Locality Planning Energy Holdings Limited Annual Report 2022 Your Smarter, Friendlier, Better Strata Experts 1 Locality Planning Energy Holdings Limited | Annual Report 2022 Contents Corporate Directory Chairman’s Letter Message from the Managing Director & CEO Operating and Financial Review Directors’ Report Directors’ Meetings Remuneration Report - Audited Financial Statements Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information 1 2 3 5 7 9 10 14 19 44 45 51 Your Smarter, Friendlier, Better Strata Experts 2 Locality Planning Energy Holdings Limited | Annual Report 2022 Corporate Directory Non-Executive Chairman Mr Justin Pettett Non-Executive Directors Mr Barnaby Egerton-Warburton Ms Kathryn Guides Executive Director Mr Damien Glanville Company Secretary Ms Elissa Hansen Principal & Registered Office Level 8, 8 Market Lane, Maroochydore, QLD 4558 Phone: 1800 040 168 Auditors Bentleys Level 9, 123 Albert Street Brisbane, Qld 4000 Phone +61 7 3222 9777 Lawyers Holding Redlich Level 1, 300 Queen Street Brisbane, Qld 4000 Phone +61 7 3135 0500 Share Registrar Link Market Services Limited 10 Eagle Street Brisbane, Qld 4000 Phone: + 61 1300 554 474 Stock Exchange Listing Australian Securities Exchange Code: LPE 1 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited Chairman’s Letter Dear Shareholders, By all yardsticks, the fiscal year to 30 June 2022 (FY22) has been LPE’s most challenging, transformative and successful since listing on the ASX in January 2016. In May 2022, the Board made the difficult strategic decision to encourage all LPE’s on-market customers to transfer to alternative providers so they could continue to enjoy receiving competitively priced electricity. Pleasingly, around 80% of the on-market customers switched to alternative providers by 30 June 2022. As a result of this transformative restructuring exercise, LPE avoided many of the exogenous challenges arising from the volatile wholesale electricity market and booked a net profit of $6.1 million for FY22 versus $0.9 million in FY21. With the material reduction in on-market customers, LPE had to make a commensurable reduction in the workforce, with termination costs reflected in part within the FY22’s results with some overflowing into the FY23 year. As such, LPE will continue to work hard through the beginning of FY23 to ensure that its forward fixed cost structure and headcount are optimal relative to the group’s anticipated requirements. On the positive side, LPE has recovered most of the $8 million in credit support obligations sitting with the Australian Energy Market Operator (AMEO). Further, LPE has closed out all its hedge positions enabling a $22 million gain to be booked. These cash inflows will be utilised to: 1) pay down all debt facilities; 2) steadily grow the stable strata business; and 3) develop the exciting vertically integrated renewable energy business. Having successfully navigated through a challenging FY22, LPE is now in a robust financial position. More importantly, the Board now has considerably more time to focus on productively growing the group’s remaining businesses and creating value for shareholders. Justin Pettett Chairman Brisbane, Australia 31 August 2022 2 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited Message from the Managing Director & CEO Without question FY22 was a highly challenging yet transformative year for the group. However, thanks to a strong corporate culture, high calibre team members, solid operational processes and extremely tough decisions at Board level, LPE had a successful and profitable year. As such, LPE is now in a strong financial position, with two solid businesses to focus on developing moving ahead. Notably, thanks to LPE’s team members being flexible, we kept operations as normal as practical while complying with mandated safety protocols to protect the health of stakeholders over the summer months. However, unseasonal weather and generation outage in FY22 adversely impacted wholesale energy market: • Fewer sunlight days, due to higher rainfall and cloud cover, removed solar generation availability which in turn place upward pressure on wholesale energy prices; and • Persistent hot humid weather, propelling demand, in conjunction with generation shortage appeared to be the catalyst which started to push wholesale energy prices on an unstoppable upward trajectory from 1 April 2022. Prudently, the Company’s hedging strategy was well placed to protect LPE’s exposure and the Company had forecast adequate cash reserves to meet AMEO’s stringent credit obligations in typical market conditions. However, as wholesale energy prices showed no signs of correcting, the Board decided to implement a transformative restructuring exercise in late May 2022 to encourage on-market customers to move to alternate providers or face significant price increases. Pleasingly, LPE saw circa 80% of on-market customers switch to alternate providers by 30 June 2022, which crystallised several positive developments: • $22 million profit on closing out derivative hedges that will flow in over the next 24-months; • Remaining $4.2 million in credit support to be fully returned over next few months; • Repayment of all short-term debt by end FY23; • Significant reduction in operating costs due to lower headcount; and • Material increase in management time to focus on creating shareholder value. 3 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited Message from the Managing Director & CEO FY23: Simplified business structure The Board is excited about prospects for FY23 as we re-focus our efforts on growing the strata business and developing the vertically integrated assets. Notably, for the former, we will continue targeting to expand our strata footprint in Queensland, leveraging LPE’s reputation as a quality and reliable service provider. Concurrently, we will continue to remove inefficiencies within the operating platform so that costs align with revenues, potentially enabling forward EBITDA margin expansion. Our team are now working on encouraging the remaining on-market customers to transfer to new service providers and effectively managing related legacy receivables. We are targeting to have this concluded during the final quarter of the calendar year. Across the entire operating platform, our team have done an amazing job delivering a value added service to our customers, despite the multiple challenges. Their support, as well as shareholders, are critical ingredients to ensuring LPE’s ongoing success in FY23 and beyond. Damien Glanville Managing Director & CEO Brisbane, Australia 31 August 2022 4 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Operating and Financial Review Operating Results From mid-May until 30 June 2022, circa 80% of LPE’s on-market customers transferred away to alternate service providers, due to Queensland’s wholesale electricity crisis. Since the fiscal year-end to 31 August 2022, this has increased to 92% which is an excellent outcome. Pleasingly, all LPE’s FY22 metrics are up on FY21, with the restructuring exercise – that commenced in May 2022 – delivering material benefits. Notably, LPE is now in significantly stronger financial position and well placed to rapidly develop its strata business and vertically integrated renewable assets. Key operational highlights for the year ended 30 June 2022 include: • +25% growth in sales to $69.4 million (2021: $55.6 million), with growth realised across all customer segments; • Gain on fair value of derivatives coming in at $14.3 million (2021 $5.6 million); • Gross margin reaching 17% of sales (excluding unrealised gain on derivatives) (2021: 16%); and • Net profit accelerating to $6.1 million (2021 $0.9 million). LPE’s financial performance during FY22 was driven initially by an increase in customers, which peaked at circa 50,000, prior to the wholesale energy crisis necessitating the restructuring exercise. With LPE’s ability to continue offering on-market customers competitive pricing for electricity compromised by exogenous factors, they were encouraged to rapidly transfer to alternative providers to avoid substantial price increases. Notwithstanding the difficult and unforeseen wholesale electricity market conditions, LPE’s revenues remained strong throughout the year reaching $69.4 million (2021: $55.6 million; +25% YoY). Optimal Restructuring Exercise In late May 2022, LPE went through a transformative restructure in response to the wholesale electricity crisis that adversely impacted millions of electricity customers along Australia’s east coast. In a pioneering move, LPE directly advised on-market customers it could no longer provide competitive rates. Further, LPE encouraged impacted customers to swiftly switch providers to avoid substantial increases to future power bills passed on directly from the wholesale electricity market. Since then, LPE’s on-market customer base in this sector has reduced substantially from approximately 21,000 to 2,000 at 30 June 2022 (1,500 at 31 August 2022). This has delivered a significant positive flow on effect, with the moderation in customers and load reducing LPE’s credit support obligations to the Australian Energy Market Operator (AEMO). At 30 June 2022, $3.8 million out of $8 million in credit support had been released back to LPE enabling a $4 million short-term loan obligation to Black Rock Group to be settled in full. Further, at 31 August 2022, only $1 million still remains outstanding with AEMO. In addition, LPE closed its wholesale electricity hedge book at $22 million which represents booked “in-the-money” value of forward electricity purchases for on-market customers. These fixed, known, weekly cash flows are earmarked to pay down LPE’s remaining debt obligations. Note, most of the closed hedge book cash flows $15.6 million will be received during FY23 which more than covers LPE’s outstanding debts - primarily with BlackRock Group. The remaining $6.6 million is expected in the 12 months that follow. However, LPE is considering options to bring the whole balance forward through receivables funding. This would enable LPE to finalise loan commitments and strengthen the cash position much sooner, enabling the management team to focus creating value for shareholders. 