries that increased revenues or that reclassified costs from the income statement to the balance sheet;
– potential management bias in determining accounting estimates, especially in relation to their assessment of the valuation of
intangible assets;
– transactions with related parties.
– In assessing the potential risks of material misstatement, we obtained an understanding of:
– the entity’s operations, including the nature of its revenue sources, products and services and of its objectives and strategies to
understand the classes of transactions, account balances, expected financial statement disclosures and business risks that may
result in risks of material misstatement;
– the applicable statutory provisions;
– the entity’s control environment, including the relevant legislation, rules and other regulations of the regulator, the procedures
for authorisation of transactions, internal review procedures over the entity’s compliance with regulatory requirements.
– These audit procedures were designed to provide reasonable assurance that the financial statements were free from fraud or
error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error and detecting irregularities that result from fraud is inherently more difficult than detecting those that result from error, as
fraud may involve collusion, deliberate concealment, forgery or intentional misrepresentations. Also, the further removed
non-compliance with laws and regulations is from events and transactions reflected in the financial statements, the less likely we
would become aware of it.
– Engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the engagement team
including consideration of the engagement team’s:
– understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate
training and participation;
– knowledge of the industry in which the client operates;
– understanding of the legal and regulatory requirements specific to the entity including:
– the provisions of the applicable legislation
– the regulators rules and related guidance, including guidance issued by relevant authorities that interprets those rules
– the applicable statutory provisions
– Team communications in respect of potential non-compliance with laws and regulations and fraud included the potential for fraud
in revenue recognition through manipulation of deferred income. This is also reported as a key audit matter in the key audit
matter section of our report where the matter is explained in more detail and the specific procedures, we performed in response
to the key audit matter are described in more detail.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
David White
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Sheffield
14 September 2022
ITM Power PLC Annual Report 2022 78
Overview Strategic Report Governance Financial Statements Shareholder Information
Consolidated Income Statement and Other Comprehensive Income
Revenue
Direct costs
Grant income against direct costs
Cost of sales
Gross loss
Operating costs
Research and development
Production and engineering
Sales and marketing
Administration expenses
Expected credit loss
Other income – government grants
Loss from operations
Share of loss of associate companies and joint ventures
Finance income
Finance costs
Loss on deemed disposal of subsidiary
Loss before tax
Tax
Loss for the year
Other total comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences on foreign operations
Net other total comprehensive income
Total comprehensive loss for the year
Basic and diluted loss per share
All results presented above are derived from continuing operations and are attributable to owners of the Company.
Note
5
5
2022
£000
(29,104)
–
2021
£000
(12,145)
1,356
£000
5,627
(29,104)
(23,477)
(1,383)
(7,931)
(1,920)
(10,669)
84
560
(44,736)
(10)
325
(532)
(1,710)
(46,663)
(31)
(46,694)
(71)
(78)
(71)
(46,765)
(8.1p)
£000
4,275
(10,789)
(6,514)
(3,489)
(8,839)
(1,436)
(7,404)
(165)
1,190
(26,657)
(595)
83
(479)
–
(27,648)
(49)
(27,697)
(78)
(27,775)
(5.5p)
5
6
12
9
9
12
10
11
ITM Power PLC Annual Report 2022 79
Overview Strategic Report Governance Financial Statements Shareholder Information
Consolidated Balance Sheet
Non-current assets
Investments in associate and joint venture
Loan notes
Intangible assets
Right of use assets
Property, plant and equipment
Financial asset at amortised cost
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Provisions
Lease liability
Total current liabilities
Net current assets
Non-current liabilities
Lease liability
Provisions
Total non-current liabilities
Net assets
Equity
Called up share capital
Share premium account
Merger reserve
Foreign exchange reserve
Retained loss
Total equity
The financial statements of ITM Power PLC, registered number 05059407, were approved by the Board of Directors
and authorised for issue on 14 September 2022. Signed on behalf of the Board of Directors:
Andy Allen
Director
Note
12
13
14
15
16
30
17
19
20
21
22
23
23
22
24
24
24
24
24
2022
£000
1,662
1,548
9,081
6,454
15,637
161
34,543
32,198
25,542
365,882
423,622
(34,296)
(15,207)
(626)
(50,129)
373,493
(6,522)
(6,561)
(13,083)
394,953
30,658
542,323
(1,973)
12
(176,067)
394,953
2021
£000
259
–
3,269
6,399
13,514
148
23,589
6,418
22,981
176,078
205,477
(12,857)
(12,276)
(204)
(25,337)
180,140
(6,282)
–
(6,282)
197,447
27,533
302,248
(1,973)
83
(130,444)
197,447
ITM Power PLC Annual Report 2022 80
Overview Strategic Report Governance Financial Statements Shareholder Information
Consolidated Statement of Changes in Equity
Director
At 1 May 2020
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total Transactions with owners
Loss for the year
Other comprehensive loss
Total comprehensive loss
At 1 May 2021
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total Transactions with owners
Loss for the year
Other comprehensive loss
Total comprehensive loss
At 30 April 2022
Called up
share
capital
£000
23,664
3,869
–
3,869
–
–
–
27,533
3,125
–
3,125
–
–
–
30,658
Share
premium
account
£000
137,236
165,012
–
165,012
–
–
–
302,248
240,075
–
240,075
–
–
–
542,323
Merger
reserve
£000
(1,973)
–
–
–
–
–
–
(1,973)
–
–
–
–
–
–
(1,973)
Foreign
exchange
reserve
£000
161
–
–
–
–
(78)
(78)
83
–
–
–
–
(71)
(71)
12
Retained
loss
£000
(103,342)
–
595
595
(27,697)
–
(27,697)
(130,444)
–
1,071
1,071
(46,694)
–
(46,694)
(176,067)
Total
equity
£000
55,746
168,881
595
169,476
(27,697)
(78)
(27,775)
197,447
243,200
1,071
244,271
(46,694)
(71)
(46,765)
394,953
Note
24
24
24
24
24
24
24
ITM Power PLC Annual Report 2022 81
Overview Strategic Report Governance Financial Statements Shareholder Information
Consolidated Cash Flow Statement
Net cash used in operating activities
Investing activities
Investment in joint venture/associate
Cashflows arising from loss of control of subsidiary
Loan notes (loan to joint venture)
Purchases of property, plant and equipment
Capital Grants received against purchases of non-current assets
Proceeds on disposal of property, plant and equipment
Payments for intangible assets
Interest received
Net cash used in investing activities
Financing activities
Issue of ordinary share capital
Costs associated with equity raise
Payment of lease liabilities
Net cash from financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of year
Note
26
12
13
27
2022
£000
(38,155)
(1,838)
(993)
(1,899)
(4,119)
150
352
(7,036)
304
(15,079)
250,000
(6,800)
(69)
243,131
189,897
176,078
(93)
365,882
2021
£000
(20,141)
(535)
–
–
(14,422)
3,992
3
(1,524)
83
(12,403)
173,835
(4,954)
(156)
168,725
136,181
39,919
(22)
176,078
ITM Power PLC Annual Report 2022 82
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements
1. General information
ITM Power PLC is a public company incorporated in England and Wales under the Companies Act 2006. The registered office is at
2 Bessemer Park, Sheffield, South Yorkshire S9 1DZ. The nature of the operations and principal activities of the Company and its
subsidiaries (together the Group) are disclosed in the Strategic Report.
3. Significant accounting policies
Basis of accounting
The consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards and
with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
These financial statements are presented in pounds sterling, which is also the functional currency, because that is the currency of
the primary economic environment in which the Group operates.
The financial statements have been prepared under the assumption that the Group operates on a going concern basis and on the
historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.
2. Adoption of new and revised standards
Amendments to International Financial Reporting Standards (IFRSs) that are mandatorily effective for the current year
In the current year, the Group has applied the following amendments to IFRSs issued by the International Accounting Standards
Board (IASB) that are mandatorily:
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for Interest Rate Benchmark reform – phase 2 (effective for periods
beginning on or after 1 January 2021)
– IFRS 16 Amendment for COVID-19 related Rent Concessions beyond 30 June 2021 (effective for periods beginning on or after
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation
technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or
liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement
date. Fair value for measurement purposes in these financial statements is determined on such a basis, except for share-based
payment transactions that are within the scope of IFRS 2, and measurements that have some similarities to fair value but are not fair
value, such as net realisable value in IAS 2 or value in use in IAS 36.
1 April 2021)
These standards have not had a material impact on the entity in the current reporting period.
New and revised IFRSs in issue but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 30 April 2022 reporting
periods and have not been early adopted by the Group. These standards are expected neither to have a material impact on the
entity in the current or future reporting periods nor on foreseeable future transactions:
– IFRS 3 Amendments to references to the Conceptual Framework Current (effective for periods beginning on or after
1 January 2022)
– IAS 16 Amendments to Property, Plant and Equipment – Proceeds before intended Use Current (effective for periods beginning on
or after 1 January 2022)
– IAS 37 Amendments to Onerous Contracts – Cost of Fulfilling a Contract (effective for periods beginning on or after
1 January 2022)
– Annual Improvements to IFRS Standards 2018-2020, affecting IFRS 1, IFRS 9, IFRS 16, IFRS 41 (effective for periods beginning on or
after 1 January 2022)
– IAS 1 Classification of Liabilities as Current or Non-Current (effective for periods beginning on or after 1 January 2024)
– IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting Policies from significant to material (effective for periods beginning
on or after 1 January 2023)
– IAS 8 Amendments to Definition of Accounting Estimates (effective for periods beginning on or after 1 January 2023)
– IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective for periods beginning on or after
1 January 2023)
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to
which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in
its entirety, which are described as follows:
– Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
– Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either
directly or indirectly; and
– Level 3 inputs are unobservable inputs for the asset or liability.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 30 April each year. Control is achieved when the Company:
– has power over the investee;
– is exposed, or has rights, to variable return from its involvement with the investee; and
– has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
ITM Power PLC Annual Report 2022
83
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when
the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company
considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient
to give it power, including:
– the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
– potential voting rights held by the Company, other vote holders or other parties;
– rights arising from other contractual arrangements; and
– any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company ceases
to have control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the date the Company gains control until the date when the Company ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company. Total
comprehensive income of the subsidiaries is attributed to the owners of the Company.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line
with the Group’s accounting policies.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the
Group are eliminated on consolidation.
Going concern
The Directors have prepared a cash flow forecast for the period from the balance sheet date until 30 September 2023. This forecast
indicates that the Group would expect to remain cash positive without the requirement for further fund raising based on delivering
the existing pipeline, for a period of at least 12 months from the date of approval of these financial statements.
By the end of the period analysed, the Group will still hold significant cash reserves. This should give the business sufficient funds
to trade for the next 12 months if the business continues with its medium-term business plan.
The business remains in a development phase and continues in a cash outflow position, using funding generated from previous
fundraises. As such, this cash flow forecast has also been stress-tested. As a worst-case scenario, if all payments had to continue
as forecast while receipts were not received at all, the business would remain cash positive for the full 12 months from the date
of approval of these financial statements.
The accounts have therefore been prepared on a going concern basis.
Revenue recognition
Product sales
ITM Power undertakes product sales of both whole systems and individual electrolyser units that involve manufacture followed by
varying degrees of installation and commissioning over a period of several months. Systems are usually quoted to an end user as a
single value but an intermediary may be quoted for individual electrolyser units. Both types of sale will be split into agreed payment
milestones to facilitate cash flow. Performance obligations are identified according to the separability of the items being provided.
Any ancillary requests, e.g. for training, will be treated as separate performance obligations if they can be separately identified and
measured and the revenue value is also quoted separately.
Under IFRS 15, a performance obligation is satisfied over time if one of the following criteria is met:
a) the customer simultaneously receives and consumes the benefits provided by the seller’s performance as the seller performs;
b) the seller’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
c) the seller’s performance does not create an asset with an alternative use to the seller and the seller has an enforceable right to
payment for performance completed to date.
