Shop Apotheke Europe Annual Report 2021

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ANNUAL REPORT 2021 CONTENTS Chairman’s Statement Chief Executive Officer’s Statement Board of Directors Directors’ Report Corporate Governance Report Audit Committee Report Directors’ Remuneration Report Directors’ Responsibility Statement Independent Auditor’s Report Consolidated Statement of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Consolidated Statement of Cash Flows Notes to the Financial Statements Company Information PAGE 3 6 8 10 12 19 22 26 27 29 30 31 32 33 74 Uskmouth power station Cable laying - Loch Etive Powerhouse - Glenkinglass Safety Briefing - Shop 1 Nigg Energy Park AR500 System Testing - Shop 1 Nigg Energy Park AR500 - Goto Islands Chairman’s Statement Introduction The last 12 months have been a very challenging period for the Group in which we have had to make a number of very difﬁcult decisions, however, it has also been a period in which we have been successful in identifying and securing a number of new and exciting opportunities. I believe that we end the period with a clear path forward for the Group, a signiﬁcantly streamlined business, and a number of exciting projects under development that will deliver value to shareholders. The backdrop for the Group, as for many other companies, has remained difﬁcult over the last 12 months. A combination of the recovery from COVID, the COP26 meetings in Glasgow, and the war in Ukraine, have provided an increased focus on, and resulting acceleration of, the pressing need for decarbonisation, but also on the imperative for energy security. New challenges have emerged in the UK and in a number of other countries around the world as a result of a signiﬁcantly increased reliance on weather dependent renewables, which coupled with a decrease in thermal power generation, have brought into focus the need for both predictable power generation as well as the need for increased energy storage solutions. Uskmouth As we announced in April 2022, we made the very difﬁcult decision to halt the development of the Uskmouth Power Station conversion from coal to waste-derived fuel pellets. Whilst we still believe that the rationale for the project is compelling and we had been making excellent progress in engineering design, procurement, fuel testing and securing fuel supply, it was clear that we were not going to be able to secure the permit and planning consents that the project required. The Company spent a huge amount of time and money on developing this project, so I will not pretend that this was not a major setback for us. However, despite the cancellation of the conversion project, we still retain the Uskmouth Power Station site, for which we are identifying other development opportunities, and we have the beneﬁt of a huge amount of learnings from the development of the Uskmouth conversion that we can apply to other coal power station conversion projects elsewhere. For the Uskmouth Power Station site, we are planning to redevelop the site into a sustainable energy park. The site has a number of valuable features, including a signiﬁcant and upgradeable connection to the UK National Grid, a signiﬁcant amount of land, rail and port access, proximity to major commercial and industrial power users, and a nearby gas pipeline. We are developing a comprehensive plan for the redevelopment of the Uskmouth site, and we were delighted to announce in May 2022 the ﬁrst step in this plan, the development of 230 MW battery energy storage project at the site. New conversion opportunities Whilst the Uskmouth Power Station conversion project is not proceeding, much of the engineering design, procurement, fuel testing and fuel supply designs, contractual structures and expertise that we developed for Uskmouth are directly applicable to other coal power station conversion projects internationally. The management team has undertaken a detailed global mapping to identify potential coal conversion projects, targeting countries with a high reliance on coal-ﬁred power stations and where we can secure the required waste feedstocks on attractive terms. In these countries, simply closing coal-ﬁred power stations is not an option without the lights going out, so conversions of existing coal-ﬁred power plant to waste derived fuel pellets that bring down carbon emissions signiﬁcantly, akin to those of a new gas-ﬁred power station, and which in addition address the huge issue of plastic waste, are compelling. We are focusing our development efforts in eastern Europe for these reasons, with the attractiveness of this proposition being signiﬁcantly boosted by the current increased price of, and security of supply issues for, gas, which have brought into focus the need for alternative sources of low carbon emission, predictable power generation. We are already working with our partners on a number of early-stage opportunities and look forward to bringing these projects forward through development and into construction. Annual Report and Accounts 2021 3 Chairman’s Statement continued MeyGen phase 1A The tidal business also had a challenging last 12 months, with three out of the four tidal turbines at MeyGen out of the water for much of that period as a result of technical issues coupled with a delay in securing funding