5 Locality Planning Energy Holdings Limited | Annual Report 2022 Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) Statutory EBIT Government Grants Government Grants Loss/(gain) on fair value of financial instruments Underlying EBIT Depreciation and Amortisation Underlying EBITDA 2022 $ million 2021 $ million 8.7 0.0 (14.3) (5.6) 0.5 (5.1) 2.5 0.0 (5.6) (3.1) 0.6 (2.5) Underling EBIT is the primary alternative performance measures used by the Directors for the purpose of assessing the performance of the Group. Underlying EBIT is a non-statutory (non-IFRS) measure. The objective of measuring and reporting underlying EBIT is to provide a more meaningful and consistent representation of financial performance by removing items that distort performance or are non-recurring in nature. Changes in the fair value of financial instruments are excluded from underlying EBIT to remove the significant volatility caused by timing mismatches in valuing financial instruments and the related underlying transactions. The valuation changes are subsequently recognised in underlying earnings when the underlying transaction are settled. LPE closed the fiscal year with $3.1 million in cash and cash equivalents. Bolstering Strata Embedded Network Services Over the years, LPE has grown its reputation as one of the largest providers of embedded electricity, solar and hot water services for strata communities throughout Queensland. The way LPE supplies electricity to strata communities is different to on-market customers, as it is a “fixed price purchase contract” currently through larger retailers which provide the AEMO credit support. Strata customers, currently at 28,000 (+19% YoY), continue to grow as LPE takes on existing embedded networks, without the upfront capital requirement. Additional resources will be focused on the strata business to build on LPE’s reputation as the strata provider of choice for body corporates and their occupants throughout Queensland. Vertically Integrated Renewable Assets Currently, the BioHub facility in Bundaberg (Queensland), with its anchor tenant behind-the-meter digital currency miner STAK Mining Pty Ltd (STAK), remains LPE’s inaugural generation asset. Based on current estimates, STAK should commence commercial operations late in Q4 CY2022. Opportunities to co-locate other high energy users within two solar farms (refer ASX Release - 24 March 2022) have the potential to boost high margin revenues moving forward. While in its infancy, the Board is encouraged by the pace of development and positive reception from stakeholders with its plans to accelerate renewable asset development through vertically integrated, high-energy users that can significantly improve returns. Outlook Post the restructuring exercise, LPE will settle all debt obligation and focus on bolstering the embedded network business which has circa 28,000 customers to build on. Concurrently, LPE will look to grow its vertically integrated renewable energy business, capitalising on projects like the BioHub in Bundaberg and other exciting renewable projects located throughout Queensland. During FY23, management will continue to identify efficiencies within the operating platform to ensure costs align with revenues in order to maximise EBITDA margins. Overall, LPE has navigated the wholesale energy crisis largely unscathed, and is in a much stronger position to create value for shareholders from the remaining operations. 6 Locality Planning Energy Holdings Limited | Annual Report 2022 Directors’ Report The following persons were directors of the Company during the financial year and up to the date of this report. Mr Damien Glanville Executive Director, Co-founder, and Chief Executive Officer Appointment Date: 11 December 2015 Experience: Mr Glanville has eighteen years experience in senior management, logistics and Executive Director roles, the last eight specifically focused in renewable energy on-site generation and solar PV industry. Mr Glanville is a co-founder and architect of the electricity retail model that successfully enabled LPE to obtain their Australian Energy Regulator authorisation and is also listed as its Chief Executive Officer for the management components of the Australian Energy Regulators authorisation to retail electricity. Special Responsibilities: Mr Glanville is a the Chief Executive Officer. Interest in Shares and Options 8,400,955 fully paid ordinary shares Directorships Held in Other Listed Entities: Nil Mr Justin Pettett Non-Executive Director, Co-founder, and Chairman Appointment Date: 21 January 2020 Experience: Mr Pettett has over 22 years of ASX company experience having founded and helped companies from start-up to take over/acquisition/ public-listing stage. He has a proven track record in identifying and maximising business opportunities in the energy sector having led teams to deliver successful results, working closely with key stakeholders, investors, and industry partners. He has been involved in the energy business, namely the oil and gas industry for over 22 years and currently serves as an advisor to the board of Conrad Energy Asia Ltd, a Singapore, Asian-focused natural gas company to provide pipeline natural gas to Singapore for their electricity generation needs. He has a solid, proven track record in identifying and maximising business opportunities, particularly in the energy sector with strengths including capital raising, negotiation, investment analysis and leading teams to deliver successful results. Mr Pettett is a co-founder of LPE and as such has operational and strategic insight into the electricity retailing industry. Special Responsibilities: Mr Pettett is a member of the Nomination and Remuneration Committee and the Audit and Risk Committee. Interest in Shares and Options 9,409,102 fully paid ordinary shares Directorships Held in Other Listed Entities: Nil 7 Locality Planning Energy Holdings Limited | Annual Report 2022 Mr Barnaby Egerton-Warburton Non-Executive Director Qualifications: BEcon, GAICD Appointment Date: 13 March 2020 Experience: Mr Egerton-Warburton has 25 years of trading, investment banking, international investment and market experience with positions at JP Morgan, BNP Equities and Prudential Securities. Experienced investment banker and corporate advisor, having held managing director and non-executive director positions in the investment banking, technology and the resource sectors. Degree in economics, and a graduate of the Australian Institute of Company Directors. Special Responsibilities: Mr Barnaby Egerton- Warburton is Chairman of the Nomination and Remuneration Committee. He is also a member of the Audit and Risk Committee. Interest in Shares and Options: 60,000 Directorships Held in Other Listed Entities Non-Executive Chairman of Arizona Lithium Limited (AZL), Non-Executive Chairman of Pantera Minerals Limited (PFE), Non-Executive Director of Diablo Resources Limited (DBO), Executive Director of Lord Resources Limited (LRD), Non-Executive Director of Southern Cross Payments Limited (SP1) and Non-Executive Director of the National Stock Exchange of Australia (NSX). Ms Elissa Hansen Company Secretary Mrs Kathryn Guides Non-Executive Director Appointment Date: 3 March 2022 Experience: Mrs Giudes was previously the Senior Director of Xbox Games Marketplace, as well as the Microsoft Store online where she managed the profit and loss and global expansion in over 200 geographies, with both having an annual revenue budget in the mid US$1 billion range. Ms. Foster is the Managing Director of macroDATA Group, a grouping of companies, that includes a green datacentre company. She holds a Bachelor of Science (BSc) in International Marketing from Oregon State University and Associate of Science (ASc) - Computer Science and Information Systems from Shoreline Community University. Kathryn is a member of the Australian Institute of Company Directors. Special Responsibilities: Mrs Guides is Chair of the Audit and Risk Committee, and a member of the Nomination and Remuneration Committee. Interest in Shares and Options: Nil Directorships Held in Other Listed Entities Nuheara Ltd (ASX: NUH) Qualifications: BComm, Grad Dip Applied CorpGov, GAICD, FGIA Appointment Date: 1 June 2021 Experience: Elissa has over 20 years’ experience advising boards and management on corporate governance, compliance, investor relations and other corporate related issues. She has worked with boards and management of a range of ASX listed companies including assisting companies through the IPO process. Elissa is a Chartered Secretary who brings best practice governance advice, ensuring compliance with the Listing Rules, Corporations Act and other relevant legislation. Interest in Shares and Options: Nil 8 Locality Planning Energy Holdings Limited | Annual Report 2022 Directors’ Meetings Director Justin Pettett Barnaby Egerton-Warburton Damien Glanville Melissa Farrell Kathryn Giudes Director Melissa Farrell Damien Glanville Justin Pettett Barnaby Egerton-Warburton Director Melissa Farrell Damien Glanville Justin Pettett Barnaby Egerton-Warburton * of which eligible to attend Meetings of Directors Held* Meetings of Directors Attended 12 12 12 8 4 12 11 12 8 4 Audit & Risk Committee Meetings Held* Audit and Risk Committee Meetings Attended 2 2 2 2 1 1 1 1 Nomination and Remuneration Committee Meetings Held* 2 2 2 2 Nomination and Remuneration Committee Meetings Attended 1 1 1 1 9 Locality Planning Energy Holdings Limited | Annual Report 2022 Remuneration Report - Audited Remuneration Practices The Company has established a Nomination and Remuneration Committee as a Committee of the Board. The primary purpose of the Committee is to support and advise the Board in fulfilling its responsibilities to shareholders by: a. reviewing and approving the executive remuneration policy to enable the Company to attract and retain executives and Directors who will create value for shareholders; b. ensuring that the executive remuneration policy demonstrates a clear relationship between senior executive performance and remuneration; c. recommending to the Board the remuneration of executive Directors; d. fairly and responsibly rewarding executives having regard to the performance of the Company, the performance of the executive and the prevailing remuneration expectations in the market; e. reviewing the Company’s recruitment, retention and termination policies and procedures for senior management; f. reviewing and approving the remuneration of the Chief Executive Officer and, as appropriate other senior executives; and g. reviewing and approving any equity based plans and other incentive schemes. The Committee has the right to seek any information it considers necessary to fulfil its duties, which includes the right to obtain appropriate external advice at the Company’s expense. The key management personnel (KMP) of Locality Planning Energy Holdings Limited and the consolidated entity includes the directors of the Parent Entity. Remuneration Policy The Board’s policy for determining the nature and amount of remuneration for KMP of the Consolidated Group is based on the following: • The remuneration policy is to be developed by the Nomination and Remuneration Committee and approved by the Board after professional advice is sought from independent external consultants. • All KMP receive a base salary (which is based on factors such as length of service and experience), and superannuation. • The Nomination and Remuneration Committee reviews KMP packages annually by reference to the Consolidated Group’s performance, executive performance and comparable information from industry sectors. The Board’s policy is to remunerate non-executive directors at market rates for time, commitment and responsibilities. The Nomination and Remuneration Committee determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. 