Revenue from product sales, which do not meet the first two criteria, will therefore be treated differently depending on whether
the product is standard or bespoke in reference to point (c) above:
– Revenue from standard products will be recognised at point in time, only when the performance obligation has been fulfilled and
ownership of the goods has transferred, i.e. at the official handover of control of a working machine to the customer. This is due to
the ‘transferability’ of such products and their components up until handover, so the asset generated has an alternative use to the
Group up to the point of handover. In the meantime, income from progress billings and advances received from customers will be
reflected in the balance sheet as contract liabilities (deferred income). Costs incurred on projects to date will not be included in
the statement of comprehensive income but will be accumulated on the balance sheet as work in progress so long as they are
considered recoverable and only transferred to cost of sales once the revenue applicable to those costs can be recognised in the
accounts. Should costs exceed anticipated revenues, a provision will be recognised and the surplus costs expensed with
immediate effect;
– Bespoke contracts by their nature do not create an asset with an alternative use to the seller; some have traceability requirements
attached to them that would prevent them being diverted during production whilst others are simply bespoke to the customer’s
requirements and therefore would not meet the needs of, or be easily converted for use on, another project. There is also an
enforceable right to payment for performance completed to date if the contract is terminated by the customer for reasons other
than ITM Power’s failure to perform as promised. Revenues for bespoke contracts will therefore be recognised over time
according to how much of the performance obligation has been satisfied. This is measured using the input method, comparing
the extent of inputs towards satisfying the performance obligation with the expected total inputs required. Any changes in
expectation are reflected in the total inputs figure as they become known. The progress percentage obtained is then applied to
the revenue associated with that performance obligation. Management view this as a much more reliable measure of progress
towards completion of the performance obligation than the output method as, despite contracting with milestone payments,
these are not reliable measures of progress or value to the customer but instead have been designed to aid cash flow. Any
differences between the revenues recognised and the milestone billings will result in contract assets/liabilities (shown as
accrued or deferred income on the balance sheet).
ITM Power PLC Annual Report 2022 84
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
ITM Power supplies units with a standard 12-month warranty, which covers the equipment against any fault due to manufacturing
defects. Any repairs made under this warranty will be completed free of charge. Where possible, diagnosis will be performed via
remote connection to minimise the time and expense associated with travel to the site. The warranty period starts from the date
site acceptance testing is deemed to be passed.
Unless an extended warranty is specifically purchased under the sales contract and thus, together with its maintenance obligations,
creates a separate performance obligation under that contract, warranty provisions will continue to be treated under IAS 37 as they
are by nature an assurance warranty.
Parts that are replaced due to being at their end of life are not included. Expected lifetimes of individual parts will be provided in a
detailed maintenance plan during the design phase of the project. Out-of-warranty repairs and part replacements will be charged to
the customer. It should be noted that a maintenance contract is mandatory for the duration of the warranty period and will form a
separate performance obligation. After the warranty period, it is recommended that a maintenance package is continued (see
maintenance contracts below).
ITM Power’s standard contract wording aims to limit the right of rejection once a customer has accepted the unit under either
factory acceptance testing (for ex-works or FCA Sheffield) or site acceptance testing. Up until that time, contractual obligations
would protect our right to recognise revenues for work performed to date. Remedy for any dissatisfaction would instead exist in a
separate claim for damages.
Maintenance contracts
Maintenance contracts typically involve two scheduled annual visits. Therefore, revenue is recognised in two instalments against
the costs of those visits, i.e. when each performance obligation is met. However, where remote support forms part of the contract,
revenue for this performance obligation will be recognised over time as the customer simultaneously receives and consumes the
benefits of such a service, and criteria (a) under IFRS 15 is met as referred to above.
Consulting contracts
Larger systems or those where the system will need to perform to new conditions, are sometimes preceded by a design study or a
Front-End Engineering Design (FEED) contract that defines solutions to customer specifications. ITM Power’s equipment being part
of the solution, our expertise is often required to feed in to these studies. Where the IFRS 15 criteria for recognition over time are
met (in this case that the customer simultaneously receives and consumes the benefits of the service), revenue will be recognised
over time. For those contracts where these criteria are not met, revenue will be recognised on completion of the contract.
Fuel sales or sales of scrap/spares
Sales are recognised immediately upon completion of the performance obligation, being the transfer of ownership of the goods.
Grants
Government and other grants are included in other operating income in the period that the related expenditure is incurred, unless
relating to property, plant and equipment when they are netted against the cost of the assets acquired on the balance sheet.
Grants have stage payments, which can include up-front payments to ITM Power. Where pre-finance has been received at the start
of the grant and continues to exceed expenditure incurred to date, the surplus is shown as deferred income and is included in the
consolidated balance sheet as a liability. When expenditure incurred to date exceeds receipts from the grant body, the surplus is
shown as accrued income until such time that it can be claimed. Such balances are reviewed for recoverability, ensuring that the
costs incurred met the conditions of the grant for recognition of grant income and such recognition of income does not exceed the
maximum value of the award.
In specific instances where grant income subsidises a sale, grant income can be recognised against appropriate expenditure on
agreed projects and shown as receivable from the time of the expense. This means that grant income can be recognised against
stage payments made on larger items. Thus, a further category of grant income receivable against pro forma payments has been
established within deferred income on the balance sheet to allow for a difference in treatment in grant-subsidised sales. Once the
items have been received, this grant income will come to be shown as ‘grant income against direct costs’ in profit and loss.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial
position of each group company are expressed in pounds sterling, which is the functional currency of the Group, and the
presentation currency for the consolidated financial statements. The financial statements are presented in round thousands.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except exchange differences on monetary
items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore
forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and
reclassified from equity to profit or loss on disposal or partial disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in
equity (attributed to non-controlling interests as appropriate).
ITM Power PLC Annual Report 2022 85
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income
statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or
substantively enacted by the balance sheet date. The resulting tax charge, where applicable, is shown within the tax line of the
income statement.
Research and development tax credits are recognised on an accruals basis, and are reported in the income statement. By their
nature, they are similar to grant funding and are presented amongst other income.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised.
Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity,
in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities, and when they relate to income taxes levied by the same
taxation authority, and the Group intends to settle its current tax assets and liabilities on a net basis.
Investment in associates and joint ventures
These are companies where ownership is 50% or less but significant influence is retained. Significant influence is the power to
participate in the financial and operational policy decisions of the investee but is not control over those policies. Joint ventures will
allow for joint control as no one party has overall control, but where there is no control, the investment is referred to as an
associate. Both joint ventures and investments in associates are accounted for using the equity method.
The investment is initially recognised at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other
comprehensive income of the investment entity, adjusted where necessary to ensure consistency with the accounting policies of
the Group. When the Group’s share of losses of an investment exceeds the Group’s interest in that entity, the Group discontinues
recognition of its share of further losses. Additional losses are then recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of the investment entity.
As per IAS 28, the investment will be subject to impairment review only with objective evidence of impairment from observable
data as a result of one or more events adversely impacting the expected future cash flows and where such impact can be reliably
estimated. Any such impairment will reduce the carrying value of the investment and be recognised immediately in profit or loss to
the extent that it relates to the investment by the Group.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of
the Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
Intangible assets – software
Software purchased from external companies has been recognised at cost under the heading of intangible assets. Amortisation is
charged so as to write off the cost of assets over an estimated useful life of three years (in-line with the Group policy for computer
equipment), using the straight-line method. This is recognised in Administration expenses.
Internally-generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred, except where the costs of
activities are considered development for the purposes of capitalising development costs.
An internally-generated intangible asset arising from the Group’s product development is recognised only if all of 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 to use or sell it;
– the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset;
– 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.
Once completed, Development Costs transfer into the category of Know-how. As these assets form the basis of the Group’s product
range (being the development of new processes, standard products or new product features that improve the capacity or efficiency
of the electrolysers) amortisation is recognised on a straight-line basis in Research and development costs over their useful lives,
considered to be four years, in line with expected product life cycles. Each asset is assessed on an annual basis to ensure that it still
meets the criteria and will still contribute to the Group’s products. If not, an impairment will be recognised. Where no internally-
generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred.
ITM Power PLC Annual Report 2022
86
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
Right of use assets
Right of use assets are recognised at the total value of the minimum lease payments (i.e. initial measurement of the lease liability)
plus any deposit or lease payments made at or before the commencement date, less any lease incentives. The Group creates a
separate asset under leasehold improvements for the initial direct costs incurred in establishing the lease but also for any
dilapidations costs to restore a property to the condition required by the landlord at the end of the lease.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit and loss. Where an impairment loss subsequently
reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised
in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. The value of any impairment (or its
reversal) is recognised within the same cost line that the depreciation or amortisation would normally appear in.
Depreciation of right of use assets will be recognised over the lease term in production or administration expenses depending on
the asset.
Property, plant and equipment
Leasehold improvements, laboratory and test equipment, production plant and equipment, computer equipment and office
furniture and fittings are stated at cost less accumulated depreciation and any recognised impairment loss.
Assets in the course of construction are carried at cost, less any recognised impairment loss. These assets are not depreciated but
are subject to impairment review. Once completed and ready for their intended use, the assets are transferred into other asset
categories and depreciated accordingly.
Depreciation is charged so as to write off the cost of assets, other than land and assets under construction, over their estimated
useful lives, using the straight-line method, on the following bases:
Category
Laboratory and test equipment
Production plant and equipment
Computer equipment
Office furniture and fittings
Leasehold improvements
Period
5 to 8 years
5 to 8 years
3 years
10 years
10 years or lease term
Recognition in profit and loss
Research and development costs
Production and engineering costs
Administration expenses
Administration expenses
Administration expenses
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in income.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
each asset (or cash-generating unit) is estimated to determine the extent of the impairment loss.
The recoverable amounts of non-current assets are derived from value-in-use calculations. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the group of units.
Inventories
Inventories are 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 present location and condition. Cost is
calculated using the ‘first in, first out’ (FIFO) method. Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and distribution.
Financial assets
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or loss are expensed in profit or loss. Subsequent measurement of financial assets
depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three
measurement categories of which the Group holds financial instruments in two:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is
not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from
these financial assets is included in finance income using the effective interest rate method.
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or Fair Value through Other Comprehensive Income (FVOCI) are measured at
fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss
and is not part of a hedging relationship is recognised in profit or loss and presented net in the profit or loss statement within other
gains/(losses) in the period in which it arises. Interest received from these financial assets is included in investment income.
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its assets carried at amortised cost.
The impairment methodology applied depends on whether there has been a significant increase in credit risk in trade receivables
and contract assets (accrued sales income). For trade receivables only, the Group applies the simplified approach permitted by
IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. An analysis of historical
default amongst our trade receivables was conducted and showed that less than 1% of sales over several years have resulted in
default. The Group continue to trade with large entities with good credit scores but trading data is monitored annually to ensure
that there are no significant changes to this percentage.
ITM Power PLC Annual Report 2022 87
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
3. Significant accounting policies continued
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on demand deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the
contractual provisions of the instrument. Financial liabilities are recorded initially at fair value, net of direct issue costs, and are
subsequently recorded at amortised cost using the effective interest method, with interest-related charges recognised as an
expense in finance cost in the income statement. Finance charges are charged to the income statement on an accruals basis using
the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the
period in which they arise. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is
discharged or cancelled or expires.
Derivative financial instruments
The Group enters into derivative financial instruments to manage its exposure to foreign exchange rate risk. These are not deemed
to be effective hedging instruments to be matched off against a related asset or liability but rather as stand-alone financial assets or
liabilities at fair value through profit and loss. Within the financial statements, therefore, this portfolio of contracts will be shown as
either an asset or liability on the balance sheet, with a corresponding gain or loss through the income statement, depending on how
the contractual rate of exchange compares with the year-end rate.
Leases
At inception of a contract, the Group assesses whether it conveys the right to control the use of an identified asset – and obtain
substantially all of the economic benefits from use of the asset – for a period of time in exchange for consideration. In this instance
the contract should be accounted as a lease.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is recognised
at cost and is subsequently depreciated using the straight-line method over the lease term.
The lease liability is initially measured at the present value of the lease payments and discounted using the interest rate implicit in
the lease or, if that rate cannot be determined, the Group’s incremental borrowing rate or best estimate of the same. The lease
liability continues to be measured at amortised cost using the effective interest method. It is remeasured when there is a change in
the future lease payments. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying
amount of the right-of-use asset.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of less than 12 months and leases of low
value assets. These largely relate to short-term rentals of equipment to undertake our field activities. The Group recognises the
lease payments associated with these leases, together with any property service charges and storage fees, as an expense on a
straight-line basis over the lease term (see Note 6).
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is
probable that the Group will be required to settle that obligation, and that a reliable estimate can be made of the amount of that
obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the
balance sheet date, and are discounted to present value where the effect is material.
Warranties
Provisions for the expected cost of warranty obligations under local sale of goods legislation are recognised at the date of sale of the
relevant products, at the Directors’ best estimate of the expenditure required to settle the Group’s obligation.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at
fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed in
profit or loss on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
The Group also recognises a provision for Employer’s National Insurance Contributions (NIC) that becomes payable on the exercise
of share options granted under the Group’s non-tax advantaged share plans, to the extent that the liability has not been transferred
to the employees. Where a liability is due, the provision has been calculated using the intrinsic value of the share option which is the
difference between the Group’s share price at the balance sheet date and the exercise price. The actual amount of Employer’s NIC
that will be payable will be determined on the difference between the exercise price and Group’s share price at the date of exercise.