to redeploy to these turbines. The Atlantis AR1500 turbine was successfully redeployed in March 2022 after a number of upgrades to the turbine and an extensive testing programme. The AR1500 has since operated successfully and dispatched power into the UK grid, together with one of the Andritz turbines which has operated almost continuously since its deployment in 2018. In April 2022, we were very grateful to Scottish Enterprise for providing MeyGen with a further £2.5 million loan. This funding will be used to fund the redeployment of the two remaining Andritz tidal turbines and support the stabilisation of operations. We expect to complete the redeployment of these two turbines within the next 9 months. Whilst the ﬁrst phase of the MeyGen project has suffered from operational challenges, the learnings from this ﬁrst phase of MeyGen have been enormous and these learnings are already being applied to future phases of MeyGen and tidal power projects elsewhere. We continue to believe that tidal power has a crucial role to play within modern renewable energy dominated electricity grids in providing a predictable and sustainable source of electricity generation, and the ﬁrst phase of MeyGen has demonstrated the viability of tidal power as a commercial source of sustainable, predictable power generation. MeyGen phase 2 We were delighted, therefore, with the UK Government’s announcement in November 2021 of “ring fenced” funding support for tidal power and a commitment for ongoing support for the development of the tidal power sector. We are optimistic that we will be able to secure revenue support for future phases of the MeyGen project through this mechanism to allow us to progressively build out at least the remaining consented 86 MW at MeyGen and ultimately to the site’s full 398 MW capacity. Development of the MeyGen project remains a key priority for us, and we will continue to explore ways to further develop the site and generate value for shareholders. Strategy We are a developer of innovative sustainable alternative energy solutions. We are not seeking to compete with large utilities and oil companies in delivering “commoditised” renewable energy projects such as wind and solar, but rather seek to identify innovative solutions to help aid the energy transition. In particular, we recognise the challenges posed by the growing dominance of weather dependent renewable generation and that the transition to renewables and net zero cannot be immediate. Our coal project conversions business, for example, provides a predictable, diversiﬁed source of sustainable power generation, provides for a larger reduction in carbon emissions than the same capacity of weather-dependent renewables, and delivers the added beneﬁt of addressing the plastic pollution problem. Our priorities in the near term are focused on the development of the Uskmouth sustainable energy park, stabilisation of existing operations at, and expansion of, the MeyGen tidal project, and securing future coal conversion projects. 4 Simec Atlantis Energy Limited and its subsidiaries Chairman’s Statement continued Financial You will see from our accounts this year that we made a very signiﬁcant loss for the year as a result of having to make asset write downs, principally associated with our decision not to proceed with the Uskmouth Power Station conversion project. We are optimistic about the value that we can deliver from the Uskmouth Sustainable Energy Park, but given that we are still in the relatively early stages of developing our strategy for the Uskmouth site, these developments are not yet sufﬁciently advanced to demonstrate a tangible valuation to our auditors. You can be assured that we are very focused on delivering full value to shareholders from the Uskmouth site as well as to capitalise on the extensive learnings from the Uskmouth conversion project which we are seeking to apply elsewhere. Thank you As a Group we are passionate about what we do and feel privileged to be in a position to make a tangible contribution to the transition to net zero. We look forward to the next 12 months and to keeping you apprised of our progress. I would like to sincerely thank all the members of our fantastic management team for their hard work throughout the last 12 months and all of our stakeholders - shareholders, local communities, governments, and business partners - for their ongoing support to the Group and our projects. Annual general meeting Notice of the Annual General Meeting will be provided in due course. Details of the resolutions to be proposed will be set out in a separate Notice of Annual General Meeting, which accompanies this report for shareholders receiving hard copy documents, and which will be available at www.simecatlantis.com for those who have elected to receive documents electronically. Duncan Black Chairman 28 June 2022 Annual Report and Accounts 2021 5 Chief Executive Ofﬁcer’s Statement This statement gives me the opportunity to reflect on my ﬁrst year as CEO at SAE. We have been presented with many signiﬁcant challenges, but I am incredibly proud that we’ve overcome most of these and I know we have the team, skills and assets in place to deliver long-term, sustainable growth for our business and you, our shareholders. 