10 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Remuneration 2022 Remuneration Directors Justin Pettett Damien Glanville *Melissa Farrell Barnaby Egerton-Warburton ** Kathryn Giudes Executives ****Toby Mills Total 2021 Remuneration 2021 Remuneration Directors Justin Pettett Damien Glanville Melissa Farrell Short Term Short Term Employee Employee Benefits Benefits Salary & Fees Salary & Fees Post Post Employment Employment Benefits Benefits Superannuation Superannuation Long Term Long Term Employment Employment Benefits Benefits Options Issued Total $220,000 $461,774 $318,992 $60,000 $20,000 $23,568 $23,568 $6,000 $221,482 $1,302,248 $22,148 $75,284 $8,149 $2,235 $484 $30,000 $220,000 $493,491 $344,795 $96,000 $20,000 $0 $244,114 $10,868 $30,000 $1,418,400 Short Term Short Term Employee Employee Benefits Benefits Salary & Fees Salary & Fees Post Post Employment Employment Benefits Benefits Superannuation Superannuation Long Term Long Term Employment Employment Benefits Benefits Options Issued Total $139,100 $352,268 $258,992 $25,000 $24,795 $5,700 $19,797 $75,292 $3,803 $2,053 $810 $6,667 $139,100 $381,072 $285,840 $65,700 $228,992 $0 $1,100,703 Barnaby Egerton-Warburton $60,000 Executives ***Paul Wilson Total $208,385 $1,018,745 *Resigned 01 March 2022 ** Appointed 03 March 2022 *** Terminated 30 June 2021 **** Appointed 23 September 2021 Shareholdings of Key Management Personnel Balance 30 June 2021 Shares Acquired Shares Disposed Balance 30 June 2022 Directors Justin Pettett Damien Glanville Melissa Farrell Barnaby Egerton-Warburton Kathryn Guides Executives Toby Mills 7,509,102 8,400,995 0 60,000 0 0 1,900,000 9,409,102 8,400,995 0 60,000 0 0 11 Locality Planning Energy Holdings Limited | Annual Report 2022 Other required disclosures for the year ended 30 June 2022 Principal Activities of the Consolidated Entity access to books and records of the Company to those The principal activity of the Consolidated Entity is the sale of electricity and utility services to residential and commercial customers throughout the Australian National Directors and the Secretary. The Company has insured all of the Directors and Officers of Locality Planning Energy Holdings Limited. Electricity Market. Dividends The Directors do not recommend the payment of a dividend and no amount has been paid or declared by way of a dividend since 30 June 2022 and to the date of this report. Review of Activities and Business Strategies An operating and financial review of the Company during the financial year is contained on pages 5 to 6 of this report and forms part of the Director’s Report. It includes a review of operations during the year, as well as the The contract of insurance prohibits the disclosure of the nature of the liabilities covered and amount of the premium paid. The Corporations Act 2001 does not require disclosure of the information in these circumstances. The Company has not indemnified or insured its auditor. Events Subsequent to Balance Date There are no matters or circumstances that have arisen since the end of the year which significantly affected or could significantly affect the operations of the Consolidated Entity, the result of those operations or the state of affairs of the Consolidated Entity in future financial results and business strategies of the Company. financial years. Changes in State of Affairs In the opinion of the Directors there were no significant changes in the state of affairs of the consolidated entity that occurred during the financial year. Proceedings on Behalf of the Company No person has applied under Section 237 of the Corporations Act for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any other such proceedings during the year. Non-Audit Services Non-audit services have been provided during the year by the external auditor, Bentleys. Disclosure of the details of these services can be found in Note 24 of the Financial Statements. Auditor’s Independence Declaration Non-IFRS Financial Information The Operating & Financial Review attached to and forming part of this Directors’ Report includes non-International Financial Standards (IFRS) financial measures. The Company’s management uses these non-IFRS financial measures to assess the performance of the business. • Principal among these non-IFRS financial measures is Underlying EBIT. This measure is adjusted for significant items (which are material items of revenue or expenses that are unrelated to the underlying performance of the business); and • Changes in the fair value of financial instruments recognised in the statement of profit or loss (to remove the volatility caused by mismatches in valuing financial instruments and the underlying asset differently). The Company believes that Underlying EBIT provides a better understanding of its financial performance than Statutory EBIT and allows for a more relevant comparison A copy of the external auditor’s declaration under of financial performance between financial periods. Section 370C of the Corporates Act in relation to the audit for the financial year is attached to the Company’s Financial Statements. Indemnification and Insurance of Officers or Auditor Each of the Directors and the Secretary of the Company have entered into a Deed with the Company whereby the Company has provided certain contractual rights of Underlying EBIT is presented with reference to ASIC Regulatory Guide 230 ‘Disclosing non-IFRS financial information’, issued in December 2011. The Company’s policy for reporting Underlying EBIT is consistent with this guidance. The Directors have had the consistency of the application of the policy reviewed by the external auditor of the Company. 12 Locality Planning Energy Holdings Limited | Annual Report 2022 Corporate Governance Cyber security A copy of Locality Planning Energy Holdings Limited’s A cyber security incident could lead to disruption of critical Corporate Governance Statement can be found on the business operations. It could also lead to a breach of Company’s website at: https://investors.joinlpe.com.au/corporate-governance/ Business Risks The Company has identified the following risks as having the potential to materially affect LPE’s ability to meet its privacy, and loss of and/or corruption of commercially sensitive data which could adversely affect customers. LPE regularly assesses its cyber security profile. All employees undertake cyber awareness training, including how to identify scam emails and how to keep data safe. Climate change business objectives: Regulatory policy LPE is exposed to regulatory policy change and government interventions. Changes in energy market design and climate change policies for example, have the potential to impact the financial outcomes of the Company. LPE contributes to policy process by actively participating in public policy debate, proactively engaging with policy makers and participating in public forums, industry associations and research. Competition LPE operates in a highly competitive industry which can put pressure on margins. Our strategy to mitigate this risk is to effectively build customer loyalty and trust by delivering an exceptional customer service experience based on openness and transparency, and by offering innovative energy solutions that come with longer length supply terms. Changes in demand for energy A decrease in demand for energy could possibly reduce LPE’s revenues and adversely affect the Company’s future financial performance. LPE cannot control the habits or consumption patterns of our customers, however LPE works to mitigate the impact of this risk by utilising data analytics to better predict customer demand. Technological developments/disruption Technology is allowing consumers to understand and manage their electricity usage through smart appliances, having the potential to disrupt the Company’s existing relationship with consumers. Advances in technology have the potential to create new business models and introduce new competitors. LPE actively monitors and participates in technological developments and is exploring investments in new innovative products to enhance customer experience and reduce cost to serve. The ongoing decarbonisation of energy markets and the decreasing demand for fossil fuels provides both risks and opportunities for LPE. The Company is focused and committed to growth and innovation of its solar products. Company Health and Safety Policy It is the responsibility of all employees to act in accordance with occupational health and safety legislation, regulations and policies applicable to their respective organisations and to use security and safety equipment provided. Specifically, all employees are responsible for safety in their work area by: • following the safety and security directives of management; • advising management of areas where there is a potential problem in safety and reporting suspicious occurrences; and • minimising risks in the workplace. Environmental Whilst it was not an environmental issue for the Company, under the Renewable Energy Target, the Company is obliged to purchase and surrender an amount of large-scale generation certificates, and small-scale technology certificates, based on the volume of electricity the Company acquires each year. Approval of Directors’ Report This Director’s Report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Board this 31st day of August 2022. Justin Pettett Chairman 13 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Financial Statements 14 14 Locality Planning Energy Holdings Limited | Annual Report 2022 Operating and Financial Review Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2022 Electricity revenue Electricity cost of goods sold Unrealised gain on derivatives Gain from trading Note 5A 5B 2022 $ 2021 $ 68,600,739 54,880,379 (56,854,785) (46,265,094) 14,314,320 5,638,187 26,060,274 14,253,472 Other income Total operating income 5C 830,365 711,322 26,890,639 14,964,794 Impairment losses Financing expenses Other expenses 5D 5E 5F (2,612,920) (598,039) (3,449,454) (2,217,719) (14,698,318) (11,230,789) Profit before income taxes 6,129,947 918,247 Income tax benefit/(expense) Net profit for the period 6 - - 6,129,947 918,247 Other comprehensive income Other comprehensive income net of tax - - - - Total comprehensive profit/(loss) for the year 6,129,947 918,247 Basic earnings/(loss) per share (dollars per share) Diluted earnings/(loss) per share (dollars per share) 17 17 0.05725 0.04100 0.0149 0.0142 The Consolidated Statement of Profit or Loss and the Consolidated Statement of Financial Position should be read in conjunction with the Notes to the Financial Statements. 