For share options that have not vested, the provision for Employer’s NIC is calculated on the same basis and is accrued over the
vesting period.
For option grants prior to 2020, the Group has agreed that settlement of the Employer’s NIC liability arising on gains made on the
exercise of unapproved share options be capped at the exercise price of the options. Any excess liability for Employer’s NIC would be
recovered from the option holder. For option grants from 2020, the employees have agreed to pay any Employer’s NIC liability that
is due on exercise of their options. As such a separate reimbursement asset is recognised for this recoverable amount.
Pension costs
The Group operates a defined contribution pension scheme. The amount charged to the income statement in respect of pension
costs is the contributions actually payable in the year. Differences between the contributions actually payable and those paid are
shown as accruals or prepayments in the consolidated balance sheet.
ITM Power PLC Annual Report 2022 88
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in Note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods.
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the
Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
Capitalisation of development costs
The Group undertakes a number of internal projects for the advancement of our core technology, the design of our standard
products and improved efficiencies around our business. Whilst these will be timebound and involve specific groups of staff, time
and costs can be tracked through our reporting and accounting systems. Management must decide at what point such efforts
become development work that will result in future economic benefits to the Group and thus, at which point they meet the criteria
for capitalisation. See Note 14.
Key sources of estimation uncertainty
Contract accounting, including consideration of contract balances and loss provisions
Management have assessed sales contracts in accordance with the 5-step principle laid out by IFRS 15 to confirm whether a
contract should be recognised over time or at a point in time. Contract balances are reviewed to ensure that they reflect the status
of the project and that amounts remain recoverable. Rolling forecasts of costs to complete the performance obligation are
maintained so that onerous contracts can be recognised and provided for at the point where costs are predicted to exceed the
expected income. Risk registers are also maintained and regular discussions with project managers highlight whether any further
provisions are required, e.g. for liquidated damages. See Notes 5 and 18.
Provisions
Note 22 gives details of the amounts currently recognised under four different categories of provision. Management have
particularly considered the following:
Warranty provisions are based on management’s current best estimate of the potential costs involved in diagnosing and correcting
faults and the likelihood of such faults occurring within the first year (or duration of the warranty period) of operation of a unit.
These assumptions are built upon historical data of units in the field so are likely to be reviewed and revised as more information
becomes available with a higher quantity of machines in operation. If it becomes known that additional work is required, then the
provision is immediately extended.
A provision for onerous contracts (contract losses) has been recognised in line with the requirements of IAS 37, given the expected
costs to complete legacy projects exceeding the headroom in contracted sales values. Cost forecasts produced by project managers
are monitored on a monthly basis to ensure that such potential losses are recognised immediately in the accounts. As quotes are
finalised with suppliers these estimates may fluctuate but the provision will be adjusted accordingly and ultimately used to offset
the future costs of the project as it nears completion. Furthermore, the Group uses software to track the risks and opportunities
of each project. This gives a potential cost and risk rating for active risks and has been reviewed by management at year end to
determine if any additional contingency should be recognised on projects. A sensitivity analysis was performed on the current
provision and future forecast costs. If forecasted costs were to increase by 10%, the provision would need to increase by
£4.3 million (2021: £1.8 million).
Changes in accounting estimates
Useful asset lives
The Directors have reconsidered the useful lives of the Group’s fixed asset categories to reflect a change in the Group’s purchasing
habits over recent months. As plant and lab equipment is now being bought brand new, rather than second hand, this has resulted
in a change to the expected useful lives of some categories of plant and equipment as follows:
Category
Laboratory and test equipment
Production plant and equipment
Computer equipment
Office furniture and fittings
Leasehold improvements
Previous useful life
4 years
4 years
3 years
4 years
4 years or the remainder of the lease term
New estimated useful life
5 to 8 years
5 to 8 years
3 years
10 years
10 years or lease term
The change has been treated prospectively and has impacted profit and loss in the current period to reduce losses by £499,000.
Provision for inventory obsolescence
With the increase in inventory and the move towards more standardised products, the Directors have reviewed and refined their
policy for the provision of stock obsolescence. Previously stock was assessed by its age and usage in the business, writing it down by
60% if parts were over 12 months old but still being used on products or else by 100% if parts were over a year old and seemingly
not in use on products.
However, it is recognised that parts can now be held in the business for a number of reasons, not least the contractual requirements
of our warranty and aftersales provisions and this needed to be reflected in our treatment. In the current year therefore, stocked items
have been classified into four different categories: those actively in use in our bills of material, those that can be used for product
development work, discontinued items that may not be part of active bills of material but still have demand through maintenance
and aftersales work on legacy equipment, and finally redundant parts. The first three categories still hold value for the business and
have been maintained at cost, whilst redundant stock has continued to be fully written down. The initial effect of this change was
not material in the current year. Going forward, this categorisation of stock will allow us to review our holdings to ensure that they
are sufficient to meet our contractual obligations, whilst also allowing us to refine the provision further, for example if the
discontinued category began to exceed our contractual obligations.
ITM Power PLC Annual Report 2022 89
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
5. Revenue, operating segments and income from government grants
All revenues are derived from continuing operations. An analysis of the Group’s revenue is as follows:
An analysis of the Group’s revenue, by major product (or customer group), is as follows:
Revenue from product sales recognised over time
Revenue from product sales recognised at a point in time
Consulting contracts recognised over time
Maintenance contracts recognised at a point in time
Fuel Sales
Other (e.g. scrap sales)
Revenue in the Consolidated Income Statement
Grant income shown against cost of sales
Grant income (claims made for projects)
Other government grants (R&D claims)
Other government grants (COVID-19 furlough scheme)
Other income – government grants
2022
£000
271
289
–
£000
808
1,231
2,948
43
229
368
5,627
–
560
6,187
2021
£000
761
404
25
£000
1,697
–
2,108
112
153
205
4,275
1,356
1,190
6,821
At 30 April 2022, the aggregate amount of the transaction price allocated to remaining performance obligations of continuing build
contracts was £42.0 million (2021: £16.7 million). The Group expects to recognise 73% of this within one year, with the remaining
27% expected the following year.
Segment information
ITM Power PLC is organised internally to report to the Group’s Chief Operating Decision Maker, the Chief Executive Officer,
on the financial and operational performance of the Group as a whole. The Group’s Chief Operating Decision Maker is ultimately
responsible for entity-wide resource allocation decisions, evaluating performance on a Group-wide basis and any elements within
it on a combination of information from the executives in charge of the Group and Group financial information.
Management has previously identified three target markets for our products (Power-to-Gas, Refuelling, and Industrial). Revenue
reporting has begun to look at these three sectors to assess the commerciality of those sales. However, decisions for resourcing
cannot be made by reference to these segments. The Group operates a single factory that builds units for use across all sectors.
It would be hard to assign overhead costs to particular product segments as builds all occur in that one facility and can run
concurrently. Similarly, fixed assets and suppliers’ balances cannot be assigned to the production of one specific segment.
For overhead costs and net asset resources, therefore, decisions are taken on a group basis.
Power-to-Gas
(of which product sales recognised over time £56,000)
Refuelling
(of which product sales recognised over time £245,000)
Industrial
(of which product sales recognised over time £507,000)
Other
Revenue in the Consolidated Income Statement
2022
£000
207
1,704
507
3,209
5,627
2021
£000
210
(38)
1,870
2,233
4,275
In the prior year, the negative sales revenue on refuelling was caused by the effects of foreign exchange as well as actual and
forecast overruns (affecting stage of completion) on the product sale therein.
The Other category contains a large consultancy project, involving design and FEED studies for larger scale product manufacture.
Geographical analysis
The United Kingdom is the Group’s country of domicile but the Group also has subsidiary companies in the United States, Germany
and Australia. All non-current assets were domiciled in the United Kingdom or Germany. Revenues have been generated as follows:
United Kingdom
Germany
(of which product sales recognised over time £563,000)
Rest of Europe
(of which product sales recognised over time £245,000)
United States
Australia
Included in revenue are the following amounts, which each accounted for more than 10% of total revenue:
Customer A
Customer B
Customer C
Industrial
Other
Refuelling
2022
£000
3,359
770
246
22
1,230
5,627
2022
£000
<10%
2,840
673
2021
£000
2,505
1,966
(196)
–
–
4,275
2021
£000
1,870
2,027
–
Except where extended warranties have been purchased and treated as separate performance obligations for the purpose of IFRS 15
Revenue from contracts with customers, warranty commitments are covered under Note 22 Provisions.
ITM Power PLC Annual Report 2022 90
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
6. Loss for the year
Loss for the year has been arrived at after charging / (crediting):
Whilst costs have been shown on the income statement by function within the Group, the following table shows costs grouped
by nature:
Net foreign exchange losses/(gains)
Fair value gain on forward contracts
Fair value loss on loan notes
Share-based payment charge (Note 25)
Depreciation of property, plant and equipment
Depreciation of right of use assets
Impairment of non-current assets
Amortisation of intangibles
Research and non-capitalised Development costs
Expected credit loss (trade receivables)
(Reversal of) expected credit loss on prepaid suppliers
Loss on disposal of property, plant and equipment
Loss on disposal of Motive
Rentals under short-term leases:
– Land and buildings
– Other equipment
Government grants receivable
Staff costs (Note 8)
Cost of inventories recognised as an expense
Movement on aged stock provision
2022
£000
386
(136)
344
1,429
1,628
711
–
849
1,383
1
(100)
–
1,710
58
219
(560)
14,482
5,690
1,417
2021
£000
(53)
–
–
799
1,576
745
1,713
274
3,489
(3)
168
173
–
8
142
(2,546)
11,434
4,241
845
Direct costs
Materials
Labour
Other bought in items
Contract provisions
Total direct costs
Operating costs
Staff and employment costs
Consultancy and consumables
Building overheads
Depreciation
Amortisation
Impairment
Other
Total operating costs
2022
£000
3,862
4,303
17,738
3,201
29,104
4,315
11,225
2,564
2,340
849
–
525
21,818
2021
£000
4,241
707
6,987
210
12,145
9,594
5,666
1,650
2,321
274
1,713
115
21,333
Calculation of Adjusted EBITDA
In reporting EBITDA, management use the metric of adjusted EBITDA, to better reflect underlying performance and remove the
effect of the following items:
Loss from operations
Add back:
Depreciation
Impairment
Amortisation
Loss on disposal
Fair value loss on loan notes
Share-based payment charge (Note 25)
2022
£000
(44,736)
2,340
–
849
–
344
1,429
(39,774)
2021
£000
(26,657)
2,321
1,713
274
173
–
799
(21,377)
ITM Power PLC Annual Report 2022 91
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
7. Auditor’s remuneration
The following amounts were payable to the Group’s auditor and have been charged within the loss before tax:
More detail is provided for directors’ remuneration and share options within the Remuneration Report. No share options were
exercised during the year, although four directors participate in these long-term incentive plans (2021: 4) and benefited from
exercises in the prior year.
Fees payable to the Company’s auditor for
– The audit of the Company’s annual accounts
– The audit of the Company’s subsidiaries pursuant to legislation
Total audit fees
Other services pursuant to legislation
– Interim agreed upon procedures/review work (audit related services)
– Assurance fee on corporate finance transaction
Total non-audit fees
8. Remuneration of directors and employees
Directors
Fees/Basic salary plus bonuses earned in the year
Pension contributions
Aggregate emoluments
Other key management personnel
Fees/Basic salary plus bonuses
Pension contributions
Aggregate emoluments
Employer’s NIC
Share-based payment expense
Total costs for directors and key management personnel
2022
£000
137
33
170
55
125
180
2022
£000
1,576
71
1,647
116
6
122
224
686
2,679
2021
£000
120
33
153
13
–
13
2021
£000
1,436
55
1,491
–
–
–
169
549
2,209
Gains made by directors exercising share options in the prior year:
Director
S Bourne
S Bourne
S Bourne
S Bourne
S Bourne
G Cooley
G Cooley
G Cooley
R Smith
A Allen
A Allen
Type of share
option
EMI
Unapproved
EMI
Unapproved
Unapproved
Unapproved
EMI
Unapproved
Unapproved
EMI
Unapproved
Number of shares
exercised
123,596
276,404
100,000
250,000
583,333
800,000
250,000
750,000
416,666
50,000
333,333
Exercise price
67p
67p
50p
27p
30p
67p
50p
27p
30p
55p
30p
Market price at
date of exercise
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
283.05p
Gain made
£000
267.3
597.9
233.2
641.4
1,476.1
1,730.4
582.6
1,924.1
1,054.4
114.3
798.9
Four directors also participate in the Group BAYE scheme (2021: 4) and receive matching shares. Three directors were members
of money purchase pension schemes during the year (2021: 3).
