PowerHouse Energy Group Plc Annual Report 2020

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FY2020 Annual Report · PowerHouse Energy Group Plc

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ANNUAL REPORT AND
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2020

CLEANER ENERGY
from Sustainable Technology

POWERHOUSE
ENERGY

“Part of the
solution to
two of the
greatest
environmental
challenges
of this decade”

Tim Yeo, Chairman

DIRECTORS

Tim Yeo
Executive Chairman

David Ryan
Chief Executive
Officer

James Greenstreet
Director

Myles Kitcher
Director

Allan Vlah
Director

Kirsty Gogan
Director

Mark Berry
Director

Company secretary
Rose Herbert

Company number
03934451

Registered office
15 Victoria Mews
Mill Field Road
Cottingley Business Park
Bingley BD16 1PY

Website
www.powerhouseenergy.co.uk

Bankers
HSBC
79 Piccadilly
London W1J 8EU

Nominated Adviser
WH Ireland
24 Martin Lane
London EC4R 0DR

Registrar
Neville Registrars Limited
Neville House, Steelpark Road
Halesowen B62 8HD

Auditor
Jeffreys Henry LLP
Finsgate 5-7
Cranwood Street
London EC1V 9EE

Forward-looking statements
This report includes forward-looking statements. Whilst these forward-looking
statements are made in good faith, they are based upon the information
available to Powerhouse Energy Group PLC at the date of this report and
upon current expectations, projections, market conditions and assumptions
about future events. These forward-looking statements are subject to risks,
uncertainties and assumptions about the Company and should be treated with
an appropriate degree of caution.

Highlights of 2020..........................................................

..................

Chairman’s Statement...................................................

..................

CEO’s Annual Review....................................................

..................

Strategic Report..............................................................

..................

Directors’ Report.............................................................

..................

Corporate Governance Report..................................

..................

Remuneration Committee Report............................

..................

Audit Committee Report.............................................

..................

Environmental, Social & Governance
Committee Report.........................................................

..................

Statement of Directors’ Responsibilities................

..................

Independent Auditor’s Report...................................

..................

Statement of Comprehensive Income....................

..................

Statement of Financial Position................................

..................

Statement of Cashflows...............................................

..................

Statement of Changes in Equity...............................

..................

Notes to the Accounts..................................................

..................

CONTENTSCOMPANY INFORMATIONANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

HIGHLIGHTS
OF 2020

COMMERCIAL ACTIVITIES

• Commercial terms signed with Peel NRE under which Powerhouse will receive
an annual license fee of £500,000 for each DMG® plant built in the UK.

• Peel NRE awarded an Option to enter into an exclusive agreement for the

development of DMG® Technology in the UK and indicate plans for more than 70 sites
UK wide.

• Acquisition of Waste2Tricity Limited completed.

• Heads of terms signed for first international application of DMG technology.

• Post year end award of revised Statement of Feasibility from DVN for the enhanced

DMG design.

PROJECT PROGRESS

CHAIRMAN’S
STATEMENT

Dear Fellow Shareholder

I am pleased to report that 2020 was a year of substantial progress
and extensive change for Powerhouse Energy Group plc (“Powerhouse”).
During 2020 Powerhouse:

• Prepared to begin construction of our first commercial scale plant

• Completed the acquisition of Waste2Tricity Limited

• Signed an Exclusivity Option Agreement with Peel NRE for the rollout
of DMG technology in the UK

• Transformed our financial position and broadened our shareholder base

• Refined and developed our DMG technology

• Entered our first overseas market

• Planning permission for first DMG application on Protos site granted in March 2020.

• Strengthened our Board and overhauled our corporate governance

• Completion of the front-end Engineering and Design.

• Expanded our management team

• Completion of Value Improvement and enhanced export options for Protos to provide

commercial flexibility for Peel NRE.

• Planning commenced for second site in Clydebank, Scotland.

•

Instigated the process of selecting a new Chief Executive Officer to succeed David Ryan

We have made further significant progress on many of these issues in the early months of 2021.

FINANCIAL PERFORMANCE

• £5m fundraise and engagement of cornerstone financial and industrial investors.

• Peel Holdings (IOM) Ltd granted warrants to acquire new shares equating to 10% of

the current issued capital of Powerhouse triggered by announcement of the Financial
Closing of the Protos Project.

• Powerhouse secured first payments in year.

• Post year end fundraise of £10m to protect schedule for Protos and engage in Protos

Special Purpose Vehicle.

ORGANISATION & GROWTH

• Reorganisation and strengthening of the Board.

• Recruitment of operational and technology development team.

• Establishment of new Board committee – the Environmental Social Governance

committee.

BUILDING OUR FIRST COMMERCIAL SCALE PLANT
Construction of our first commercial scale DMG plant by Protos Plastics to Hydrogen No. 1 Limited, the Special
Purpose Vehicle (the “SPV”) owned by Peel NRE (formerly known as Peel Environmental) at the Protos site in
Cheshire owned by Peel NRE is Powerhouse’s top priority. The successful commissioning and operation of this
plant is the step which, when accomplished, opens up a worldwide market for our DMG technology.

Powerhouse is therefore working very closely with Peel NRE to achieve this outcome as quickly as possible. Even
before financial close has been reached, Powerhouse has lent the SPV £3.8 million to ensure that its progress is
not impeded by having to wait for items of equipment needed for the DMG plant to be supplied.

Action to ensure the structured delivery of this first plant is being facilitated by advice from Ian Crockford whose
former assignments include responsibility for project delivery at the 2012 Olympic Delivery Authority. Ian started
advising both Powerhouse and Peel NRE in April 2021.

Powerhouse’s technical team has supported Peel NRE throughout 2020 and in the current year in preparing for
the plant’s construction. This support has been extended to the SPV following its establishment.

The technical team has been led until now by David Ryan in his capacity as Chief Executive. Following David’s
departure on 30 June 2021 it will be led by Paul Emmitt, our newly appointed Chief Technical Officer, who
has been very closely involved in the development of our DMG technology for the last four years as Managing
Director of the engineering consultancy Engsolve Limited.

POWERHOUSE ENERGY GROUP 4

POWERHOUSE ENERGY GROUP 5

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CHAIRMAN’S
STATEMENT

ACQUISITION OF WASTE2TRICITY LIMITED
The acquisition of Waste2Tricity Limited
(“Waste2Tricity”) by Powerhouse was successfully
completed following the overwhelming shareholder
vote to approve this transaction at the General
Meeting on 14 July 2020. Detailed information
about the terms of this acquisition and about
Waste2Tricity was given in the circular sent to all
shareholders on 26 June 2020, a copy of which is
on our website.

The activities and assets of Waste2Tricity have now
been successfully integrated into Powerhouse. This
integration has enabled greater efficiency in the
work of Powerhouse to be achieved.

Since the year end Waste2Tricity has ceased
trading and has been wound up.

EXCLUSIVITY OPTION AGREEMENT
WITH PEEL NRE
On 9 March 2020 Powerhouse announced the
signing of a UK Exclusivity Option Agreement with
Peel NRE . Under this Agreement Peel NRE can, on
payment of £500,000 to Powerhouse, acquire the
exclusive rights to develop our DMG technology
in the UK. This Agreement was an important step
in formalising and strengthening Powerhouse’s
partnership with Peel NRE. It enables Peel NRE to
lead the engagement with potential licensees of
our DMG technology and with end customers for
UK based DMG plants such as local authorities and
waste management companies.

Powerhouse believes that Peel NRE is the ideal
partner to work with to deliver our ambitions for
rapid nationwide rollout of DMG plants. Peel NRE
has identified the market for more than 70 DMG
plants across the UK, and has identified potential
sites, a number of which are already in their
ownership. For each DMG plant developed in the
UK Powerhouse will receive an annual licence fee
of £500,000.

Peel NRE’s experience of working within
communities and with other businesses will
be valuable in identifying and acquiring
further sites.

Coupled with their record of successfully
negotiating land use planning approvals for
infrastructure projects, including energy
from waste projects, this augurs very well for
Powerhouse’s growth prospects once it has been
shown that DMG technology works at scale.

A STRONGER FINANCIAL POSITION AND
A BROADER SHAREHOLDER BASE
At the start of 2020, Powerhouse was still in
the weak cash position which had severely
constrained its progress for several years.
A priority for the Company, following the
acquisition of Waste2Tricity and my appointment
to the Board in July 2020, was to rectify this.

In September 2020 Powerhouse raised £5
million before expenses by way of a placing and
subscription of 200 million new shares at 2.5
pence per share, five times higher than the share
price at the start of the year. Peel Holdings (IoM)
Limited (“Peel (IoM)”), the parent company of
Peel NRE, subscribed for 40 million of these new
shares. Powerhouse’s 31 December 2020 balance
sheet shows the significant improvement in our
financial position which this placing achieved.

In January 2021 another placing of just over
181 million new shares at 5.5 pence per share
raised £10 million before expenses. This further
substantially strengthened our financial position.

Powerhouse’s largest shareholder, the White
family, maintained their stake of approximately
26% of our equity by subscribing for new shares
in both these placings.

In March 2021, three former Waste2Tricity
shareholders were given permission to sell
just over 141 million Powerhouse shares which
they had received in July 2020 through the
acquisition by Powerhouse of Waste2Tricity. On
19 March 2021 Powerhouse announced that more
than three quarters of these shares had been
bought by 1798 Volantis Fund Ltd, a fund which
is managed by Lombard Odier.

REFINING AND DEVELOPING OUR DMG
TECHNOLOGY
More detail of the progress which Powerhouse
has made during 2020 in refining our DMG
technology is described in the Chief Executive’s
Review of the Year.

In the current year Powerhouse expects to
provide chargeable engineering services during
the construction phase of Protos.

CONT’D

OUR FIRST OVERSEAS MARKET AGREEMENT
In November 2020 Powerhouse signed Heads of Terms
with a view to granting Hydrogen Utopia International
Limited (“HUI”) an exclusive non-transferable licence for
the application of our DMG technology in Poland. Since
the year end HUI has made good progress in finding
sites for DMG plants in the city of Konin and in building
relationships with central and local government and
with potential suppliers and influential partners.

Recently HUI has also identified opportunities for the
deployment of our DMG technology in Greece
and Hungary.

AN OUTSTANDING BOARD AND STRONGER
GOVERNANCE
During 2020 the Powerhouse Board was enlarged and
strengthened by the appointment of new non-executive
Directors who have brought a wide range of experience
and skills to benefit our Company.

Details of all Directors, including those
appointed since the start of 2020, are shown
in the Directors’ Report.

Powerhouse’s longest serving director, Brent
Fitzpatrick, stepped down from the Board in
August. Since the year end my predecessor as
Chairman, Dr Cameron Davies, retired on 31
March 2021. Our CEO, David Ryan announced
last November that he wished to stand down
as Chief Executive Officer on 30 June 2021.

Mark Berry has indicated his wish not to
stand for re-appointment at the 2021 AGM.
Following discussion with the Board James
Greenstreet, whose retirement from the board
was announced on 16 April 2021, has agreed
to remain on the board until the AGM to be
held in 2022.

H
KONIN

POWERHOUSE ENERGY GROUP 6

POWERHOUSE ENERGY GROUP 7

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CONT’D

This is a very exciting time in Powerhouse’s development.

A technology which can solve the environmental problem of unrecyclable plastic waste,
meet the extremely urgent need for zero carbon energy and extend life expectancy for
billions of urban dwellers by improving the air quality in their neighbourhoods has a truly
global market.

The modular design of our DMG plant allows production to be scaled up rapidly once the
operation of our first commercial scale plant provides proof of concept. Since most of
the capital cost of deploying our technology will be borne by our development partners
and by the companies which are licensed to use our DMG technology it will be possible
for very rapid growth to take place simultaneously in different markets without having to
have recourse to our shareholders for additional cash to fund this expansion.

The Board expects that 2021 will be another year of substantial progress towards our goal
of bringing our DMG technology to full commercial operation in many parts of the world.

Tim Yeo
Executive Chairman
29 June 2021

CHAIRMAN’S
STATEMENT

On behalf of shareholders I should like to express our
deep gratitude to these colleagues for their service
to Powerhouse over many years. We wish them well
in the future.

Rose Herbert was appointed Company Secretary
following Brent Fitzpatrick’s resignation. Rose has
many years’ experience working with AIM quoted
companies on transactions and in a company
secretarial capacity.

After becoming Chairman of Powerhouse
in September 2020 I led an overhaul of our
Corporate Governance procedures. Our Audit
and Remuneration Committees now meet on a
regular basis and a new Board Committee, the
Environmental Social and Governance Committee,
was established in December. The responsibilities
and work are described in the Reports of these
Committees set out in this Annual Report.

The Board is also taking steps to improve its
accountability to our shareholders. In future any
director who is over the age of 70 or has been on
the board for eight years at the date of the Annual
General Meeting will submit themselves for re-
election annually, in addition to those Directors
retiring by rotation in accordance with our Articles of
Association.

BUILDING OUR MANAGEMENT TEAM
During 2020 Powerhouse became a fully-fledged
operating business.

David Ryan, Chief Executive is supported by Chris
Vanezis, the Company’s Chief Financial Officer.
Chris is responsible for financial control issues
including the production of monthly management
accounts and cash flow projections for the Board,
the preparation of half yearly and annual accounts,
liaison with the Company’s auditors and for cash
management .

Dr Andy Physick was appointed as the Process
Engineering Team Lead in December 2020
with responsibility for preparing the operating
organisation for licensing activities.

Paul Emmitt has recently been appointed as
Chief Technical Officer. This is a new position
which has been created in anticipation of David
Ryan stepping down as Chief Executive Officer.
Paul will fill it on a part time basis, working two
days a week for Powerhouse while continuing as
Managing Director of Engsolve Limited.

In recognition of the importance of project
delivery to Powerhouse, the Company appointed
specialist Project Executive, Ian Crockford. Ian is
to direct all aspects of the project establishment
and delivery on a consultancy basis. Ian has
been advising the Company since April 2021 on
project delivery matters.

The Board has also recently selected a Business
Development Executive who will join the team
later this summer. His focus will be mainly on
international business development while also
providing support for Peel in rolling out DMG
plants in the UK.

SELECTING OUR NEW
CHIEF EXECUTIVE OFFICER
Following the announcement last November
of David Ryan’s decision to stand down as
Chief Executive Officer, the Board instigated
the process of recruiting his successor. After
considering several search firms the Board
appointed Egon Zehnder in May 2021. Their wide
experience and international reach was thought
to be likely to help identify the best candidates.

The Board felt that it would be easier to attract
top quality candidates to this post if the search
process was carried out after greater clarity
about the funding of the SPV had been achieved.
Now that financial close for the SPV is expected
soon Egon Zehnder has started work.

I expect to be able to announce the choice of
Powerhouse’s new CEO in due course.

POWERHOUSE ENERGY GROUP 8

POWERHOUSE ENERGY GROUP 9

THE FUTUREANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CEO’S
ANNUAL REVIEW

PROGRESS TO FIRST
APPLICATION AT PROTOS

The first application of the Powerhouse
DMG technology is to be built at the Protos
Site, a Peel NRE energy park development
on a 54 hectare site known as ‘Protos’ near
Ellesmere Port, Cheshire, England. The site is
the first development by Peel NRE under the
Collaboration Agreement.

Powerhouse is providing technical assurance
services to the project and will licence the
DMG application and will provide operational
services under Protos specific agreements.

The DMG application lies at the heart of
the Protos Plastic Park, which will be Peel
NRE’s flagship energy and resource hub
situated on Protos site. The facility will bring
together large energy users with sources of
low-carbon energy, and clusters together
resource management technologies. The park
will handle up to 300,000 tonnes per annum,
with the non-recyclable content directed at
Powerhouse DMG unit.

PROTOS ENGINEERING DEFINITION –
FEED STAGE
In mid-2020 EnerMech were appointed to
undertake a Front End Engineering Design
(“FEED”), the scope of which provided the
site process definition drawings together with
specifications for the equipment and module
procurement. Powerhouse was responsible
for validation and direction of the design to
ensure the Protos project meets the design
criteria.

PROTOS VALUE IMPROVEMENT
Peel NRE’s negotiation of their hydrogen
contracts indicated that in early years of
Protos operation, some degree of flexibility
in hydrogen operation was needed and
Powerhouse revised the DMG to offer an
option to export large packets of hydrogen
via tanker and container. The additional
hydrogen export requirement was subject to
quantitative risk studies that were completed
in the first quarter of 2021.

For waste supplies, Peel NRE secured the interest
of multiple waste providers and they recognised
the Protos site would be an opportunity for waste
companies to prove this new process. As a result,
the Protos design and specific aspects of the
DMG application were modified to allow different
non-recyclable feedstocks to be handled on the
site concurrently.

These adaptations were considered necessary
for this first DMG application as it would allow
confirmation of feedstock for future plants. The
design additions will not be the norm on the
multiple site roll outs.

The above changes and further construction
definition were included in a FEED Update report
issued by Enermech.

PROTOS SCHEDULE
The original planning permission for the site was
approved, on 3 March 2020 by Cheshire West and
Chester planning committee.

Through 2020, the engineering development
work on Protos has proceeded almost to schedule
with minimal delay. However the second Covid-19
lockdown meant that project interaction to
complete negotiations were more difficult. As a
result of design variations arising from the value
improvement exercise for the site a Section 73
revision for the planning will now be submitted by
Peel NRE. This is likely to result in a delay in the
planned completion of construction and start of
operation of the plant.

CONT’D

The plant is modular in nature, with managed
fabrication activities undertaken off site.
Commencement of civil construction is
expected to commence before the end of 2021.
The successful commissioning of the Protos
project remains the key milestone in the growth
of Powerhouse and the Directors have made
the delivery and operation of the plant their
number one priority.

PROCUREMENT
The supply of modules and equipment for the
Protos and Clydebank DMG will arise from the
UK. All modules have been bid commercially
and submissions from suppliers analysed
against the Powerhouse specifications and
specific requirements for application on the
Peel Protos site.

The procurement phase for Protos has
commenced with an initial order for the alloy
material for the Thermal Conversion Chamber
(TCC). This alloy material was selected after
four years of engineering work and research by
the Powerhouse team, the TCC manufacturers
and external material consultants and heat
transfer specialist consultants.

All other long lead equipment orders are being
refined against the Protos contract conditions
and will be placed by the Peel NRE project
managers to ensure an optimum delivery
programme. These items include the gas clean-
up module, compression, power generation and
the DMG control system.

CONTRACTING ARRANGEMENTS
The first DMG project will be delivered by a
specialist integration contractors under the
guidance of Powerhouse technical assurance
and key component teams. Construction
quality control systems defined by Powerhouse
– the written scheme of examination - will be
followed on all components and equipment.

The Contractors will be building into their
delivery programmes the necessary safety
precautions inherent in their Covid-19 safe
operating practices to deliver Protos and these
will be confirmed at contract award.

PROTOS PROJECT MANAGEMENT
Powerhouse and Peel NRE have undertaken
contractor engagement over the past three years
and familiarisation to select the right contractor
for this execution and we are confident that
the execution quality will be maintained. In
recognition of the importance of project delivery
both to the Peel NRE and Powerhouse, the
companies jointly appointed Ian Crockford as
Project Executive. Ian has a long track record
in directing project delivery having successfully
led the London 2012 Olympic Stadium and
Aquatics Centre, together with the analogous
development of the London Eye - another first of
a kind application.

He will be supported by the Technology
Development team consisting of the staff team
and Engsolve, and the key consultants who
have provided peer assist measures through
the last four years of technology development.
Powerhouse is leading the vendor technical
assurance activities through the contract period.

PEEL STRATEGIC
DEVELOPMENT PROGRESS

The Company made significant
progress in our commercial
arrangements with Peel NRE, our
development partner on Protos.

POWERHOUSE ENERGY GROUP 10

POWERHOUSE ENERGY GROUP 11

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CEO’S
ANNUAL REVIEW

CONT’D

Second
project

In June 2021 Peel NRE and Powerhouse announced the next
DMG development would be in Clydebank, Glasgow.

The pre-planning application work has been completed and an application for planning
permission is expected to be submitted within three months. Subject to the necessary
permissions the FEED and contract bidding can be completed ready for sanction prior
to completion of Protos.

PEEL INVESTMENT IN POWERHOUSE
This alignment between the companies was consolidated in September 2020, when
Peel Holdings (IoM) Limited invested £1 million as part of the financial raise to provide
funds for Powerhouse operations through to commissioning of Protos. The investment
agreement further granted Powerhouse access to Protos design materials and other
intangible benefits.

In recognition of this commitment Powerhouse granted a Warrant to Peel Holdings (IoM)
Limited providing a conditional right to subscribe for 371,510,069 new Powerhouse shares,
representing just under 10 per cent of the Company’s current issued share capital.

PEEL COLLABORATION AGREEMENT AND COMMERCIAL TERMS AGREEMENT
During 2020 the Peel Collaboration Agreement (“CA”) that had been signed in 2019 was
strengthened by addition of the specific commercial terms for the Protos project and
the ten subsequent projects as addressed in the CA. The terms required Powerhouse
to complete the acquisition of Waste2Tricity, and based on this it confirmed an
annual licence fee of £500,000 per DMG plant to be paid per annum after successful
commissioning of each DMG process. The terms allowed for the project technical
assurance and engineering fees for services delivered during the project and specific
contracts have been signed for Protos delivery.

PEEL EXCLUSIVITY AGREEMENT FOR DMG IN
PLASTICS TO HYDROGEN APPLICATIONS
In support of the CA, an Option for exclusivity was signed with Peel NRE. Under the
Exclusivity Agreement, Peel NRE will pay the sum of £500,000 to Powerhouse for
exclusive rights to the DMG technology in the UK and will lead the development and the
funding strategy for all future UK projects. The exclusivity must be enacted within six
months of the financial close of Protos.

TECHNOLOGY DEVELOPMENT PROGRESS

The technology development has continued at pace through 2020 with design development by
the engineering contractor and Powerhouse technical team’s work, addressing risk issues and
enhancing designs to offer options for UK and international project applications.

Furthermore, in 2020 design developments and process enhancements were driven by Peel
NRE commercial framework and their need for flexibility in feedstock and production regimes.
These enhancements included options for hydrogen export through pipeline, local refueling
station and the addition of high-pressure compression and export facilities enabling the plant to
provide packets of hydrogen up to 750kg to be shipped to offtakers.