2021 saw the Company make some difﬁcult but important decisions. While these have had short-term impacts on the business and our ﬁnancial statements, I am convinced they are the right decisions for the long term beneﬁt of the business. The termination of the Uskmouth power station conversion and the repair of the defects identiﬁed on the two Andritz tidal turbines used at the MeyGen site and its operational challenges impacted our cashflow position and resulted in the need for an equity capital raise in October, the disposal of non-core assets and a signiﬁcant reduction in the cost base. Having taken the necessary steps to restructure the business the leadership team have put in place a sustainable business plan which will ultimately deliver a return to shareholders in the medium to long term. Tidal business: Our Japanese project was a major success with our AR500 (500 KW) turbine commissioned early in 2021 and operating faultlessly for the duration of the project, delivering 250 MWh. The project was concluded at the end of 2021. The MeyGen site currently has 2 of the 4 turbines fully operational, it is important to recognise that the project has generated 43GWh of renewable power to date, and 7GWh in 2021/22. To put this achievement in context, this represents 60% of worldwide generation from tidal energy. We are proud that we remain the leaders in tidal stream technology and want to build on this to ensure we remain in that position. Of course, this has only been achieved with the huge support of our shareholders and business partners. I would like to especially recognise the support of Scottish Enterprise who continue to support the MeyGen project and ensure that Scotland is front and centre in the exciting development of this technology. We have been working hard to ensure that we take all our learnings and unlock this world-leading site for the further deployment of turbines, collaboration with the wider tidal industry has been a key part of this. The industry now has the backing of Westminster and its own dedicated budget in the Application Round 4, Contract for Difference auction, which ended in mid June. We will know the results by mid July 2022. Development Business: It was an incredibly difﬁcult decision to halt the conversion of the Uskmouth power station, but it was made easier knowing the knowledge and skills we have developed can still deliver value for our business. The lessons learned will be translated into future success in Europe where there is a recognition that transition technologies will be part of the generation mix in achieving net zero. We are working with our partners and have identiﬁed some key prospects in Poland and the Czech Republic and will continue to update you as these opportunities progress. It is also important that we still realise the value of the Uskmouth site, separate from the conversion. As we develop plans for a Sustainable Energy Park, we were delighted in May to announce an anchor battery storage project of a 230MW/460MWh, which will be owned and operated by Quinbrook Infrastructure Partners and is due for completion in 2024. We are planning to develop a further two battery projects on the site. We are also exploring alternative and complementary uses for the 237 MW MeyGen grid connection which is currently scheduled for completion in 2026. 6 Simec Atlantis Energy Limited and its subsidiaries Chief Executive Ofﬁcer’s Statement continued 2021 ﬁnancial Performance: The Group recorded a loss after tax of £74.1 million for the year ended 31 December 2021, compared with a £19.4 million loss in the prior year. The increase in loss is driven by £53.1 million of non-cash impairments on tangible and intangible assets in the year, the most signiﬁcant of which are a £32 million charge against the Uskmouth Power Station assets following the decision in April 2022 not to proceed with the power station conversion project and a £13.2 million charge on the value of the Meygen project assets, reflecting the operational difﬁculties experienced with the turbines during the year. Group revenue fell from £13.5 million in 2020 to £9.3 million in 2021. This reflected a drop off in revenues in our Atlantis Turbines and Engineering Services division following the successful completion of the phase 1 Japan contract. Power sales from the Meygen tidal power project were £1.6 million, a drop of £0.9 million from 2020 reflecting the turbine outages during the year. Total expenses for the year (excluding depreciation and impairment) were £16.6 million, down from £18.4 million in 2020. During the latter part of 2021, the Group undertook a major restructuring of its cost base which will deliver signiﬁcant operating costs reductions in full year 2022. The Group’s closing net asset balance was £16.7 million (2020: £81.8 million) with the decrease largely the result of the asset impairments recognised during the year. In October 2021, SAE raised approximately £2.6 million through a placing which resulted in 104,000,000 new Ordinary shares being issued. In June 2022 the Group reached agreement with its Atlantis Ocean Energy debenture holders to defer repayment of £4.9 million of principal due on 30 June 2022 until 30 June 2023. Graham Reid Chief Executive Ofﬁcer 28 June 2022 Annual Report and Accounts 2021 7 Board of Directors Duncan Stuart Black Non-Executive Chairman Duncan