Remuneration of the highest paid director
Aggregate emoluments
Money purchase pension contributions
2022
£000
472
–
472
2021
£000
500
–
500
Salary figures detailed here are after salary exchange for pensions. Consequently, the pension figures are employer contributions
inclusive of those salary exchange amounts.
ITM Power PLC Annual Report 2022 92
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
8. Remuneration of directors and employees continued
Gains made by the highest paid director exercising share options in the year were £Nil (2021: £4.2 million).
10. Tax
Monthly average number of persons employed
– Research and development
– Production and engineering
– Sales and marketing
– Administration
Staff costs during the year (including directors)
Wages and salaries
Social security costs
Other pension costs
Share-based payment expense
Less: staff costs capitalised in development costs
Staff costs expensed in the year
2022
Number
86
184
20
48
338
2022
£000
14,893
1,694
1,259
1,429
19,275
(4,793)
14,482
2021
Number
54
113
13
30
210
2021
£000
8,687
1,988
759
799
12,233
(1,430)
10,803
As at 30 April 2022 pension contributions of £123,000 (2021: £72,000) due in respect of the current year had not been paid over
to the scheme. These were paid over in the following month and within statutory deadlines.
9. Finance income and costs
Finance income
Interest received on cash deposits
Finance cost
Interest paid
Lease liability interest paid
Net finance costs
2022
£000
(41)
(491)
£000
325
(532)
(207)
2021
£000
(60)
(419)
£000
83
(479)
(396)
Current taxation
Tax charge in the year
Tax charge relating to prior years
2022
£000
31
–
31
2021
£000
25
24
49
Corporation tax is calculated at 19% (2021: 19%). Taxation for other jurisdictions is calculated at the rates prevailing in the respective
jurisdictions.
The charge for the year can be reconciled to the income statement as follows:
Loss before tax
Tax on loss at 19% (2021: 19%)
Factors affecting (charge)/credit for the year:
Expenses not deductible for tax purposes
Fixed asset differences
Tax charge on current year RDEC claim
Adjustments in respect of prior years
Unrelieved tax losses carried forward
Tax charge for the year
2022
£000
(46,663)
(8,866)
2021
£000
(27,648)
(5,253)
332
445
31
–
8,089
31
204
1,510
25
24
3,539
49
Factors affecting future tax charges
The Group has tax losses of approximately £99.8 million (2021: £65.6 million) available to carry forward against future taxable
profits, subject to agreement with HM Revenue & Customs. Deferred tax would have been calculated at a rate of 25% following
substantive enactment in May 2021. However, a deferred tax asset has not been recognised so this change is immaterial to the
current financial statements.
ITM Power PLC Annual Report 2022 93
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
11. Loss per share
The calculation of the basic and diluted earnings per share is based on the following data:
Below we provide information regarding the performance of the investment in associate within the year:
2022
£000
2021
£000
(46,694)
(27,697)
ITM Linde Electrolysis GmbH
Cost brought forward
Additions
Foreign exchange
50% share of loss recognised in the year
2022
£000
259
–
(21)
(178)
60
2021
£000
346
535
(27)
(595)
259
Loss for the purposes of basic and diluted loss per share
being net loss attributable to owners of the Company
Number of shares
Weighted average number of ordinary shares for the purposes
of basic and diluted earnings per share
Loss per share
576,699,822
507,262,743
8.1p
5.5p
The above amounts relate to ITM Linde Electrolysis GmbH (ILE) which is incorporated in Germany, with registered office:
Bodenbacher Str. 80, 01277 Dresden, Germany. Interest in ILE is split 50:50 with Linde Engineering GmbH, although control is
deemed to lie with Linde for the purposes of consolidation as they appoint the Managing Director. ITM Power has significant
influence in ILE due to its representation on the company’s board of directors.
The loss per ordinary share and diluted loss per share are equal because share options are only included in the calculation of diluted
earnings per share if their issue would decrease the net profit per share. The number of potentially dilutive shares not included in
the calculation above due to being anti-dilutive in the years presented were 45,064,658 (2021: 50,893,546).
The investment is therefore an equity-accounted investment in associate but will be subject to impairment review. In the current
year, there were no triggers to warrant an impairment review.
12. Investments in associates and joint ventures
A list of investments in subsidiaries, including the name, country of incorporation and proportion of ownership interest is given in
Note 6 to the Company’s separate financial statements.
Investment in associates and joint ventures
ITM Linde Electrolysis GmbH (associate)
Motive Fuels Limited (joint venture)
2022
£000
60
1,602
1,662
2021
£000
259
–
259
Key financial data of ILE:
Non-current assets
Current assets
Current liabilities
Revenue
Loss from continuing operations
2022
£000
11
6,553
(6,425)
2,397
(355)
2021
£000
14
3,145
(2,658)
1,018
(1,193)
Balance sheet figures were translated from euros using the year-end exchange rate of 1.18 (2021: 1.16). Revenue and loss figures
were translated using an average exchange rate of 1.18 (2021: 1.12).
During the year, ITM Power continued to pay for the hosting of ILE’s website. ITM Power engaged ILE for consultancy work equating
to £0.2 million, which was paid shortly after year end. Invoices for progress billings of £5.4 million were raised to ILE with £1.0 million
outstanding at year end. Further cash injections are planned over the twelve months, equating to €750,000 by each party.
ITM Power PLC Annual Report 2022 13. Loan notes
ITM Power PLC and Vitol also each granted loan notes to Motive Fuels Limited. These are accruing interest at 1.5% above SONIA.
Loans are granted for a period of 10 years without expectation of repayment for at least three full financial years.
Loan notes
2022
£000
1,548
2021
£000
–
As the interest rate takes into account the time value of money but not the potential credit risk, a fair value adjustment has been
made. The loan has also been subject to a provision for expected credit loss under IFRS 9 of £15,000.
Further cash injections are planned, equating to £30 million by each party over the next five years. These will be based on proposals
being subject to approval by both parties for new hydrogen refuelling station development.
94
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
12. Investments in associates and joint ventures continued
Below we provide information regarding the performance of the joint venture within the period:
Motive Fuels Limited
Cost
Additions (fair value of net assets retained)
50% share of loss recognised in the period
2022
£000
–
1,434
168
1,602
The above amounts relate to Motive Fuels Limited (Motive) which is incorporated in the UK, with registered office: AMP Technology
Centre, Brunel Way, Catcliffe, Rotherham, S60 5WG. Motive commenced trading from 1 May 2021 as a wholly-owned subsidiary.
However, in March 2022, Vitol Holding SARL matched our shareholding in the entity and interest in Motive therefore became split
50:50, with no single party having control. ITM Power has significant influence and joint control in Motive due to its equal
representation on the company’s board of directors and rights to the net assets.
The investment is therefore treated as a joint venture that is equity-accounted and subject to impairment review. In the current
year, there were no triggers to warrant an impairment review.
Key financial data of Motive (income statement figures shown are for the period since the transaction with Vitol when Motive was
trading as a joint venture):
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Revenue
Profit from continuing operations
30 April 2022
£000
1,112
7,864
(862)
(3,410)
22
334
The Group has also recognised a loss of £1.7 million on the deemed disposal of 50% of the net assets of the former subsidiary and
including the cost of professional fees relating to the transaction.
ITM Power (Trading) Limited continues to pay for and recharge some of the overheads of Motive. This has resulted in charges of
£183,000 in the period, all of which remained outstanding at the year end. It has also received payments from Motive’s customers
(total £2,000) which have been shown as a liability (sitting within accruals) for repayment to Motive post-year end.
ITM Power PLC Annual Report 2022 95
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
14. Intangible assets
Cost at 1 May 2020
Transfers
Additions
Grant received
Cost at 1 May 2021
Transfers
Additions
Grant received
Transferred to Motive Fuels Limited
Cost at 30 April 2022
Amortisation at 1 May 2020
Charge for the year
Amortisation at 1 May 2021
Charge for the year
Transferred to Motive Fuels Limited
Amortisation at 30 April 2022
Carrying amount at 30 April 2022
Carrying amount at 30 April 2021
Software
£000
140
–
–
–
140
–
282
–
(55)
Know-how
£000
625
2,170
–
–
2,795
542
–
–
(231)
Development
Costs
£000
1,832
(2,170)
1,524
(135)
1,051
(542)
6,754
(150)
–
Total
£000
2,597
–
1,524
(135)
3,986
–
7,036
(150)
(286)
367
3,106
7,113
10,586
42
46
88
89
(10)
167
200
52
401
228
629
760
(51)
1,338
1,768
2,166
–
–
–
–
–
–
7,113
1,051
443
274
717
849
(61)
1,505
9,081
3,269
The amortisation period for externally purchased software has been set at three years (in line with our policy for computer equipment).
Development costs are generated internally by development of our stack technology, unit designs and processes. They are built up
over a period of time but capitalisation ceases once the asset comes into use and is transferred to the Know-how category, where
they will amortise over four years.
15. Right of use assets
Cost at 1 May 2020
Additions
Disposals
Cost at 1 May 2021
Additions
Transferred to Motive Fuels Limited
Disposals
Cost at 30 April 2022
Depreciation at 1 May 2020
Charge for the year
Disposals
Depreciation at 1 May 2021
Foreign Exchange
Charge for the year
Transferred to Motive Fuels Limited
Disposals
Depreciation at 30 April 2022
During the year there was rapid development of our 3MEP 30bar designs as interest in the product grew. Besides the design of the
electrolyser, more information about the performance of the core technology was gleaned from testing the prototype (£2.8 million
capitalised).
Net book value at 30 April 2022
Net book value at 30 April 2021
Impairment considerations
Most of the development projects currently capitalised here, and being amortised, relate to technologies being used in our current
sales and so remain relevant. Further capitalisations relate to continuing design work for standard products and advancements or
efficiencies that should allow the Group to improve its offering and gain interest in new markets.
Management considered the recoverability of its internally-generated intangible asset, using fair value less costs to sell based on an
adjusted market capitalisation of the Group. Given that the assets held make up the intellectual property that is key to potential
future revenue generation of the Group and are thus intrinsic to its valuation, no impairment was deemed necessary.
Leasehold
Property
£000
7,072
544
(179)
7,437
896
(292)
(214)
7,827
608
698
(159)
1,147
–
637
(24)
(214)
1,546
6,281
6,290
Leased
Vehicles
£000
94
52
(2)
144
122
–
(24)
242
Office
Equipment
£000
–
48
–
48
8
–
–
56
38
45
(2)
81
(8)
65
–
(24)
114
128
63
–
2
–
2
–
9
–
–
11
45
46
Total
£000
7,166
644
(181)
7,629
1,026
(292)
(238)
8,125
646
745
(161)
1,230
(8)
711
(24)
(238)
1,671
6,454
6,399
The Group currently holds right of use assets in both the UK (four properties, 17 vehicles and office equipment at two sites) and
Germany (three vehicles).
Right of use assets are depreciated over their lease term.