POWERHOUSE ENERGY GROUP 12

POWERHOUSE ENERGY GROUP 13

CLYDEBANKANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CEO’S
ANNUAL REVIEW

CONT’D

TECHNOLOGY ENDORSEMENT
In June 2021 DNV reported, confirming that the technology revisions implemented since 2018 have removed the
majority of the technical uncertainties and defining their assessment programme for endorsement of the DMG
process output at 40 tonnes per day of waste feedstock and 2 tonnes per day of hydrogen production. They
revised their Statement of Feasibility to address the process enhancements and initiated the definition of their
assessment programme for endorsement.

In January 2021 the Company raised £10 million before expenses, in order to support the early procurement
of the materials and services for the Protos development and engage in the SPV. A total of 181,818,182 new
Ordinary Shares were placed at a price of 5.5p per share.

The Company’s strategy of attracting a cornerstone investor was confirmed when most of these shares were
placed with an institutional investor.

In addition to the formal DNV process, the technology has been reviewed by a series of engineering contractors
for Protos and international projects. The FEED by Enermech has addressed all design features in detail and the
FEED report was issued with no reservations against the design.

The Company’s cash position has been enhanced by down payments for territorial exclusivity options, R&D
tax credits and the exercise of share options and warrants in both 2020 and 2021.

UNRECYCLABLE
PLASTIC IS FED INTO
THE SYSTEM

IT IS MELTED,
VAPOURISED AND
CLEANED INTO SYNGAS

ENERGY
CONVERSION
FROM THE SYNGAS

OUTPUT
PRODUCTS

Natural Gas
(Start-up only)

Oxidising Agent

Cleaned
Exhaust Gases

HEAT

Hydrogen
Extraction and
Storage

Thermal
Conversion
Chamber

FEEDSTOCK

Solid
Residues

Liquid
Residues

Safety
Vent

CORPORATE PROGRESS

FINANCIAL PERFORMANCE
The Company secured its first revenue in 2020
of £100,000 for initial engineering work on
Protos. These funds were part of the careful cash
management through the first half of 2020.

The acquisition and hive up of Waste2Tricity
resulted in goodwill arising of £57.15 million. The
Company is required to assess the carrying value
of goodwill on an annual basis and commissioned
an independent third party to carry out a valuation.
This has resulted in an impairment charge for the
year of £14.2 million to leave a carrying value of
£42.96 million. The carrying value is supported by,
and dependent upon, the roll out proposals for the
DMG technology and underlying revenue streams
which will arise therefrom.

ELECTRICITY

HYDROGEN

Electricity
Generation

Waste Plastic
Storage and
Feed System

The Directors can confirm that the position does
not materially influence the Company’s ability to
pay dividends in the medium term. In future the
transition to a company with annuity revenue
streams will command a completely different
valuation and volatility profile.

In September 2020, the Company raised £5
million, before expenses, by way of a placing
and subscription of 200 million new Ordinary
Shares of 0.5p (Ordinary Shares) at 2.5p per
share. The placing was oversubscribed and the
majority of the equity was placed with a single
institutional investor. This fundraise secured the
financial position of the Company through to
planned commissioning of the Protos site.

SPV LOAN
In May 2021 the Company provided a short term loan facility to the SPV of up to £3.8 million which is available
for 6 months. Full details were announced on 12 May 2021.

TRANSACTION - ACQUISITION OF WASTE2TRICITY
On 14 July 2020 at an EGM the shareholders approved the acquisition of Waste2Tricity Limited
(“Waste2Tricity”), which had been Powerhouse’s project developer and marketing company in the UK. The
transaction used Powerhouse shares to acquire the whole of the issued share capital of Waste2Tricity. Full
details of the transaction were set out in the circular to shareholders dated 26 June 2020.

In March 2021 the Directors released three shareholders from the one year lock-in period on condition that
their shares were sold to existing Powerhouse shareholders including the Company’s cornerstone institutional
investor, advancing the Board’s strategy of strengthening the Company’s long-term investor base.

Following completion of the acquisition, Waste2Tricity was wound down and dissolved on 1 June 2021.

POWERHOUSE ENERGY GROUP 14

POWERHOUSE ENERGY GROUP 15

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

The Company systems and IT structure have been
consolidated. Investment in IT enhancements
was necessary to accommodate the technology
team and the migration of information for Protos
and to meet Covid-19 operational restrictions. All
Powerhouse designs now reside in ISO 27001 and
ISO27017 compliant data centres.

MY THANKS TO SHAREHOLDERS
After four intense but enjoyable years taking the
Powerhouse technology through development
to the point of commerciality, I must take this
opportunity to thank the shareholders for their
fantastic commitment to Powerhouse and I will join
them in looking ahead to a successful completion
of the first DMG application at Protos.

David Ryan
Chief Executive Officer
29 June 2021

CEO’S
ANNUAL REVIEW

ORGANISATIONAL DEVELOPMENT

PERSONNEL
Dr Andrew Physick was recruited in December
2020 to lead the internal process engineering team,
readying the company for operational licensing.
Dr Physick has a background in waste technology
developments, having studied at the Universities
of Bath and Swansea, with a series of published
papers. He will lead a team of graduate engineers
and scientists and his team will continue technology
development whilst readying the operational
licencing systems for Protos commissioning to
provide the necessary technical guidance to smoothly
bring Protos into full operation.

The recruitment has provided the Board with
confidence that depth of suitably qualified
engineering and management candidates exist to
nurture the Company through its growth phase.

In recognition of the challenging work environment
arising from Covid-19, the Company initiated a
full staff support network to provide professional
development to individuals.

RESEARCH CENTRE AND OFFICES
Powerhouse extended the office facilities in the fourth
quarter to accommodate the extended technology
development and operation support teams and the
allow the Protos project team to have engineering
offices close to site.

MANAGEMENT SYSTEMS
Under the guidance of the new Board the Company
has overhauled its governance provisions and
initiated management systems to cover all operations.
Ian Crockford has advised controls specific to the
effective governance of Protos.

The Company technology and product development
guidelines provide a gated structure against which
the technology has been developed and will be used
to direct the project delivery. The challenges of such
a system ensure the team undertakes the important
stage of self-review prior to initiating the third-party
due diligence that any new technology meets as part
of approval and delivery process.

STRATEGIC
REPORT

The strategic report section addresses
the Directors’ management of the
Company and contains certain
forward-looking statements.

These statements are made by the Directors in
good faith based on the information available to
them up to the time of the report preparation and
approval and such statements should be treated
with caution as they address uncertainties.

BUSINESS STRATEGY
Powerhouse designs, delivers and licenses DMG
technology, a proprietary design for advanced
thermal conversion which converts calorific waste
streams into synthetic gas (syn-gas), a valuable
intermediate product a that can be used for power
generation and as a source of hydrogen for fuel
cell vehicles.

The process converts non-recyclable waste plastic
or end of life tyres to produce clean syngas into
these ‘end of waste’ products:

• Hydrogen
• Electrical power and heat
• Natural gas replacement
• Chemical feedstocks.

Powerhouse will license the use of its technology
to the companies which will operate plants using
this technology. Powerhouse does not intend to
develop or operate individual plants itself or to be
a power producer. This business model minimises
the capital needed by Powerhouse to expand
its business rapidly and simultaneously across
markets in the UK and overseas.

Powerhouse Energy will derive revenue principally
from the annual licence fee payable by the plant
operators in respect of each process application of
the DMG technology.

In addition it will generate revenues in the project
development stage from the engineering services
and technical assurance services for specific client
feedstock analysis and laboratory services, from
engineering during project development, and then
from operational support services when plants are
in operation.

DEVELOPMENT PARTNERSHIP FOR UK -
PEEL NRE
Powerhouse’s strategy is to find partners for the
development and operation of our technology in
each region. In the UK in 2019 the Company had
contracted with a major development partner
in the form of Peel NRE, part of Peel Group,
one of the leading infrastructure, transport and
real estate investors in the UK, with collective
investments owned and under management of
more than £5 billion.

FIRST PROJECT
The first commercial scale application of
Powerhouse technology is under development
at the Protos Energy Park, Ellesmere Port,
Cheshire by our Collaboration Partners Peel
NRE. Completing the construction of this first
commercial scale plant is the Company’s top
strategic priority.

The successful commissioning of the Protos
project is a key milestone in the growth of
Powerhouse and the Directors have made the
delivery and operation of the plant their number
one priority and will initiate schedule recovery
programme for Protos.

BOARD STRENGTHENING
The Board’s strategy is to keep the composition
of the Board and related corporate governance
issues under constant review. The aim is to ensure
that the Directors have the right mix of skills,
experience and qualifications to carry out their
duties in a way which ensures the Company’s
future success.

OPERATIONS
The Company’s operations are based at Thornton
Energy Park where the Operations teams manage
the design development process for existing and
future projects. The Protos project team is based
here.

The Research and Development team carries
out development testing on the Research
Demonstrator rig and associated laboratory
equipment, analysing feedstock materials for new
customers and refining the chemical engineering
models for process enhancement and new
applications.

POWERHOUSE ENERGY GROUP 16

POWERHOUSE ENERGY GROUP 17

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STRATEGIC
REPORT

CONT’D

SALES THROUGH PARTNERSHIP
Powerhouse’s international business
development is being delivered through
a network of partnerships in different
markets in Europe and further afield,
including Australia and Thailand. These
partners identify the most attractive
opportunities for the deployment of our
technology. Powerhouse supports these
partners, providing technical assistance
and services, and where appropriate,
design definition work. Specific local
market requirements are met by
these partners.

In the UK Powerhouse’s partner is Peel
NRE who own the site where the first
plant is being built in Ellesmere Port,
Cheshire. Under the UK Exclusivity
Option Agreement Peel NRE, on payment
of £500,000 to Powerhouse, can
acquire the exclusive rights to develop
Powerhouse’s DMG technology in the UK.

HYDROGEN MARKET
Powerhouse supports the development
of hydrogen economies in the UK
and elsewhere which will facilitate
deployment of its new proprietary
technology to enable production of
low cost hydrogen. Powerhouse’s DMG
hydrogen technology is the first move in
this strategy to facilitate the adoption of
fuel cell heavy goods transportation, and
in the longer term, flexing of the national
grid gas specifications to enable DMG
produced gasses as well as bio-gas to be
added.

Powerhouse participates actively in policy
discussions with government and is an
active member of the UK Hydrogen and
Fuel Cell Association. The Company has
also joined Peel NRE in the North West
Hydrogen Alliance.

WASTE PLASTIC MARKET
Powerhouse’s DMG technology is an
innovative method for handling end of
life plastics. The Company’s pipeline
of projects is driven in part by the
international interest in the product to
handle this waste plastic.

OUR PRODUCT

DMG takes waste plastics that cannot
be recycled and regenerates them into
clean energy that can be separated into
hydrogen for delivery either as clean fuel
for fuel cell transport or as a feedstock in
other applications in the chemicals and
plastics industries.

Powerhouse maintains an active
programme of product development
to ensure that our technology remains
competitive and relevant to meet the
needs of our customers, development
partners and potential licensees.

TECHNOLOGY ENDORSEMENT
The international gas consultancy DNV
have been contracted to assess and
report the updated technology design
against their standards and are planning
to provide the technology endorsement
in the third quarter of 2021.

INTELLECTUAL PROPERTY
MANAGEMENT
The Company follows a dual route of
IP protection via a suite of patents and
maintaining secrecy over the design
documents, calculations, and chemical
engineering models for the process. The
most important IP remains the chemical
engineering model of the process to
create the clean gas – and Powerhouse
maintain strict protocols to ensure
this information is protected as secret,
including limited access to process
control on the system.

Through last year and into 2021
the technical development team
of Powerhouse have assessed the
DMG control system, technology
of application and how the key
programming, control and maintenance
of the systems will be protected. The
specification of the system has been
bid by international control systems
companies, this process has allowed
definition of the system.

The Company’s
technology
development also
takes account of the
emission footprint
of our processes

The system will be enacted tested and quality
assured to the DNV, Recommended Practice - G108
defining cyber security systems. Of priority this
enactment will be the IP focused risk assessment
to determine the measures that algorithms and
control functional blocks embedded in the systems
will be protected. Once in operation, under the
licence agreements the key system support
activities on Protos and other projects will be
undertaken by Powerhouse staff.

Following the patent protection, there is a family
of patent work completed and filed nationally,
and within Europe, within GCC and worldwide.
The associated statements of invention and claims
initiated and are under scrutiny and assessment
work continues for completion prior to the first
application of DMG. The family of patents will be
augmented by the detailed design novel designs
that the team are generating.

REGULATORY AND PLANNING APPROVALS
The Directors of Powerhouse believe that
planning approvals, regulation and compliance
for community based DMG applications should be
straightforward.

Priority is given to ensuring that emissions,
noise, visual impact and vehicle movements are
minimised. The Company will follow this approach
in each market which it enters anywhere in the
world.

Our international partners share the view of
regulatory approvals . The Polish agency has
identified that regulatory approval will be
straightforward, applying the same EU emission
limits that have been demonstrated in UK. It is
understood this will also apply to Greece and
Hungary. Later in 2021 the Australian projects are
planning to seek state environmental approvals in
their engineering work programme.

The Company’s technology development also
takes account of the emission footprint of
our processes. Similarly our submissions to
Government are based on a pragmatic holistic
analysis of the environmental impact of our
technology. An example of this was our view on
Road Transport fuels in which we joined with Peel
NRE in arguing passionately that our process, as
an alternative regeneration for plastics is a far
more environmentally attractive solution than
incineration.

POWERHOUSE ENERGY GROUP 18

POWERHOUSE ENERGY GROUP 19

OUR PRODUCTANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CUSTOMER’S
VALUE PROPOSITION

Powerhouse customers in the UK
and for international applications will
have differing internal drivers for the
application of DMG.

In some instances the application may well
be driven by community and municipality
waste plastic or power need and, in which
case ,conventional project investment
returns are replaced by the lower
requirements of utilities investment.

However, in developed economies
Powerhouse will partner established
investment houses and blue-chip companies
requiring project returns that meet their
investment criteria. The Powerhouse
project teams will work with these
organisations to ensure the application
of DMG in their locale can meet their
requirements. The customer support
material on the Company’s website guides
developers through each of the potential
revenue streams available for waste
materials in lieu of landfill payments,
power revenues and hydrogen export
options and revenues.

STRATEGIC
REPORT

Longer term Powerhouse supports the
development of a Contract for Difference type
of scheme which offers support to all forms of
low carbon hydrogen and leads to a more level
playing field.

The Company’s technology development team
continues to seek reductions in the environmental
footprint arising from the DMG technology.
These options include addressing the retention
of a portion of the carbon in the residue with
potential agricultural uses as well as alternatives
to enhance hydrogen production. Specifically,
the Protos application is being made ready for
modular exhaust capture, for onward transmission
to offshore storage and alternative routes are
under technical evaluation.

HYDROGEN PRODUCTION
For hydrogen contracts the DMG cost of
production of hydrogen is proving attractive for
hydrogen customers and Peel NRE have explored
pricing arrangements for both short term, long
term offtake contracts as well as spot market
sales.

The development by the Company to offer
pressurised packets of hydrogen was driven
by the nascent nature of the hydrogen market.
Market indications suggest that for the early
years of deployment there may not be a single
contracted offtaker, but multiple offtake contracts
delivered to the users in larger volume packets to
support a number of buses or lorries for up to a
week.

The Company intends to refine the DMG process,
specifically in improving hydrogen production
and the Directors are confident that, once in
operation a DMG application will be capable of
3 tonnes per day of hydrogen production.

This output increase will be an early operational
enhancement target that will be enacted once
Protos has been successfully commissioned
and handed over.

FUTURE PRODUCT DEVELOPMENTS
In addition, the Directors recognise that the
evolving hydrogen and associated energy
transition market offers significant opportunities
to develop technologies. The Research and
Development team will be tasked with developing
a catalogue of research products using our
existing product development guidelines,
ensuring investment is carried forward only on
robust technical and commercial opportunities.

CONT’D
CONT’D

SALES

UK
The Peel NRE plan is replicate the Protos development model, incorporating the ”Plastic Parks” vision and the
community based provision of hydrogen. Each park is intended to have a Powerhouse DMG unit to divert plastic
from landfill and produce hydrogen and clean power.

UK PROJECT PIPELINE
Under the CA Business Planning, Peel NRE are maintaining a long term plan of more than 70 sites. These sites
will be a mixture of Peel NRE developed sites, together with a pipeline of third party sites enacted by Peel NRE
on tolling commercial terms or by capital sales on waste processing sites around the UK. Each application of
DMG will carry the Powerhouse licence fee.

The development counterparties vary and current interest in the pipeline arises from waste management
companies, councils, companies in the plastics and consumer goods production sectors and developers.

Glasgow

Manchester

Protos
Ellesmere
Port

POWERHOUSE ENERGY GROUP 20

POWERHOUSE ENERGY GROUP 21

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STRATEGIC
REPORT

INTERNATIONAL SALES PIPELINE
The international business development activities will
focus on developing project, regional and territory-
by-territory partnership agreements to roll out DMG
technology. The interest in the Powerhouse DMG
technology indicates that there will be many varied
and different users of the DMG technology, paying
license and engineering fees based on their project
premise, plastic destruction, power generation and
hydrogen.

These sales pipeline are currently embodied in
project agreements, country agreements and
memoranda of understanding.

Project agreements allow developers access to initial
limited information to undertake project screening.
Project agreements have been structured through
Europe, North and South America, Asia, Australasia
and Africa. The work in these phases includes
supporting the review of feedstock alternatives,
offtake and environmental constraints.

It is anticipated that the Australian
development partner Oceania Clean Energy
Solutions Pty Limited will take at least one of
their projects through the Engineering and
Environmental phase in the coming months.
This will be the first international application
and Powerhouse will be charged with
validating procurement routes and identifying
regional manufacturing routes for the key
components including the Thermal Conversion
Chamber, gas clean up and control systems.

The final route is through agreements
with industrial partners under Exclusivity
Agreements. The Company has reported
significant interest in the technology from
major industrial partners and these interests
have been maintained throughout the Protos
engineering development. Specific national
agreements or development agreements
with blue-chip companies is expected to be
delivered once Protos is commissioned.

This has resulted in an impairment charge for the
year of £14.2 million to leave a carrying value of
£42.96 million. The carrying value is supported
by, and dependent upon, the roll out proposals
for the DMG technology and underlying revenue
streams which will arise therefrom.

2021 KEY PERFORMANCE
INDICATORS

The Board of Powerhouse remains focused on
the first application for DMG. The principal Key
Performance Indicator for 2021 is to guide Protos
development through the procurement and
construction phase leading to proving the process
in operation in 2022.

The Company will continue to reduce the
environmental footprint of the process and
reduce the current target emission level of
hydrogen and will demonstrate the lifecycle
performance of the process.

The Company puts safety to the fore in our
activities and for 2021 our target will be to
operate without harm and to ensure that our
operating systems and process are developed
with safety of all as the prime concern.
Continued incident free activity is a key
performance indicator for 2021.

CONT’D

The Company has agreed Exclusivity Options
with HUI for developments in Poland,
Greece and Hungary. HUI has identified that
regulatory approval in Poland is expected to be
straightforward, applying the same EU emission
limits that have been demonstrated in the
UK and it is understood this will also apply to
Greece and Hungary.

The application of the process internationally
will be delivered by international contracting
company partners delivering plants to
customers on behalf of Powerhouse, with
Powerhouse maintaining quality assurance
through their nominated equipment suppliers.
In readiness for international delivery these
international companies are being engaged
through the Protos first project development
cycle.

FINANCIAL STRATEGY

The Company chose to complete the
Waste2Tricity acquisition prior to raising any
funds in 2020. This strategy required careful
budget management throughout the first half
of 2020 and, even with the costs associated
with the extended acquisition process of
Waste2Tricity, it meant that a fundraise could be
delayed until the acquisition was completed.

As a result, when the Company approached
financial institutions with the aim of attracting
a single cornerstone investor, the strategy and
commercial plans for the Company were clear.
The Company was successful in securing a long
term cornerstone investor who has chosen to
engage in a subsequent financial raise aimed at
supporting the Protos development.

GOODWILL

POWERHOUSE ENERGY GROUP 22

POWERHOUSE ENERGY GROUP 23

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STRATEGIC
REPORT

CORPORATE SOCIAL
RESPONSIBILITY

OUR COMMITMENT
The Company cares profoundly about the
environment and is committed to addressing
two of the world’s current challenges in the
eradication of unrecyclable plastic waste and
the production of clean hydrogen energy
to replace diesel in heavy goods vehicle use
improving air quality around our communities.

The Company is committed to operating with
an inclusive, transparent, and respectful culture
and places particular emphasis on operating to
the highest ethical and environmental standards
and our applications target the best achievable
energy efficiency.

The Directors take personal ownership of the
policies and maintenance of the necessary high
standards of business conduct throughout the
organisation and for delivering these Corporate
Social Responsibilities.

HEALTH AND SAFETY
Powerhouse cares profoundly about the health
and safety of our employees, customers and
the communities who could be affected by
our activities and aims to protect them from
any foreseeable hazard or danger arising from
our activities or our products. To this end in
2020 and 2021 we have undertaken a series of
safety related studies and reviews, including
hazard and operability studies, quantified risk
assessments and layer of protection analysis
using external experts to review the product
risk and the application on sites such as Protos.
In all instances the findings of the safety risk
assessments have demonstrated that the risk
arising from the DMG technology is well within
acceptable tolerable risk levels.

The Directors recognise that the key to
successful health and safety management
requires an effective policy, organisation and
arrangements, which reflect the commitment of
senior management.

The Chief Executive Officer will implement the
Company’s health and safety policy and ensure
that the company Health and Safety (HSE)
management system and safety standards are all
adequately maintained, monitored and improved
where necessary.

The Company’s research and development
activities and activities at Protos were delivered
HSE incident free in 2020.

ENVIRONMENT POLICIES
The Company’s Environmental Policy recognises
the importance of our technology from a global
challenge perspective. The Company will regularly
evaluate the environmental impact of its activities,
products and services, taking all actions necessary
to continually improve the Company’s and its
products’ environmental performance.