15 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Consolidated statement of financial position as at 30 June 2022 Current assets Cash and cash equivalents Cash and cash equivalents Trade and other receivables Site conversion receivables GST receivable Financial assets Other current assets Total current assets Non-current assets Trade and other receivables Site conversion receivables Financial assets Plant and equipment Leasehold improvements Intangibles Right of use assets Total non-current assets TOTAL ASSETS Current liabilities Trade and other payables Employee entitlements - leave provisions Lease Liabilities Provisions Borrowings Total current liabilities Non-current liabilities Employee entitlements - leave provisions Lease Liabilities Borrowings Total non-current liabilities TOTAL LIABILITIES NET ASSETS Equity Issued capital Share option reserve Accumulated losses Total equity Note 22 7 7 8 9 7 7 10 11 12 13 14 15 15 16 June 2022 $ 3,137,913 27,659,526 1,226,793 659,297 3,000,000 445,510 36,129,039 6,578,316 2,712,974 5,212,312 316,241 331,965 81,325 664,472 15,897,605 June 2021 $ 5,745,250 10,045,765 944,180 179,918 3,403,475 1,327,000 21,645,588 - 3,703,181 1,612,312 479,578 426,609 210,058 823,408 7,255,146 52,026,644 28,900,734 10,120,105 11,872,243 390,527 255,750 36,085 20,025,025 30,827,492 99,583 785,552 20,201 905,336 323,673 222,364 32,805 173,612 12,624,697 74,143 1,011,331 14,088,430 15,173,904 31,732,828 27,798,601 20,293,816 1,102,133 54,298,849 811,440 (34,816,473) 20,293,816 41,775,446 273,107 (40,946,420) 1,102,133 16 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Consolidated statement of cash flows for the year ended 30 June 2022 Cash flows from operating activities Receipts from customers Receipts from government grants Notes June 2022 $ June 2021 $ 67,795,250 49,940,376 9,545 119,248 Payments to suppliers and employees (78,796,755) (54,892,817) Interest received Interest paid 692,026 645,621 (1,892,323) (1,566,314) Net cash used in operating activities 22 (12,192,257) (5,753,886) Cash flows from investing activities Payment for financial assets Payment to acquire investments Payment for plant and equipment Payment for leasehold improvements Payment for intangibles (2,544,200) 1,707,915 (5,000,000) - (54,747) (1,979) (70,700) (244,092) (10,294) (109,089) Net cash provided by/(used in) investing activities (7,671,626) 1,344,440 Cash flows from financing activities Proceeds from issues of shares Share issue costs Financing costs paid Proceeds from loans Repayment of leases Repayment of loans 13,832,150 3,168,500 (766,664) (699,355) 6,327,294 (219,797) (1,217,082) 22 22 22 22 (184,827) (950,804) 225,251 (184,579) (170,461) Net cash provided by/(used in) financing activities 17,256,546 1,903,080 Net decrease in cash and cash equivalents (2,607,337) (2,506,366) Cash and cash equivalents opening balance 5,745,250 8,251,616 Cash and cash equivalents closing balance 22 3,137,913 5,745,250 The Consolidated Statement of Cash Flows should be read in conjunction with the Notes to the Financial Statements. 17 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Consolidated statement of changes in equity for the year ended 30 June 2022 Balance at 1 July 2020 Issue of Share Capital Capital Raising Costs Issue of Share Capital (Options) Profit/(Loss) after income tax Issued capital $ 39,064,880 3,168,500 (457,934) - - Options reserve $ Accumulated losses $ Totals $ (41,864,667) (2,799,787) - - - 273,107 - - - 3,168,500 (457,934) 273,107 918,247 - 918,247 Balance at 30 June 2021 41,775,446 273,107 (40,946,420) 1,102,133 Balance at 1 July 2021 41,775,446 273,107 (40,946,420) 1,102,133 Issue of Share Capital Capital Raising Costs Issue of Share Capital (Options) Profit/(Loss) after income tax 13,828,400 (1,304,997) - - - - 538,333 - - - 13,828,400 (1,304,997) 538,333 - 6,129,947 6,129,947 Balance at 30 June 2022 54,298,849 811,440 (34,816,473) 20,293,816 The Consolidated Statement of Changes in Equity should be read in conjunction with the Notes to the Financial Statements. 18 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 1. Reporting Entity The financial statements of Locality Planning Energy Holdings Limited (“the Company”) for the year ended 30 June 2022 covers the Consolidated Entity consisting of Locality Planning Energy Holdings Limited and the entities it controlled from time to time throughout the year (“the Group” or “Consolidated Entity”) as required by the Corporations Act 2001. Locality Planning Energy Holdings Limited is a for-profit entity for the purpose of preparing these financial statements. The financial statements are presented in Australian dollars, which is the functional currency. The address of the Group’s registered office and principal place of business is Level 8, 8 Market Lane, Maroochydore, QLD, 4558. 2. Basis Of Preparation (a) Statement of compliance The Financial Report has been prepared in accordance with requirements of Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. This report is to be read in conjunction with any other public announcements made by the Group during the year in accordance with the continuous disclosure requirements of the Corporations Act 2001. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. The accounting policies adopted are consistent with those of the previous financial year, unless stated otherwise. (b) Basis of measurement The financial statements have been prepared on the historical cost basis, modified, where applicable by the measurement at fair value of selected financial assets and liabilities. (c) Use of estimates and judgements The preparation of financial statements in conformity with AASB’s requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical estimates and judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are outlined below: Impairment The Group assesses impairment at the end of each reporting period by evaluating conditions specific to the Group that may be indicative of impairment triggers. Impairment of financial assets (trade receivables and financial assets) are assessed for impairment as described in Note 3G. Note 3H describes the process for assessing impairment for non-financial assets (property, plant and equipment, intangible assets and other assets). 19 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 2. Basis Of Preparation (Cont’d) (c) Use of estimates and judgements (Cont’d) Site Conversion Revenue Site conversion revenue is recognised upon installation, however customers are able to make payment over a 5 to 15 year period. The Group has assessed that where this payment is deferred, the transaction contains a significant financing component and therefore the revenue must be adjusted for the effects of the time value of money. Judgement is therefore required to determine the amount of the consideration that relates to the site conversion revenue, and the amount relating to the financing of the purchase. See Note 3K for further details Derivatives LPE’s approach to managing energy price risks reflects the need to provide pricing certainty to customers and limit exposure to adverse wholesale market outcomes. LPE uses certain financial instruments (derivatives) to manage these energy price risks arising in the normal course of business to align with LPE’s risk appetite. These derivatives are recorded at fair value through profit or loss. Fair value is determined using valuation techniques that incorporate a range of estimates and judgements, as described in Note 27. (d) Going Concern The financial statements have been prepared on a going concern basis which contemplates the continuity of normal business activities and the realisation of assets and discharge of liabilities in the ordinary course of business. The Group earned a net profit after income tax for the year ended 30 June 2022 of $6,129,947 (2021: $918,247), and net assets of $20,293,816 (2021: $1,102,133), however a non-cash movement on the fair value of derivatives increased this performance by $14,314,320 (2021:$5,638,187). Net cash outflow from operations for the year was $12,162,257 (2021: $5,753,886). These factors, prima facie, indicated that there is material uncertainty on whether the Group will continue as a going concern without additional funding. The Group has $3,134,163 in unrestricted cash at 30 June 2022 and the Group is examining refinancing opportunities, for its current debt facility. On this basis, the Group has prepared budgets and has determined it has sufficient net working capital to maintain continuity of normal business activity and pay its debts as and when they fall due, and therefore that it is appropriate to prepare the financial report on a going concern basis. 3. Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied by all entities in the Group. (a) Basis of Consolidation The consolidated financial statements comprise the financial statements of Locality Planning Energy Holdings Limited and its subsidiaries for the year ended 30 June 2022 (“the Group”). Subsidiaries are entities (including structured entities) over which the Group has control. The Group has control over an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity, and has the ability to use its power to affect those returns. Subsidiaries are consolidated from the date on which control is transferred to the Group and are deconsolidated from the date that control ceases. All intercompany balances and transactions, including unrealised profits arising from intragroup transactions have been eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. 