ITM Power PLC Annual Report 2022 96
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
16. Property, plant and equipment
Cost at 1 May 2020
Additions
Grant income
Transfers
Disposals
Foreign Exchange
Cost at 1 May 2021
Additions
Grant income
Transfer to Motive Fuels Limited
Disposals
Foreign Exchange
Cost at 30 April 2022
Depreciation at 1 May 2020
Disposals
Charge for the year
Impairment
Foreign Exchange
Depreciation at 1 May 2021
Disposals
Charge for the year
Transfer to Motive Fuels Limited
Foreign Exchange
Depreciation at 30 April 2022
Net book value at 30 April 2022
Net book value at 30 April 2021
Production
plant and
equipment
£000
5,466
893
–
1,657
(437)
–
7,579
452
–
(3,311)
(393)
(1)
Laboratory
and test
equipment
£000
1,993
309
–
–
(45)
–
2,257
423
–
–
(27)
–
Computer
Equipment
£000
916
376
–
–
(9)
–
1,283
500
–
(35)
(322)
(1)
Office
furniture and
fittings
£000
213
244
–
–
(135)
–
322
217
–
(23)
–
–
Leasehold
improvements
£000
7,585
7,463
–
–
(1,534)
–
13,514
692
–
–
(1,089)
(1)
Assets in the
course of
construction
£000
5,845
5,140
(3,857)
(1,657)
–
(84)
5,387
1,956
–
(4,021)
(1,675)
–
4,326
2,653
1,425
516
13,116
1,647
4,997
(268)
325
841
(1)
5,894
(393)
277
(3,311)
1
2,468
1,858
1,685
1,674
(44)
191
–
–
1,821
(27)
120
–
–
1,914
739
436
747
(5)
140
–
–
882
(322)
283
(4)
1
840
585
401
197
(126)
39
–
–
110
–
35
–
–
145
371
212
3,507
(1,533)
881
–
–
2,855
(1,089)
913
–
–
2,679
4,394
–
–
872
–
5,266
(1,675)
–
(3,591)
–
–
10,437
10,659
1,647
121
15,637
13,514
Total
£000
22,018
14,425
(3,857)
–
(2,160)
(84)
30,342
4,240
–
(7,390)
(3,506)
(3)
23,683
15,516
(1,976)
1,576
1,713
(1)
16,828
(3,506)
1,628
(6,906)
2
8,046
17. Inventories
Raw Materials
Work in progress
2022
£000
24,311
7,887
32,198
2021
£000
3,879
2,539
6,418
Inventories have been stated after a provision for impairment of aged-stock of £2.7 million (2021: £1.3 million). Stocks have
increased as we have ramped up production to meet demand and have taken on new sales contracts that refocus the business as a
manufacturer.
18. Contract balances and performance obligations
Contract revenue recognised through release from deferred income was £3.2 million (2021: £1.5 million).
Contracts with customers in progress at the balance sheet date
Amounts due from contract customers included in trade and other receivables
Contract assets (accrued income)
Contract liabilities (deferred income)
Balance sheet position of sales contracts
2022
£000
2,897
1,189
(17,258)
(13,172)
2021
£000
5,727
873
(6,740)
(140)
The contract position will change according to the number or size of contracts in progress at the year end as well as the status of
payment milestones towards those contracts. The Group will continue to structure payment milestones to cover the up-front costs
of materials for cash flow purposes. The variance between these and the performance obligations for revenue recognition under
IFRS 15 (typically acceptance of the product by the customer –at factory or at site – for all standard products), will cause increasing
values to remain in deferred income for longer as the Group move away from bespoke projects.
ITM Power PLC Annual Report 2022 97
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
19. Trade and other receivables
Trade receivables are measured at amortised cost. Their ageing is analysed as follows:
Amount receivable for the sale of goods
Amounts due from contract customers (Note 18)
Impairment for credit risk
Total trade receivables
Restricted cash balances
Other receivables
Forward contracts
R&D relief claims receivable
Prepayments
Amounts recoverable from employees
Accrued sales income
Accrued grant income
2022
£000
638
2,897
(60)
£000
3,475
297
2,459
127
426
11,972
2,186
1,189
3,411
25,542
2021
£000
100
5,432
(59)
£000
5,473
1,050
503
–
550
6,526
3,183
873
4,823
22,981
Prepayments include amounts paid up-front by way of pro forma and stage payments to suppliers for the long-lead time items
required on our build projects.
Less than 30 days
31-60 days
61-90 days
Greater than 91 days
Movement in expected credit loss
Brought forward balance at 1 May
Impairment losses recognised
Movement on credit risk provision
Balance at 30 April
2022
£000
2,066
243
–
1,226
3,535
2022
£000
59
17
(16)
60
2021
£000
4,955
220
245
112
5,532
2021
£000
62
–
(3)
59
Our payment terms with customers are generally 30 to 60 days so items falling beyond those terms are chased up and monitored
for potential default. A specific bad debt provision may arise.
The movement on the doubtful debts provision in the year related the IFRS 9 credit risk provision that recognises a potential loss of
1% on the company’s trade debtor and accrued sales income balances.
Amounts recoverable from employees relates to the Employer’s NIC on share options where, under the terms of the offer, staff will
cover this cost upon exercise.
20. Cash and cash equivalents
Other receivables represent indirect taxes reclaimable by the Group.
Restricted cash balances refer to monies received from customers that are currently sat on bank guarantee until specific
performance milestones are met on product sales contracts.
Cash and cash equivalents
2022
£000
365,882
2021
£000
176,078
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less. The
Directors consider that the carrying amount of these assets approximates to their fair value. Cash has increased since the previous
year end due to the fund raise that took place in November 2021.
ITM Power PLC Annual Report 2022 98
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
21. Trade and other payables
22. Provisions
Trade payables
Other taxation and social security
Forward contracts
Accruals
Deferred Sales income
Deferred Grant income
Grant income received against pro forma
2022
£000
8,716
726
–
3,323
17,258
3,752
521
34,296
2021
£000
1,191
511
8
2,112
6,740
1,751
544
12,857
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
As discussed in Note 18, the increase in deferred sales income is due to the move away from bespoke projects where revenue is
recognised over time, to standard products with revenue recognition at point in time.
Overall, grant projects have reduced in number and deferred income against pro formas continues to reduce as those ongoing
projects reach their conclusion.
Balance at 1 May 2020
Provision created in the year
Use of the provision
Release in the year
Balance at 1 May 2021
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2022
Leasehold
Property
Provision
£000
(750)
(584)
140
170
(1,024)
(36)
206
–
Provision
for contract
losses
£000
(3,645)
(2,574)
1,399
–
(4,820)
(15,052)
7,379
–
Warranty
£000
(848)
(210)
252
9
(797)
(2,163)
18
4
Employers’
National
Insurance
Provision
£000
(1,647)
(3,871)
560
–
(4,958)
–
–
805
Other
Provisions
£000
–
(677)
–
–
(677)
(1,330)
509
168
Total
Provisions
£000
(6,890)
(7,916)
2,351
179
(12,276)
(18,581)
8,112
977
(854)
(2,938)
(12,493)
(1,330)
(4,153)
(21,768)
In the balance sheet:
Expected within 12 months (current)
Expected after 12 months (non-current)
–
(854)
(1,145)
(1,793)
(9,453)
(3,040)
(456)
(874)
(4,153)
–
(15,207)
(6,561)
The leasehold property provision represents management’s best estimate for the dilapidations work that may be required to return
our leased buildings to the landlords at the end of the lease term. During the year we vacated another property. In the prior year we
recognised a dilapidations provision for Bessemer Park at a discounted value. This is for the present value of the cost of works
quoted by our Employers Agent for stripping the work back to the original condition at handover from the landlords. The
discounting has started amortising in the current year and will continue over the remaining 13 years of the lease.
The warranty provision represents management’s best estimate of the Group’s liability under warranties granted on products,
based on historical knowledge of the products and their components. As with any product warranty, there is an inherent
uncertainty around the likelihood and timing of a fault occurring that would trigger further work or part replacement. Warranties
are usually granted for a period of one year, although two-year warranties are the standard within some jurisdictions.
ITM Power PLC Annual Report 2022 99
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
22. Provisions continued
Included within warranties is the cost of extensive refurbishment of a system due to extreme weather conditions. The effect of
removing this one unit from the provision would be:
23. Lease liabilities
The following table describes the types of right of use asset owned by the Group and shows the movements on lease liabilities
within the year:
Balance at 1 May 2020
Provision created in the year
Use of the provision
Release in the year
Balance at 1 May 2021
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2022
Warranty
£000
(455)
(210)
20
9
(636)
(1,965)
18
4
(2,579)
The provision for contract losses is created when it becomes known that a commercial contract has become onerous. Project
Managers provide rolling spend forecasts, updating these as quotes are obtained. The provision is therefore based on best
estimates and information known at the time to ensure the expected losses are recognised immediately through profit and loss.
This provision will be used to offset the costs of the project as it reaches completion in future periods.
Provision is also made at the point when project forecasts suggest that the contractual clauses for liquidated damages might be
triggered. The other provisions category relates to potential liquidated damages for overruns on contracts with customers. In the
prior year there was also a provision for contractual breach by a supplier. However, an agreement was reached in the current year
and the payment plan has been adhered to.
There is a provision for Employer’s NIC due on share options as they exercise (see share-based payment Note 25).
2022
Brought forward at 1 May 2021
Adjustments
Additions
Transferred to Motive Fuels Limited
Interest applied
Payments made
At 30 April 2022
Split:
Within 1 year
2-5 years (inclusive)
Over 5 years
Less:
Future finance charges
Present value of lease obligations
In the balance sheet:
Due within 12 months (current)
Due after 12 months (non-current)
Leasehold
Property
£000
Office
Equipment
£000
Motor
Vehicles
£000
6,388
303
597
(298)
483
(467)
7,006
911
3,660
5,913
(3,478)
7,006
564
6,442
44
–
8
–
3
(11)
44
12
38
–
(6)
44
10
34
54
(2)
123
–
5
(82)
98
56
47
–
(5)
98
52
46
Total
£000
6,486
301
728
(298)
491
(560)
7,148
979
3,745
5,913
(3,489)
7,148
626
6,522
ITM Power PLC Annual Report 2022 100
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
23. Lease liabilities continued
2021
Brought forward at 1 May 2020
Adjustments
Additions
Interest applied
Payments made
At 30 April 2021
Split:
Within 1 year
2-5 years (inclusive)
Over 5 years
Less:
Future finance charges
Present value of lease obligations
In the balance sheet:
Due within 12 months (current)
Due after 12 months (non-current)
24. Called up share capital and reserves
Called up, allotted and fully paid: (ordinary shares of 5p each)
At 1 May 2021
Fund raise November 2021
At 30 April 2022
Number of shares
550,658,155
62,500,000
613,158,155
£000
27,533
3,125
30,658
Holders of ordinary shares have voting rights at General Meetings in proportion with their shareholding.
The share premium account represents the amount paid in excess of the nominal value when shares are issued.
The merger reserve arose on the acquisition of ITM Power (Research) Limited in 2004.
The foreign exchange reserve arises upon consolidation of the foreign subsidiaries in the Group, and accounts for the difference
created by translation of the income statement at average rate compared with the year-end rate used on the balance sheet as well
as the effect of the change in exchange rates on opening and closing balances.
The Group’s other reserve is retained earnings which represents cumulative profits or losses, net of any dividends paid and
other adjustments.
Leasehold
Property
£000
6,492
15
–
454
(573)
6,388
Office
Equipment
£000
–
–
48
–
(4)
44
Motor
Vehicles
£000
34
1
52
1
(34)
54
430
3,169
6,711
(3,922)
6,388
168
6,220
11
41
–
(8)
44
8
36
30
27
–
(3)
54
28
26
Total
£000
6,526
16
100
455
(611)
6,486
471
3,237
6,711
(3,933)
6,486
204
6,282
Adjustments refers to foreign exchange movements and contracts that have changed their length of duration or their value during
the year, e.g. following a rent review or a change in decision regarding potential break clauses. In the current year, the latter situation
arose at one of the properties where we had previously intended it to be a stop-gap measure so had only recognised up to the break
clause but have since decided to continue in residence.
The interest charge appears with other interest at the bottom of the income statement and is the only value described above that
affects profit or loss. Each liability is matched by a corresponding right of use asset, upon which depreciation is also charged to the
income statement (see Note 15). The two amounts together replace the previous accounting treatment of expensing rentals
payments.
Total lease payments for capitalised leases and short-term leases was £816,000 (2021: £762,000).
ITM Power PLC Annual Report 2022 101
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
25. Share-based payments
The Group operates a number of share schemes to provide employees and third parties with the opportunity to acquire a
proprietary interest in the Group as an incentive to attract and retain their services as follows:
– An all-employee Share Incentive Plan (referred to as the Buy As You Earn or BAYE scheme);
– An Enterprise Management Incentive (EMI) and Unapproved Share Option Plan, under which Group employees can be granted
share options; and
– A Long Term Incentive Plan (LTIP) under which Group employees can be granted share options or conditional share awards.
Share Incentive Plan
In FY21, the Company implemented a new Share Incentive Plan (the BAYE scheme), which is available to all eligible UK Group
employees. Employees can contribute up to £150 per month to acquire partnership shares, which are purchased or allotted
monthly. The Group currently matches employee contributions, awarding matching shares on a one-for-one basis.
At 30 April 2022 the trustees of the SIP held 102,139 ordinary shares in ITM Power PLC, of which 99,122 have been conditionally
awarded to employees and 3,017 remain unallocated.
The Group recognised a charge of £161,000 in relation to this scheme in 2022 (2021: £75,000).
EMI and Unapproved Share Option Plan and LTIP
In 2010 the Company introduced an EMI and Unapproved Share Option Plan to be applied to subsequent issues of share options.