STAFF
Powerhouse recruited further administration and
operational staff during the year. This recruitment
and staff management was undertaken in line
with the Company Employment Policy which has
committed to a working environment with equal
opportunities for all, without discrimination and
regardless of sex, sexual orientation, age, race,
ethnicity, nationality, religion or disability.

Furthermore, the Company has committed
to continuous development schemes and will
support staff to attain the best for themselves
and the Company through personal assessment,
training and mentoring. The Company looks
forward to bringing mentored staff through the
ranks to executive positions in future years.

CONT’D

STAKEHOLDER ENGAGEMENT
The board is mindful of the duties of Directors
under S.172 of the Companies Act 2006. The
Directors believe strongly in the importance
of solid and exemplary corporate governance
to help achieve our corporate goals. The
Board takes its accountability to each of
Powerhouse’s stakeholder groups very
seriously.

The Directors have committed to promoting
a company culture that treats everyone
fairly and with respect and this commitment
extends to all principal stakeholders including
shareholders, employees, consultants,
suppliers, customers and the communities
where it is active.

All Directors act in a way they consider, in
good faith, to be most likely to promote the
success of the Company for the benefit of
its shareholders. In doing so, they each have
regard to a range of matters when making
decisions for the long-term success of the
Company.

LOCAL COMMUNITY ENGAGEMENT
Powerhouse is committed to local community
and to using local staff and local companies in
each project application.

Powerhouse has engaged with the local
forums and communities close to the Protos
development. Unfortunately, face-to-face
engagement through 2020 has not been
possible. Local meetings will be planned as
soon as meeting restrictions are lifted.

Powerhouse plans to engage the local
community for the Clydebank development in
support of the Peel NRE planning application.

THE PRODUCT EMISSIONS IN OPERATION
The Company is committed to providing a solution
to use non-recyclable plastics within its technology
to produce hydrogen as a clean fuel to buses and
trucks which minimises emissions and to comply with
all relevant environmental legislation, regulations and
other environmental requirements. The Company
passionately believes that our gasification process
is a far better alternative to incineration and our
calculations premised on hydrogen regenerated
from waste plastic as replacement for diesel off-sets
significant carbon that would be released in heavy
goods vehicles.

Powerhouse, using UK Department of Transport
calculation methodology for Renewable Transport
Fuel Obligation, currently considers that the proposed
hydrogen from plastics facility could demonstrate up to
125% GHG savings vs. diesel, at -29 gCO2/tonne waste
over the current technology options for non-recyclable
waste plastic treatment. Further, using a like-for-like
feedstock basis, the projected emissions from our first
waste plastic to hydrogen facility would be 43% lower
than emissions from hydrogen produced by ATR, 56%
lower than aviation fuel manufacturing eligible under
RTFO and 70% lower than the waste incineration
current technology options.

The application of the Company’s technology in waste
to hydrogen plants produces residues in two forms, a
char like solid residue and waters with hydrocarbon
content. The Company is addressing the residue and
plans to implement a test programme with a local
agricultural college to test the char in agricultural
settings. Similarly, once the Protos plant is in operation,
the technical development team is looking to
implement further cleaning processes to treat and use
the emitted water to return into the process.

Under the Powerhouse Environmental Policy,
Powerhouse has committed to improving the product
emission performance, and Directors are confident
that the technology performance in this area will be
improved and we will report annually on this matter.

EDUCATIONAL ENGAGEMENT
Powerhouse has a commitment to student and
technical apprenticeship sponsorship and involvement
in mentoring and career events to promote interest
and engagement of children for a future in engineering.
Unfortunately, the Directors recognise that our
engagement programme with local schools and
charities has been materially affected by Covid-19 and
the Company proposes to restart this programme as
meeting restrictions are eased later in 2021.

POWERHOUSE ENERGY GROUP 24

POWERHOUSE ENERGY GROUP 25

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STRATEGIC
REPORT

PRINCIPAL RISKS AND UNCERTAINTIES

The Company is subject to various operational risks and the following issues are
particularly relevant to the company’s business activities:

TECHNOLOGY RISK
The Company continues to manage
technology risks within the detailed
Technology Management Programme.
The risks are identified from our test
and design activities, tests on potential
waste materials and the residues arising.
The strategy of selecting mainly proven
components with extensive operating
hours in similar service in other plants
significantly reduces the risk profile for
its DMG system. The Directors’ objective
is to reduce technology risk wherever
practical, however the risk of the first
application will remain until the Protos
plant is commissioned.

Throughout 2020 and the current
year, engineering design contractors
and independent experts have refined
the design, removing some of the
risk issues completely and refining
other matters. The design has been
validated by commissioning experiences
that Powerhouse and our specialist
suppliers have experienced, and further
challenged by the independent reviews
that have been undertaken by the
FEED contractor, specialist consultants
addressing the chemical engineering,
gas, and hydrogen activities.

The Research Demonstrator test
programme has been structured to
address any key risk arising and further
monies have been spent to enhance the
rig, in addition the Company is looking
to a next stage rig that can be operated
to augment the Protos facility.

Peel NRE, as Powerhouse’s Collaboration
partner, continues to review technology
and the Company takes confidence
from the progress in this review, with all
issues arising to date already defined
and being managed in the Technology
Development Programme.

Similarly the independent due diligence
ongoing by the appointed contractor for
the Polish agreement provides confidence
in design.

The management of risk is to the fore in
the construction completion testing and
commissioning programme. Equipment
will be tested to the greatest extent
possible in the factory environment and
then all components and the modules
themselves will be fully proven against the
Powerhouse written scheme of examination
to demonstrate suitability for service before
commissioning and undertaking module
testing and process testing on a system-by-
system basis.

The Protos final vendor selection to be
made in mid 2021 will allow the final
detailed design to be completed and
the control system loop functionality
to be defined. This design detail, the
commissioning and testing programme
and the outstanding risk management
programme have been further assessed
by DNV as the second stage of their
Technology Validation process. This work
is in progress and all design revisions have
been incorporated into a revised statement
of feasibility, leading to the planned issue
of a Certificate of Endorsement. Their
report produced further guidance to the
Company on technical risks to be managed
through the final stages of the design and
commissioning process.

PROTOS PROJECT EXECUTION RISK
Quality
The Company recognises that the
equipment and fabrication quality and
timing of the execution of the first project
must be of a standard to deliver the
performance and availability inherent in the
design of the DMG.

CONT’D

The DMG design has been completed to
minimise construction risk by the use of
skidded components with limited hook
up demands.

The selected Protos construction contracting
strategy ensures one company as responsible
for these hook ups, with the contractor
providing all electrical and instrument systems.

To support international roll out the Company
is engaging with major European contractors.
The Company has undertaken a contractor
familiarisation exercise to be able to align
contractors with the other DMG processes as
and when new orders arise.

Protos project cost and schedule risk
The successful commissioning of the Protos
project is a key milestone in the growth of
Powerhouse. The Directors have made the
delivery and operation of the plan their
number one priority. They regularly undertake
schedule risk analysis with Peel NRE and
implement schedule risk protection where
necessary.

Throughout 2020, the engineering
development work on Protos proceeded
almost to schedule with minimal delay. In
January 2021, the Board initiated a fundraise
to support project schedule. Notwithstanding
this funding, the design progress to a final
arrangement has been slower than anticipated.
The delays are principally related to Covid-19
restrictions, The Directors will continue to
monitor and support the project wherever
practical.

RESEARCH AND DEVELOPMENT
ACTIVITY RISK
The Powerhouse research and development
equipment has been subject to formal
design and functional safety reviews with all
activities being subject to risk assessments in
accordance with the Company Health & Safety
Management processes.

Powerhouse operates its research and
development laboratory equipment and testing
programme in accordance with the Company
Health and Safety Management system.

During 2020 the Company initiated external
audit of the HSE systems in place. The review
identified no significant issues and the worklist
have subsequently been enacted.

The Research and Demonstrator rig has been
enhanced during the year and where necessary
formal design, functional safety review and
hazard and operability studies have been
undertaken.

MANUFACTURING RISK
Prior to any commitment on manufacturers or
Contractors, the Directors will ensure that Peel
NRE have undertaken the financial due-diligence
and vendor assurance activities to ensure that
the suppliers have the financial capability to
meet their obligations.

COMPETITION RISK
The Company monitors competitive technologies
and recognises that there are a number of
larger scale waste gasification entities but, as
far as the Board is aware, these do not offer the
community located solution of Powerhouse’s
DMG technology, nor are they offering hydrogen.

There are also a number of active plastics
to liquid companies, many using specific
feedstocks, and the application of these
processes is currently seen as complementary to
the DMG process.

MARKET ADOPTION RISK
In the UK Peel NRE, as our collaboration partner,
has been leading the commercial engagement
for waste plastic and hydrogen, and contract
negotiations with various waste suppliers
confirmed as available to the plant.

The Company acknowledges that once Protos
is operating successfully, rapid roll out of the
process must be achieved. The design additions
for Protos have now been adopted and future
engineering processes should be straight forward
applications.

POWERHOUSE ENERGY GROUP 26

POWERHOUSE ENERGY GROUP 27

BUSINESSANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STRATEGIC
REPORT

PRINCIPAL RISKS AND UNCERTAINTIES

IP PROTECTION RISK
The Directors are aware of the risks of IP
leakage and, through our IP attorneys,
are maintaining and monitoring
compliance of any potentially conflicting
technologies as well as maintaining
protection around the freedom to
operate worldwide. The Company
follows a dual route of IP protection via a
suite of patents and maintaining secrecy
over the design documents, calculations,
and chemical engineering models for the
process through systems management.

Once the control system is developed
it will have algorithms and control
functional blocks embedded to IEC
62443, specifically following the
gas systems guidance of DNV, risk
management application commissioning
and operation as described in their
Recommended Practice - G108 defining
cyber security systems.

Finally, all contracts robustly define the
IP and staff are trained to limit data
made available to third parties.

STAFFING RISK
The recruitment process for the
technical and support staff team has
demonstrated that finding suitably
qualified staff should not become a
hurdle to progress for the Company.
The Board is also aware that the
value of the Company is inherently
embedded in the staff and has made
commitments to make Powerhouse an
attractive workplace, both in terms of
suitably attractive packages but also
commitment to development through
training and compliance and other staff
benefits.

As part of the Covid-19 measures all
employees were supported to ensure
that their home working facilities were
compliant and, as the Directors are also
aware of the pressures on employees,
health insurance measures including
stress counselling helplines, have been
introduced.

CASHFLOW RISK
The Company’s cash position at the
start of 2020 meant that careful budget
management was required. By the time
of the fundraise in September 2020 and
after the acquisition of Waste2Tricity, the
commercial plans for the Company were
clear and the Company was able to raise £5
million (before expenses) and attracted a
major investment fund as the cornerstone
institutional investor.

Post year-end, the Company’s cash position
has been enhanced by the receipt of
deposits for territorial exclusivity options,
R&D tax credits and the exercise of certain
share options and warrants.

In addition, in January 2021, the Company
raised £10 million before expenses.

Other financial risks are considered as
follows:

FOREIGN CURRENCY RISK
The execution of the first project does not
expose the Company to any significant
foreign currency risk. The Company does
not hold any cash in foreign currencies and
there are not yet any planned international
projects, therefore foreign currency value
fluctuations are insignificant. In the future, as
international contracts are signed, the Board
will examine the currency risk exposure of
each project and protect any revenues and
expenses against currency volatility.

INTEREST RATE RISK
The Company does not have any corporate
or project related debt outstanding, and
deposit rates are currently negligible, so the
Board considers that there is currently no
significant risk of any exposure to interest
rate variations.

CONT’D

PROTOS SPV ENGAGEMENT RISK
The negotiation of any SPV engagement is managed through an investment committee which is charged with
addressing the investment risk management in the same manner that would be undertaken by any development
investor. For the short-term loan facility made available to the SPV, the Company’s protections included securities
of the design, the procured assets and the share capital of the SPV.

OTHER FINANCIAL RISK
The Company considers price risk, liquidity risk and credit risk to be negligible in relation to their performance
and financial position at this early stage of its development.

As described for the Protos project procurement, prior to entering into any contract, partnership or collaboration
arrangements for service providers to Powerhouse, the Board ensure that steps are taken to confirm the ability
to deliver of any contractor or partner so as to avoid business disruption.

The Company is subject to various
risks originating from external events
including political, economic, legal,
business and financial conditions.
The assessment of these risks, their
evaluation and mitigation are essential
parts of the Company’s planning and
internal control system.

The following risk factors, which are not
exhaustive, are particularly relevant to
our current business activities:

COVID-19
Throughout 2020, the engineering
development work on Protos proceeded
almost to schedule with minimal delay.
However, in recent months, progress has
been slower than anticipated and delays
in the coordination of the planning
for the plot variations on Protos have
resulted in an anticipated delay in the
planned start-up of the project.

The testing and research activity
programme was relatively unaffected
throughout 2020. However, the five-
month restriction on movements
through 2020 have restricted the Protos
feedstock testing necessary to finalise
the waste feedstock materials handling
systems. As described above, in addition
to the technical evaluation, all suppliers
and contractors to the Protos project
are financially checked to establish their
status prior to the entering into any new
contract arrangements.

POLITICAL RISK – TRADE TARIFFS
The Company’s current project activities are
not considered to be at risk of trade tariffs.
However, the Board will continue to monitor
tariffs and may modify trading operations
to ensure the delivery and licensing of DMG
in international territories is not significantly
affected.

REGULATORY AND COMPLIANCE RISK
The Protos permit submission has been
straightforward so far, and, with the speedy
planning permission approval for the
Ellesmere Port site, the Board does not
anticipate undue delay in securing future
regulatory permit approvals and planning
in England and Wales. The first planning
application in Scotland has been initiated
and we are confident that this process will
be equally straightforward.

The enhanced hydrogen handling design
completed at the end of the year has been
enacted without requiring more onerous
permitting or legislative compliance
consents.

The Company observes various changes
in new governments’ regulations within
different geographies diligently and the
specific international regulatory framing
application work continues in countries
where project agreements are in place,
namely Australia, Poland, Hungary, and
Greece.

POWERHOUSE ENERGY GROUP 28

POWERHOUSE ENERGY GROUP 29

FINANCIALEXTERNALANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CONT’D

LOCAL COMMUNITY ENGAGEMENT
The Company is committed to using local staff and local
companies in each project application.

Powerhouse has engaged with the local forums
and communities close to the Protos development.
Unfortunately, face-to-face engagement through 2020 has
not been possible. Local meetings will be planned as soon
as meeting restrictions are lifted.

Powerhouse plans to engage the local community for
the Clydebank development in support of the Peel NRE
planning application.

EDUCATIONAL ENGAGEMENT
Powerhouse has a commitment to student and technical
apprenticeship sponsorship and involvement in mentoring
and career events to promote interest and engagement
of children for a future in engineering. Unfortunately, the
Directors recognise that our engagement programme with
local schools and charities has been materially affected
by Covid-19 and the Company proposes to restart this
programme as meeting restrictions are eased later in 2021.

Tim Yeo
Executive Chairman
29 June 2021

Powerhouse has
a commitment
to student
and technical
apprenticeship
sponsorship

STRATEGIC
REPORT

STATEMENT OF DIRECTORS’ DUTIES TO STAKEHOLDERS
UNDER S.172 COMPANIES ACT 2006

The board is mindful of the duties of Directors
under S.172 of the Companies Act 2006. The
Directors act in a way they consider, in good
faith, to be most likely to promote the success
of the Company for the benefit of its members.
In doing so, they each have regard to a range
of matters when making decisions for the long-
term success of the Company.

STAKEHOLDER ENGAGEMENT
The Directors promote a culture within
Powerhouse of treating everyone fairly and
with respect. This extends to all principal
stakeholders including shareholders,
employees, consultants, suppliers, customers
and the communities where it is active. We aim
to ensure that our management operate the
business in a responsible and fair manner and
to the highest standards of business conduct
and good governance.

STAFF
In 2020 Powerhouse strengthened its
operational engineering and administration
team. It is fully committed to promoting a
working environment of equal opportunities for
all without discrimination or harassment and
regardless of part-time working, gender, sexual
orientation, age, race, ethnicity, nationality,
religion or disability. The Company will continue
to report against this commitment in future
annual reports.

ENGAGEMENT WITH SUPPLIERS
As a company that works closely with suppliers
and partners, we strive to manage these
relationships as closely as possible to ensure
they meet our standards. The Company is
committed to ensuring the highest standards
and quality across our operations and require
both our suppliers and partners to operate to
the same high standards.

HEALTH SAFETY AND ENVIRONMENT
The health and wellbeing of its staff and
associates is considered in the evolving
working practices as the Company grows.
Our commitment covers the ways in which
work is carried out from offices, home,
laboratories, R&D facilities and operational
sites.

The Company’s research and development
activities were delivered HSE incident free
through 2020. Continued incident free
performance is a key performance indicator
for 2021.

ENVIRONMENTAL POLICIES
In 2020, the Board established a new
Environmental Social and Governance
(ESG) Committee with an aim to integrate
sustainability best practice into all decision-
making and business activities as part of
the Company’s commitment to ensuring
sustainable and ethical best practice in all
its work.

THE PRODUCT EMISSIONS IN OPERATION
The Company is committed to developing
technology for projects with emissions that
are safe and which meet all environmental
and regulatory requirements.

The application of the Company’s
technology in waste to hydrogen plants
produces residues in two forms, solids and
hydrocarbon paste. The solid residue is
generally inert material and proven as such
on Protos and will be sold for use in road fill.
Typically, the output is around 3-4 tonnes
per day from 35-40 tonnes, but varies with
the type of customer feedstock. The gas
clean up residue is a hydrocarbon rich paste
that is generally taken by road tarmac type
producers and, specifically for the first
project may be directed to nearby
Stanlow refinery and added to its
processing capability.

POWERHOUSE ENERGY GROUP 30

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ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

DIRECTOR’S
REPORT

DIRECTOR’S REPORT

The Directors present their report together with the
audited financial statements for the year ended 31
December 2020 for Powerhouse Energy Group Plc
(“Powerhouse” or the “Company”). The financial
statements have been prepared in accordance with
International Financial Reporting Standards (IFRS)
as adopted by the European Union and will be laid
before the shareholders of the Company at the
Annual General Meeting.

PRINCIPAL ACTIVITIES
Powerhouse is a company incorporated in England
and Wales with company number 03934451. The
Company is a public limited company which trades
on the AIM market of the London Stock Exchange.
The address of the registered office is 15 Victoria
Mews, Mill Field Road, Cottingley Business Park,
Bingley BD16 1PY.

Powerhouse designs, delivers and licenses plastic
regeneration processes to generate hydrogen and
electrical energy systems and provides associated
customer engineering and testing services.

The Company has a Distributed Modular Generation
(“DMG”) product platform for the regeneration
of plastic to power and hydrogen. The Company
engineers, sells, licenses and supports operations
of the DMG process for applications in UK and
throughout the world.

BUSINESS STRATEGY
The Company Business strategy is described in the
Strategic Report.

BUSINESS REVIEW
The review of the year and the Directors’ strategy
are set out in the Strategic Report, the Chairman’s
Statement and the CEO’s Annual Review.

KEY PERFORMANCE INDICATORS
For the year ended 31 December 2020, the Directors
consider that performance is measured against
the commercialisation and business development
milestone activities reported in the Strategic Report.

REVIEW OF FUTURE DEVELOPMENTS
Future developments and the Company’s
corporate development strategies are
reported in the Chairman’s Statement and
the Strategic Report.

MANAGEMENT OF CAPITAL
The Company manages its capital according
to budgets with the aim of ensuring it can
continue as a going concern. Capital sources
include debt and equity instruments.

Board members review cash balances
available for ongoing spend on a weekly
basis against budget and income forecasts
in assessing needs forward and timing for
any future equity raises.

SUBSIDIARIES
The Company’s only UK subsidiaries are
non-trading and not material. There are also
long-term restrictions on the operations of
the Company’s subsidiaries in the US and
Switzerland. With these restrictions in place,
the Company is also unable to exert control
over the subsidiaries. As such the Company
has claimed exemptions applicable to it
under Companies Act section 405 (2) and
405 (3b) and IFRS 10 to not present any
Consolidated financial statements for the
year ended 31 December 2020.

RESULTS AND DIVIDENDS FOR THE YEAR
The Company financial statements for the
year ended 31 December 2020 are set out in
this annual report The Company loss for the
year after taxation amounted to £15,837,741
(2019: loss of £1,510,226). The net assets
of the Company are £46,857,836 (2019:
liabilities of £12,982) with the movement
in the year set out in the Statement of
Changes in Equity.

The Company has not paid a dividend
during the year ended 31 December 2020
(2019: £nil) and the Directors do not
recommend the payment of a dividend at
31 December 2020 (2019: £nil).

CONT’D

RESEARCH AND DEVELOPMENT
Research and development related costs
incurred during the year, relating to the
DMG product, amounted to £407,071 (2019:
£419,333). This excludes amounts expended
on client projects that are expected to be
recovered.

FINANCIAL RISK
Financial risk management and exposure are
set out in the Strategic Report.

EVENTS AFTER THE REPORTING PERIOD
There have been no significant events since
the balance sheet date other than those
discussed in the Strategic Report and note
27 to the Company financial statements.

DIRECTORS
The Directors who held office during the
period and up to the date of the Annual
Report are as follows:

Tim Yeo
(appointed 15 July 2020)

David Ryan

James Greenstreet

Myles Kitcher
(appointed 18 March 2020)

Allan Vlah
(appointed 27 July 2020)

Kirsten Gogan
(appointed 30 September 2020)

Mark Berry
(appointed 18 December 2020)

Dr Cameron Davies
(resigned 31 March 2021)

Brent Fitzpatrick
(resigned 10 August 2020)

COMPANY SECRETARY
Rose Herbert
(appointed 22 October 2020).

A brief biography of the current Directors
can be found below:

EXECUTIVE DIRECTORS:

Tim Yeo
Executive Chairman

Tim is a former Member of Parliament where he served as
Chair of the Energy and Climate Change Select Committee
2010/15, Chair of the Environmental Audit Select Committee
2005/10 and Member of the Shadow Cabinet 1998/2005
where his positions included Shadow Secretary of State for
Trade and Industry. Before that he was Minister of State for
the Environment in John Major’s government.