20 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (b) Income Tax The charge for current income tax expense is based on the profit/(loss) for the year adjusted for any non- assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Current and deferred tax is recognised in the profit or loss, except where it relates to items recognised in the other comprehensive income or directly in equity. In this case the tax is recognised in the other comprehensive income or directly in equity respectively. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences or tax losses can be utilised. To the extent that any rebates are received from Government taxation authorities, they are recognised in profit or loss as an income tax benefit. (c) Plant and Equipment Plant and equipment are measured on the cost basis less depreciation and impairment losses. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. All assets are depreciated on either a straight line basis or diminishing value basis over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant and equipment Motor Vehicles Depreciation Rate & Method 10-50% per annum straight line or diminishing value 25% per annum, diminishing value The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the profit or loss. (d) Intangible Assets Intangible assets include the cost of software development. Software has an estimated useful life of between three and ten years. It is assessed annually for impairment. 21 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (e) Leasehold Improvements Leasehold improvements are amortised over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. (f) Trade and Other Payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the year end and which are unpaid. These amounts are unsecured and have 30-60 day payment terms. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. (g) Impairment of Financial Assets The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which prescribes the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, and a provision matrix is used. The “amounts written off” are all due to customers declaring bankruptcy, or term receivables that have now become unrecoverable. At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the Statement of Profit or Loss and Other Comprehensive Income. (h) Impairment of Non-Financial Assets At each reporting date, the Consolidated Entity reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed in the profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (i) Share-based Payments The Consolidated Entity may make share-based payments to directors, employees and suppliers. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a valuation which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at each reporting date such that the amount recognised for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest. 22 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (j) Cash and Cash Equivalents Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position. (k) Revenue Revenue for the Group can be categorised as follows: • Supply of electricity • Supply of embedded network or solar infrastructure (including installation) Supply of electricity Revenue from the supply of electricity is recognised as the customer obtains a benefit from the supply, which occurs over time as the customer consumes the electricity. Consumption is determined by meter readings. Between meter readings, consumption is estimated using industry and historical customer consumption patterns, along with consumption reports from the Group’s suppliers. Costs associated with the supply of the electricity are expensed over time in line with customers’ consumption. Supply of embedded network or solar infrastructure The Group arranges to supply and install embedded network infrastructure on customers’ premises. The performance obligation is the installation of the infrastructure, and therefore revenue is recognised at a point in time upon installation. Likewise, the Group arranges to supply and install solar infrastructure on customers’ premises. The performance obligation is the installation of the infrastructure, and therefore revenue is recognised at a point in time upon installation. Customers have the option to pay for the site conversion infrastructure over the life of a related electricity supply contract, ranging from 5 to 15 years. Therefore a significant financing component has been identified within these contracts. The revenue is therefore discounted to remove the financing component. Consideration receivable in respect of this revenue is recognised as ‘Site conversion receivables’ in the Statement of Financial Position. The financing component has been assessed by the Group at a rate between 10%-12% per annum, and this is recognised as interest revenue over time until the customer has paid all consideration. Costs incurred to supply and install the site conversion infrastructure are expensed when the revenue is recognised, upon installation. For costs incurred on site conversions where the infrastructure has not yet been installed, and therefore no revenue yet recognised, the costs are capitalised within the inventory balance contained within ‘Other Current Assets’ in the Statement of Financial Position. (l) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of expense. Receivables and payables in the Consolidated Statement of Financial Position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. 23 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (m) Issued Capital Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from equity. (n) Earnings per Share The Consolidated Entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for the effects of all dilutive potential ordinary shares. (o) Leases At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However all contracts that are classified as short-term leases (lease with remaining lease term of 12 months or less) and leases of low value assets are recognised as an operating expense on a straight-line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: • fixed lease payments less any lease incentives; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; • the amount expected to be payable by the lessee under residual value guarantees; • the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; • lease payments under extension options if lessee is reasonably certain to exercise the options; and • payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability as mentioned above, any lease payments made at or before the commencement date as well as any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset whichever is the shortest. Where a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. 24 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (p) Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Classification and subsequent measurement Financial Liabilities Financial liabilities are subsequently measured at: • Amortised cost; or • Fair value through profit or loss. A financial liability is measured at fair value through profit and loss if the financial liability is: • A contingent consideration of an acquirer in a business combination to which AASB 3: Business Combinations applies; • Held for trading; or • Initially designated at fair value through profit or loss. All other financial liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. A financial liability is held for trading if: It is incurred for the purpose of repurchasing or repaying in the near term; • • Part of a portfolio where there is an actual pattern of short-term profit taking; or • A derivative financial instrument (except for a derivative that is in a financial guarantee contract or a derivative that is in an effective hedging relationship). The Group recognises the financial derivative instruments at fair value through profit or loss. Financial Assets Financial assets are subsequently measured at: • Amortised cost; • Fair value through other comprehensive income; or • Fair value through profit or loss. 25 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (p) Financial Instruments (Cont’d) Measurement is on the basis of two primary criteria: • The contractual cash flow characteristics of the financial asset; and • The business model for managing financial assets. A financial asset that meets the following conditions is subsequently measured at amortised cost: • The financial asset is managed solely to collect contractual cashflows; and • The contractual terms within the financial asset give rise to cashflows that are solely payments of principal and interest on the principal amount outstanding on specified dates. A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: • The contractual terms within the financial asset give rise to cashflows that are solely payments of principal and interest on the principal amount outstanding on specified dates; • The business model for managing the financial assets comprises both contractual cashflows and the selling of the financial asset. By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. The Group currently has futures contracts that are recognised within financial assets in the Statement of Financial Position that are recognised at fair value through profit or loss. All other financial assets are recognised at amortised cost. Derecognition Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position. Derecognition of financial liabilities A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder’s contractual rights to its cash flows expire, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All of the following criteria need to be satisfied for ‘Derecognition of financial assets’: • The right to receive cash flows from the asset has been expired or been transferred; • All risk and rewards of ownership of the asset have been substantially transferred; and • The Group no longer controls the asset. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. 