Under the scheme rules the exercise price is deemed to be the mid-market price of shares on the London Stock Exchange AIM
market at the close of trading on the day before the grant of the share options. Share options vest over a period of three to five
years and are exercisable up to the tenth anniversary of the grant. The last of the EMI share options were exercised in the prior
financial year. As a general rule, unexercised awards granted to participants who leave employment, both pre- and post-vesting,
will be forfeited. In the event a participant leaves as a result of a qualifying reason, they retain vested but unexercised share options
but forfeit unvested share options.
The EMI and Unapproved Share Option Plan was replaced by a Long Term Incentive Plan in 2020. The exercise price for awards
granted to date has been set at the nominal value for shares. Share options vest, subject to the achievement of performance
conditions set at grant, over a period of 3 years and are exercisable up to the tenth anniversary of the grant. As a general rule,
awards granted to participants who leave employment prior to vesting will be forfeited. In the event a participant leaves as a result
of a qualifying reason, they receive a pro rata entitlement.
A more comprehensive description of the different schemes can be found within the Remuneration Report.
Movements within the year on the share option plans (including the EMI, unapproved and LTIP options) were as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2022
2021
Weighted
average
exercise
price
27p
5p
–
5p
24p
30p
Number
10,486,500
1,275,172
(4,183,333)
(76,485)
7,501,854
3,333,333
Weighted
average
exercise
price
36p
5p
44p
5p
27p
30p
Number
7,501,854
1,431,837
–
(323,571)
8,610,120
5,666,667
The options outstanding at 30 April 2022 had a weighted average exercise price of 24p and a weighted average remaining
contractual life of four years.
The fair value of options issued in the current year was measured using a combination of the Monte Carlo options pricing model and
the Black Scholes model as options were split 60% based on total shareholder return (TSR) performance conditions and 40% based
on non-market performance conditions. This is a change from our previous measures as options issued in the prior year were
measured using the Monte Carlo option alone (as awards granted in the prior year were subject solely to a TSR performance
condition) and prior to that all options were measured using the Black Scholes model. Wherever share options include a TSR
performance condition, IFRS 2 requires the use of a model that can take into account the likelihood of the performance condition
being achieved (hence the use of the Monte Carlo model) but for non-market-based performance conditions, the Black Scholes
model suffices.
The assumptions used in the models are as follows:
Weighted averages
Share price
Exercise price
Expected volatility
Expected life
Risk-free rate
2022
385.4p
5p
89.5%
3 years
0.5%
2021
256p
5p
84.7%
3 years
-0.06%
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations. Expected volatility was determined by calculating the historical volatility of
the Company’s shares over a period in line with the expected term of the options. The expected dividend impact used is 0% as
participants are entitled to dividend equivalents in respect of any dividends paid over the vesting period.
ITM Power PLC Annual Report 2022 102
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
25. Share-based payments continued
The Group has recognised a share-based payment expense in the income statement for the year, made up of three elements:
27. Net cash reconciliation
Net debt as at 1 May 2020
Adjusted
Cash flows
Acquisition – leases
Other changes – Interest expense
Net (debt)/cash as at 1 May 2021
Adjusted
Cash flows
Acquisition – leases
Other changes – interest expense
Net(debt)/cash as at 30 April 2022
Share-based payment expense (as seen through equity)
Purchase of partnership shares under the BAYE scheme
Provision for Employers’ NIC on potential gain
2022
£000
1,071
200
161
1,432
2021
£000
595
75
129
799
For options granted prior to 2020, the Group has elected to pay Employer’s NIC on gains made on unapproved share options
exercise, to be capped at the proceeds the Group would receive from the exercise. Any further Employer’s NIC would be recovered
from the exercising party. For options granted from 2020, the Group have agreed to transfer the full Employer’s NIC liability to the
employee share option holders.
26. Notes to the cash flow statement
Loss from operations
Adjustments:
Depreciation
Share-based payment
Foreign exchange on intercompany transactions
Fair value adjustment and expected credit loss on loan notes
Loss on disposal
Impairment
Amortisation
Operating cash flows before movements in working capital
(Increase) in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase in provisions
Cash used in operations
Interest paid
Income taxes (paid)/received
Net cash used in operating activities
2022
£000
(44,736)
2,340
1,071
(43)
359
–
–
849
(40,160)
(25,780)
(2,550)
21,437
9,492
(37,561)
(532)
(62)
(38,155)
2021
£000
(26,657)
2,321
595
–
–
173
1,712
274
(21,582)
(1,987)
185
(1,156)
4,857
(19,683)
(479)
21
(20,141)
Lease
Liabilities
£000
(6,526)
(16)
611
(100)
(455)
(6,486)
(302)
552
(436)
(476)
Cash
£000
39,919
–
136,181
–
(22)
176,078
–
189,897
–
(93)
Total
£000
33,393
(16)
136,792
(100)
(477)
169,592
(302)
190,449
(436)
(569)
(7,148)
365,882
358,734
28. Capital commitments
The Group had capital commitments of £0.6 million at the balance sheet date (2021: £1.1 million). There was also a further
£1.9 million of costs to complete refuelling station equipment promised to Motive as part of the shareholders agreement for the
joint venture.
29. Contingent liability
Receipt of government grants
The Group participates in a number of grant funded projects. Income is recognised in the accounts as receivable based on the grant
contract and the levels of expenditure incurred on the project. It is claimed periodically according to a timetable laid down by each
coordinator. The claims are audited before any money is awarded. However, grants are ultimately funded by government or EU
institutions and can be subject to further scrutiny at later dates. This leaves grant income in the accounts subject to potential recall.
Management do not know which grants will be subject to such audit nor the time that they are likely to arise and as such would be
unable to quantify the potential financial impact of any subsequent recall of funds. To the best of their knowledge, claims are made
for expenditure agreed ahead of any project undertaking and in accordance with grant procedure.
ITM Power PLC Annual Report 2022 103
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
30. Financial instruments
Capital risk management
The current capital risk management objective is to ensure that the existing pipeline continues to be delivered in line with cash
management expectations.
The Group manages cash balances in Australian and US dollars, euros and pound sterling, with natural hedges occurring for most
transactions. The Group keeps under review the need for other hedging opportunities with regards to Capital Risk Management.
The capital risk management landscape has not materially changed in the last year for the Group. Larger cash reserves gained
through the fund raise have led management to put some of the funds on fixed-term deposit to generate interest. The funds have
also been split between different banking institutions. Given the COVID-19 situation and the increasing volumes of raw materials
and stock required to fulfil our contracts, more frequent credit checks have been performed and bank guarantees sought from
some suppliers where up-front payments were made.
Externally imposed capital requirement
During the year the Group was not required to comply with any externally imposed capital requirements.
Categories of financial instruments
Financial assets – amortised cost
Financial asset at amortised cost
Long-term loan notes
Trade receivables (excluding IFRS 9 impairment)
Restricted cash balances
Other receivables
Accrued Sales income
Accrued Grant income
2022
£000
161
1,548
3,534
297
2,459
1,189
3,411
12,599
2021
£000
148
–
5,532
1,050
455
541
4,823
12,549
Both the loan notes and the financial asset at amortised cost sit under non-current assets in the balance sheet. The latter relates to
the security deposit on our leasehold property at Bessemer Park. The rest of the Group’s financial assets consist of cash and
receivables that are largely due from large organisations with a strong credit history. Accrued income amounts are included as
financial assets as they relate to contractual agreements that will result in future cash inflows. ITM Power PLC do not consider there
to be undue risk associated with receivables.
Financial liabilities – amortised cost
Trade payables
Accruals
Lease liabilities
2022
£000
8,716
3,322
7,148
19,186
2021
£000
1,191
2,112
6,486
9,789
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed
repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay.
2022
Trade and other payables
Lease liabilities
2021
Trade and other payables
Lease liabilities
Within
1 year
£000
12,038
979
13,017
Within
1 year
£000
3,303
473
3,776
2-5 years
(inclusive)
£000
–
3,745
3,745
2-5 years
(inclusive)
£000
–
3,236
3,236
Over
5 years
£000
–
5,913
5,913
Over
5 years
£000
–
6,711
6,711
Total net
payable
£000
12,038
10,637
22,675
Total net
payable
£000
3,303
10,420
13,723
ITM Power PLC Annual Report 2022 104
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
30. Financial instruments continued
Fair value through profit and loss
In both years, the Group held foreign currency forward contracts that were measured at fair value through profit or loss. The figures
shown in Notes 19 and 21 represent the difference between their contract value and the exchange rates at the balance sheet date.
These financial instruments would sit within Level 2 of a fair value hierarchy, being derived from other inputs – other than quoted
prices in active markets – that are observable. However, as they are the only financial instruments measured at fair value, no fair
value hierarchy table has been presented.
The carrying value of all other financial instruments at 30 April 2022 and 30 April 2021 approximated to their fair value.
Financial risk management objectives and policies
The Group’s finance function monitors and manages the financial risks relating to the operations of the Group. The Group’s activities
expose it primarily to the financial risks of changes in interest rates.
The Group also receives and spends money in different currencies. Significantly, contracts are often in the currency of the customer.
As such, the Group has exposure to foreign exchange variation. This is naturally hedged where possible by paying for supplies in the
currencies in which they are invoiced, but this does not eliminate exposure. Management look to use forward contracts as a means
of mitigating exposure to exchange rate volatility on long-term contracts.
The Group seeks to minimise the effects of these risks. The Group’s policies approved by the Board of Directors provide written
principles on interest rate risk and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed on a
continuous basis.
The treasury activities are reported to the Group’s Board as required.
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The
Group has adopted a policy of only dealing with creditworthy counterparties. Sales invoices are expected to be paid within 30 to 60
days under our usual contractual terms. At the year end, there were receivables totalling £1.0 million (2021: £0.4 million) that were
overdue but considered fully recoverable. Most of our sales income is subject to contractual terms and therefore largely protected
from default.
The credit risk of liquid funds (cash, cash equivalents and short-term deposits) is limited because the counterparties are banks with
high credit ratings assigned by international credit-rating agencies.
Liquidity and interest risk management
The Group is exposed to the interest rate risks associated with its holdings of cash and cash equivalents and short-term deposits.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which regularly monitors the Group’s short,
medium and long-term funding, and liquidity management requirements. The Group manages liquidity risk by maintaining adequate
reserves and banking facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of
financial assets and liabilities.
Foreign currency risk management
At year end, the Group did not hedge its exposure of foreign investments held in foreign currencies.
The table below shows the Group’s currency exposure at year end. Such exposure comprises the monetary assets and monetary
liabilities that are not denominated in the functional currency of the operating unit involved. The Group’s exposure to currency risk
predominately arises on trade (transactions with both suppliers and customers) in a variety of locations and denominated in
currencies other than the functional currency of the operating unit excluding intercompany balances.
These exposures were as follows:
EUR
USD
SEK
AUD
(i)
(ii)
(iii)
(iv)
Liabilities
Assets
2022
£000
46
268
33
–
347
2021
£000
1,504
32
–
9
1,545
2022
£000
1,961
8
–
307
2,276
2021
£000
4,175
596
–
285
5,056
(i) This is mainly attributable to the exposure to outstanding Euro to Pound Sterling receivables and payables in the Group at the
balance sheet date.
(ii) This is mainly attributable to the exposure to outstanding US Dollar to Pound Sterling receivables and payables at the balance
sheet date.
(iii) This is mainly attributable to the exposure to outstanding Swedish Krona to Pound Sterling receivables and payables at the
balance sheet date.
(iv) This is mainly attributable to the exposure to outstanding Australian Dollar to Pound Sterling receivables and payables at the
balance sheet date.
ITM Power PLC Annual Report 2022 105
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Consolidated Financial Statements continued
30. Financial instruments continued
Foreign currency sensitivity analysis
The table below assumes an increase/decrease of 10% change of the Euro to Pound Sterling exchange, the US Dollar to Pound
Sterling exchange rate and the Australian Dollar to Pound Sterling exchange rate.
The sensitivity analysis is based on the subsidiaries’ profit or loss for the year.
Profit or loss
EURO impact
2022
£000
78
2021
£000
70
USD impact
2022
£000
42
2021
£000
61
AUD impact
2022
£000
62
2021
£000
37
If interest rates had been 1% higher/lower and all other variables had remained constant, loss for the year would have decreased/
increased by £181,000 (2021: £168,000).
The Group’s financial liabilities consist of trade and other payables as shown on the balance sheet. No interest is paid on these
balances and all amounts are due within three months.
Fair value of financial instruments
Carrying amounts of financial instruments are a reasonable approximation of the fair values of those instruments.