Tim is non-executive chair of ElecLink Limited which
operates a 1GW electricity interconnector between the
UK and France, chair of the New Nuclear Watch Institute,
and Honorary Ambassador of Foreign Investment
Promotion for South Korea. His past Directorships include
Getlink SE 2007/21 where he chaired the Corporate
Social Responsibility and Ethics Committee, and past
chairmanships include AFC Energy plc 2007/17 and
Waste2Tricity Limited until its acquisition by Powerhouse.

David Ryan
Chief Executive Officer

David Ryan has over 40 years in a professional engineering
career solely within the energy industry. He brings a breadth
of project experience and has run major energy projects,
set up and developed a blue chip engineering company
serving energy companies and the investment community
and run the international organisation of a multinational
conglomerate. His experience in managing finances and
growth of a start-up business has been brought to bear on
operational improvements.

POWERHOUSE ENERGY GROUP 32

POWERHOUSE ENERGY GROUP 33

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

DIRECTOR’S
REPORT

NON-EXECUTIVE DIRECTORS:

James Greenstreet
Non-Executive Director

James Greenstreet has over
20 years of corporate and
structured finance experience.
Having started his career at
Arthur Andersen, he joined
BAE Systems in 1994 to work
in the corporate finance team.

After leaving BAE, Mr Greenstreet held corporate
finance positions at IBM and XL Capital, once more
focusing on asset and lease finance. In 2001 he co-
founded Orbis Capital a successful corporate and
structured finance business. Over the past 10 years
Mr Greenstreet has been instrumental in sourcing,
structuring, packaging and managing transactions for
a number of high-profile clients across a wide range
of sectors.

Myles Kitcher
Non-Executive Director

Myles Kitcher was appointed
as a Non-Executive Director on
18 March 2020. Mr Kitcher is
Managing Director of
Powerhouse’s development
partner for Protos, Peel NRE
and the leading force behind Protos, – Peel NRE’s
flagship destination for energy, innovation and
industry where the first application of Powerhouse
DMG technology is to be built. Myles is a Chartered
Surveyor with extensive experience in both the public
and private sectors managing the development
process for a number of large waste infrastructure
projects.

Prior to joining the Peel Group, Mr Kitcher worked
for Lancashire County Council where he held senior
positions within the planning and waste management
functions of the authority.

Allan Vlah
Non-Executive Director

Allan Vlah has more than
twenty years’ experience in
the investment industry and
is a partner at River &
Mercantile Infrastructure LLP
(“RMI”) where he is responsible
for the group’s Energy from Waste equity strategy.

Prior to joining RMI in 2021, Mr Vlah was a director at
Aviva Investors where he led the group’s infrastructure
energy from waste strategy. He was previously a vice
president at the Macquarie European Infrastructure
Fund with a focus on transportation and renewable
energy and a research analyst and portfolio manager
covering energy and infrastructure trusts for TD
Waterhouse Investment Advice.

Kirsten Gogan
Non-Executive Director

Kirsty Gogan is an internationally
sought-after advisor to
governments, industry, academic
networks and NGOs and is a
recognised expert speaker on
science communication, climate
change, competitiveness and innovation. She has
more than 15 years’ experience as a senior advisor to
Government on climate and energy policy, including
10 Downing Street, and the Office of the Deputy Prime
Minister.

Ms Gogan is managing partner of LucidCatalyst, a highly
specialised international consultancy offering thought
leadership, strategy development and techno-economic
expertise focused on multiplying and accelerating zero
carbon technology options available for large-scale,
affordable, market-based decarbonisation of the global
economy over a wide range of future scenarios. Ms
Gogan chairs the UK Government’s Nuclear Innovation
Research and Advisory Board (NIRAB) Cost Reduction
Working Group. She is also Co-founder of Energy for
Humanity (EFH), an environmental NGO focused on
large scale deep decarbonisation and energy access.

Mark Berry
Non-Executive Director

Mark Berry is a Partner at
Norton Rose Fulbright LLP.
Mark specialises in the project
financing of energy,
infrastructure and process
engineering projects.
He has particular expertise
in the waste to energy (including materials recovery and
fuel recovery from waste), transport and mining sectors.
Mark’s experience includes advising on a number of
project financed waste and waste to energy schemes
including PFI and merchant/commercial projects. He
is also a Chartered Engineer and a member of the
Chartered Institution of Building Services Engineers.

CONT’D

DIRECTORS’ SERVICE CONTRACTS
Details of the Directors’ service contracts and their respective notice terms are detailed in the Remuneration
Committee report.

DIRECTORS’ INTERESTS
The interests of the Directors at 1 June 2021, being the latest practicable date before the publication of the
Annual Report, in the ordinary shares of the Company, together with their interests at 31 December 2020
were as follows:

Tim Yeo

David Ryan

Dr Cameron Davies*

James Greenstreet

Myles Kitcher

Allan Vlah

Kirsten Gogan

Mark Berry

*Dr Davies resigned from the Board on 31 March 2021.

NUMBER OF ORDINARY SHARES

1 June 2021

71,871,959

36,567,923

N/A

1,840,000

356,071

31 Dec 2020

71,871,959

36,567,923

1,200,000

1,000,000

SIGNIFICANT SHAREHOLDERS
As at 1 June 2021, being the latest practicable date before the publication of the Annual Report, the Company is
aware of the following significant interests in its ordinary, voting share capital:

Holder

White Family* consisting of: -

* Josh White

* Ben White

* Serena White-Reyes

* Howard White

Vidacos Nominees Limited A/C CLRLUX

Hargreaves Lansdown (Nominees) Limited A/C 15942

Hargreaves Lansdown (Nominees) Limited A/C HLNOM

Hargreaves Lansdown (Nominees) Limited A/C VRA

Interactive Investor Services Nominees A/C SMKTISAS

Interactive Investor Services Nominees A/C SMKTNOMS

Vidacos Nominees Limited A/C IGUKCLT

Amount

1,015,045,935

377,746,610

247,775,210

211,459,086

178,065,029

367,581,743

273,154,818

193,997,894

180,331,706

158,039,110

140,045,201

139,511,050

Percentage

25.88%

9.63%

6.32%

5.39%

4.54%

9.37%

6.96%

4.95%

4.60%

4.03%

3.57%

3.56%

POWERHOUSE ENERGY GROUP 34

POWERHOUSE ENERGY GROUP 35

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

DIRECTOR’S
REPORT

CORPORATE
GOVERNANCE REPORT

CORPORATE GOVERNANCE
The Company complies with the AIM Rules for Companies, including AIM Rule 26, concerning the disclosure of
information. It also complies with the provisions of the Quoted Companies Alliance Corporate Governance Code
(“QCA Code”). More details are provided in the Corporate Governance Report in this document.

PAYMENT TO SUPPLIERS
The Company does not have a standard or code which deals specifically with the payment of suppliers. Total
creditor days for the Company for the year ended 31 December 2020 were 22 days (2019: 31 days).

RISK MANAGEMENT AND PRINCIPAL RISKS
The principal risks to the Company, including financial risks and exposures and descriptions of how they are
managed is explained in detail in the Strategic Report and in Note 23 to the financial statements.

GOING CONCERN BASIS
The financial statements have been prepared on a going concern basis and is explained in Note 1.3 to the financial
statements.

POLITICAL DONATIONS
The Company has not made any political donations in the year ended 31 December 2020 (2019: nil).

AUDITORS
Jeffreys Henry LLP were re-appointed as auditors at the Company’s 2020 AGM. A resolution is to be proposed at
the 2021 AGM for the re-appointment of Jeffreys Henry LLP as auditors to the Company, at a rate of remuneration
to be determined by the Audit Committee.

Each of the persons being a Director at the date of approval of this report confirms that:

• So far as the Director is aware there is no relevant audit
information of which the Company’s auditor is unaware; and

• The Director has taken all the steps that he ought to have
taken as a Director in order to make himself aware of any
relevant audit information and to establish that the
Company’s auditor is aware of that information.

This confirmation is given, and should be interpreted,
in accordance with the provisions
of s.418 of the Companies Act 2006.

Approved by the Board of Directors and signed
on behalf of the Board on 29 June 2021.

David Ryan
Chief Executive Officer
29 June 2021

INTRODUCTION
The Directors attach great importance to maintaining
high standards of corporate governance to help achieve
the Company’s goals. To that end they have adopted
the principles set out in the Quoted Companies Alliance
Corporate Governance Code for Small and Mid-Size
Quoted Companies (the ‘QCA Code’) 2018. The QCA
Code, which is constructed around 10 broad principles,
sets out a standard of minimum best practice for
small and mid-size quoted companies, including AIM
companies. Companies are required to disclose how the
implementation of the QCA Code has been applied or, to
the extent not done so, to explain any areas of departure
from its requirements.

We have considered how we apply each principle to the
extent that the Board judges these to be appropriate for
our circumstances, and below we provide an explanation
of the approach taken in relation to each. Our compliance
with the QCA Code is based on the Company’s current
practices and the improvements in its governance made
since the last Annual General Meeting.

The QCA Code makes clear it is the prime responsibility
of the Chairman to ensure the Company applies the QCA
Code for the benefit of all the Company’s stakeholders.
The Chairman and the Board accept their responsibility
for setting the Company’s corporate culture, its values
and for the behaviour of all its employees.

This report sets out our approach to the QCA Code and
governance. Our compliance with the 10 principles is
also available to view on the Company’s website:
www.powerhouseenergy.co.uk

We have identified two principal areas where we are not
in full compliance:

The first relates to the position of Executive Chairman,
where the best practice under the Code is for the
Chairman to be non-executive. See Principle
5 for further details.

The second is that Powerhouse allows non-executive
Directors to participate in the Company’s share options
schemes. See Principle 5 for further details.

The QCA Code allows cross reference to disclosures
made on the website rather than repeating them all
in this Report. The principal disclosures such as the
Remuneration Committee and Directors’ Report will
continue to be included in the Annual Report. However,
for a full assessment of the Company, shareholders
are encouraged to review the Company’s website for
regulatory disclosures and for up to date information
on activities.

QCA PRINCIPLES

PRINCIPLE 1 - ESTABLISH A STRATEGY AND
BUSINESS MODEL WHICH PROMOTE
LONG-TERM VALUE FOR SHAREHOLDERS

Powerhouse has a clear business model and
growth strategy. Our objective is to be a leading
sustainable technology provider and to enable
the rapid deployment of modular distributed
hydrogen production, distributed electricity
generation and the provision of heat. This will be
done by the use of non-recyclable and end-of-life
waste material, including plastic. Powerhouse’s
proprietary process technology is one of the
world’s first proven, distributed, modular,
hydrogen from waste (HfW) processes.

Details of the Company’s strategy and business
model are set out in the Strategic Report. This
describes progress to date, our commercial
partnerships, our DMG development programme
and our plans for the future. Key challenges facing
the Company and how they will be addressed
are set out in the Strategic Report in the section
headed Principal Risks and Uncertainties.

PRINCIPLE 2 - SEEK TO UNDERSTAND
AND MEET SHAREHOLDER NEEDS AND
EXPECTATIONS

Powerhouse is committed to open communication
with all of its shareholders. The Company believes
it is important to explain business development
and financial results to its shareholders and to
ensure that suitable arrangements allow the issues
and concerns of shareholders to be heard and
understood.

The Chairman is primarily responsible for
shareholder liaison. Since the last Annual General
Meeting the Company has welcomed new
institutional investors to its shareholder base
which is otherwise largely comprised of retail
shareholders, as well as its largest shareholder, the
White family. The Chairman and Chief Executive
Officer make presentations to shareholder events
from time to time where investors have the
opportunity to discuss the Company’s progress
and performance. Trading updates and press
releases are issued as appropriate.

POWERHOUSE ENERGY GROUP 36

POWERHOUSE ENERGY GROUP 37

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CORPORATE
GOVERNANCE REPORT

CONT’D

Hard copies of the Annual Report and Accounts
are issued to all shareholders who have requested
them and these, together with the interim results
are also published on the Company’s website at
www.powerhouseenergy.net. The Company makes
full use of its website to provide information
to shareholders, other stakeholders, potential
customers, and other interested parties.

Shareholders are given the opportunity to raise
questions at the Annual General Meeting (“AGM”)
and the Directors are normally available both
before and after the meeting for further discussion
with shareholders. As a matter of policy, the level
of proxy votes (for, against and votes withheld)
lodged on each resolution is declared at the
meeting. In the event there were a significant
number of votes against a resolution, the Directors
would seek to communicate with the shareholder(s)
concerned to discuss their issues. In order to
comply with best practice the Company will follow
the Government’s social distancing guidelines
relating to Covid-19 for the 2021 AGM.

The Company’s internal stakeholders are its
employees and its consultants. The Company
is fully committed to promoting a working
environment of equal opportunities for all without
discrimination or harassment and regardless of
part-time working, gender, sexual orientation, age,
race, ethnicity, nationality, religion or disability. The
Company will report against this commitment in
future annual reports.

The Company proactively seeks feedback to
enable the management to make improvements
and changes to products and processes. All
stakeholders have access to contact information
for communication with the Company. Feedback
is respectfully acknowledged by the Company and
appropriately dealt with.

The Board believes that investment in the wider
stakeholder network assists the achievement of its
long-term goals and helps create an environment
of trust which will promote the long term success
of the Company.

The Board receives regular share register analysis
reports to monitor the Company’s shareholder
base and help identify the types of investors on the
register.

There are further details of the Company’s
approach to corporate social responsibility in
the Strategic Report of this Annual Report and
Financial Statements

PRINCIPLE 3 - TAKE INTO ACCOUNT WIDER
STAKEHOLDER AND SOCIAL RESPONSIBILITIES
AND THEIR IMPLICATIONS FOR LONG- TERM
SUCCESS

PRINCIPLE 4 - EMBED EFFECTIVE RISK
MANAGEMENT, CONSIDERING BOTH
OPPORTUNITIES AND THREATS, THROUGHOUT
THE ORGANISATION

The Company regards its shareholders, employees,
neighbours, customers, contractors, consultants
and advisors, business partners and suppliers as
forming part of the wider stakeholder group. The
Company recognises the contribution of each
of these stakeholder groups and seeks to build
meaningful and mutually beneficial relationships
with them all.

As the needs and growth of the business evolves,
management identifies key relationships and aims
to ensure they are managed appropriately.

Risk assessment and evaluation is an essential
part of the Company’s planning and an important
aspect of the Company’s internal control system.

The Board has established a comprehensive risk
register relating to significant aspects of the
Company’s business. The Board regularly considers
the risk register and the mitigation and removal
measures on a risk- by-risk basis focusing on those
deemed most critical.

To address the technology challenges the Company has
instigated a detailed and comprehensive engineering
and technology risk management programme that has
continued since the design phase. This programme is
termed the Technology Risk Management Programme.
The Programme is derived from its own test and design
activities and informed by the DNV Technical Assurance
process. The Technology Risk Management Programme
will be reviewed by the Powerhouse Board, and individual
risks addressed through studies allowing the register to
be continuously updated.

Standards and policies
The Board is committed to maintaining appropriate
standards for all the Group’s business activities and
ensuring that these standards are set out in written
policies. Key examples of such standards and policies
include:

Policy for Authorities and Approvals
Share Dealing Code
Social Media Policy
Terms of Reference for the Board Committees
Business Ethics Policy
Environmental Policy
Health and Safety Policy
Employment Policy

APPROVAL PROCESS
All contracts are required to be reviewed and signed by a
Director of the Company.

For further details of the Company’s approach to risk
and its management, please refer to the Principal Risks
and Uncertainties section of the Strategic Report in this
Annual Report and Financial Statements.

PRINCIPLE 5 – MAINTAIN THE BOARD AS A WELL-
FUNCTIONING, BALANCED TEAM LED BY THE CHAIR

David Ryan, the Chief Executive Officer, is
stepping down from his full-time role with the
Company on 30 June 2021. Thereafter he will
continue to work for Powerhouse as a consultant
to help ensure the successful completion and
commission of the first DMG plant at Protos. The
Board is in the process of recruiting Mr Ryan’s
successor. Until a new CEO is in place Tim Yeo,
previously Non-Executive Chairman, has taken
on responsibility for public relations, investor
relations and some international business
development work and so has been designated
Executive Chairman. The Board accepts that
best practice under the Code of the for the
Chairman to be non-executive and Tim Yeo will
resume his non-executive status when the new
CEO is in place.

The executive Directors are Tim Yeo and David
Ryan. The non-executive Directors are James
Greenstreet, Myles Kitcher, Allan Vlah, Kirsty
Gogan and Mark Berry.

As chairman, Tim Yeo is responsible for the
Company’s approach to corporate governance
and the application of the principles of the
QCA Code. Myles Kitcher, James Greenstreet,
Allan Vlah, Kirsty Gogan and Mark Berry are
the Company’s independent Directors and, as
such, are independent of management and any
business or other relationships which would
interfere with the exercise of their independent
judgement.

James Greenstreet, Allan Vlah and Mark Berry
do not meet the strict criteria for independence
set out in the QCA Code, due to either their
length of service, ownership of ordinary shares
and/or their participation in the Company’s
share option arrangements, as part of their
remuneration arrangements.

The Board, chaired by Tim Yeo, comprises two executive
and five non-executive Directors and it oversees and
implements the Company’s corporate governance
programme.

Mr Greenstreet has been a non-executive
Director since 2011. However, there has been
no concurrent tenure with management which
could hinder his ability to be independent.

POWERHOUSE ENERGY GROUP 38

POWERHOUSE ENERGY GROUP 39

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CORPORATE
GOVERNANCE REPORT

The Board considers that the ownership of shares and participation in the Company’s share option scheme
by certain non-executive Directors encourages the alignment of their interests with those of the Company’s
shareholders and not material enough to compromise their independence, character and judgement.
Therefore, the Company considers Mr Greenstreet, Mr Vlah and Mr Berry to be independent for the purposes
of the QCA Code.

Each Board member commits sufficient time to fulfill their duties and obligations to the Board and the
Company. They attend board meetings, join ad hoc board calls and are available for consultation when
needed. The contractual arrangements between the Directors and the Company specify the minimum time
commitments which are considered sufficient for the proper discharge of their duties. When exceptional
circumstances arise all Board members understand the need to commit additional time.

Board packs include information on business developments, progress and risks faced as well as financial
performance and are circulated ahead of board meetings. Key issues are highlighted and explained,
providing board members with sufficient information to enable full discussion in the board meeting. From
time to time, members of the Company’s senior management present to the Board to update them on issues
and developments.

The Board is supported by its Audit Committee, its Remuneration Committee and its Environmental, Social
and Governance (ESG) Committee which was established in December 2020.

BOARD AND COMMITTEE MEETINGS
Attendances of Directors at Board and committee meetings convened in 2020, and which they were eligible
to attend, are set out below:

Director

Number of meetings in year

Tim Yeo*

Dr Cameron Davies

David Ryan

Brent Fitzpatrick*

James Greenstreet

Miles Kitcher*

Allan Vlah*

Kirsty Gogan*

Mark Berry*

Board Meetings
Attended

Remuneration
Committee
Attended

Audit
Committee
Attended

ESG
Committee
Attended

5/5

10/10

5/5

8/10

5/5

3/3

1/1

N/A

1/1

0/1

1/1

N/A

1/1

N/A

1/1

0/1

1/1

N/A

1/1

N/A

1/1

N/A

1/1

*NOTES:
Myles Kitcher joined the Board on 18 March 2020.
Tim Yeo joined the Board on 15 July 2020.
Allan Vlah joined the Board on 27 July 2020.
Brent Fitzpatrick resigned from the Board on 10 August 2020.
Kirsty Gogan joined the Board on 30 September 2020.
Mark Berry joined the Board on 18 December 2020.

CONT’D

APPOINTMENT AND TENURE
The Board makes decisions regarding the appointment
and removal of Directors. There is a formal, rigorous and
transparent procedure for appointments, some of which
have been delegated to the Remuneration Committee
which, when needed, also acts as Nomination Committee,
to make recommendations to the Board about the
appointment of Directors and senior executives.
Appointments are made on merit, taking account of the
balance of skills, experience and knowledge required.

As part of its commitment to improve accountability to
shareholders, the Board has decided that, in future, any
director who is over the age of 70 or has been on the
board for eight years at the date of the Annual General
Meeting will submit themselves for re-election annually,
in addition to those Directors retiring by rotation in
accordance with our Articles of Association.

PRINCIPLE 6 – ENSURE THAT BETWEEN THEM THE
DIRECTORS HAVE THE NECESSARY UP-TO-DATE
EXPERIENCE, SKILLS AND CAPABILITIES.

The Board comprises two executive Directors and five
non-executive Directors, five of whom are independent.
Details of the Directors are set out in the Directors’
Report of this Annual Report and Financial Statements.

The Chairman believes that the Board should always have
a suitable mix of skills and competencies covering all
essential disciplines bringing a balanced perspective that
is beneficial both operationally and strategically.

The nature of the Company’s business requires the
Directors to keep their skillset up to date. Periodic
advice on regulatory matters is given by the Company’s
professional advisers. Directors joining the Board and
new employees are offered full familiarisation briefings
with the Company’s technology, the development
programme and the current status of technology
risk. During the period of Covid-19 restrictions, the
opportunity for Directors to visit the R&D facilities has
been limited but normally familiarisation includes visits to
the Company’s facilities.

The Board is supported by senior management and by
its key partners and professional advisers. The advice
provided to the Board is often commercially sensitive.
It is used by the Board to inform their decisions but
typically will not be disclosed.

The Company Secretary supports the Board and reports
directly to the Chairman on governance matters.

The Board is supported and advised by a Chief
Financial Officer, a chartered accountant with extensive
experience, who works closely with the Board and is
managing financial procedures and controls.

PRINCIPLE 7 - EVALUATE BOARD
PERFORMANCE BASED ON CLEAR
AND RELEVANT OBJECTIVES, SEEKING
CONTINUOUS IMPROVEMENT

BOARD PERFORMANCE
EFFECTIVENESS PROCESS
The assessment of the Board’s performance has
to date been largely focused on its contribution
to the achievement of the Company’s financial
and strategic goals. As the Company moves
towards full commercial operation the Board
intends to consider how to make the evaluation
of its own performance more formal and
rigorous.

Each Board member is subject to a review
by the Remuneration Committee based on
their professional contribution as well as
their contribution to the performance of the
Company.

The terms and conditions of the arrangements,
including remuneration are set by the
Remuneration Committee.