26 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 3. Significant Accounting Policies (Cont’d) (q) Employee Entitlements Provision is made for the Group’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Long-term employee benefits are only recognised to the extent that it is considered probable that employees will reach the eligible service period. (r) New Accounting Standards Issued but not yet Applicable A number of new standards and interpretations are effective for annual reporting periods beginning after 1 July 2021 and earlier application is permitted; however the Company has not early adopted the new or amended standards in preparing these financial statements. The new standards relate to very specific circumstances that are not applicable to the Group. 4. Segment Reporting The Group has identified its operating segments as being the energy retail sector in Australia. Management currently identifies the energy retail sector as being the Group’s sole operating segment. There have been no changes in the operating segments during the year. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from the segment are equivalent to the financial statements of the Group as a whole. 27 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 5. Statement of Profit or Loss and other Comprehensive Income Consolidated Entity 2022 $ Consolidated Entity 2021 $ A. Electricity Revenue Electricity sales Site conversion sales Total Electricity Revenue B. Electricity Cost of Goods Sold Energy usage charges Network charges Other COGS Site conversion COGS Total Electricity Cost of Goods Sold C. Other Revenue Interest revenue Government grants Total Other Revenue D. Impairment Losses Bad debts written off Addition to provision for doubtful debt Total Impairment Losses E. Financing Expenses Borrowing expenses Interest on leases Interest expense Total Financing Expenses F. Other Expenses Bank Fees Depreciation and amortisation Employee costs Loss on disposal of assets Information technology Insurance Marketing & advertising Occupancy expenses Other expenses Professional costs Total Other Expenses 66,712,172 1,888,567 68,600,739 16,838,093 29,373,948 8,926,987 1,715,757 56,854,785 820,820 9,545 830,365 702,322 1,910,598 2,612,920 1,557,131 110,287 1,782,036 3,449,454 193,096 490,104 7,351,997 141,793 2,556,628 95,083 691,146 57,298 2,527,268 593,905 14,698,318 53,310,798 1,569,581 54,880,379 17,401,769 21,508,930 5,917,640 1,436,755 46,265,094 642,074 69,248 711,322 249,158 348,881 598,039 651,405 55,944 1,510,370 2,217,719 123,659 606,206 6,093,965 46,382 2,292,215 84,851 580,617 30,026 1,052,980 319,888 11,230,789 28 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 6. Income Tax Components of tax expense/(benefit) comprise: Current tax Prior year tax Deferred tax Income Tax Expense/(Benefit) Consolidated Entity 2022 Consolidated Entity 2021 $ $ - - - - - - - - Numerical reconciliation of income tax benefit to prima facie tax payable Profit/(Loss) from operations before tax for the year The prima facie income tax benefit on loss before income tax at a tax rate of 30% (2021: 30%) 6,129,947 1,838,984 918,247 275,474 Tax effect amounts which are not (deductible)/taxable in calculating taxable income: 1,163 (16,758) Deferred tax asset not brought to account (1,840,147) (258,716) Total income tax benefit - - Net unrecognised deferred tax assets Net Deductible/(Assessable) temporary differences (126,975) (2,457,628) Unused tax losses Net unrecognised deferred tax asset 3,328,054 3,201,079 7,256,080 4,798,452 The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed. The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in the statement of financial position as the recovery of this benefit is uncertain. The consolidated entity has no franking credits. 29 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 7. Trade & Other Receivables Current Trade & Other Receivables Trade receivables Trade receivables provision Hedging counterparty receivables Interest receivables Non Current Trade & Other Receivables Hedging Counterparty Receivables Current Site Conversion Receivables Site conversion receivables Site conversion receivables provision Consolidated Entity 2022 Consolidated Entity 2021 $ $ 8,248,449 (1,249,969) 20,531,835 129,211 8,848,596 (163,911) 1,360,663 417 27,659,526 10,045,765 6,578,316 6,578,316 1,404,172 (177,379) 1,226,793 - - 1,522,741 (578,561) 944,180 Non Current Site Conversion Receivables Site conversion receivables 3,938,696 3,703,181 Site conversion receivables provision (1,225,722) - 2,712,974 3,703,181 Current trade receivables are not interest bearing and are generally receivable within 14 days. The Group closed all financial derivative positions during the financial year (refer to note 27) therefore the Hedging Counterparty Receivables reflects the cash receivable from these closed positions. 30 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 7. Trade & Other Receivables (cont’d) Lifetime Expected Credit Loss: Credit Impaired Current trade receivables Current interest receivables Current site conversion receivables 44,973 23,526 Non-Current site conversion receivables 222,789 287,273 Opening Balance 1 July 2020 Net Measurement of loss allowance Amounts written off Closing Balance 30 June 2021 125,829 38,082 249,158 163,911 - - - - - - 68,499 510,062 393,591 348,881 249,158 742,472 Opening Balance 1 July 2021 Net Measurement of loss allowance Amounts written off Closing Balance 30 June 2022 163,911 1,086,058 702,322 1,249,969 - - - - - - 177,379 1,225,722 Lifetime Expected Credit Loss: Credit Impaired Current trade receivables Current interest receivables Current site conversion receivables 68,499 108,880 Non-Current site conversion receivables 510,062 715,660 742,472 1,910,599 702,322 2,653,070 The entity does not hold any financial assets whose terms have been renegotiated, but which would otherwise be past due or impaired. Collateral held as security No collateral is held as security for any of the trade and other receivable balances. Collateral pledged No collateral has been pledged for any of the trade and other receivable balances. 31 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 8. Financial Assets At fair value through the profit or loss Financial assets - derivatives Term deposits ASX Initial Margin on Derivatives 9. Other Current Assets Prepayments Environmental certificates Inventory Environmental Certificates Consolidated Entity 2022 Consolidated Entity 2021 $ $ - 3,347,675 3,000,000 - 3,000,000 - 55,800 3,403,475 154,655 - 290,855 445,510 246,675 618,709 461,616 1,327,000 Environmental certificates are classified into two certificate types, Large-scale Generation Certificates (LGCs) and Small-scale Technology Certificates (STCs). LGCs and STCs are measured at fair value at the end of the financial year, with changes in fair value recognised in the statement of profit or loss and other comprehensive income. LGCs and STCs held at the end of financial year are valued at the market price on the measurement date. 10. Non-Current Financial Assets At Amortised Cost Term Deposits Investments 212,312 5,000,000 5,212,312 1,612,312 - 1,612,312 LPE has entered into an agreement with Bundaberg Biohub Pty Ltd (BBH) and Stak Mining Pty Ltd (STAK) whereby LPE has funded $5m in capital works (Capital Works Funds) to facilitate the construction of the Bundaberg Biohub. LPE will receive a 15% per annum margin on the Capital Works Funds, to be paid quarterly. The Capital Works Funds principal is expected to be repaid to the Company in October 2023. LPE may elect to exercise an option to redeem up to $3m of the Capital Works Funds in return for 50% of the fully paid ordinary shares in STAK. Before exercising the option, LPE will be required to comply with any applicable regulatory requirements. Term Deposits AEMO & Hedging Counterparties Office Lease - 212,312 212,312 1,400,000 212,312 1,612,312 32 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 11. Plant & Equipment Plant & equipment at cost Accumulated depreciation Motor vehicles at cost Accumulated depreciation Consolidated Entity 2022 Consolidated Entity 2021 $ $ 391,588 (184,807) 206,781 222,772 (113,312) 109,460 316,241 621,960 (353,266) 268,694 413,440 (202,556) 210,884 479,578 Reconciliation Reconciliations of the carrying amount of each class of plant and equipment between the beginning and the end of the financial year. Plant and equipment Plant and equipment Balance at the beginning of the year Additions Depreciation Disposals Balance at the end of the year Motor Vehicles Balance at the beginning of the year Additions Depreciation Disposals Balance at the end of the year 268,694 91,065 (101,519) (51,459) 206,781 210,884 - (52,721) (48,703) 109,460 235,575 143,145 (88,002) (22,024) 268,694 159,871 103,028 (52,015) - 210,884 33 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 12. Leasehold Improvements Leasehold improvements at cost Accumulated depreciation Reconciliation Consolidated Entity 2022 Consolidated Entity 2021 $ $ 484,273 (152,308) 331,965 482,294 (55,685) 426,609 Reconciliations of the carrying amount of leasehold improvements between the beginning and the end of the financial year. Leasehold improvements Leasehold improvements Balance at the beginning of the year Additions Depreciation Disposals Balance at the end of the year 13. Intangibles Intangibles at cost Intangibles work in progress Accumulated amortisation 426,609 1,979 (96,623) - 331,965 331,464 - (250,139) 81,325 177,090 482,294 (211,952) (20,823) 426,609 346,553 94,300 (230,795) 210,058 Reconciliation Reconciliations of the carrying amount of Intangibles between the beginning and the end of the financial year. Intangibles Intangibles Balance at the beginning of the year Additions Amortisation Disposals Balance at the end of the year 210,058 31,700 (49,620) (110,813) 81,325 478,002 109,089 (31,518) (345,515) 210,058 34 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 14. Right of Use Asset Right of use asset at cost Accumulated amortisation Reconciliation Consolidated Entity 2022 Consolidated Entity 2021 $ $ 959,452 (294,980) 664,472 939,146 (115,738) 823,408 Reconciliations of the carrying amount of Right of Use Assets between the beginning and the end of the financial year. Right of use assets Balance at the beginning of the year Additions Depreciation Balance at the end of the year 15. Borrowings Current Insurance financing Motor vehicle financing Short term financing BlackRock funding facility Non-current Motor vehicle financing BlackRock funding facility 823,408 30,685 (189,621) 664,472 116,724 928,767 (222,083) 823,408 43,827 38,049 2,000,000 17,943,149 20,025,025 107,421 66,191 - - 173,612 20,201 58,253 - 14,030,177 20,201 14,088,430 The Group has a funding facility of $18.24 million (of which $3.24 million includes the balance of a short term loan from BlackRock) as at 30 June 2022 (2021:$15 million). This is presented above net of borrowing costs. There is a further $1 million loan from Bundaberg Biohub Pty Ltd and $1 million loan from IJ Financial Services Pty Ltd used for short term funding. The loan from IJ Financial Services Pty Ltd has been personally guaranteed by Chairman Justin Pettett and Managing Director & CEO Damien Glanville. 