Black was appointed Chair of the of the Board on 1 September 2021 following his return to the Board as a Non-Executive Director in October 2020. Duncan previously served as the Chief Financial Ofﬁcer and an Executive Director of the Company from 2012-2015, and subsequently as a Non-Executive Director. He has been based in Asia for over 20 years working in the power and infrastructure sectors as a project developer, Chief Financial Ofﬁcer, investment banker and fund manager. Duncan’s previous roles have included Co-Head of Infrastructure Investment at Eastspring Investments (part of Prudential plc), Asia Head of Acquisitions at Deutsche Asset Management’s infrastructure funds management business, and CFO of CLP Holdings’ Australian electricity and gas utility business, now EnergyAustralia. Duncan is currently engaged in developing wind and solar power projects in Asia. Duncan has a BEng (Hons) in Civil Engineering and a PhD in Fluid Dynamics, each from Imperial College, London. Graham Matthew Reid Chief Executive Ofﬁcer Graham Reid became Chief Executive Ofﬁcer and a member of the Board of Directors on 18 January 2021. Graham is an experienced and highly capable CEO, leader and engineer with extensive international experience in the energy and infrastructure space. Prior to joining the Company, Graham was CEO of RES Americas, and prior to that CEO of Arcadis Middle East, a member of Network Rail’s project delivery board for the London bridge station project, and earlier in his career was the UK Managing Director and an Executive Board member of Hyder Consulting plc. Having delivered more than 5GW of wind, solar and storage projects in previous roles, Mr Reid was selected by the Board of Directors as CEO to build on the successful development history of the Company. Simon Hirst Chief Financial Ofﬁcer Simon Hirst was appointed Chief Financial Ofﬁcer on 25 April 2022. Simon has worked within the Group since 2015 and prior to his appointment as CFO was primarily responsible for all ﬁnancial and commercial aspects of the MeyGen project. Before joining the Group, Simon gained international blue-chip corporate experience at a number of organisations including ExxonMobil, Pepsi Cola, Iron Mountain and international power generation company InterGen. John Anthony Clifford Woodley Non-Executive Director John Woodley joined the Board on 22 September 2008. He was at that time co-head of the power- and gas- related commodity business for Europe and Asia at Morgan Stanley. He founded the very successful US electricity trading operations for Morgan Stanley in New York in 1994, having worked as a power plant operator and then as an industrial marketing engineer for electric utilities. After ten years with Morgan Stanley in New York, John moved to London to help build the electricity and electricity-related energy business outside the US. John is now based in Switzerland and acted as a senior adviser to Morgan Stanley until Q1 2021. John has a BSc Eng (Elec) from Wits University, Johannesburg, an MBA from Valdosta State University and an MS in Finance from Georgia State University. 8 Simec Atlantis Energy Limited and its subsidiaries Board of Directors continued Andrew Luke Dagley Non-Executive Director Andrew Dagley joined the Company in early 2014 from IFM Investors, one of the largest fund managers of infrastructure globally, having previously worked with a range of superannuation infrastructure investors, renewable energy project developers and Flinders Corporate Finance, a boutique investment bank. Andrew previously served in an executive capacity as Chief Financial Ofﬁcer and Executive Director – Corporate Finance, before being appointed as a Non-Executive Director in November 2021. Andrew has over 15 years of experience in infrastructure investment with an emphasis on renewable energy, having worked on a range of renewable and sustainable energy projects across Asia Paciﬁc and the UK. He has a Bachelor of Commerce (Hons) Finance from the University of Melbourne. Mark Edward Monckton Elborne Former Non-Executive Director Mark Elborne joined the Board on 15 June 2018 and left the Board on 26 October 2021. George Jay Hambro Former Non-Executive Director Jay Hambro joined the Board on 15 June 2018 and left the Board on 28 September 2021. Annual Report and Accounts 2021 9 Directors’ Report The Directors are pleased to present their report and the consolidated audited ﬁnancial statements of the Company and the Group for the year ended 31 December 2021. Corporate governance The corporate governance statement on pages 12 to 18 forms part of the Directors’ report. Principal activities and business review The Group is a global developer of renewable and sustainable energy projects. The Group holds equity positions in a diverse portfolio of power projects in various stages of development which include the world’s flagship tidal stream project, MeyGen and the Uskmouth power station site that is being developed into a sustainable energy park. During the year, the Group sold its subsidiary SIMEC GHR Ltd. (“GHR”), an operator and developer of hydroelectric assets in Scotland. Further information on the Group’s activities is contained in the Chief Executive Ofﬁcer’s Statement on page 6. A review of the business during the year is contained in the Chairman’s Statement