BOARD APPOINTMENTS
The Remuneration Committee, which acts as
Nomination Committee as needed, meets when
necessary to consider the appointment of new
Directors. Board members all have appropriate
notice periods so that if a board member
indicates his or her intention to step down, there
is sufficient time to appoint a replacement,
whether internal or external.

Board appointments are made after consultation
with advisers in all cases. The Nomad undertakes
due diligence on all new potential board
candidates.

Each director is required to offer themselves
for re-election at least once every three years
as per the Company’s articles of association.
In addition, any director who is over the age
of 70 or has been on the board for eight years
at the date of the Annual General Meeting will
submit themselves for re-election annually, in
addition to those Directors retiring by rotation in
accordance with our Articles of Association.

SUCCESSION PLANNING
Succession planning is undertaken by the
Executive Chairman in consultation with
the Board.

POWERHOUSE ENERGY GROUP 40

POWERHOUSE ENERGY GROUP 41

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

CORPORATE
GOVERNANCE REPORT

CONT’D

The appropriateness of the Company’s governance structures will be reviewed annually in light of further
developments of accepted best practice and the development of the Company.

PRINCIPLE 10 – COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY
MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS

The Company maintains a regular dialogue with stakeholders including shareholders to enable interested
parties to make informed decisions about the Company and its performance. Regular communication enables
the Board to receive shareholders’ views by various means as set out in Principle 2 above.

The Company regularly releases appropriate price sensitive information regarding its activities and progress to
the market. The Chairman, Chief Executive Officer and other management team members regularly participate
in industry forums and investor conferences to keep stakeholders apprised of company developments.

The Board discloses the result of general meetings by way of announcement and discloses the proxy voting
numbers to those attending the meetings. In order to improve transparency, the Board has committed to
announcing proxy voting results in future and disclosing them on the Company’s website. In the event that a
significant portion of voters have voted against a resolution, an explanation of what actions it intends to take
to understand the reasons behind the vote will be included.

Tim Yeo
Chairman
On behalf of the Board
29 June 2021

PRINCIPLE 8 – PROMOTE A CORPORATE
CULTURE THAT IS BASED ON ETHICAL
VALUES AND BEHAVIOURS

Consistent with Principle 3 above, the Company
operates an inclusive, transparent and respectful
culture.

The Board places particular emphasis on operating
to the highest ethical and environmental standards.
HS&E is a specific agenda item at every board
meeting. In December 2020, the Board established
a new Environmental Social and Governance (ESG)
Committee with the aim of placing sustainability
at the heart of all decision-making and business
activities. The Company’s objectives include
observing the highest level of health and safety
standards, developing our staff to their highest
potential and being a good corporate citizen in
all the countries where we operate. A health and
safety management system has been developed
for operation in 2021 with policies for healthy and
safety, environment and quality in place.

Management has also engaged with independent
environmental and safety engineering specialists
to review the Company’s product and demonstrate
that it will have minimal environmental and safety
impact on the communities in which the Company
operates. The Board has also undertaken a product
environmental lifecycle analysis, the results of which
will be published in due course.

The Company’s employment policies follow best
practice, based on equal opportunities for all
employees, irrespective of ethnic origin, religion,
political opinion, gender, marital status, disability,
age or sexual orientation.

PRINCIPLE 9 – MAINTAIN GOVERNANCE
STRUCTURES AND PROCESSES THAT ARE FIT
FOR PURPOSE AND SUPPORT GOOD DECISION-
MAKING BY THE BOARD.

The Board is confident that its processes and
culture are appropriate for the Company’s current
size and complexity. It will review its practices
as the Company evolves and grows as part of
its commitment to improve accountability to
stakeholders.

The Chief Executive Officer has overall
responsibility for managing the day to day
operations of the Company. The Executive
Chairman has assumed responsibility for investor
relations, PR and business development.

The Board as a whole is responsible for implementing
the Company’s strategy. Management systems and
procedures have been implemented in 2020 in parallel
with project execution and licencing readiness activities.

The Company has established an Audit Committee, a
Remuneration Committee and an Environmental Social
and Governance Committee with formally delegated
duties and responsibilities.

AUDIT COMMITTEE
The duties of the Audit Committee include reviewing,
in draft, form the Company’s annual and half-yearly
report and accounts and providing advice to the
Board. Members of the Audit Committee are also
responsible for reviewing and supervising the financial
reporting process and internal control systems of
Powerhouse. The Audit Committee is comprised of
three Non-Executive Directors.

REMUNERATION COMMITTEE
The Remuneration Committee is responsible for
determining the policy for Directors’ remuneration
and setting remuneration for the Company’s chair,
executive Directors and senior management including
share option schemes and any bonus arrangements.
The Remuneration Committee also acts as a
Nomination Committee as needed. No director plays
any role in determining his or her own remuneration.

ENVIRONMENTAL SOCIAL AND GOVERNANCE
(ESG) COMMITTEE
The ESG Committee was established in December
2020 with the aim of integrating sustainability
best practice into all decision making and business
activities as part of the Company’s commitment to
ensuring sustainable and ethical best practice in all its
work. Powerhouse is pioneering clean fuel technology
and the ESG Committee supports the Board in
developing the technology that could help accelerate
the UK’s clean energy transition. The Committee
ensures that Powerhouse promotes achievement of
the UN Sustainable Development Goals throughout
its business.

Furthermore the ESG Committee monitors the
Company’s recruitment policies and its progress
towards employing a fully diverse work force and
engagements with stakeholders.

POWERHOUSE ENERGY GROUP 42

POWERHOUSE ENERGY GROUP 43

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

REMUNERATION
COMMITTEE REPORT

I am pleased to present the Committee’s report for
the year ended 31 December 2020. The following
pages provide an insight into how the Committee
discharged its responsibilities during the year
and the key topics that it considered in doing so.
The composition and terms of reference for the
Remuneration Committee were updated in the final
quarter of 2020 to reflect the Company’s renewed
commitment to corporate governance and enhanced
practices.

COMPOSITION
The membership of the Remuneration Committee
was renewed in 2020 and comprises Kirsty Gogan
and Tim Yeo and is chaired by Myles Kitcher.

The Remuneration Committee is responsible for
determining the policy for Directors’ remuneration
and setting remuneration for the Company’s chair,
executive Directors and senior management including
share option schemes and any bonus arrangements.
The Remuneration Committee also acts as a
Nomination Committee as needed.

REMUNERATION POLICY
The Remuneration Committee is aware that the
remuneration package should be sufficiently
competitive to attract, retain and motivate individuals
capable of achieving the Group’s objectives and
thereby enhancing shareholder value without paying
more than is necessary, having regard to views of
shareholders and other stakeholders. In determining
remuneration policy, the Remuneration Committee
takes into account all other factors which it deems
necessary including relevant legal and regulatory
requirements.

No director or senior manager is involved in any
decisions as to their own remuneration outcome.

SERVICE CONTRACTS
Tim Yeo, James John Pryn Greenstreet, Allan
Vlah, Kirsty Gogan and Mark Berry have service
contracts which can be terminated by providing
three months’ written notice. Myles Kitcher has
a service contract which can be terminated
without provision of notice. David Ryan has a
service contract which can be terminated by
providing six months’ written notice.

Prior to their resignations, William Cameron
Davies and Brent Fitzpatrick held service
contracts which could be terminated by
providing three months’ written notice. Mr
Fitzpatrick resigned from the Company on 10
August 2020 and Mr Davies resigned from the
Company on 31 March 2021.

Tim Yeo’s remuneration includes amounts
paid to Rivermill Partners Limited, a company
wholly owned by Tim Yeo and Mrs Diane Yeo,
for executive corporate management services
provided during the year. These services are
contracted for on an annual basis and can be
terminated by providing one month’s written
notice.

BASIC SALARY AND BENEFITS
The remuneration of the Directors of the
Company paid for the year or since date of
appointment, if later, to 31 December 2020 is set
out below:

2020
£
Salary/Fee

2020
£
Pension

2020
£
Share
based
payments

2020
£
Other
benefits

Tim Stephen Kenneth Yeo

David John Ryan

William Cameron Davies

Nigel Brent Fitzpatrick

James John Pryn Greenstreet

Myles Howard Kitcher

Allan Thomas Vlah

Kirsten Gogan

Mark Berry

Robert Keith Allaun

27,004

178,000

50,000

25,807

30,000

13,306

7,500

1,129

N/A

17,000

N/A

Total

332,746

17,000

1,856

4,421

1,061

N/A

8,399

N/A

2020
£
Total

27,004

196,856

54,421

26,868

31,061

13,306

7,500

1,129

N/A

2019
£
Total

N/A

159,247

62,378

37,426

N/A

70,000

358,145

366,477

CONT’D

NOTES:
Mr Kitcher joined the Board on 18 March 2020.
Mr Yeo joined the Board on 15 July 2020.
Allan Vlah joined the Board on 27 July 2020.
Mr Fitzpatrick resigned from the Board on 10 August 2020.
Kirsty Gogan joined the Board on 30 September 2020.
Mark Berry joined the Board on 18 December 2020.

Share options held by the Directors are detailed in note 24 in the Notes to the Accounts. Total remuneration
includes share based payments arising from the issue of options amounting to £8,399 (2019: £40,229) and
details are set out in note 24 in the Notes to the Accounts. There have been no awards of shares to Directors
under long term incentive plans.

BONUS SCHEMES
There was no bonus scheme in place for 2020. However, a new bonus scheme is being considered as the
Company enters a revenue generating and growth period.

No bonuses are payable in respect of the year ended 31 December 2020 (2019: nil).

SHARE OPTIONS
No share options were issued to Directors during the year. However, in 2021, non-executive Directors were
granted options under the Company’s Non-Employee Share Option Plan in lieu of part or all of the fees to
which which they were entitled.

David Ryan was the highest paid Director in the year. There were no shares received or receivable by him in
respect of qualifying services under long term incentive schemes.

For details of the total number of options outstanding at 31 December 2020 please refer to Note 24 of the
Notes to the Accounts.

REMUNERATION COMMITTEE MEETINGS
AND ATTENDANCE
Please see the table in the Corporate Governance
Report in this document for attendance by the
members of the Remuneration Committee.

On behalf of the Directors of Powerhouse
Energy Group plc

Myles Kitcher
Chairman of Remuneration Committee
29 June 2021

POWERHOUSE ENERGY GROUP 44

POWERHOUSE ENERGY GROUP 45

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

AUDIT
COMMITTEE REPORT

CONT’D

EXTERNAL AUDITOR
Jeffreys Henry has been the external Auditor of the Group since 2018. The continued appointment of Jeffreys
Henry is to be reviewed by the Committee each year, taking into account the relevant legislation, guidance and
best practice appropriate for a Company of Powerhouse’s size, nature and stage of development.

The Committee will consider a number of areas when reviewing the external Auditor appointment, namely its
performance in discharging the audit, the scope of the audit and terms of engagement, its independence and
objectivity, and its reappointment and remuneration.

The breakdown of fees between audit and non-audit services paid to Jeffreys Henry during the financial year
is set out in Note 4 to the Group’s Consolidated Financial Statements. The non-audit fees relate to taxation
advisory and compliance services and general consultancy relating to Waste2Tricity Limited.

ATTENDANCE AT AUDIT COMMITTEE MEETINGS
Please see the table in the Corporate Governance Report in this document for attendance by the members of the
Audit Committee.

Allan Vlah
Chairman of the Audit Committee
29 June 2021

PRINCIPAL ACTIVITIES DURING THE YEAR
The Committee held one meeting during the
year under review and considered the following:

• An overview of the planned work by the

external auditors on the 2020 audit including
the scope and regulatory requirements of
the audit and the fees; and

• The Committee’s Terms of Reference.

The Committee is planning the following
activities during 2021:

• Review and approve the FY20 and FY21
external Auditor’s plan, including the
proposed materiality threshold, the scope of
the audit, the significant audit risks and fees;

• Review the Company’s procedures, systems
and controls for the prevention of bribery or
fraud;

• Review the adequacy and security of the

Company’s arrangements for its employees
to raise concerns, in confidence, about
possible wrongdoing in financial reporting or
other matters. The Committee shall ensure
that these arrangements allow proportionate
and independent investigation of such
matters and appropriate follow up action;

• Review the Committee’s internal audit role,
in the absence of an external provider of an
internal audit service;

• Risk - review and challenge the Risk Register,

and consider the risk appetite of the
business.

I am pleased to present the Committee’s report
for the year ended 31 December 2020. The
following pages provide an insight into how the
Committee discharged its responsibilities during
the year and the key topics that it considered in
doing so. The composition and terms of reference
for the Audit Committee were updated in the
final quarter of 2020 to reflect the Company’s
renewed commitment to corporate governance
and enhanced practices.

COMPOSITION
The Audit Committee is comprised of three non-
executive Directors, currently Allan Vlah, James
Greenstreet and Myles Kitcher, with Allan Vlah
acting as Chairman. The Chairman is considered
by the Board to have recent and relevant
financial experience and the other members have
competence relevant to the Company’s sector of
operation.

Other members of the Board, the Chief
Financial Officer and other members of senior
management may also be invited to attend the
meetings as guests.

ROLE AND RESPONSIBILITIES
The Audit Committee determines and examines
any matters relating to the financial affairs of
the Group including the terms of engagement
of the Group’s auditors and, in consultation with
the auditors, the scope of the audit. In 2021 and
onwards, the Audit Committee intends to meet at
least twice in each financial year.

The Audit Committee is responsible for
monitoring the integrity of the Company’s
financial statements, reviewing significant
financial reporting issues, reviewing the
effectiveness of the Group’s internal control
and risk management systems. In addition, it
considers the financial performance, position
and prospects of the Group and the Company
and ensures they are properly monitored and
reported on. It oversees the relationship with the
Auditor (including advising on their appointment,
agreeing the scope of the audit and reviewing the
audit findings).

POWERHOUSE ENERGY GROUP 46

POWERHOUSE ENERGY GROUP 47

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ENVIRONMENTAL
SOCIAL & GOVERNANCE
COMMITTEE REPORT

I am pleased to present the Committee’s first
report for the year ended 31 December 2020.
The Committee was established in December
2020 with the aim of integrating sustainability
best practice into all decision making and
business activities as part of the Company’s
commitment to ensuring sustainable and
ethical best practice in all decision-making and
business activities.

COMPOSITION
The ESG Committee is comprised of three
non-executive Directors, currently Kirsty
Gogan, Allan Vlah and Mark Berry, with Kirsty
Gogan acting as Chair. Two executive Directors,
Tim Yeo and David Ryan, are also part of the
Committee. The Chair is considered by the
Board to have recent and relevant experience
with more than 15 years’ experience as a senior
advisor to Government on climate and energy
policy.

Tim Yeo brings his experience as Chair of the
Getlink SE Corporate Social Responsibility and
Ethics Committee, and Mark Berry is a member
of the Norton Rose Fulbright Sustainability
Committee.

Other members of the Board and other
members of senior management may also be
invited to attend the meetings as guests.

ROLE AND RESPONSIBILITIES
The overall mission of the ESG Committee
is to support the Board in ensuring that
Powerhouse attaches the highest priority
to environmental, social and governance
issues and managing the associated
ESG risks.

As a sustainable hydrogen company, Powerhouse
is pioneering clean fuel technology and the ESG
Committee supports the Board in developing the
technology that could help accelerate the UK’s
clean energy transition along with helping to
clean up unrecyclable plastic and improving air
quality. The Committee ensures that Powerhouse
promotes achievement of the UN Sustainable
Development Goals throughout its business.

The ESG Committee will monitor Powerhouse’s
performance in relation to its stated aims of
providing a solution to the global problem of
plastic waste and producing a sustainable low
carbon alternative to fossil fuels whose adoption
will accelerate the world’s progress to net zero
emissions. Where appropriate it will make
recommendations to the Board to ensure these
aims are achieved.

Powerhouse technology aims to be used at a
local level providing a closed loop solution within
the community for non-recyclable plastic waste,
cleaning up our oceans and helping to accelerate
the clean energy transition to reach the target of
net zero emissions by 2030.

“committed to
providing a solution
to the global
problem of plastic
waste”

CONT’D

Importantly the ESG Committee will scrutinise
particularly closely the greenhouse gas
emissions caused by Powerhouse’s own
activities as well as those of its suppliers and
customers with the aim of achieving continuous
improvement in performance.

As a business which is helping accelerate the
clean energy transition, the welfare of the
environment and the impact of climate change
are key issues for the business. Powerhouse
technology aims to work at a local level,
therefore engaging with communities will be a
vital part of this Committee’s work.

The ESG Committee will monitor Powerhouse’s
recruitment policies and its progress towards
employing a fully diverse work force at all levels,
including consultants.

The ESG Committee will keep all aspects of
Powerhouse’s governance under continuous review and
make recommendations to the Board for improvements
where necessary.

In 2021 and onwards, the ESG Committee intends to
meet at least twice in each financial year.

PRINCIPAL ACTIVITIES DURING THE YEAR
The Committee held one meeting, its first since the
Committee was established in December 2020, during
the year under review and considered the following:

• The Committee’s Terms of Reference.

• An overview of the potential activities under

consideration including scrutinising greenhouse
gas emissions, engaging with agencies who
could undertake an ongoing assessment of the
environmental impact of Powerhouse’s processes
and the Company’s approach to recruitment bearing
in mind the aims of the ESG Committee.

ATTENDANCE AT ESG COMMITTEE MEETINGS
Please see the table in the Corporate Governance Report
in this document for attendance by the members of the
ESG Committee.

Kirsty Gogan
Chair of the ESG Committee
29 June 2021

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STATEMENT
OF DIRECTORS’ RESPONSIBILITIES

INDEPENDENT
AUDITOR’S REPORT

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union (EU). Under company law the Directors must not approve
the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the company
and of the profit or loss of the company for that period. In preparing these financial statements, International
Accounting Standard 1 requires that Directors:

• properly select and apply accounting policies;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable

and understandable information;

• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the

company will continue in business;

• provide additional disclosures when compliance with the specific requirements in IFRS Standards is

insufficient to enable users to understand the impact of particular transactions, other events and conditions
on the entity’s financial position and financial performance.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the company’s transactions and disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance
and integrity of the corporate and financial information included on the company’s website. Legislation in
the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.

RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge that:

•

the financial statements, prepared in accordance with International Financial Reporting Standards, give a
true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

the strategic report includes a fair review of the development and performance of the business and the
position of the Company together with a description of the principal risks and uncertainties that it faces;
and

the annual report and financial statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company’s performance, business model
and strategy.

Tim Yeo
Chairman
On behalf of the Board
29 June 2021

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
POWERHOUSE ENERGY GROUP PLC

We have audited the financial statements of Powerhouse Energy Group Plc (the
‘Company’) for the year ended 31 December 2020 which comprise the statement of
comprehensive income, the statement of financial position, the statement of cash
flows, the statement of changes in equity and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting
framework that has been applied in the preparation of the financial statements is
applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
In our opinion, the financial statements:

• give a true and fair view of the state of the company’s affairs as at 31 December

2020 and of its loss for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the

European Union; and,

•

the financial statement have been prepared in accordance with the requirements
of the Companies Act 2006.

BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the company in
accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the director’s use of
the going concern basis of accounting in the preparation of the financial statements
is appropriate. Our evaluation of the directors assessment of the entity’s ability to
continue to adopt the going concern basis of accounting included, as part of our risk
assessment, review of the nature of the business of the company, its business model
and related risks including where relevant the impact of the COVID-19 pandemic
and Brexit, the requirements of the applicable financial reporting framework and the
system of internal control. We evaluated the directors’ assessment of the Company’s
ability to continue as a going concern, including challenging the underlying data and
key assumptions used to make the assessment, and evaluated the directors’ plans for
future actions in relation to their going concern assessment.

Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Company’s ability to continue as a going concern for
a period of at least twelve months from the financial statements are authorised for
issue.

Our responsibilities and the responsibilities of the directors with respect to going
concern are described in the relevant sections of this report.

POWERHOUSE ENERGY GROUP 50

POWERHOUSE ENERGY GROUP 51

OPINIONANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

INDEPENDENT
AUDITOR’S REPORT

CONT’D

OUR APPROACH TO THE AUDIT
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risk identified
by our audit.

CARRYING VALUE OF INTANGIBLE ASSETS

OUR AUDIT PROCEDURES

A key balance on the statement of financial
position is intangible fixed assets of £43,519,582
(2019: £16,514) at 31 December 2020 as detailed
in Note 9.

We reviewed and reperformed the calculations
for the hive up of Waste2Tricity Limited and the
resulting goodwill and merger relief reserve. We
confirmed the inputs used in the calculations.

During the year the Company acquired and hived
up Waste2Tricity Limited. This transaction was
a share for share exchange and qualified for
merger relief as described further in Note 1.1. The
treatment of the merger reserve resulted in a
large goodwill and intangible asset increase as is
described in Note 9 and of the assets acquired as
is mentioned in Note 11.

At the year end the Company obtained a third
party opinion of the Goodwill value that was
accounted for as a result of the hive up of the
Waste2Tricity Limited acquisition. The report
of the third party valuer concluded that an
impairment of £14,192,699 was necessary leaving
a residual value for goodwill at 31 December 2020
of £42,960,000.

This goodwill impairment has been accounted for
in the statement of comprehensive income for the
year.

As part of the goodwill review exercised
performed by the third party valuer, consideration
was made for intangible assets acquired on
acquisition, the only intangible that was deemed
acquired through the acquisition of Waste2Tricity
Limited were exclusivity rights of £500,000.

We were involved with the Company in providing
the third party valuer the scope of the work to
be performed for the goodwill valuation and
identification of intangible assets at the year end.
We attended meetings with the valuer at various
stages of the report writing and reviewed and
checked the workings and the inputs used in their
model. We checked the assumptions used and
corroborated the information to our understanding
of the business and information that was provided
by the management of the Company.

We discussed the model and its assumptions
internally to determine whether the valuation model
and assumptions used were appropriate.

Overall we were satisfied that the Company
remained independent of the valuation process.
The valuers’ model was based on a discounted
cash flow and their assumptions are reflected in
Note 9. Valuations based on this methodology were
both compliant with IFRS and the International
Private Equity and Venture Capital Valuation (IPEV)
guidelines. The assumptions and workings in the
goodwill model are UK specific and not dependent
on any other potential source of activity or income
outside the UK. The valuation report acknowledged
that the development of revenues from international
(non UK) sources were not sufficiently developed
to be included within his valuation model at the
year end, but may have an impact following delivery
of the first project at Protos. We corroborated the
discount rates to check if they were applicable. We
also checked the income streams and the number
of expected projects based on a probability matrix
which we challenged and the outcome of which is
very much dependent on the roll out of UK sites
over the next 5 years.