35 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 16. Issued Capital (a) Issued and paid up capital Ordinary shares fully paid no par value 171,168,736 62,884,736 2022 Number 2021 Number (b) Movement in ordinary shares on issue Balance at 30 June 2021 Issued for cash 25 August 2021 Issued for cash 26 October 2021 Issued 18 February 2022 Issued 06 April 2022 Issued 06 April 2022 Capital raising expenses Balance at 30 June 2022 Ordinary shares Number $ 62,884,736 15,720,000 14,280,000 23,221,183 51,778,817 3,284,000 171,168,736 41,775,446 3,144,000 2,856,000 2,322,118 5,177,882 328,400 (1,304,997) 54,298,849 Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Share buy-back There is no current on-market share buy-back. (c) Share options Unlisted Options Issued 11-Nov-2020 EX $0.375 Issued 06-Apr-2022 EX $0.20 Listed Options Issued 26-Oct-2021 EX $0.30 Issued 26-Oct-2021 EX $0.30 Issued 06-Apr-2022 EX $0.30 Issued 06-Apr-2022 EX $0.30 Balance at 30 June 2022 Expiry Number $ 21/10/2022 30/03/2026 26/10/2023 26/10/2023 26/10/2023 26/10/2023 3,400,000 1,000,000 4,400,000 15,000,000 3,333,334 75,000,000 37,500,000 130,833,334 273,107 30,000 303,107 - 133,333 - 375,000 508,333 36 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 The fair value of options is determined in accordance with the fair market value of the shares available at the issue date. The Black-Scholes option valuation method has been utilised and some inputs require the application of judgement. The assumptions are set out below: 16. Issued Capital (cont’d) Unlisted Options Volatility Risk-free interest rate Expected life of share options (years) Dividend yield Listed Options Volatility Risk-free interest rate Expected life of share options (years) Dividend Yield 6/04/2022 82.0% 2.1% 4.00 0.0% 26/10/2021 6/04/2022 80.0% 0.16% 2.00 0.0% 82.0% 2.1% 1.60 0.0% The expected volatility and life of share options are based on historical data and current expectations and are not necessarily indicative of actual outcomes. Capital risk management The Consolidated Entity’s objectives when managing capital are to safeguard its ability to continue as a going concern so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In common with many other listed companies, the parent raises finance for the Consolidated Entity’s working capital and asset development activities. The Consolidated Entity is not subject to externally imposed capital requirements. 17. Earnings Per Share Weighted average number of shares used as the denominator in calculating basic and diluted earnings per share Basic Diluted Net profit after tax used in calculating basic earnings per share Basic earnings per share (dollars per share) Net profit after tax used in calculating diluted earnings per share Diluted earnings per share (dollars per share) 2022 Number 2021 Number 107,076,998 61,442,254 149,314,898 64,469,651 $ 6,129,947 0.0572 6,129,947 0.0410 $ 918,247 0.0149 918,247 0.0142 37 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 18. Controlled Entities Investment in controlled entities Country of incorporation Class of shares % of ownership 2022 % of ownership 2021 Locality Planning Energy Pty Ltd Locality Embedded Networks Pty Ltd LPE Generate Pty Ltd Australia Australia Australia Ord Ord Ord 100% 100% 100% 100% 100% 100% 19. Commitments The Group has no material commitments that require reporting. 20. Contingent Liabilities And Assets The Directors are not aware of any contingent liabilities or contingent assets that are likely to have a material effect on the results of the Group as disclosed in these financial statements (2021: nil). 21. Related Parties Key management personnel compensation Short term employee benefits Post-employment benefits Long-term benefits 2022 $ 2021 $ 1,309,421 1,018,745 75,108 10,868 75,291 6,667 1,395,397 1,100,703 Other related party transactions Director Kathryn Giudes is a director of STAK Mining Pty Ltd (refer to note 10). Chairman Justin Pettett and Managing Director & CEO Damien Glanville have personally guaranteed the loan from IJ Financial Services Pty Ltd (refer to note 15). There were no other related party transactions. 38 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 22. Cash Flow Information Reconciliation of cash flow from operations with profit / (loss) after tax Profit after tax Non-cash flows: Depreciation and amortisation Loss on disposal of assets Intangible asset write-off Unrealised gain on derivatives Expenditure classified as financing activities Changes in operating assets and liabilities Increase in receivables Increase in other assets Increase in creditors and payables Increase in employee entitlements Net cash used in operating activities Reconciliation of liabilities arising from financing activities Borrowings Opening balance Non-cash changes Cashflow Closing Balance Lease Liabilities Opening balance Non-cash changes Cashflow Closing Balance Cash and cash equivalents in the Consolidated Statement of Cash Flows include: Cash at bank Cash on deposit Restricted cash** Consolidated Entity 2022 Consolidated Entity 2021 $ $ 6,129,947 918,247 490,104 141,793 69,182 (14,314,320) 109,510 (7,373,784) (1,900,786) (4,118,511) 1,108,530 92,294 606,206 46,382 338,700 (5,638,187) 632,317 (3,096,335) (4,680,850) (865,726) 2,769,945 119,080 (12,192,257) (5,753,886) 14,262,042 1,372,327 4,410,857 20,045,226 1,233,695 27,404 (219,797) 1,041,302 13,665,062 1,492,994 (896,014) 14,262,042 111,350 1,306,924 (184,579) 1,233,695 21,086,528 15,495,737 3,134,163 - 3,750 3,137,913 3,215,250 1,530,000 1,000,000 5,745,250 **Restricted cash represents $3,750 that the Company is holding as a deposit from CPS Capital for Broker Options. 39 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 23. Financial Instruments Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expense are recognised, in respect of each class of financial asset, financial liability, and equity instrument are disclosed in Note 3 to the financial statements. Financial risk management objectives The financial risks of the Consolidated Entity include price risk, interest rate risk, liquidity risk and credit risk. The Consolidated Entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. Price risk Price risk is the risk of changes to market prices in the supply of electricity. This risk applies to both the price at which the Company sells electricity to its customers and the price it pays for that electricity. The Company eliminates wholesale price risk by using fixed price contracts where possible. Where fixed price contracts are not possible, the Company minimises its exposure to the wholesale spot prices by using derivative products, and a minimum hedge limit (MHL) provides floor coverage over a contracted load. Interest rate risk Interest rate risks are caused by fluctuations in interest rates which, in turn, are due to market forces. The Consolidated Entity’s main interest rate risk arises from cash and cash equivalents held to maturity investments, and borrowings. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Consolidated Entity’s profit or loss before taxes through the impact on cash and cash equivalents, and borrowings with a decrease or an increase of 1% in interest rates. It is the policy of the Consolidated Entity to manage their risks by continuously monitoring interest rates. Cash and cash equivalents Borrowings Sensitivity Effect on profit or loss before taxes Increase 1% Decrease 1% Consolidated Entity 2022 Consolidated Entity 2021 $ $ 3,137,913 5,745,250 (20,045,226) (14,262,042) (16,907,313) (8,516,792) (169,073) 169,073 (85,168) 85,168 40 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 23. Financial Instruments (Cont’d) Liquidity risk management Liquidity risks are caused by the inability to raise the money needed to meet payment of liabilities as and when they fall due. The Consolidated Entity manages liquidity risk by maintaining of reserves and by continually monitoring forecast and actual cash flows and cash balances. At 30 June 2022 current assets exceed current liabilities by $5,301,547 (2021: current assets exceeded current liabilities by $9,020,891). Financial liabilities comprised trade payables, accruals and other payables. All trade payables and accruals have a contractual maturity of 6 months or less. Credit risk management In relation to financial assets, credit risk arises from the potential failure of counterparties to meet their obligations under a contract or arrangements. Credit risk for the Consolidated Entity arises from cash and cash equivalents, outstanding receivables and financial assets. The Consolidated Entity partially reduces credit risk by the use of direct debit facilities with its customers. In addition, the Company has the right to withhold the supply of electricity to secure payment. All cash & cash equivalents and financial assets are held with Australian regulated banks. The maximum exposure to credit risk is the carrying amount of the financial assets recognised in the Consolidated Statement of Financial Position. Fair values The carrying amounts of all financial assets and liabilities primarily comprising cash and cash equivalents, trade and other receivables, trade and other payables, employee entitlements, derivatives and loans approximate their fair value. 24. Auditors Remuneration Amounts paid/payable for audit or review of the financial statements Amounts paid/payable for tax and other services Consolidated Entity 2022 Consolidated Entity 2021 $ $ 90,679 5,250 95,929 94,016 3,000 97,016 25. Subsequent Events LPE has repaid $3.24m of the BlackRock facility in July 2022. The $1 million loan to Bundaberg Biohub Pty Ltd was also repaid in August 2022. LPE is actively exiting the on-market customer base with less than 2,000 on-market customers remaining There are no other matters or circumstances that have arisen since the end of the year which have significantly affected or could significantly affect the operations of the Consolidated Entity, the result of those operations or the state of affairs of the Consolidated Entity in future financial years. 