31. Transactions with related parties
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are
not disclosed in this note. All related party transactions which were not intra-group have been conducted at arms’ length.
Tom Rae Consulting Limited, owned by director Tom Rae who was a Non-Executive Director of the Company during the financial
year, has been engaged to carry out consultancy work equating to £2,000 in the current year. This was fully paid by year end.
During the year, purchases from Linde/BOC Group, represented on the Board by J Nowicki, totalled £0.5 million (2021: £3.5 million)
with £114,000 outstanding for payment at year end (2021: £256,000). Furthermore, an amount of £0.6 million relates to stage
payments made for goods but not yet received. There were also milestone billings on sales contracts of £7.0 million (2021: £0.4
million) with £1.7 million remaining outstanding at year end (2021: only £13,684).
Balances and transactions with ILE and Motive are discussed in Note 12 Investments.
The remuneration of the directors and key management personnel of the Group is shown in Note 8.
32. Controlling party
As at the date of these accounts neither the Directors together, nor any individual shareholder, owned more than 50% of the issued
share capital of the Company and hence, in the opinion of the Directors, there is no controlling party at this date.
33. Events after the balance sheet date
After the balance sheet date, the Group announced that ITM Power had been awarded a contract by BEIS, under its Net Zero
Innovation Portfolio Low Carbon Hydrogen Supply 2 Competition to accelerate the commercial deployment of the 5 MW Gigastack
platform and its manufacture. The award for the Gigatest project is for £9.3 million and follows initial designs developed through
previous BEIS funding competitions. The award is expected to be spread over a three-year period and is also expected to be
back-end loaded.
In addition, at the time of the trading update in June, we announced the development of ITM Power Service, an aftermarket focused
customer support business based in Germany designed to provide full product life cycle support of deployed electrolyser systems.
All existing aftermarket operations, including the Group’s 24/7 UK Remote Support Centre, will be merged into one focused
organisation with new headquarters in Linden in Germany.
In September 2022, we reviewed our plans to open a second UK factory at Aviation Park, given the current business climate and
general cost escalation. Our ambitions remain as strong as ever, but we need to be nimble and flexible, and we want to ensure
investment decisions are correct and right for the business and considered fully before capital is committed. In the near-term
extending the total capacity at Bessemer Park up to 1.5 GW is a better use of capital with commensurately improved near-medium
term cash flows.
In September 2022 Dr Graham Cooley decided to step aside from his position as CEO of the Company after 13 years in post.
The Company has commenced a process to select a new CEO. Dr Cooley will remain in position until a successor is appointed,
and thereafter assume a senior strategic role in the Company, reporting to the Chairman and the new CEO.
ITM Power PLC Annual Report 2022 106
Overview Strategic Report Governance Financial Statements Shareholder Information
Company Statement of Changes in Equity
At 1 May 2020
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total transactions with owners
Profit for the year and comprehensive income
Total comprehensive income
At 1 May 2021
Transactions with owners
Issue of shares
Credit to equity for share-based payment
Total transactions with owners
Loss for the year and comprehensive loss
Total comprehensive loss
At 30 April 2022
Retained losses have been restated for a prior year adjustment to reverse the impairment on an investment (see Note 6).
Called up
share
capital
£000
23,664
3,869
–
3,869
–
–
Share
premium
account
£000
137,236
165,012
–
165,012
–
–
Retained
loss
RESTATED
£000
(74,480)
–
595
595
7,515
7,515
Total
equity
RESTATED
£000
86,420
168,881
595
169,476
7,515
7,515
27,533
302,248
(66,370)
263,411
3,125
–
3,125
–
–
240,075
–
240,075
–
1,070
1,070
243,200
1,070
244,270
–
–
(5,621)
(5,621)
(5,621)
(5,621)
30,658
542,323
(70,921)
502,060
ITM Power PLC Annual Report 2022 107
Overview Strategic Report Governance Financial Statements Shareholder Information
Company Balance Sheet
Fixed assets
Tangible assets
Intangible assets
Investments
Loan notes
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Trade and other payables
Provisions
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Retained loss
Shareholders’ funds
The Company reported a loss for the financial year ended 30 April 2022 of £5.6 million (2021: a restated profit of £7.5 million).
The financial statements of ITM Power PLC, registered number 05059407, were approved by the Board of Directors and authorised for issue 14 September 2022.
Signed on behalf of the Board of Directors
Andy Allen
Director
Note
4
5
6
6
7
8
9
10
10
10
2022
£000
21
12
162,563
1,548
164,144
1,479
340,409
341,888
(1,704)
(2,268)
(3,972)
2021
RESTATED
£000
8
8
112,252
–
112,268
2,117
152,556
154,673
(611)
(2,919)
(3,530)
337,916
151,143
502,060
263,411
30,658
542,323
(70,921)
502,060
27,533
302,248
(66,370)
263,411
ITM Power PLC Annual Report 2022 108
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Company Financial Statements
1. Significant accounting policies
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006.
Investments
Balances are stated at cost less a provision for any permanent impairment in value.
The Company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial
Reporting Council. Accordingly, financial statements have been prepared in accordance with FRS 101 (Financial Reporting Standard
101) ‘reduced disclosure framework’ as issued by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation
to share-based payments, financial instruments, capital management, presentation of comparative information in respect of
non-current assets, presentation of a cash flow statement and certain related party transactions.
Where required, equivalent disclosures are given in the consolidated financial statements.
In accordance with s408 of the Companies Act 2006, the Company has taken the exemption from presenting the parent company’s
individual profit and loss account.
The financial statements have been prepared on the historical cost basis except for the re-measurement of certain financial
instruments to fair value. The principal accounting policies adopted are the same as those set out in Note 3 to the consolidated
financial statements except as noted below.
Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is charged
so as to write off the cost, over an estimated useful life of three years, using the straight-line method. The gain or loss arising on the
disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset
and is recognised in income.
Intangible assets – software
Software purchased from external companies has been recognised at cost under the heading of intangible assets. Amortisation is
charged so as to write off the cost of assets over an estimated useful life of three years using the straight-line method and is
recognised in income.
Investments are considered for any potential impairment under the IAS 36 impairment of assets. Given that the subsidiaries
are in the early stages of commercial trade and that the Company continues to support its subsidiaries as they build up trade,
all investments have been compared with their net asset value and where that does not provide any immediate prospect
of repayment, especially if assets are not sufficiently liquid, investment values are impaired down to nil value.
The Company previously invested in ILE, which is owned equally by both investors (50% shares), although control is deemed to lie
with Linde for the purposes of consolidation as they appoint the managing director, who also has the casting vote at meetings of the
ILE board of directors. ITM Power has significant influence due its representation on the board. As such, ITM Power accounts for this
investment in associate using the equity method. This means that the investment is originally recognised at cost, with subsequent
movements to reflect ITM Power’s share of the profit or loss after the date of acquisition. This share of the profit or loss is
recognised in ITM Power’s profit or loss. Should any adjustments be necessary for changes in proportionate interest arising from
changes in ILE’s other comprehensive income, ITM Power’s share of those changes would be recognised in the other comprehensive
income. Any distributions received will reduce the carrying amount of the investment.
The Company holds 50% of the share capital of Motive since a partnership deal was signed with Vitol. There is no outright control by
either party but ITM Power still has significant influence due to its representation on the board. As such, ITM Power accounts for
this joint venture using the equity method. This means that the investment is originally recognised at cost, with subsequent
movements to reflect ITM Power’s share of the profit or loss after the date of acquisition. This share of the profit or loss is
recognised in ITM Power’s profit or loss. Should any adjustments be necessary for changes in proportionate interest arising from
changes in Motive’s other comprehensive income, ITM Power’s share of those changes would be recognised in the other
comprehensive income. Any distributions received will reduce the carrying amount of the investment.
ITM Power PLC Annual Report 2022 109
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Company Financial Statements continued
1. Significant accounting policies continued
Financial instruments
Financial assets are recognised in the Company’s balance sheet when the Company becomes party to the contractual provisions of
the instrument. They are initially measured at fair value plus, in the case of financial assets not at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at
fair value through profit or loss are expensed in profit or loss. Subsequent measurement of financial assets depends on the Group’s
business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories of
which the Group holds financial instruments in two:
Amortised cost
Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and
interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is
not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from
these financial assets is included in finance income using the effective interest rate method.
Fair value through profit or loss
Assets that do not meet the criteria for amortised cost or Fair Value through Other Comprehensive Income (FVOCI) are measured at
fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss
and is not part of a hedging relationship is recognised in profit or loss and presented net in the profit or loss statement within other
gains/(losses) in the period in which it arises. Interest received from these financial assets is included in investment income.
2. Critical accounting judgements and key sources of estimation uncertainty
The Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that
are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods
if the revision affects both current and future periods. There were no critical judgements that the Directors have made in the
process of applying the Company’s accounting policies.
Key sources of estimation uncertainty
Recoverability of investment
The Company tests the net recoverable amounts of assets annually for impairment, or more frequently if there are indicators of
impairment. During the year, management considered the recoverability of its investment in subsidiary companies, which are
disclosed in Note 6. The subsidiaries continue to trade, but currently are trading at a loss, which is seen as temporary by
management. Under IFRS 9 Financial Instruments, most of the intercompany loans or subsidiary investments have been impaired to
nil. With a net asset position at the year end and its contribution to the valuable intellectual property of the Group together with the
interest that that generates for revenue opportunities, the investment in ITM Power (Trading) Limited was not impaired. Any
previous impairment relating to this entity has been reversed. Both the associate investment in ILE and the joint venture with
Motive were also left un-impaired.
Impairment
The Group assesses, on a forward-looking basis, the expected credit losses associated with its assets carried at amortised cost. The
impairment methodology applied depends on whether there has been a significant increase in credit risk in trade receivables and
contract assets (accrued sales income). For trade receivables only, the company applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from initial recognition of the receivables. An analysis of historical default
amongst our trade debtors was conducted and showed that less than 1% of sales over several years have resulted in default. The
Group continue to trade with large entities with good credit scores but trading data is monitored annually to ensure that there are
no significant changes to this percentage.
Share option charges
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the
determination of the fair value of equity-settled share-based transactions are set out in Note 24 of the Group financial statements.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest (other than for market-based
performance conditions). At each balance sheet date, the Group revises its estimate of the number of equity instruments expected
to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to
equity reserves.
Pension costs
The Company operates a defined contribution pension scheme. The amount charged to the profit and loss account in respect of
pension costs is the contributions actually payable in the year. Differences between contributions payable and contributions actually
paid are shown as either accruals or prepayments in the balance sheet.
3. Staff numbers and costs
Monthly average number of persons employed
Staff costs during the year (including directors)
Wages and salaries
Social security costs
Other pension costs
Remuneration of the highest paid director
Aggregate emoluments
2022
Number
6
2021
Number
6
2022
£000
1,504
235
35
1,774
2022
£000
653
653
2021
£000
1,007
131
34
1,172
2021
£000
500
500
As at 30 April 2022 pension contributions of £2,000 (2021: £2,000) due in respect of the current year had not been paid over to the
scheme. These were paid over in the following month and within statutory deadlines.
ITM Power PLC Annual Report 2022 110
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Company Financial Statements continued
4. Tangible fixed assets
6. Investments
Cost
At 1 May 2021
Additions
Disposals
At 30 April 2022
Depreciation
At 1 May 2021
Charge for the year
Disposals
At 30 April 2022
Net book value
At 30 April 2021
At 30 April 2022
5. Intangible assets
Cost
At 1 May 2021
Additions
At 30 April 2022
Amortisation
At 1 May 2021
Charge for the year
At 30 April 2022
Carrying amount
At 30 April 2021
At 30 April 2022
Cost
At 1 May 2021
Additions
Waiving of Motive intercompany loan (akin to capital contribution)
Disposal of ITM Motive Limited
Foreign exchange
Share options granted to subsidiary employees
50% share of loss
Transfers
At 30 April 2022
Provisions for impairment
At 1 May 2021 (restated)
Movement in year
Disposal of ITM Motive Limited
At 30 April 2022
Net book value
At 30 April 2021 (restated)
At 30 April 2022
Loans to
subsidiary
undertakings
£000
Investment
in subsidiary
undertakings
RESTATED
£000
Investments
in associates
and joint
ventures
£000
11,091
50,088
(4,685)
–
–
–
–
(48,255)
149,327
1,500
4,685
(6,185)
(1)
789
–
48,255
8,239
198,370
11,091
(2,852)
–
8,239
37,334
5,222
(4,685)
37,872
259
338
–
1,500
(22)
–
(10)
–
2,065
–
–
–
–
Total
£000
160,677
51,926
–
(4,685)
(23)
789
(10)
–
208,674
48,425
2,371
(4,685)
46,111
–
–
111,993
160,498
259
2,065
112,252
162,563
Computer
equipment
£000
205
24
(128)
101
197
11
(128)
80
8
21
Software
£000
22
14
36
14
10
24
8
12
The amortisation period for externally purchased software has been set at three years (in line with our policy for computer equipment).