and Chief Executive Ofﬁcer’s Statement on pages 3 to 7. Directors The Directors who served in ofﬁce during the year ended 31 December 2021 were as follows: Duncan Black – Independent Non-Executive Chairman – appointed as Chair 1 September 2021 John Neill – Independent Non-Executive Chairman – resigned 18 August 2021 Graham Reid – Chief Executive Ofﬁcer – appointed 18 January 2021 Timothy Cornelius – Chief Executive Ofﬁcer – resigned 18 January 2021 Andrew Charters – Chief Financial Ofﬁcer – appointed 29 November 2021, resigned 25 April 2022 John Woodley – Non-Executive Director Andrew Dagley – Non-Executive Director Mark Elborne - Non-Executive Director – resigned 26 October 2021 Jay Hambro - Non-Executive Director – resigned 28 September 2021 The Directors’ biographies are shown on pages 8 and 9. Further detail of the Board changes can be found in the Corporate Governance Report on pages 12 to 18. Directors’ remuneration The report on Directors’ remuneration is set out on pages 22 to 25. 10 Simec Atlantis Energy Limited and its subsidiaries Directors’ Report continued Directors’ interests in shares The interests of Directors in shares of the Company are disclosed in the Remuneration Report on pages 22 to 25. Annual general meeting Further details of the AGM will be communicated in a separate Notice of Annual General Meeting to be sent in due course and which will be available at www.simecatlantis.com This report was approved by the Board on 28 June 2022 and signed on its behalf. By order of the Board of Directors Duncan Black Chair of the Board 28 June 2022 Graham Reid Chief Executive Ofﬁcer 28 June 2022 Annual Report and Accounts 2021 11 Corporate Governance Report The Company was incorporated in Singapore under the Singapore Companies Act on 19 December 2005 and has been listed on AIM since 20 February 2014. The Directors recognise the importance of sound corporate governance and the Board is committed to maintaining high standards of corporate governance in line with an effective and efﬁcient approach to management. The Board has taken into consideration the Corporate Governance Code for Small and Mid-Size Quoted Companies produced by the Quoted Companies Alliance (“QCA Code”) and has taken steps to comply with the principles of the QCA Code in so far as they can be applied practically, given the size of the Group, its stage of development, resources and the nature of its operations. The QCA Code adopts key elements of the UK Corporate Governance Code, as well as other relevant guidelines and tailors these to the needs and particular circumstances of small and mid-size quoted companies on a public market. Further details of the Company’s application of the QCA Code are set out in this report and on the Company’s website. Where we do not comply with the QCA Code, this is set out in further detail on our website. The Board of Directors During 2021, the Board comprised seven Directors for the majority of the year. The seven Directors included an independent Non-Executive Chairman, one independent Non-Executive Director, three non-independent Non-Executive Directors and two Executive Directors: the Chief Executive Ofﬁcer and the Corporate Finance Executive. Two of the non-independent Non-Executive Directors held Board positions as the nominated representatives of the Company’s major shareholder SIMEC. Following the resignations of the SIMEC nominated representatives in September and October 2021, SIMEC has not appointed replacement representatives to the Board. In November 2021, Mr Andrew Dagley resigned his executive position and was appointed as a non-executive member of the Board. Since that date, the Board has comprised an independent non-executive Chairman, one independent non-executive Director, one non-independent non-executive Director and two Executive Directors: the Chief Executive Ofﬁcer and the Chief Financial Ofﬁcer. The following Directors of the Company were in ofﬁce during the whole of the year ended 31 December 2021: Duncan Black – Independent Non-Executive Chairman Andrew Dagley – Executive Director – Corporate Finance and subsequently Non-Executive Director John Woodley – Non-Executive Director The following Directors of the Company were in ofﬁce during parts of the year ended 31 December 2021: Graham Reid was appointed as an Executive Director and Chief Executive Ofﬁcer on 18 January 2021. Jay Hambro and Mark Elborne resigned as Non-Executive Directors on 28 September 2021 and 26 October 2021 respectively. On 29 November 2021, Andrew Charters was appointed to the Board as an Executive Director and Chief Financial Ofﬁcer. Subsequent to the year end, on 25 April 2022, Andrew Charters resigned and was replaced by Simon Hirst. Director biographies illustrating their relevant skills and experience can be found on pages 8 and 9. The Chairman The Chairman, Duncan Black, is deemed by his fellow Directors to be independent and to have no conflicting relationships. The Chairman is responsible for providing leadership for the Board and ensuring its effectiveness in all aspects of its role, ensuring that Directors have sufﬁcient resources available to them to fulﬁl their statutory duties. The Chairman is responsible for running Board meetings, ensuring there is sufﬁcient challenge from Non-Executive Directors and a particular focus