CORRECT CALCULATION OF SHARE-BASED PAYMENTS

OUR AUDIT PROCEDURES

We have understood and assessed the methodology
utilised to estimate the Company’s share-based
payment charge calculations and checked that the
calculation of the provision was mathematically
accurate.

The share-based payment charge recognised
in profit or loss for the year is £40,634 (2019:
693,142).

All share-based payments are equity-settled and
are made up of share issues, share option issues
and share warrant issues.

These share based payments have been reviewed
for the purpose of calculating an appropriate
share based payment charge. The fair value of
services was used to value share-based payments
where the fair value of services may be directly
calculated. Where the fair value of services may
not be directly calculated, the Black-Scholes
model was used.

The vesting period of share options and warrants
are fixed.

EXEMPTION FROM PREPARING CONSOLIDATED
FINANCIAL STATEMENTS

OUR AUDIT PROCEDURES

The Company has claimed exemptions applicable
to it under Companies Act section 405 (2)
and 405 (3b) and IFRS 10 to not present any
Consolidated financial statements for the year
ended 31 December 2020. This is on the basis that
the Company’s only UK subsidiary is non-trading
and not material and there being long-term
restrictions on the operations of the Company’s
subsidiaries in the US and Switzerland.

We have reviewed and discussed with the Directors
applicable legislation and accounting standard and
assessed that based on the Directors’ explanation,
the Company satisfies the conditions under
Companies Act section 405 (2) and 405 (3b) and
IFRS 10 to not present any Consolidated financial
statements for the year.

We also verified via third party sources that these
conditions were in effect during and as at the year
end.

OUR APPLICATION OF MATERIALITY
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the
nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures
and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a
whole.

Based on our professional judgement, we determined a materiality of £470,000 (2019: £12,000) for the review
of the goodwill and its impairment. In respect of other balances, we considered that a level of £80,000 (2019:
£12,000) was more appropriate for our review. A benchmark of 1% of gross assets of the company was used to
calculate the materiality when reviewing goodwill and its impairment whilst a benchmark of 5% of net losses
(excluding goodwill impairment) was used for other areas (2019: 2.5% of gross assets for all areas). We believe that
gross assets and net losses are primary measures used by the shareholders in assessing the performance of the
company, and are generally accepted auditing benchmarks.

We agreed with management that we would report to them misstatements identified during our audit above
£4,000 (2019: £650) as well as misstatements below those amounts that, in our view, warranted reporting for
qualitative reasons.

POWERHOUSE ENERGY GROUP 52

POWERHOUSE ENERGY GROUP 53

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

INDEPENDENT
AUDITOR’S REPORT

AN OVERVIEW OF THE SCOPE OF OUR AUDIT
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements. In
particular, we looked at where the Directors
made subjective judgments, for example in
respect of significant accounting estimates that
involved making assumptions and considering
future events that are inherently uncertain. As
in all of our audits we also addressed the risk
of management override of internal controls,
including evaluating whether there was evidence
of bias by the Directors that represented a risk of
material misstatement due to fraud.

HOW WE TAILORED THE AUDIT SCOPE
We tailored the scope of our audit to ensure
that we performed enough work to be able to
give an opinion on the financial statements as
a whole, taking into account the structure of
the Company, the accounting processes and
controls, and the industry in which they operate.
We performed an audit of the financial
information of Powerhouse Energy Group PLC.
Our engagement team performed all audit
procedures.

OTHER INFORMATION
The other information comprises the information
included in the annual report other than the
financial statements and our auditor’s report
thereon. The directors are responsible for the
other information contained within the annual
report. Our opinion on the financial statements
does not cover the other information and, except
to the extent otherwise explicitly stated in our
report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read
the other information and, in doing so, consider
whether the other information is materially
inconsistent with the financial statements or our
knowledge obtained in the course of the audit
or otherwise appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we are
required to determine whether this gives rise
to a material misstatement in the financial
statements or a material misstatement in the
financial statements themselves. If, based on
the work we have performed, we conclude that
there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion, based on the work undertaken in the
course of the audit:

•

the information given in the strategic report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and

the strategic report and the Directors’ report have
been prepared in accordance with applicable legal
requirements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
In the light of the knowledge and understanding of the
company and its environment obtained in the course of
the audit, we have not identified material misstatements
in the strategic report or the Directors’ report.

We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:

•

adequate accounting records have not been kept by
the company, or returns adequate for our audit have
not been received from branches not visited by us;
or

the company financial statements are not in
agreement with the accounting records and returns;
or

certain disclosures of Directors’ remuneration
specified by law are not made; or

• we have not received all the information and

explanations we require for our audit.

RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities
statement set out on page 53, the Directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a
true and fair view, and for such internal control as
the Directors determine is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors
are responsible for assessing the company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the Directors either
intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.

CONT’D

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of
these financial statements.

Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of
irregularities, including fraud.

Our approach to identifying and assessing the risks
of material misstatement in respect of irregularities,
including fraud and non-compliance with laws and
regulations, was as follows:

•

the senior statutory auditor ensured the
engagement team collectively had the appropriate
competence, capabilities and skills to identify or
recognise non-compliance with applicable laws
and regulations;

• we focused on specific laws and regulations which
we considered may have a direct material effect on
the financial statements or the operations of the
company;

• we assessed the extent of compliance with the
laws and regulations identified above through
making enquiries of management and inspecting
legal correspondence; and

•

identified laws and regulations were
communicated within the audit team regularly
and the team remained alert to instances of non-
compliance throughout the audit.

We assessed the susceptibility of the company’s
financial statements to material misstatement,
including obtaining an understanding of how fraud
might occur, by:

• making enquiries of management as to where they

considered there was susceptibility to fraud, their
knowledge of actual, suspected and alleged fraud;

•

considering the internal controls in place to
mitigate risks of fraud and non-compliance with
laws and regulations.

To address the risk of fraud through management
bias and override of controls, we:

• performed analytical procedures to identify
any unusual or unexpected relationships;

•

tested journal entries to identify unusual
transactions;

assessed whether judgements and
assumptions made in determining the
accounting estimates set out in Note 1.2 of the
Company financial statements were indicative
of potential bias; and,

•

investigated the rationale behind significant or
unusual transactions.

In response to the risk of irregularities and
non-compliance with laws and regulations, we
designed procedures which included, but were not
limited to:

•

agreeing financial statement disclosures to
underlying supporting documentation;

reading the minutes of meetings of those
charged with governance;

enquiring of management as to actual and
potential litigation and claims; and,

reviewing correspondence from local
authorities and the company’s legal advisor.

There are inherent limitations in our audit
procedures described above. The more removed
that laws and regulations are from financial
transactions, the less likely it is that we would
become aware of non-compliance. Auditing
standards also limit the audit procedures required
to identify non-compliance with laws and
regulations to enquiry of the directors and other
management and the inspection of regulatory and
legal correspondence, if any.

Material misstatements that arise due to fraud can
be harder to detect than those that arise from
error as they may involve deliberate concealment
or collusion.

A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.
org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.

POWERHOUSE ENERGY GROUP 54

POWERHOUSE ENERGY GROUP 55

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

INDEPENDENT
AUDITOR’S REPORT

OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
We were reappointed as auditors by the company at the Annual General Meeting on 30 September
2020 to audit the financial statements for the period ending 31 December 2020. Our total
uninterrupted period of engagement is 4 years, covering the periods ending 31 December 2017 to 31
December 2020.

The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the company
and we remain independent of the company in conducting our audit.

In addition to the audit, the firm provides tax compliance services to Powerhouse Energy Group Plc.

Our audit opinion is consistent with the additional report to the audit committee.

USE OF THIS REPORT
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.

Mark Tenzer
(Senior Statutory Auditor)
For and on behalf of Jeffreys Henry LLP

Chartered Accountants
Statutory Auditor

Finsgate
5-7 Cranwood Street
London EC1V 9EE
29 June 2021

STATEMENT
OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2020

Revenue

Cost of sales

Gross Profit

Administrative expenses
Acquisition costs
Goodwill impairment

Operating loss

Net finance costs

Loss before taxation

Income tax credit

Total comprehensive loss

Loss per share (pence)

Diluted loss per share (pence)

Note

31 December
2020
£

31 December
2019
£

100,000

(99,868)

132

(1,477,415)
(303,224)
(14,192,699)

(1,705,184)
-
-

(15,973.206)

(1,705,184)

(3,032)

(750)

(15,976,238)

(1,705,934)

138,497

195,708

(15,837,741)

(1,510,226)

(0.57)

(0.08)

(0.57)

not applicable

All activities are in respect of continuing operations and there are no other items of comprehensive income.

The notes numbered 1 to 28 are an integral part of the financial information.

POWERHOUSE ENERGY GROUP 56

POWERHOUSE ENERGY GROUP 57

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STATEMENT
OF FINANCIAL P0SITION

STATEMENT
OF CASHFLOWS

AS AT 31 DECEMBER 2020

FOR THE YEAR ENDED 31 DECEMBER 2020

Note

2020
£

2019
£

Note

2020
£

2019
£

ASSETS
Non-current assets
Intangible fixed assets
Tangible fixed assets
Investments in subsidiary undertakings
Investments in associated undertakings

Total non-current assets

Current Assets
Contract costs
Trade and other receivables
Corporation tax recoverable
Cash and cash equivalents

Total current assets

Total assets

LIABILITIES
Current liabilities
Creditors: amounts falling due within one year

Total current liabilities

Total assets less current liabilities
Creditors: amounts falling due after more than one year

Net assets/(liabilities)

EQUITY
Share capital
Share premium
Merger relief reserve
Accumulated deficit

Total surplus/(deficit)

9
10
11
11

12
13
7
14

19
20
20
21

43,519,582
53,020
2
49

43,572,653

14,550
200,310
138,497
3,464,475

3,817,832

47,390,485

16,514
229
1
-

16,744

114,418
46,244
195,708
103,580

459,950

476,694

(509,194)

(489,676)

(509,194)

(489,676)

46,881,291
(23,455)

46,857,836

(12,982)
-

(12,982)

21,689,288
52,594,934
36,117,711
(63,544,097)

12,922,727
48,778,651
-
(61,714,360)

46,857,836

(12,982)

The financial statements of Powerhouse Energy Group Plc, Company number 03934451, were approved by the
Board of Directors and authorised for issue on 29 June 2021 and signed on its behalf by:

David Ryan
Director

The notes numbered 1 to 28 are an integral part of the financial information.

Cash flows from operating activities
Operating Loss
Adjustments for:
Share based payments
Amortisation
Depreciation
Goodwill impairment
Changes in working capital:
Decrease/(Increase) in contract costs
Decrease/(Increase) in trade and other receivables
Increase/(Decrease) in trade and other payables
Tax credits received

(15,973,206)

(1,705,184)

40,634
2,170
2,311
14,192,699

99,868
(143,504)
(171,998)
195,708

693,142
-
1,450
-

(114,418)
17,752
242,614
144,796

Net cash used in operations

(1,755,318)

(719,848)

Cash flows from investing activities
Purchase and hive up of subsidiary
Purchase of intangible fixed assets
Purchase of tangible fixed assets

Net cash flows from investing activities

Cash flows from financing activities
Proceeds from issue of shares
Payments of principal under leases
Net finance costs

Net cash flows from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

11
9
10

18.3
6

1,934
(45,238)
(5,852)

(49,156)

5,170,314
(1,913)
(3,032)

5,165,369

3,360,895

103,580

3,464,475

-
(16,514)
-

(16,514)

-
-
(750)

(750)

(737,112)

840,692

103,580

The notes numbered 1 to 28 are an integral part of the financial information.

POWERHOUSE ENERGY GROUP 58

POWERHOUSE ENERGY GROUP 59

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

STATEMENT
OF OF CHANGES IN EQUITY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

Ordinary share
capital
£

Deferred
shares
£

Share
premium
£

Merger
relief
reserve
£

Accumulated
deficit
£

Total
£

Balance at 1 January 2019

9,282,158

3,113,785

48,773,510

Transactions with equity parties:

- Share issue in lieu of services

526,784

Share based payments

Total comprehensive loss

5,141

Balance at 31 December 2019

9,808,942

3,113,785

48,778,651

Transactions with equity parties:

- Share issues in lieu of services

- Share issues on exercise warrants

- Share issues to acquire W2T

- Share issues in year

Share based payments

Share issue costs

Reserve transfer - goodwill impairment

Total comprehensive loss

261,141

318,219

7,187,201

1,000,000

9,757

38,963

4,000,000

(232,437)

(60,365,351)

804,102

161,217

531,925

161,217

(1,510,226)

(61,714,360)

(12,982)

270,898

357,182

57,497,611

5,000,000

(184,695)

(232,437)

(14,192,699)

14,192,699

(15,837,741)

50,310,410

Balance at 31 December 2020

18,575,503

3,113,785

52,594,934

36,117,711

(63,544,097)

46,857,836

The following describes the nature and purpose of each reserve within equity:

DEFERRED SHARES:
Represents the combined total of all deferred shares (0.5p, 4p and 4.5p)

SHARE PREMIUM:
Amount subscribed for share capital in excess of nominal value

MERGER RELIEF RESERVE:
Amount subscribed for share capital in excess of nominal value where merger relief applies (Note 1.1)

ACCUMULATED DEFICIT:
Accumulated deficit represents the cumulative losses of the company and all other net gains and losses
and transactions with shareholders not recognised elsewhere

The notes 1 to 28 are an integral part of the financial information.

1. ACCOUNTING POLICIES

Powerhouse Energy Group PLC is a Company
incorporated in England and Wales. The Company
is a public limited company quoted on the AIM
market of the London Stock Exchange. The
address of the registered office is 15 Victoria
Mews, Mill Field Road, Cottingley Business Park,
Bingley BD16 1PY. The principal activity of the
Company is to continue the development of the
newly developed PHE G3-UHt Waste-to-Energy
System in order to achieve its full commercial roll-
out. The following accounting policies have been
applied consistently in dealing with items which
are considered material in relation to the financial
information.

1.1. Basis of preparation
This financial information is for the year ended
31 December 2020 and has been prepared
in accordance with International Financial
Reporting Standards (“IFRS”) adopted for use
by the European Union and the Companies Act
2006. These accounting policies and methods of
computation are consistent with the prior year,
unless otherwise stated.

The Company’s only UK subsidiaries are non-
trading and not material. There are also long-term
restrictions on the operations of the Company’s
subsidiaries in the US and Switzerland. With these
restrictions in place, the Company is also unable
to exert control over the subsidiaries. As such the
Company has claimed exemptions applicable to
it under Companies Act section 405 (2) and 405
(3b) and IFRS 10 to not present any Consolidated
financial statements for the year ended 31
December 2020. Investments in subsidiaries that
are not consolidated are carried at cost less any
provision for impairment.

The acquisition of Waste2Tricity Limited during the
year was transacted by way of a share for share
exchange and qualifies for merger relief, meaning
that no share premium is recorded on the issue of
the consideration shares. The excess of the fair
value of consideration shares over their nominal
value has been recorded in a merger relief reserve.

Associates are entities which the Company has
significant influence but not control or joint control
as defined under IAS 28. This is generally the case
where the Company holds between 20% and 50%
of the voting rights. Investments in associates
are accounted for using the equity method of
accounting after initially being recognised at cost
less any fair value adjustment.

Under the equity method of accounting,
investments are initially recognised at cost and
adjusted thereafter to recognise the Company’s
share of the post-acquisition profits or losses of
the investee in the Income statement. Dividends
received or receivable from associates and joint
ventures are recognised as a reduction in the
carrying value of the investment.

When the Company’s share of losses in an
equity-accounted investment exceeds or equals
its interest in the equity, the Company does not
recognise further losses, unless it has incurred
obligations or made payments on behalf of the
other entity. Unrealised gains on transactions
between the Company and its associates and
joint ventures are eliminated to the extent of the
Company’s interest in these entities. Unrealised
losses are also eliminated unless the transaction
provides evidence of an impairment in the asset
transferred.

Accounting policies of the equity accounted
investees are changed where necessary to ensure
consistency with the policies adopted by the
Company. The carrying value of equity accounted
investments is tested for impairment in accordance
with the policy described in Note 1.18 (i).

The Company has one associate, W2T International
(Thailand) Limited, acquired as part of the
acquisition of Waste2Tricity Limited. The entity is
in the process of being closed down and as such
the investment has been held at cost (£49) until
closure has been confirmed.

POWERHOUSE ENERGY GROUP 60

POWERHOUSE ENERGY GROUP 61

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1.2. Judgements and estimates
The preparation of financial statements in
conformity with IFRS requires management to make
judgements, estimates and assumptions that affect
the application of policies and reported amounts in
the financial statements.

Areas involving a higher degree of judgements or
complexity, or areas where assumptions or estimates
are significant to the financial statements such as
the exercise to assess the fair value of goodwill,
share based payments (share options and warrants)
and going concern are disclosed within the
relevant notes.

1.3. Going concern
The financial statements have been prepared on
a going concern basis. The Company has a total
comprehensive loss of £15.84m, which excluding the
impairment of goodwill arising on the Waste2Tricity
Limited acquisition would amount to £1.65m (2019:
£1.51m) and net operating cash outflows of £1.76m
(2019: 0.72m). However, the Directors believe the
going concern basis to be appropriate for the
following reasons.

As at the balance sheet date, the Company has
available cash of £3.46m (2019: £0.1m) and since the
end of the financial year has raised a further £10m in
proceeds before issue costs via a fund raise. These
funds are considered by the Directors to be sufficient
to enable the Company to continue in operational
existence for the foreseeable future by meeting its
liabilities as they fall due for payment.

The Directors views are based upon working capital
projections which take into account the intended
uses of the funds in hand over the next 12 months.

In the event that the Protos project did not
proceed then the Company would need to consider
alternative ways to commercialise the DMG
technology, including the potential introduction of
third party developers. However, the Directors do not
see that this would impact the going concern basis
on which these accounts are drawn up.

The Directors have assessed the effects on the
business arising from Covid-19 and from Brexit
in respect of potential tariff charges and do not
consider these to impact the going concern basis
on which these accounts are drawn up.

1.4. Foreign currency translation
The financial information is presented in sterling
which is the Company’s functional currency.

Foreign currency transactions are translated
into the functional currency using the exchange
rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in
foreign currencies are revalued to the exchange
rate at date of settlement or at reporting dates (as
appropriate). Exchange gains and losses resulting
from such revaluations are recognised in the
Statement of Comprehensive Income.

Foreign exchange gains and losses are presented
in the Statement of Comprehensive Income within
administrative expenses.

1.5. Revenue
The Company provides engineering services
for the application of the DMG Technology, the
intellectual property which the Company owns.
Revenue from providing services is recognised
in the accounting period in which services are
rendered. For fixed-price contracts, revenue is
recognised based on the actual service provided
to the end of the reporting period as a proportion
of the total services to be provided to the extent
to which the customer receives the benefits. This
is determined based on the actual labour hours
spent relative to the total expected labour hours.

Where contracts include multiple performance
obligations as specified by the work scope,
the transaction price will be allocated to each
performance obligation based on estimated
expected cost plus margin.

Estimates of revenues, costs or extent of progress
toward completion of services are revised if
circumstances change. Any resulting increases
or decreases in estimated revenues or costs are
reflected in profit or loss in the period in which
the circumstances that give rise to the revision
become known by management.

In case of fixed-price contracts, the customer pays
the fixed amount based on a payment schedule. If
the services rendered by the Company exceed the
payment, a contract asset is recognised.

If a contract includes an hourly fee, revenue is
recognised in the amount to which the Company
has a right to invoice.

CONT’D

1.6. Leases
For any new contracts entered into, the Company
considers whether a contract is, or contains, a lease.
A lease is defined as ‘a contract, or part of a contract,
that conveys the right to use an asset for a period
of time in exchange for consideration’. To apply this
definition the Company assesses whether the contract
meets three key evaluations which are whether:

the contract contains an identified asset which is
either explicitly defined in the contract or implicitly
specified by being identified at the time the asset is
made available to the Company;

the Company has the right to obtain substantially
all of the economic benefits from use of the asset
throughout the period of use, considering its rights
within the defined scope of the contract;

the Company has the right to direct the use of
the identified asset throughout the period of use.

Where the above evaluations are met, at lease
commencement date, the Company recognizes a
right of use asset and a lease liability on the balance
sheet. The right of use asset is measured at cost,
which is made up of the measurement of the initial
lease liability, any direct initial costs incurred by the
Company, an estimate of any costs to dismantle
and remove the asset at the end of the lease, and
any lease payments made in advance of the lease
commencement date.

The Company depreciates the right is use assets on
a straight line basis from the lease commencement
date to the earlier of the end of the useful life of
the right of use asset or the end of the lease term.
The Company assesses the right of use asset for
impairment when such indicators exist.

The Company accounted for its one short term
lease held at the time by recognising an expense
for rentals payable on a straight line basis over the
lease term.

1.7. Finance expenses
The effective interest method is a method of
calculating the amortised cost of a financial
liability and of allocating interest expense over the
relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash
payments through the expected life of the financial
liability, or, where appropriate, a shorter period, to
the net carrying amount on initial recognition.

1.8. Income tax expense
The tax expense for the period comprises current
and deferred tax.

UK corporation tax is provided at amounts
expected to be paid (or recovered) using the
tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all
temporary differences that have originated but
not reversed at the balance sheet date where
transactions or events that result in an obligation
to pay more tax in the future or a right to pay less
tax in the future have occurred at the balance
sheet date. Temporary differences are differences
between the Company’s taxable profits and its
results as stated in the financial statements that
arise from the inclusion of gains and losses in
tax assessments in periods different from those
in which they are recognised in the financial
statements.

At the commencement date the Company measured
the lease liability at the present value of the lease
payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily
available or the Company’s incremental borrowing
rate. For the assessment of the new lease entered into
in 2020 the Company applied a rate of 7.5%.