ITM Power PLC Annual Report 2022 111
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Company Financial Statements continued
6. Investments continued
Interest is charged annually upon intercompany loan balances at a rate of 1% over the Bank of England base rate. During the year,
previous intercompany debt has been converted into equity in the following amounts:
The Company holds 100% of the ordinary share capital of ITM Power, Inc. a company which is incorporated in California and its
principal activity is that of the sale of electrolysis equipment and hydrogen storage solutions. Registered office: 2 Bessemer Park,
Shepcote Lane, Sheffield, S9 1DZ.
Subsidiary company
ITM Power GmbH
ITM Power (Trading) Limited
2022
£000
255
48,000
48,255
2021
£000
3,579
32,699
36,278
As in previous years, a provision for credit losses (IFRS 9) has been made in recognition that the subsidiaries are loss-making and
therefore unlikely to be able to pay their debt to the parent company in the near term.
A further impairment assessment of the investments has also been undertaken in line with IAS 36 Impairment of Assets. The recoverable
amount was estimated based on fair value less costs to sell and based on the Group’s market capitalisation less relevant adjustments
to reflect ITM Power (Trading) Limited is a private company. This triggered a prior year adjustment of £74.7 million to reverse
previous impairments on this asset. The net book value remaining on investment in subsidiary undertakings, both in this
financial year and the previous financial year, relates solely to ITM Power (Trading) Limited.
As a result, figures have been restated in both this investment note and the Company Statement of Changes in Equity. The opening
balance on impairment of subsidiary undertakings has been adjusted by £74.7 million. The opening balance on retained earnings in
the prior year was adjusted by £50.3 million and the loss for the year as previously reported of £16.9 million has been restated by
£24.4 million to a reported profit of £7.5 million.
The Company holds 100% of the ordinary share capital of ITM Power (Trading) Limited, a company which is incorporated in England
and Wales and its principal activity is the development and manufacturing of prototype products.
The Company holds 100% of the ordinary share capital of ITM Power (Research) Limited, a company which is incorporated in
England and Wales and its principal activity is the research and development of scientific and engineering projects. The company
was dormant during the year.
ITM Power (Trading) Limited holds 100% of the ordinary share capital of ITM Power Shelfco Limited, a company which is incorporated
in England and its principal activity is that of the production of drivetrains for use with hydrogen. The company was dormant during
the year.
All of the above are registered at 2 Bessemer Park, Shepcote Lane, Sheffield, South Yorkshire, S9 1DZ.
The Company holds 100% of the ordinary share capital of ITM Power GmbH, a company which is incorporated in Germany and its
principal activity is that of the sale of electrolysis equipment and hydrogen storage solutions. Registered office: Am Muehlgraben 6,
35410 Hungen, Germany.
The Company holds 100% of the ordinary share capital of ITM Power Pty Ltd, a company which is incorporated in Australia and its
principal activity is that of the sale of electrolysis equipment and hydrogen storage solutions. Registered office: Unit 2 Level 1,
32 Main Street, Samford Village, Queensland, Australia 4520.
The Company holds 100% of the ordinary share capital of Orkney Hydrogen Trading Limited, a company which is incorporated in
Scotland and its principal activity is that of the sale of hydrogen. The company was dormant during the year. Registered office: Suite
2, Ground Floor, Orchard Brae House, 30 Queensferry Road, Edinburgh, EH4 2HS.
The investments in associates and joint ventures are discussed in more detail in Note 12 to the consolidated financial statements but
relate to the investment in ITM Linde Electrolysis GmbH and in Motive Fuels Limited.
The Company holds 50% of the ordinary share capital of ITM Linde Electrolysis GmbH, a company which is incorporated in Germany
and its principal activity is that of the sale of large-scale electrolyser solutions. ITM Power and Linde Engineering GmbH both have
an equal share of the company, although control is deemed to lie with Linde for the purposes of consolidation as they appoint the
Managing Director. ITM Power does have significant influence however, with representation on the board of directors, and as
such it is being equity accounted as an investment in associate in these statements. Registered office: Bodenbacher Str. 80,
01277 Dresden, Germany.
The Company previously held 100% of the ordinary share capital of ITM Motive Limited, a company which is incorporated in England
and Wales and its principal activity is the retail sale of automotive fuel in specialised stores. Following incorporation prior to last year
end, the company remained dormant up until 1 May 2021 when the hydrogen refuelling station operations were transferred from
ITM Power (Trading) Limited. The company was part of the Group until the end of March 2022, when a joint venture agreement was
signed with Vitol. As part of the investment agreement and prior to the Vitol transaction, ITM Power PLC waived the intercompany
loan of £4.7 million. This has been accounted as an impairment during the year.
The entity changed its name to Motive Fuels Limited on completion of the Vitol transaction. ITM Power PLC retained 50% of the
ordinary share capital. This granted significant influence and joint control through parity in representation on the company’s board
of directors and rights over its share of the net assets of the business. The Company began accounting for the investment in joint
venture at cost, including the cost of share capital and capitalised professional fees. ITM Power PLC is subsequently equity
accounting for its share of the profit or loss.
ITM Power PLC Annual Report 2022 112
Overview Strategic Report Governance Financial Statements Shareholder Information
Notes to the Company Financial Statements continued
7. Debtors: amounts falling due within one year
Prepayments
Amounts recoverable from employees
Other debtors
2022
£000
389
1,002
88
1,479
2021
£000
318
1,771
28
2,117
The amounts recoverable from employees relate to the extent that Employers’ NIC can be recovered when share options are
exercised and will off-set the provision in Note 9.
8. Trade and other payables
Trade creditors
Payroll creditors
Intercompany creditor
Accruals and deferred income
9. Provisions
Balance at 1 May 2021
Provision created in the year
Use of the provision
Release in the year
Balance at 30 April 2022
2022
£000
3
47
1,253
401
1,704
2021
£000
119
33
–
459
611
Employers’ NIC on
share options
£000
(2,919)
–
–
651
(2,268)
10. Share capital and reserves
The movements on share capital and share premium accounts are disclosed in Note 24 to the consolidated financial statements.
The Company’s other reserve is the profit and loss reserve which represents cumulative profits or losses, net of dividends paid and
other adjustments.
11. Related party transactions
The Company has taken advantage of the exemption included in FRS101 ‘Related Party Disclosures’ for wholly-owned subsidiaries
not to disclose transactions with entities that are part of the Group qualifying as related parties.
The balances with both ILE and Motive are shown under Investments in associate and joint ventures in Note 6 and the transactions
with those entities are described more fully in Note 12 to the consolidated financial statements. These were the only transactions
made with those entities in the year.
ITM Power PLC Annual Report 2022 113
Overview Strategic Report Governance Financial Statements
Shareholder Information
Glossary
Term
AIM
AQRT
BAYE
BEIS
blue hydrogen
Meaning
the Alternative Investment Market operated by the London Stock
Exchange
the Audit Quality Review Team from the UK Financial
Reporting Council
ITM Power PLC Buy As You Earn Plan (a SIP)
UK Department for Business, Energy and Industrial Strategy
hydrogen derived from natural gas through the process of steam
methane reforming – however, this produces CO2 which must
then be captured and safely stored
German Federal Ministry of Education and Research
the board of directors of ITM Power PLC
carbon capture and storage
Chief Executive Officer
Contract for Difference
Chief Financial Officer
carbon dioxide
BMBF
Board (the)
CCS
CEO
CfD
CFO
CO2
Companies Act UK Companies Act 2006
Company (the)
COP26
ITM Power PLC, registered in England and Wales number 5059407
26th session of the UN Climate Change Conference of the Parties that
took place from 31 October to 13 November 2021 in Glasgow, Scotland
27th session of the UN Climate Change Conference of the Parties
taking place from 7 to 18 November 2022 in Egypt
the coronavirus disease-19
Chief Technology Officer
earnings before interest, tax, depreciation and amortisation
equity, diversity and inclusion
enterprise management incentive
engineering, procurement and construction
COP27
COVID-19
CTO
EBITDA
EDI
EMI
EPC
Meaning
environmental, social and governance
European Union
EU Fuel Cells and Hydrogen Joint Undertaking
front end engineering design
final investment decision
first in, first out
Fair Value through Other Comprehensive Income
freedom-to-operate
the financial year ended 30 April 2021
the financial year ended 30 April 2022
the financial year ending 30 April 2023
current generation 2.5 MW stack platform
greenhouse gas(es)
Term
ESG
EU
FCH-JU
FEED
FID
FIFO
FVOCI
FTO
FY21
FY22
FY23
GEP
GHG
green hydrogen hydrogen created solely from renewable energy and water through
the process of electrolysis; this results in a clean, zero-emission fuel
the most common form of hydrogen, produced by reforming
natural gas (methane); this results in substantial carbon emissions
the group of companies headed by ITM Power PLC
gigawatt (one billion watts, 109 watts)
health, safety and environment
International Energy Agency
Institute for Energy Economics and Financial Analysis
ITM Linde Electrolysis GmbH, our joint venture with Linde
intellectual property
EU ‘important project of common European interest’
ITM Power PLC Long Term Incentive Plan
current generation 0.7 MW stack platform
Group (the)
GW
HSE
IEA
IEEFA
ILE
IP
IPCEI
LTIP
MEP
grey hydrogen
Term
Motive
MW
NED
NIC
NOMAD
PEM
PGM
QCA Code (the)
R&D
RIDDOR
SDGs
SIP
SMR
SONIA
SOP
stack
STEM
TCFD
TSR
UK
UN
US IRA
WIP
Meaning
Motive Fuels Limited (formerly ITM Motive Limited, our
joint venture with Vitol), registered in England and Wales
number 13290733
megawatt (one million watts, 106 watts)
Non-Executive Director
National Insurance Contributions
nominated advisor
proton exchange membrane
platinum group metal(s)
The Quoted Companies Alliance Corporate Governance Code 2018
research and development
UK Reporting of Injuries, Diseases and Dangerous Occurrences
Regulations 2013
UN Sustainable Development Goals
share incentive plan, a type of tax-advantaged all-employee share
plan offered to eligible UK employees
steam methane reformer
Sterling Overnight Index Average
ITM Power PLC Share Option Plan: EMI and Unapproved
a stack of cells that perform electrolysis
science, technology, engineering and maths
Task Force on Climate-related Financial Disclosures
total shareholder return
United Kingdom
United Nations
US Inflation Reduction Act of 2022
work-in-progress
ITM Power PLC Annual Report 2022 114
Overview Strategic Report Governance Financial Statements
Shareholder Information
Officers, Professional Advisors and Useful Contacts
Officers
Directors:
Executive Committee:
See biographies from page 41
Dr Graham Cooley, CEO
Andy Allen, CFO
Dr Simon Bourne, CTO
Dr Rachel Smith, Services Director
Tim Calver, Commercial Director
Martin Clay, Operations Director
Chris Yewdall, Projects Director
Useful contacts
Registered office:
Registrar:
2 Bessemer Park
Sheffield
S9 1DZ
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Investor Relations:
James Collins, Justin Scarborough
Marketing and Press:
Sharon Poulter
Telephone: +44 (0)371 664 03001
Email: shareholderenquiries@linkgroup.co.uk
Advisors
Nominated advisor
and broker:
External auditor:
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Grant Thornton UK LLP
1 Holly Street
Sheffield
S1 2GT
Credits
Designed and produced by Gather
Gather.London
Printed by Pureprint Group, a Carbon Neutral® company.
This document was printed using Pureprint® environmental
printing technology. 99% of the dry waste and 95% of cleaning
solvents associated with the production were recycled.
This document is printed on Revive 100% Recycled Silk from
Denmaur Paper. Denmaur have offset the carbon produced
in the manufacturing process and delivery to Pureprint.
The paper and printing are carbon neutral.
Both the paper mill and printer are registered to the
Environmental Management System ISO 14001 and are
Forest Stewardship Council® (FSC) chain-of-custody certified.
CBP00019082504183028
1
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK are charged at the applicable international rate.
Lines are open between 09:00 and 17:30 Monday to Friday, excluding public holidays in England and Wales.
ITM Power PLC Annual Report 2022
ITM Power PLC
2 Bessemer Park
Sheffield
S9 1DZ
Designed and produced by Gather
Gather.london