on strategic issues. The Chairman promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors in particular, and by encouraging a constructive 12 Simec Atlantis Energy Limited and its subsidiaries Corporate Governance Report continued relationship between Executive and Non-Executive Directors. Board members are encouraged to openly and constructively challenge proposals made by executive management. Board agendas are reviewed and agreed in advance to ensure each Board meeting utilises the Board’s time most efﬁciently. The Board and its Committees are provided with information on a timely basis in order to ensure proper assessment can be made of the matters requiring a decision or insight. The Board The Board is collectively responsible for the effective oversight and long-term success of the Company. It has responsibility for formulating, reviewing and approving the strategic direction and governance structure to achieve the long-term success of the Company and deliver shareholder value. In addition to setting the strategy, the Board takes the lead in areas such as ﬁnancial policy and making sure the Company maintains a sound system of internal control. The Board’s responsibilities are set out in a formal schedule of matters reserved for the Board. This schedule is reviewed and updated by the Board where considered appropriate. The Board receives appropriate and timely information prior to each meeting. A formal agenda is produced for each meeting, and Board and Committee members are given a sufﬁcient period of time to review these prior to the meetings taking place. Directors are encouraged to attend all Board meetings and meetings of Committees of which they are members. The Board delegates authority to its Committees to carry out certain tasks on its behalf, so that it can operate efﬁciently and give an appropriate level of attention and consideration to relevant matters. The composition and role of each Committee is summarised below and on pages 15 to 17. The role of the Chairman and the Chief Executive Ofﬁcer are separate with a distinct division of responsibilities. Jay Hambro and Mark Elborne were considered Non-Independent Directors as a result of their relationship with SIMEC, the Company’s largest shareholder. Although John Woodley's material relationship with the Company's shareholder, Morgan Stanley, may have led to him being designated as a Non-Independent Director, the Board has considered his independence and concluded that Mr Woodley discharges his duties in an independent manner. John Woodley’s material relationship with Morgan Stanley ended in March 2021. Notwithstanding that Duncan Black holds ordinary shares in the Company (as detailed on page 22), the Board has considered his independence and has concluded that Mr Black has demonstrated the utmost regard for his independence, appropriately challenging the Board and maintains high standards of corporate governance on the Board. Furthermore, the Board considers that Mr Black has not served as a Non-Executive Director for an undue length of time. In accordance with the QCA code, the Board consists of at least two Independent non-Executive Directors. The Board is aware of the other commitments and interests of its Directors and effective procedures are in place to deal with any conflicts of interest which may arise. Any changes to these commitments and interests are reported to the Board at the earliest opportunity. The Company and SIMEC entered into a relationship agreement to ensure that the Company can continue to operate independently of the SIMEC Group and the GFG Alliance, as detailed on page 18. As well as the support of the Company Secretary, there is a procedure in place for any Director to take independent professional advice at the Company’s expense in the furtherance of their duties, where considered necessary. Board Diversity While the Board is comprised entirely of males, we consider that, as a whole, it is diverse in respect of its range of culture, nationality and international experience. The Nomination Committee is aware that the lack of female representation requires focus and attention. Gender diversity is important to the Board of Directors and the Executive Team and subject to identifying appropriate candidates(s), future vacancies will be ﬁlled by individuals Annual Report and Accounts 2021 13 Corporate Governance Report continued with the best possible credentials, without gender bias. Further information about our approach to equality and inclusion can be found in the Our People section on page 17 and on our website www.simecatlantis.com. Board Operation The Directors meet at regular Board meetings, held at least four times a year, with additional meetings arranged as necessary. During the year to 31 December 2021, the number of scheduled Board meetings attended by each Director was as follows: Attended Duncan Black 13/13 Graham Reid 13/13 John Woodley 13/13 Andrew Dagley 13/13 John Neill* 7/7 Mark Elborne* 10/10 Jay Hambro* 9/9 Andrew Charters** 1/1 * Resigned during year. Full attendance at all Board meetings called during period of ofﬁce. ** Andrew Charters was appointed on 29 November 2021 and attended 1 Board meeting as an Executive Director during the year. The Group has a detailed Delegated Authority Matrix which is reviewed by, and approved