A net deferred tax asset is regarded as recoverable
and therefore recognised only to the extent that,
on the basis of all available evidence, it can be
regarded as more likely than not that there will
be suitable taxable profits from which the future
reversal of the underlying temporary differences
can be deducted.

Subsequent to initial measurement the liability will
be reduced for payments and increased for interest.
It is remeasured to reflect any reassessment or
modification or is there are any changes to the
repayment schedule.

On adoption of IFRS 16 in the year ended 31
December 2019, the Company applied transition
relief exempting short term and low value leases
as a practical expedient.

Deferred tax is measured at the average tax rates
that are expected to apply in the periods in which
the temporary differences are expected to reverse,
based on tax rates and laws that have been
enacted or substantively enacted by the balance
sheet date. Deferred tax is measured on a non-
discounted basis.

POWERHOUSE ENERGY GROUP 62

POWERHOUSE ENERGY GROUP 63

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1.9. Property, plant and equipment
Property, plant and equipment is stated at cost less
accumulated depreciation. Cost represents the cost
of acquisition or construction, including the direct
cost of financing the acquisition or construction until
the asset comes into use.

1.11. Other non-current assets
Other non-current assets represent investments
in subsidiaries. The investments are carried at
cost less accumulated impairment. Cost was
determined using the fair value of shares issued to
acquire the investment.

Depreciation on property, plant and equipment is
provided to allocate the cost less the residual value
by equal instalments over their estimated useful
economic lives of 3 years, once the asset is complete.

The expected useful lives and residual values of
property, plant and equipment are reviewed on an
annual basis and, if necessary, changes in useful life
or residual value are accounted for prospectively.

Financial assets
The Company classifies financial assets as loans
and receivables within current assets, except for
maturities greater than 12 months after the balance
sheet date. These are classified as noncurrent
assets. Assets are initially recognised at fair value
plus transaction costs. Loans and receivables are
subsequently carried at amortised cost using the
effective interest rate method.

1.10. Intangible assets
Goodwill represents the future economic benefits
arising from a business combination that are not
individually identified and separately recognised.
Goodwill is carried at cost less accumulated
impairment losses. Refer to note 1.18 for impairment
testing procedures. Goodwill impairment losses are
not reversible as explained in note 1.18 (ii).

Exclusivity rights acquired in a business combination
that qualify for separate recognition are recognised
as intangible assets at their fair value and
subsequently assessed for impairment loss.

Costs associated with patent applications are
capitalised in the year of spend and amortised over
their estimated useful lives of 20 years on a straight
line basis commencing from the date of patent
application. Any cost associated with the upkeep of
a patent is amortised over the remaining useful life of
that patent.

An internally generated intangible asset arising from
development is only recognised where all of the
following have been demonstrated: (i) the technical
feasibility of completing the asset; (ii) the intention
to complete the asset and the ability to use or sell
it; (iii) the availability of resources to complete the
asset; and (iv) the ability to reliably measure the cost
attributable to the asset during its development.

In all other instances research and development
expenditure is recognised as an expense as
incurred. Development costs previously recognised
as an expense are not recognised as an asset in a
subsequent period.

1.12. Contract costs
The Company recognises costs incurred in
fulfilling contracts with customers that are directly
associated with the contract as an asset if those
costs are expected to be recoverable. Contract
costs are amortised on a basis consistent with the
transfer of goods and services to which the asset
relates.

1.13. Trade and other receivables
Trade receivables are initially recognised at fair
value. Subsequently they are carried at amortised
cost less any provision for impairment.

1.14. Cash and cash equivalents
Cash and cash equivalents comprise cash
balances and call deposits and are recognised and
subsequently carried at fair value. For the purpose
of presentation in the statement of cashflows,
cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions,
other short term, highly liquid investments with
original maturities of three months or less that
are readily convertible to known amounts of cash
and which are subject to an insignificant risk
of changes in value, and bank overdrafts. Bank
overdrafts are shown within borrowings in current
liabilities in the balance sheet.

CONT’D

1.15. Trade and other payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course
of business from suppliers. Trade and other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.

1.16. Financial liabilities
Loans are financial obligations arising from funding received and used to support the operational costs of
the Company. These are initially recognised at fair value. Loans are subsequently carried at amortised cost
using the effective interest method.

1.17. Adoption of new and revised standards
(i) New and amended standards adopted by the Company
New and amended standards for the current period and effective from 1 January 2020 have been applied by
the Company, including:

Definition of Material (Amendments to IAS 1 and IAS 8)
Definition of a Business (Amendments to IFRS 3)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
Revised Conceptual Framework for Financial Reporting

There are no transition adjustments relating to the adoption of these standards.

(ii) Standards issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 31
December 2020 reporting periods and have not been adopted early by the Company. These standards
are not expected to have a material impact on the entity in the current or future reporting periods and on
foreseeable future transactions.

1.18. Impairment
(i) Impairment review
At each balance sheet date, the carrying amounts of assets are reviewed to determine whether there is any
indication that those assets have suffered an impairment loss. An impairment loss is recognised whenever
the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment
losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of
any goodwill allocated to cash generating units and then to reduce the carrying amount of the other assets
in the unit on a pro-rata basis. A cash generating unit is the group of assets identified on acquisition that
generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
The recoverable amount of assets or cash generating units is the greater of their fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash generating unit to which the asset belongs.

(ii) Reversals of impairments
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
loss had been recognised.

POWERHOUSE ENERGY GROUP 64

POWERHOUSE ENERGY GROUP 65

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

1.19. Share based payments
Share based payments are made to employees
and third parties and all are equity settled.

(i) Third party provision of services
a) Via issue of shares
Contractors receive remuneration in the form
of share-based payments, whereby services are
provided and settled by the issue of shares. The
cost of equity settled transactions is determined
at the fair value of the services provided, based
upon invoiced amounts or formal agreements in
place with suppliers.

b) Via issues of share warrants
The Company also issues share warrants to
third parties in relation to services provided
by suppliers. The cost of equity settled
transactions is determined at the fair value of
the services provided, based upon invoiced
amounts or formal agreements in place with
suppliers. Where no fair value of services can
be directly obtained, the fair value at the grant
date is determined using the Black and Scholes
valuation model. At each reporting date the
Company revises its estimates of the number of
options that are likely to be exercised with any
adjustment recognised in the income statement.

(ii) Directors and employees
c) Via issues of share options
The Company has issued share options to
Directors and employees through approved
and unapproved option plans. The fair value
of options issued is determined at the date of
grant and is recognised as an expense in the
Income Statement. The fair value at the grant
date is determined using the Black and Scholes
valuation model. At each reporting date the
Company revises its estimates of the number of
options that are likely to be exercised with any
adjustment recognised in the income statement.

Where share-based payments give rise to the
issue of new share capital, the proceeds received
by the Company are credited to share capital
and share premium when the share entitlements
are exercised.

1.20. Employee benefits
Liabilities for wages and salaries, including
non-monetary benefits, annual leave and
accumulating sick leave that are expected to
be settled wholly within 12 months after the
end of the period in which the employees
render the related service are recognised in
respect of employees’ services up to the end
of the reporting period and are measured at
the amounts expected to be paid when the
liabilities are settled. The liabilities are included
within creditors in the balance sheet.

For defined contribution pension plans, the
company pays contributions to publicly or
private administered pension insurance plans
on a mandatory, contractual or voluntary
basis. The Company has no further payment
obligations once the contributions have been
paid. The contributions are recognised as
employee benefit expense when they are due.
Prepaid contributions are recognized as an
asset to the extent that a cash refund or a
reduction in the future payments is available.

The Company does not contribute to any
defined benefit pension plans.

1.21. Segmental reporting
An operating segment is a component of the
Company:

•

that engages in business activities
from which it may earn revenues and
incur expenses (including revenues and
expenses relating to transactions with
other components of the Company);

• whose operating results are reviewed

regularly by the Company’s chief decision
maker to make decisions about resources
to be allocated to the segment and assess
its performance; and

•

for which discrete financial information is
available.

The Company considers it has one business
segment, being a UK based development
company intending to license its technology to
projects in the UK and internationally.

CONT’D

2. REVENUE

Revenue

2020
£

100,000

2019
£

During the year, the Company billed for engineering work carried out on projects. All of the revenue generated has
arisen in the UK.

3. STAFF COSTS

Directors’ fees
Wages and salaries
Social security costs
Pensions

The number of average monthly employees (including Directors) are as follows:

Management
Operations

Total

2020
£

332,746
11,473
35,659
17,000

396,878

2020
£

6
-

2019
£

313,500
-
40,365
12,750

366,615

2019
£

4
-

The total number of employees as at 31 December 2020 (including Directors) was 11 (2019: 4) comprising 8 in
management and 3 in operations (2019: 4 in management). All Directors are classed as management.

POWERHOUSE ENERGY GROUP 66

POWERHOUSE ENERGY GROUP 67

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

4. ADMINISTRATIVE EXPENSES
Included in administrative expenses are:

Lease charges
Research and development costs
Amortisation
Depreciation
Depreciation - right of use asset
Share based payments

Auditor’s remuneration for audit services:
Fees payable to the Company’s auditor for the audit of
the Company’s annual financial statements
Fees payable to the Company’s auditor and their
associates for other services:

Non-audit fees paid to auditors
Taxation advisory and compliance services
Other services

2020
£

14,250
407,071
2,170
259
2,052
40,634

20,000

1,000

13,850
5,000

2019
£

17,480
419,333
-
1,450
-
693,142

20,000

1,000

19,571
-

5. GOODWILL IMPAIRMENT

Goodwill impairment

2020
£

14,192,699

2019
£

Goodwill of £57,152,699 was recognised on the acquisition and hive up of Waste2Tricity Limited as detailed in note
11. The impairment of goodwill arose as a result of an independent fair value assessment commissioned by the
Directors on the carrying value at the balance sheet date and as explained in note 9.

6. NET FINANCE COSTS

Bank and other interest payable
Interest receivable

2020
£

3,115
(83)

3,032

2019
£

945
(195)

750

CONT’D

7. INCOME TAX AND DEFERRED TAX
As the Company incurred a loss, no current tax is payable (2019: £nil). In addition, as there is no
certainty about future profits from which accumulated tax losses could be utilised, accordingly
no deferred tax asset has been recognised. The Company has submitted a claim for research and
development tax credits relating to the 2020 tax year and amounting to £138,497 (2019: £195,708)
which has been recognised in the accounts. Accumulated tax losses amount to an estimated
£12.9 million (2019: £11 million) and reflect tax losses submitted in tax returns and arising during
the period less any relief taken for research and development credits. The tax credit rate is lower
(2019: lower) than the standard rate of tax. Differences are explained below.

Loss before taxation

15,976,238

1,705,934

Tax credit at standard UK corporation tax rate of 19% (2019: 19%)

3,035,485

324,128

2020
£

2019
£

Effects of:
Goodwill impairment not deductible for tax purposes
Expenses not deductible for tax purposes
Research and development tax credits claimed
Deferred tax asset not recognised

8. LOSS PER SHARE

(2,696,613)
(63,003)
138,497
(275,869)

-
(7,644)
195,708
(316,484)

138,497

195,708

2020

2019

Total comprehensive loss (£)

(15,837,741)

(1,510,226)

Weighted average number of shares

2,782,088,358

1,900,547,410

Loss per share in pence
Diluted loss per share in pence

(0.57)
(0.57)

(0.08)
not applicable

For the year ended 31 December 2020, 6,900,000 of the options in issue were excluded from the
diluted loss per share calculation due to being anti-dilutive.

For the year ended 31 December 2019, the share options and warrants in issue were not
considered to have any dilutive effect in accordance with IAS 33.

Shares issued since the year end are disclosed in note 27.

There are no other fees paid to the Company’s auditor other than those disclosed above.

Income tax credit

POWERHOUSE ENERGY GROUP 68

POWERHOUSE ENERGY GROUP 69

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

CONT’D

9. INTANGIBLE FIXED ASSETS

The key assumptions made by the valuer were:

Goodwill

Exclusivity rights

Patent costs

Total

Cost

At 1 January 2019

Additions

At 31 December 2019

Accumulated amortisation & impairment

At 1 January and 31 December 2019

Carrying amount

At 31 December 2019

Cost

At 1 January 2020

Additions – hive up of W2T

Additions

At 31 December 2020

Accumulated amortisation & impairment

At 1 January 2020

Amortisation charge for the year

Impairment charge for the year

At 31 December 2020

Carrying amount

At 31 December 2020

57,152,699

14,192,699

500,000

16,514

57,652,699

45,238

61,752

45,238

57,714,451

2,170

14,192,699

14,194,869

the expected licence fees arising per project based upon agreements with Peel NRE;

the expected roll out of the technology over 5 years following the delivery of the Protos project based
on probability adjusted scenarios;

that the roll out will not be significantly impacted by competing technologies;

that the Company and roll out developer have the capability to scale up where necessary to deliver the
assumed roll out pipeline;

the expected operating life of projects from which the Company will earn licence revenues;

the expected cost of services to support annual licence fee income estimated by the Company based
upon current draft project agreements;

applying a discount rate to cashflow of 10% assessed by review of market survey reports of discount
rates for projects within similar and competing sectors which was considered to provide a reasonable
estimate of a weighted average cost of capital for a company benefiting from the assumed roll out.

Changes to the above assumptions would impact the valuation assessment.

The Directors believe that the key sensitivity in the valuation is the probability adjusted roll out
scenario assumed by the valuer. The valuer attributed higher probability to the initial project pipeline
of 11 projects established with Peel NRE with allowances for increased roll out. The valuer did not
consider an international pipeline to be sufficiently developed to justify inclusion in the valuation
assessment. The rollout assumptions of the valuer averages out at 16 projects arising over the
assessment period. Based upon the valuer’s roll out assessments, an incremental project would impact
the valuation by c £2.4m.

The Directors have not accounted for the possibility of any onerous obligations arising within the
service contracts from which licence fees will be earnt as there is no reason to expect that these will
arise at this stage in the business life cycle.

42,960,000

500,000

59,582

43,519,582

Exclusivity rights arose on the acquisition and hive up of Waste2Tricity Limited. They are subject to an
Option Agreement between the Company and Peel NRE. No impairment is considered to have arisen.

As detailed in note 11, goodwill arose on the acquisition and hive up of Waste2Tricity Limited. It is considered
attributable to the Company’s DMG technology, which is intended to be licensed on a project by project basis
to generate income to the Company over the lifetime of each project.

The recoverable amount of goodwill at the balance sheet date was assessed via independent third party
valuation. The valuer took note of the ICAEW Corporate Finance Faculty Best Practice Guideline April 2008
and applied a discounted cashflow approach, supported by the International Private Equity and Venture
Capital Guidelines of December 2018.

POWERHOUSE ENERGY GROUP 70

POWERHOUSE ENERGY GROUP 71

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

CONT’D

FOR THE YEAR ENDED 31 DECEMBER 2020

11. INVESTMENTS

Right of use asset

Property, plant and

10. TANGIBLE FIXED ASSETS

Cost

At 1 January and 31 December 2019

Accumulated depreciation

At 1 January 2019

Charge for the year

At 31 December 2019

Carrying amount

At 31 December 2019

Cost

At 1 January 2020

Additions

At 31 December 2020

Accumulated depreciation

At 1 January 2020

Charge for the year

At 31 December 2020

Carrying amount

At 31 December 2020

Land and buildings

49,250

2,052

equipment

6,868

5,189

1,450

6,639

Total

6,868

5,189

1,450

6,639

229

6,868

5,852

12,720

6,639

259

6,898

6,868

55,102

61,970

6,639

2,311

8,950

47,198

5,822

53,020

2020

Subsidiaries

Associates

Subsidiaries

Associates

Cost at 1 January

Additions

Goodwill recognised on hive up

Distributions

Cost at 31 December

48,947,155

57,497,611

(57,152,699)

(344,911)

48,947,156

Provision at 1 January

(48,947,154)

Additions

Disposals

Accumulated impairment

Carrying Value at 31 December

(48,947,154)

48,947,155

(48,947,154)

Investments relate to costs of investments in subsidiary undertakings, namely in Waste2Tricity Limited, Powerhouse
Energy, Inc, Pyromex AG and Powerhouse Energy UK Limited. Waste2Tricity Limited is incorporated in the UK and
the Company owns 100 per cent of the common stock and voting rights of the subsidiary. Powerhouse Energy, Inc
is incorporated in California in the United States of America and the Company holds 100 per cent of the common
stock and voting rights of the subsidiary. Pyromex AG is based in Zug, Switzerland and the Company holds 100 per
cent of the shares and voting rights of the subsidiary. Powerhouse Energy UK Limited is a wholly owned UK based
dormant company.

The registered address of Waste2Tricity Limited is Finsgate, 5-7 Cranwood Street, London EC1V 9EE.

The registered address of Powerhouse Energy Inc is 145 N Sierra Madre Blvd Pasadena, CA 91107, USA.

The registered address of Pyromex AG is Chollerstrasse 3, CH-6300, Zug, Switzerland.

The registered address of Powerhouse Energy UK Limited is 15 Victoria Mews, Mill Field Road, Cottingley Business
Park, Bingley BD16 1PY.

On 15 July 2020, the Company acquired 100 per cent of the share capital of Waste2Tricity Limited after the
approval by shareholders at a General Meeting held on 14 July 2020 and the Company issued 1,437,440,277
ordinary shares of 0.5p (“Consideration Shares”) to complete the transaction. The fair value of the consideration
was assessed using the AIM market value of the Consideration Shares on the date of the transaction completion.
The Company has worked closely with Waste2Tricity Limited in the development of applications for the
Powerhouse technology and the acquisition brought rights to markets and developments back in-house which
facilitated the award to Peel NRE of an Option to enter into an exclusive agreement for the development of DMG
Technology in the UK. As detailed in the acquisition circular issued to shareholders on 26 June 2020 in relation
to the acquisition, the Company expressed the intention to wind up Waste2Tricity Limited. Subsequent to the
completion of the acquisition, the business of Waste2tricity was then hived up into the Company and proceedings
to wind up Waste2Tricity Limited were commenced. As a result, Waste2Tricity Limited has not been consolidated
in these accounts.

POWERHOUSE ENERGY GROUP 72

POWERHOUSE ENERGY GROUP 73

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

CONT’D

FOR THE YEAR ENDED 31 DECEMBER 2020

12. CONTRACT COSTS

The following amounts of assets and liabilities were recognized at the acquisition date and hived up into
the Company:

Carrying value

Adjustment

Fair value

Contract costs

Investment in associate

Exclusivity rights

VAT recoverable

Cash

Creditors

Cost at acquisition

Consideration (shares issued)

Goodwill arising

10,562

1,934

(167,633)

(155,088)

500,000

10,562

1,934

(167,633)

344,912

57,497,611

57,152,699

The completion of the transaction was considered a key step to the delivery of a first project utilising the
Company’s DMG technology from which licensing revenues will arise, and the precursor to a wider roll out of
similar projects both in the UK and internationally. Peel NRE have identified the opportunity for in excess of 70
facilities based upon waste arisings in the UK alone. The Company considers it has one business segment, being
the licensing of its technology to projects in the UK and internationally, and as such the goodwill is allocated to
this segment. It is not expected to be deductible for tax purposes.

The Company incurred advisory costs associated with the acquisition which have been expensed in the year.

13. TRADE AND OTHER RECEIVABLES

Other receivables
Prepayments and accrued income

14. CASH AND CASH EQUIVALENTS

Contract costs assets relate to costs arising on engineering contracts where the company has not yet completed
performance obligations which are typically met by the submission of reports, the transfer of data or on longer
contracts via the completion of milestones in accordance with the relevant contract.

Revenue is expected to be recognised and be settled in full in relation to the contact costs assets during the next 12
months.

There is no profit or loss attributable to Waste2Tricity Limited since the acquisition due to its hive up into the
Company. If Waste2Tricity Limited had been included in Consolidated accounts prepared by the Company, its
full year result would have reflected a profit of £446,000.

Cash balances

The investment in associated undertakings relates to Waste2Tricity International (Thailand) Limited, the shares
of which were transferred to the Company after the acquisition of Waste2Tricity Limited was completed. The
investment in the associate is held at cost and is not considered material to the Company. The entity is in the
process of being closed.

15. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE WITHIN ONE YEAR

Trade payables
Lease liability
Other creditors and accruals
Other taxes

2020
£

121,152
23,881
334,609
29,552

509,194

POWERHOUSE ENERGY GROUP 74

POWERHOUSE ENERGY GROUP 75

Capital commitments not accrued for at the year end amounted to £nil (2019: £Nil). Commitments made since the
year end are detailed in Note 27.

2020
£

14,550

2019
£

114,418

2020
£

158,126
42,184

200,310

2020
£

3,464,475

2019
£

23,410
22,834

46,244

2019
£

103,580

2019
£

98,660
-
391,016
-

489,676

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

16. TRADE AND OTHER PAYABLES: AMOUNTS FALLING DUE AFTER ONE YEAR

Lease liability

17. FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets
Financial assets at amortised cost:
- Other financial assets at amortised cost
- Cash and cash equivalents

Financial liabilities
Liabilities at amortised cost:
- Trade payables
- Other creditors
- Payroll taxes
- Lease liabilities

2020
£

23,455

2020
£

-
3,464,475

3,464,475

121,152
334,609
29,552
47,336

532,649

2019
£

-
103,580

103,580

98,660
391,016
-
-

489,676

18. LEASES
The Company has leased offices at the location of its research facility with the lease reflected in the accounts as
a right of use asset and a lease liability. Payments are fixed and at the balance sheet date the lease has a further 2
years left to run. Information about leases for which the Company is a lessee is presented below:

18.1 Amounts recognised in the balance sheet
Right of use assets relate to leased properties that do not meet the definition of investment property and are
presented within tangible fixed assets per Note 10.