41 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 26. Parent Entity Disclosures 2022 $ 2021 $ The following information has been extracted from the books and records of the legal parent entity Locality Planning Energy Holdings Limited. Results of parent entity Loss for the year (4,043,914) (2,668,180) Other comprehensive income/(loss) for the year - - Total comprehensive loss before tax (4,043,914) (2,668,180) Income tax benefit - - Total Comprehensive loss before Tax (4,043,914) (2,668,180) Financial position of parent entity at year end Current assets Non current assets Total Assets Current liabilities Non current liabilities Total Liabilities Net Assets Total equity of the parent entity comprising: Issued capital Reserves Accumulated losses Total equity Contingent liabilities 31,843,644 5,000,000 36,843,644 20,350,691 - 20,350,691 21,612,147 - 21,612,147 106,840 14,030,177 14,137,017 16,492,953 7,475,130 54,298,849 41,775,447 811,440 273,107 (38,617,336) (34,573,424) 16,492,953 7,475,130 As at 30 June 2022, Locality Planning Energy Holdings Ltd is not aware of any contingent liabilities Contractual commitments At 30 June 2022, contractual commitments entered into by Locality Planning Energy Holdings Ltd is $Nil (2021: $Nil). Guarantees Locality Planning Energy Holdings Ltd has not entered into any guarantees, in the current or previous financial years, in relation to debts of its subsidiaries. 42 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited - ABN 90 147 867 301 Notes to the financial statements for the year ended 30 June 2022 27. Fair Value Measurements The Group measures and recognises the following assets and liabilities at fair value on a recurring basis after initial recognition: • derivative financial instruments; • financial assets held for trading; • financial assets at fair value through other comprehensive income; The Group does not subsequently measure any liabilities at fair value on a non-recurring basis. (a) Fair Value Hierarchy AASB 13: Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which categorises fair value measurements into one of three possible levels based on the lowest level that an input that is significant to the measurement can be categorised into as follows: Level 1: Measurements based on quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Measurements based on unobservable inputs for the asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant inputs are not based on observable market data, the asset or liability is included in Level 3. The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the following valuation approaches: • Market approach uses prices and other relevant information generated by market transactions for • identical or similar assets or liabilities. Income approach converts estimated future cash flows or income and expenses into a single discounted present value. • Cost approach reflects the current replacement cost of an asset at its current service capacity. Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and therefore are developed using the best information available about such assumptions are considered unobservable. The Group uses an internally derived forward curve to calculate the fair value of its financial derivatives, using an income approach. This model uses observable futures prices from ASX Energy and distributes these prices across half hour intervals using internally derived ratios. The Group closed the derivative positions during the year and therefore the fair value of the Group’s financial derivative instruments is $nil financial asset as at 30 June 2022 (2021: $3,347,675). Given the significance of the internally-derived ratios to the valuation, the Group has assessed this as Level 3. 43 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Directors Declaration The Directors of the Company declare that: 1. The attached financial statements and notes are in accordance with the Corporations Act 2001, including: (a) complying with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) giving a true and fair view of the financial position as at 30 June 2022 and performance for the year ended on that date of the consolidated entity, 2. The financial statements also comply with International Financial Reporting Standards as disclosed in Note 2. 3. The Remuneration Report as set out in the Directors’ Report complies with Section 300A of The Corporations Act 2001. 4. The Chief Executive Officer and Chief Financial Officer have declared that: (a) the financial records of the company for the financial year have been properly maintained in accordance with Section 286 of the Corporations Act 2001; (b) the financial statements and notes for the financial year comply with the Australian Accounting Standards (including Australian Accounting Interpretations); and (c) the financial statements and notes for the financial year give a true and fair view. 5. 5. In the Directors’ opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Justin Pettett Director Dated: 31 August 2022 44 Locality Planning Energy Holdings Limited | Annual Report 2022 45 Locality Planning Energy Holdings Limited | Annual Report 2022 46 Locality Planning Energy Holdings Limited | Annual Report 2022 47 Locality Planning Energy Holdings Limited | Annual Report 2022 48 Locality Planning Energy Holdings Limited | Annual Report 2022 49 Locality Planning Energy Holdings Limited | Annual Report 2022 50 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Shareholder Information Shareholder Information Additional information required by Australian Securities Exchange (ASX) and not shown elsewhere in the Annual Report, current as at 2 August 2022, is advised hereunder. Stock Exchange Quotation The Company’s shares are quoted on the ASX under the code “LPE”. Classes of Securities The Company has the following equity securities on issue: • ASX quoted: 171,168,736 ordinary shares (LPE), each fully paid, held by 1,135 shareholders • ASX quoted: 130,833,334 options exercisable at $0.30 and expiring 26 October 2023 (LPEO), held by 270 holders • Unlisted: 3,400,000 options exercisable at $0.375 and expiring 21 October 2022, held by 10 holders • Unlisted: 1,000,000 options exercisable at $0.20 and expiring 30th March 2026, held by 1 holder Voting Rights The voting rights attaching to ordinary shares are set out in Clause 13.13 of the Company’s Constitution and are summarised as follows: • • • each shareholder entitled to vote may vote in person or by proxy, attorney or representative; on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote (even though he or she may represent more than one shareholder); and on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed proxy, attorney or representative, have one vote for the share. Holders of options have no voting rights until such options are exercised. Restricted Securities There are no current restricted securities Unmarketable Holders There are 548 shareholders holding less than a marketable parcel of shares based on the closing price of $0.06 on 2 August 2022 representing a total of 1,196,796 shares. On-market Buy-backs There is no current on-market buy-back of any securities. Corporate Governance Statement The Corporate Governance Statement is available on the Company’s website at https://investors.joinlpe.com.au/corporate-governance/ 51 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Shareholder Information As at 2 August 2022 Range 100,001 and Over 10,001 to 100,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Unmarketable Parcels Twenty Largest Shareholders Rank Name Securities % No. of holders 154,808,428 90.44 14,863,320 679,950 713,760 103,278 171,168,736 1,196,796 8.68 0.40 0.42 0.06 100.00 0.70 212 344 90 238 251 1,135 548 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 FERNSHA PTY LIMITED PETTETT PTY LIMITED MR STANISLAV MICHAEL KOLENC NATIONAL NOMINEES LIMITED MR DAMIEN IAN GLANVILLE CITICORP NOMINEES PTY LIMITED FPMC PROPERTY PTY LTD BEARAY PTY LIMITED MR LESLIE PETER WOZNICZKA JARWILL PTY LTD BRIO CAPITAL MASTER FUND LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED SUNSET CAPITAL MANAGEMENT PTY LTD THE TRUST COMPANY (AUSTRALIA) LIMITED DEFENDER EQUITIES PTY LTD MR DARYL LINDSAY ALLEN BNP PARIBAS NOMINEES PTY LTD BARCLAYS MR ANANDA KATHIRAVELU DAVSAM PTY LTD SANDHURST TRUSTEES LTD Number of shares held 15,477,657 8,945,000 8,515,930 8,030,000 8,000,000 6,365,464 5,395,936 4,700,000 4,518,502 3,738,003 3,600,000 3,494,831 2,936,000 2,471,845 1,400,000 1,334,654 1,252,882 1,250,000 1,200,000 1,154,301 Total 93,781,005 Balance of register 77,387,731 Grand total 171,168,736 % 18.68 30.31 7.93 20.97 22.11 100.00 48.28 %IC 9.04 5.23 4.98 4.69 4.67 3.72 3.15 2.75 2.64 2.18 2.10 2.04 1.72 1.44 0.82 0.78 0.73 0.73 0.70 0.67 54.79 45.21 100.00 52 Locality Planning Energy Holdings Limited | Annual Report 2022 2022 Annual Report Shareholder Information Substantial Shareholders The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act are: Number of Shares Voting Power Name Name Fernsha Pty Limited Mr. Simon Tilley Pettett Pty Limited Twenty Largest Option Holders (LPEO) Rank Name 1 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 CELTIC CAPITAL PTY LTD SANDTON CAPITAL PTY LTD KUBERA CAPITAL PTY LTD CPS CAPITAL NO 5 PTY LTD BNP PARIBAS NOMINEES PTY LTD BARCLAYS MS CHUNYAN NIU SUNSET CAPITAL MANAGEMENT PTY LTD BRIO CAPITAL MASTER FUND LTD MR PETER ANDREW PROKSA BEARAY PTY LIMITED THE TRUST COMPANY (AUSTRALIA) LIMITED FERNSHA PTY LIMITED NEWPORT TIMBER & TRADING PTY LTD CS THIRD NOMINEES PTY LIMITED MR PETER ANDREW PROKSA JINDABYNE CAPITAL PTY LTD FRESH EQUITIES PTY LTD AUKERA CAPITAL PTY LTD MR ANANDA KATHIRAVELU GUILDFORDS FUNDS MANAGEMENT PTY LTD PETTETT PTY LIMITED 15,477,657 16,777,657 8,945,000 Number of options held 11,662,875 8,600,000 8,600,000 5,782,500 4,700,000 4,568,528 3,924,082 3,600,000 3,000,000 2,700,000 2,471,845 2,045,000 2,012,500 1,900,000 1,827,411 1,800,000 1,666,667 1,654,364 1,500,000 1,373,247 1,275,000 Total 76,664,019 Balance of register 54,169,315 Grand total 130,833,334 9.04% 9.80% 6.93% %IC 8.91 6.57 6.57 4.42 3.59 3.49 3.00 2.75 2.29 2.06 1.89 1.56 1.54 1.45 1.40 1.38 1.27 1.26 1.15 1.05 0.97 58.60 41.40 100.00 53 Locality Planning Energy Holdings Limited | Annual Report 2022 Locality Planning Energy Holdings Limited Level 8 Foundation Place 8 Market Lane Maroochydore QLD 4558 Australia 1800 040 168 www.localityenergy.com.au