CONT’D

Future minimum rentals payable are as follows:

Amounts payable:
Within one year
Later than one year and not later than five years
Total gross payments
Impact of finance expenses

Carrying value of liability

18.2 Amounts recognised in income statement

Depreciation charge
Interest on lease liabilities
Expenses relating to short term leases

18.3 Amounts recognised in statement of cashflows

Interest on lease liabilities
Repayment of lease principal
Expenses relating to short term leases

Total cash outflow for leases

Right of use assets:
Balance at 1 January
Additions to right of use assets
Depreciation charge for the year

Balance at 31 December

POWERHOUSE ENERGY GROUP 76

2020
£

2019
£

Amounts payable:
Within one year

-
49,250
(2,052)

47,198

-
-
-

2020
£

2019
£

26,520
24,310
50,830
(3,494)

47,336

2020
£

2,052
296
14,250

16,598

2020
£

296
1,913
14,250

16,459

2020
£

-
-
-
-

2019
£

-
-
17,480

17,480

2019
£

-
-
17,480

17,480

2019
£

1,429

POWERHOUSE ENERGY GROUP 77

18.4 Future minimum rentals payable under non-cancellable short term leases are as follows:

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

19. SHARE CAPITAL

(i) Number of shares

0.5p Ordinary
shares

0.5p Deferred
shares

4.5p Deferred
shares

4.0p Deferred
shares

Shares at 1 January 2019

1,856,431,621

388,496,747

17,373,523

9,737,353

Issue of shares

105,356,804

Shares at 31 December 2019

1,961,788,425

388,496,747

17,373,523

9,737,353

Issue of shares

1,753,312,268

Shares at 31 December 2020

3,715,100,693

388,496,747

17,373,523

9,737,353

(ii) Value in £

0.5p Ordinary
shares

0.5p Deferred
shares

4.5p Deferred
shares

4.0p Deferred
shares

At 1 January 2019

9,282,158

1,942,483

781,808

389,494

12,395,943

Issue of shares

526,784

At 31 December 2019

9,808,942

1,942,483

781,808

389,494

12,922,727

Issue of shares

8,766,561

At 31 December 2020

18,575,503

1,942,483

781,808

389,494

21,689,288

All ordinary shares of the Company rank pari-passu in all respects.

The deferred shares do not carry any voting rights or any entitlement to attend general meetings of the Company.
They carry only a right to participate in any return of capital once an amount of £100 has been paid in respect of
each ordinary share.

On 1 April 2019 the Company issued 23,023,750, 4,306,802 and 1,808,333 ordinary shares of 0.5p each at prices of
0.5p, 0.5015p and 0.6p each respectively in settlement of services provided.

On 15 July 2019 the Company issued 35,215,000 and 3,266,667 ordinary shares of 0.5p each at prices of 0.5p and
0.6p each respectively in settlement of services provided.

On 21 November 2019 the Company issued 37,736,252 ordinary shares of 0.5p each at a price of 0.5p each in
settlement of services provided.

On 29 January 2020, the Company issued 52,228,139 ordinary shares of 0.5p each in the Company (“Ordinary
Shares”) to various service providers for the settlement of fees. Of these new Ordinary Shares, 47,732,518 were
issued at 0.5p and 4,495,621 were issued at 0.717p in accordance with terms agreed.

CONT’D

On 29 January 2020, the Company issued 5,500,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £27,500.

On 28 February 2020, the Company issued 25,440,350 ordinary shares of 0.5p each in the Company further to
the exercise of warrants for proceeds amounting to £127,202.

On 19 March 2020, the Company issued 3,750,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £18,750.

On 7 April 2020, the Company issued 7,800,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £39,000.

On 16 April 2020, the Company issued 2,500,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £12,500.

On 22 April 2020, the Company issued 5,500,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £27,500.

On 27 May 2020, the Company issued 4,100,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £20,500.

On 9 June 2020, the Company issued 2,003,502 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £10,017.

On 23 June 2020, the Company issued 1,750,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £8,750.

On 10 July 2020, the Company issued 5,300,000 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £26,500.

On 26 June 2020, the Directors of the Company issued a circular to shareholders detailing the proposed
acquisition of the whole of the share capital of Waste2Tricity Limited on a share for share basis. The acquisition
was approved by shareholders at a General Meeting held on 14 July 2020 and the Company issued 1,437,440,277
ordinary shares of 0.5p on 15 July 2020 to complete the transaction.

On 15 September 2020, the Company issued 200,000,000 ordinary shares of 0.5p each in the Company at a price
of 2.5p each, totalling £5,000,000 before issue costs.

20. OTHER RESERVES

As at 1 January 2019
Issue of shares

At 31 December 2019

Issue of shares
Share issue costs
Reserve transfer – goodwill impairment

Merger relief
reserve
£

Share premium
account
£

-
-

50,310,410
-
(14,192,699)

48,773,510
5,141

48,778,651

4,048,720
(232,437)
-

At 31 December 2020

36,117,711

52,594,934

POWERHOUSE ENERGY GROUP 78

POWERHOUSE ENERGY GROUP 79

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

21. ACCUMULATED DEFICIT

As at 1 January
Loss for the year
Share based payments
Reserve transfer – goodwill impairment

2020
£

2019
£

(61,714,360)
(15,837,741)
(184,695)
14,192,699

(60,365,351)
(1,510,226)
161,217
-

CONT’D

On 7 March 2016, the Company granted 15,000,000 options over ordinary shares to the Board. The options may
be exercised between the grant date and the fifth anniversary of the grant date and will lapse if not exercised
during that period.

On 6 March 2018, the Company granted 32,100,000 options over ordinary shares to employees, including a Board
member, under the Powerhouse Energy Group PLC 2018 EMI Option Scheme. The options vest to the employees
over a period of 24 months and are exercisable between the relevant vesting dates and the tenth anniversary of
the grant date and will lapse if not exercised during that period. These options had all been exercised or forfeited
by 31 December 2019.

On 6 March 2018, the Company granted 60,000,000 options over ordinary shares to Board members under the
Powerhouse Energy Group PLC 2018 non-employee Share Option Plan. The options vest to the Board members
over a period of 24 months and are exercisable between the relevant vesting dates and the tenth anniversary of
the grant date and will lapse if not exercised during that period.

At 31 December

(63,544,097)

(61,714,360)

The movement of share options in the year are as follows:

22. SHARE BASED PAYMENTS
The expense recognized for share based payments during the year is shown in the following table:

Share based payment charge recognised in Income Statement

Expense arising from equity-settled share-based payment transactions:

- Share options for Directors and employees

- Warrants for third party services

- Shares issued for third party services

Total share based payment charge in Income Statement

Share based payment charge recognised in Share Premium Account

- Warrants for third party services

Total share based payment charge in Share Premium Account

2020
£

2019
£

8,399

32,235

40,634

84,532

40,229

652,913

693,142

Total share based payment charges recognised

125,166

693,142

Other share based payment movement

Exercise of warrants for third party services

Shares issued for third party services

(38,963)

(270,898)

(531,925)

Total share based payment

(184,695)

161,217

There were no liabilities recognised in relation to share based payment transactions.

22.1 Share options for Directors and employees
The Company has put in place various options schemes for Directors and employees as follows:

On 8 December 2014, the Company granted 11,000,000 options over ordinary shares to the Board. The options
may be exercised between the grant date and the tenth anniversary of the grant date and will lapse if not exercised
during that period.

2020
Number

2020
WAEP (pence)

2019
Number

2019
WAEP (pence)

Outstanding at 1 January

75,000,000

0.77

99,333,333

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding at 31 December

75,000,000

Exercisable at 31 December

75,000,000

0.77

(24,333,333)

75,000,000

67,083,333

0.83

1.03

0.77

0.79

The weighted average remaining contractual life for the share options outstanding as at 31 December 2020 was 6.1
years (2019: 7.1 years)

No share options were granted during the year or in 2019.

The range of exercise prices for options outstanding at the year end was 0.6p to 2.5p (2019: 0.6p to 2.5p).

The number of options outstanding at 31 December 2020 and the movements in the year are as follows:

Date of grant

Granted

Share price
on grant

Exercised

Forfeited

At 31 Dec
2020

Exercise
price

Exercise period

8 Dec 2014

6,000,000

1.875p

7 Mar 2016

9,000,000

0.55p

6 Mar 2018

60,000,000

0.57p

Total

75,000,000

6,000,000

2.5p

9 Dec 2014 until 8 Dec
2024

9,000,000

0.75p

60,000,000

0.6p

75,000,000

8 Mar 2016 until
7 Mar 2021

7 Mar 2018 until
6 Mar 2028

No share options expired in the year. Of the 9,000,000 options granted on 7 March 2016 which were outstanding
on 31 December 2020, 7,600,000 have been exercised since the year end and 1,400,000 have expired.

POWERHOUSE ENERGY GROUP 80

POWERHOUSE ENERGY GROUP 81

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

CONT’D

FOR THE YEAR ENDED 31 DECEMBER 2020

The number of warrants, which have been included for share based payment purposes, outstanding at 31
December 2020 and the movements in the year are as follows:

The estimated fair value of the options issued was calculated by applying the Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:

Options in issue 31 December 2020
Exercise price
Expected volatility
Contractual life
Risk free rate
Estimated fair value of each option

8 December 2014

7 March 2016

6 March 2018

6,000,000
2.5p
127.56%
10 years
2%
1.79p

9,000,000
0.55p
127.56%
5 years
2%
0.45p

60,000,000
0.6p
70.00%**
10 years
1.49%
0.32p*

* the calculation applies a 25% discount for small companies
** expected future volatility of 70% based on historic volatility and the volatilities of similar sized companies.

22.2 Warrants for third party services
The Company has issued warrants in respect of services provided by consultants as part of their service
arrangements. It has also issued warrants to participating shareholders in respect of certain fund raises. No share
based payment charge is recognised for warrants issued to participating shareholders as they are outside of the
scope of IFRS 2.

Details of warrants which have been issued during the year are as follows:

On 15 September 2020, the Company granted 5,395,260 warrants to the Company’s broker as part of its service
arrangement in relation to the fund raise arising on that date. The options may be exercised between the grant date
and the third anniversary of the grant date and will lapse of not exercised during that period. At the date of grant
the share price was 3.3p and the warrants have an exercise price of 2.5p per share.

Warrants in respect of services provided
The movement of warrants issued for share based payments in the year are as follows:

2020
Number

2020
WAEP (pence)

2019
Number

2019
WAEP (pence)

Outstanding at 1 January

Granted during the year

Forfeited during the year

Exercised during the year

Outstanding at 31 December

17,740,350

5,395,260

(17,740,350)

5,395,260

Exercisable at 31 December

5,395,260

0.5

2.5

0.5

2.5

17,740,350

0.5

Date of grant

Granted

Share price
on grant

Exercised

Forfeited

At 31 Dec
2020

Exercise
price

Exercise period

4 July 2017

5,000,000

0.85p

(5,000,000)

13 July 2018

4,940,350

0.44p

(4,940,350)

10 Dec 2018

7,800,000

0.57p

(7,800,000)

15 Sep 2020

5,395,260

3.3p

Total

23,135,610

(17,740,350)

0.5p

5,395,260

2.5p

5,395,260

5 July 2017 until
4 July 2020

14 July 2018 until 13
July 2020

11 Dec 2018 until 10
Dec 2020

16 Sep 2020 until
15 Sep 2023

The Company is required to assess the fair value of instruments issued in respect of services received, with such
value charged to the Income Statement. The estimated fair value of the warrants issued during the year was
calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as
follows:

Warrants issued for services

15 Sep 2020

In issue 31 December 2020
Exercise price
Expected volatility*
Contractual life
Risk free rate
Estimated fair value of each option

5,395,260
2.5p
92.10%
3 years
0.07%
1.57p

* expected future volatility based on historic volatility and the volatilities of similar sized companies

Warrants issued to participating shareholders
Warrants issued to participating shareholders are outside the scope of IFRS 2 and no share based payment
charges have been recognised on them. On initial recognition the warrants’ cost was deducted from equity as it
represents the cost of shares issued to investors. As the agreements had a fixed-for-fixed requirement, they are
also recognised as equity at the same time. As such, there is £nil net impact on equity and has not been included in
the statement of changes in equity.

The number of warrants issued to participating shareholders, which have not been included for share based
payment purposes, outstanding at 31 December 2020 and the movements in the year are as follows:

Date of grant

Granted

Share price
on grant

Exercised

Forfeited

At 31 Dec
2020

Exercise
price

Exercise period

The weighted average remaining contractual life for the share warrants outstanding as at 31 December 2020 was
2.7 years (2019: 0.7 years)

13 July 2018

49,403,502

0.44p

(45,903,502)

(3,500,000)

0.5p

The weighted average fair value of share warrants granted in the year was 1.57p (2019: n/a).

15 Sep 2020

371,510,069

3.3p

371,510,069

2.75p

14 July 2018 until 13
July 2020

16 Sep 2020 until 15
Sep 2022

The exercise price for warrants outstanding at the year end was 2.5p (2019: 0.5p).

Total

420,913,571

(45,903,502)

(3,500,000)

371,510,069

POWERHOUSE ENERGY GROUP 82

POWERHOUSE ENERGY GROUP 83

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

FOR THE YEAR ENDED 31 DECEMBER 2020

The estimated fair value of the warrants issued was calculated by applying the Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:

Warrants issued to participating shareholders

15 Sep 2020

In issue 31 December 2020
Exercise price
Expected volatility*
Contractual life
Risk free rate
Estimated fair value of each option

5,395,260
2.5p
92.10%
3 years
0.07%
1.57p

* expected future volatility based on historic volatility and the volatilities of similar sized companies

All warrants
The number of all warrants outstanding at 31 December 2020 and the movements in the year are as follows:

Date of grant

Granted

Share price
on grant

Exercised

Forfeited

At 31 Dec
2020

Exercise
price

Exercise period

4 July 2017

5,000,000

0.85p

(5,000,000)

13 July 2018

4,940,350

0.44p

(4,940,350)

13 July 2018

49,403,502

0.44p

(45,903,502)

(3,500,000)

10 Dec 2018

7,800,000

0.57p

(7,800,000)

15 Sep 2020

5,329,260

3.3p

15 Sep 2020

371,510,069

3.3p

0.5p

5,329,260

2.5p

371,510,069

2.75p

5 July 2017 until 4 July
2020

14 July 2018 until 13
July 2020

11 Dec 2018 until 10
Dec 2020

16 Sep 2020
until 15 Sep 2023

16 Sep 2020 until 15
Sep 2022

Total

443,983,181

(63,643,852)

(3,500,000)

376,839,329

22.3 Share issue third party services
The Company issued shares to settle services to some of its service providers. The fair value of the share based
payments charge were based on invoiced amounts or amounts agreed to be paid under a formal agreement of the
Company.

23. MATERIAL RISKS
The Company is subject to various risks relating to political, economic, legal, social, industry, business and financial
conditions. Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect
of the Company’s internal control system. The Company’s approach to these risks is detailed in the Strategic
Report.

CONT’D

24. DIRECTORS’ REMUNERATION AND SHARE INTERESTS
The Directors who held office at 31 December 2020 had the following interests, including any interests of a
connected party in the ordinary shares of the Company:

Number of ordinary shares of 0.5p each

Percentage of voting rights

Tim Yeo

William Cameron Davies

David Ryan

James John Pryn Greenstreet

71,871,959

1,200,000

36,567,923

1,000,000

1.93

<0.1

0.98

<0.1

The remuneration of the Directors of the Company paid or payable for the year or since date of appointment, if
later, to 31 December 2020 is:

2020
£
Salary/Fee

2020
£
Pension

2020
£
Share based
payments

2020
£
Other
Benefits

Tim Yeo
David Ryan
William Cameron Davies
Robert Keith Allaun
Nigel Brent Fitzpatrick
James John Pryn Greenstreet
Allan Vlah
Kirsten Gogan
Mark Berry

27,004
178,000
50,000
-
25,807
30,000
13,306
7,500
1,129

-
17,000
-
-
-
-
-
-
-

Total

332,746

17,000

-
1,856
4,421
-
1,061
1,061
-
-
-

8,399

-
-
-
-
-
-
-
-
-

2020
£
Total

27,004
196,856
54,421
-
26,868
31,061
13,306
7,500
1,129

2019
£
Total

-
159,247
62,378
70,000
37,426
37,426
-
-
-

358,145

366,477

Total remuneration includes share based payments arising from the issue of options amounting to £8,399 (2019:
£40,229). There have been no awards of shares to Directors under long term incentive plans during the year.

The Directors’ social security costs for the year amounted to £34,282 (2019: £40,365) resulting in a total
remuneration expense of £392,427 (2019: £406,842).

Tim Yeo, William Cameron Davies, James John Pryn Greenstreet, Allan Vlah, Kirsten Gogan and Mark Berry have
service contracts which can be terminated by providing three months’ written notice. David Ryan has a service
contract which can be terminated by providing six months’ written notice. Prior to his resignation, Nigel Brent
Fitzpatrick held a service contract which could be terminated by providing three months’ written notice.

Rivermill Partners Limited, a company wholly owned by Tim Yeo and his associates, provided executive corporate
management services during the year the value of which is included in the above remuneration. These services are
contracted for on an annual basis as required.

David Ryan’s service contract commenced on 1 February 2019 with payments applying from 1 April 2019. His
services to 31 March 2019 were provided via Nayr Consultants Limited, an engineering consultancy. Details of
amounts paid to Nayr Consultants Limited are provided in Note 25 Related Parties. This does not include any
amount for services as a Director of the Company.

POWERHOUSE ENERGY GROUP 84

POWERHOUSE ENERGY GROUP 85

ANNUAL REPORT 2020 CLEANER ENERGY FROM SUSTAINABLE TECHNOLOGY

NOTES
TO THE ACCOUNTS

CONT’D

FOR THE YEAR ENDED 31 DECEMBER 2020

Share options held by the Directors who served during the year are as follows:

27. EVENTS AFTER THE REPORTING PERIOD
On 21 January 2021, the Company issued 181,818,182 ordinary shares of 0.5p each (“Ordinary shares”) in the
Company at a price of 5.5p each amounting to £10,000,000 before issue costs. The Company also granted
9,090,910 warrants to subscribe for Ordinary Shares at the issue price of 5.5p to its broker.

Forfeited

Exercised

Options at
31/12/20

Exercise
price

Earliest and latest
date of exercise

On 26 January 2021, the Company issued 4,895,260 ordinary shares of 0.5p each in the Company further to the
exercise of warrants for proceeds amounting to £122,382.

Options granted 8 Dec 2014
Nigel Brent Fitzpatrick
James John Pryn Greenstreet

Options granted 7 March 2016
Nigel Brent Fitzpatrick
James John Pryn Greenstreet

Options granted 6 March 2018
William Cameron Davies
Nigel Brent Fitzpatrick
James John Pryn Greenstreet
David Ryan

Options at
1/1/20

3,000,000
3,000,000

5,000,000
4,000,000

15,000,000
12,000,000
12,000,000
21,000,000

-
-

-
-
-
-

-
-

-
-
-
-

3,000,000
3,000,000

2.5p
2.5p

9/12/14 - 8/12/24
9/12/14 – 8/12/24

5,000,000
4,000,000

0.75p
0.75p

8/3/16 – 7/3/21
8/3/16 – 7/3/21

15,000,000
12,000,000
12,000,000
21,000,000

0.6p
0.6p
0.6p
0.6p

1/10/18 – 6/3/28
7/3/18 – 6/3/28
7/3/18 – 6/3/28
7/3/18 – 6/3/28

Highest Paid Director
David Ryan was the highest paid Director in the year. There were no shares received or receivable by him in
respect of qualifying services under long term incentive schemes.

25. RELATED PARTIES
Rivermill Partners Limited, a corporate management services company, wholly owned by Tim Yeo and his
associates, provided executive corporate management services during the year amounting to £7,800 (2019: £Nil).
Amounts outstanding at the year end for services provided and included in creditors and accruals amounted to
£7,800 (2019: £Nil).

Nayr Consultants Limited, an engineering consultancy services company, wholly owned by David Ryan and his
associates, provided engineering services to the Company during the year amounting to £Nil (2019: £56,000).
Amounts outstanding at year end for services provided and included in creditors and accruals amounted to £Nil
(2019: £Nil).

Engsolve Limited, an engineering solutions company, is a related party due to a Director’s family member being
part of its key management personnel. Engsolve provided engineering services to the Company during the year
amounting to £249,555 (2019: £239,137). Amounts outstanding at year end for services provided and included in
these accounts amounted to £43,841 (2019: £26,449).

26. SEGMENTAL REPORTING
The Company comprises a single operating segment being a development company operating solely within
the United Kingdom with the intention of licensing its technology within the UK and internationally. As such
the statement of comprehensive income and the statement of financial position may be used as a report on the
segment. The Company has reported its first revenues in these accounts which relates to engineering work on a
project expected to be the first to utilise the Company’s developed technology.

On 9 February 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the
exercise of options for proceeds amounting to £36,000.

On 24 February 2021, the Company issued 1,600,000 ordinary shares of 0.5p each in the Company further to the
exercise of options for proceeds amounting to £12,000.

On 4 March 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the
exercise of options for proceeds amounting to £45,000.

On 17 March 2021, the Company issued 500,000 ordinary shares of 0.5p each in the Company further to the
exercise of options for proceeds amounting to £3,000.

On 17 April 2021, the Company issued 6,000,000 ordinary shares of 0.5p each in the Company further to the
exercise of options for proceeds amounting to £36,000.

On 23 April 2021, the Company granted 1,773,239 share options in ordinary shares of 0.5p each in the Company
to two Directors of the Company in lieu of part or all of their fees to which they are entitled. The options have an
exercise price of 6.3p each and lapse 3 years from the date of grant.

On 12 May 2021, the Company announced that it had agreed to provide a loan facility for up to £3.8 million to
Protos Plastics to Hydrogen No 1 Limited, the Peel NRE special purpose vehicle and owner of the development
of the Protos plant, the first proposed commercial application of the Company’s DMG technology. The loan is
provided to secure long lead time items and project design services necessary for the Protos plant development
and construction. The loan facility is available for 6 months and will accrue interest daily set at the Bank of England
base rate plus 2%.

On 1 June 2021, Waste2Tricity Limited was dissolved.

28. ULTIMATE CONTROLLING PARTY

There is no controlling party of the Company.

POWERHOUSE ENERGY GROUP 86

POWERHOUSE ENERGY GROUP 87

POWERHOUSE ENERGY
CLEANER ENERGY
from Sustainable Technology

POWERHOUSE ENERGY GROUP PLC
15 Victoria Mews, Mill Field Road, Cottingley Business Park, Bingley, BD16 1PY, UK

R&D AND PROJECT OFFICE
Powerhouse Energy Group Plc
TEC 109, The Energy Centre, Thornton, Chester, CH2 4NU, UK

T: +44 (0) 203 368 6399 I E: enquire@powerhousegroup.co.uk