by, the Board on at least an annual basis, or more frequently as may be required. The Delegated Authority Matrix provides an overview of the thresholds of approval that senior management and the Committees of the Board can operate to. It is intended to ensure that the day-to-day operation of the business can operate in accordance with Board approved budgets while ensuring that any deviations are appropriately escalated. A third party advises newly appointed Directors of their responsibilities in connection with becoming a director of an AIM company. All Directors, including those newly appointed, receive advice, where applicable, from the Company’s nominated adviser and external lawyers. Board Evaluation The Directors are aware that they need to continually monitor and improve performance and recognise this can be achieved through regular Board evaluation, which provides a valuable feedback mechanism for improving Board effectiveness. The Nomination Committee led an evaluation of the Board performance during the year which recommended a number of changes which were endorsed by the Board and subsequently implemented. These included a series of strategy sessions between the Board and management to better deﬁne the Group’s strategic priorities, a change to the format of Board meetings to focus more on the discussion of key issues and strategy, and a restructuring of the composition of the Committees. The Board is satisﬁed that all the current Directors contribute effectively and have the appropriate balance of skills and experience relevant to the leadership and direction of the Company. The Board is also satisﬁed that it has suitable levels of experience and independence to allow the Directors to discharge their duties and responsibilities effectively. The Board further concluded that the Chairman remained independent and his performance was satisfactory, with strong leadership capability. Succession planning is given consideration by the Nomination Committee on an annual basis. Senior Independent Director The Company has not identiﬁed a Senior Independent Director of the Company in view of the size of the Board, and the Company’s stage of development. 14 Simec Atlantis Energy Limited and its subsidiaries Corporate Governance Report continued Directors’ Election/Re-Election Under the Company’s Articles of Association, Directors are required to stand for election at the ﬁrst Annual General Meeting (“AGM”) after their appointment. All Directors thereafter are obliged by the Articles of Association to retire on a rotating basis and are subject to re-election at the AGM, which will be applied at the 2022 AGM. Accordingly, Andrew Dagley and John Woodley will stand for re-election at the forthcoming AGM. With regard to those Directors who are offering themselves for election and re-election at the next AGM, the Board believes that they will continue to make effective and important contributions to the Company’s success and that Shareholders should support their election and re-election. Board Committees The Board delegates authority to four Committees, including three Committees recommended by the QCA guidelines: the Nomination Committee, the Remuneration Committee and the Audit Committee, as well as an additional Technology Committee. These Committees operate within a scope and remit deﬁned by speciﬁc terms of reference, as determined by the Board. These terms of reference for all Committees were reviewed during 2021. Each Committee is responsible for reviewing the effectiveness of its own terms of reference and for making recommendations to the Board for changes when necessary. Executive Directors are not members of the Remuneration Committee or Audit Committees, although they may be invited to attend meetings. Directors’ attendance at Committee meetings (in their capacity as members of each Committee) held during 2021 is provided in the table below: Audit Committee Committee Member Attended Remuneration Nomination Technology Committee Committee Committee Attended Attended Attended Duncan Black 6/6 John Woodley 6/6 Andrew Dagley – John Neill – Mark Elborne 5/5 Jay Hambro – 1/1 2/2 3/3 4/4 1/1 3/3 1/1 – 1/1 3/3 1/1 – 3/3 – 2/2 – 1/1 – Outside of statutory membership of the above Committees, the Chairman, in agreement with the Chairs of each Committee, encourages all Board Directors to attend any Committee meeting as observers, as appropriate. Graham Reid and Simon Hirst in their positions as Executive Directors are not formal members of Audit Committee, Remuneration Committee or Technology Committee, however, attend meetings as deemed appropriate by the Committee Chairs. Audit Committee Chairman: John Woodley (Prior to 1 September 2021: Duncan Black) Members: Duncan Black and Andrew Dagley The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the ﬁnancial performance of the Group is properly measured and reported. It receives and reviews reports from the Chief Financial Ofﬁcer and auditor relating to interim and annual accounts, and the accounting and internal control systems in use throughout the Group. The current Chairman of the Audit Committee has previously held senior positions with Morgan Stanley in the US and the UK. The Board is satisﬁed that he has recent and relevant ﬁnancial experience. The Chairman of the Audit Committee attended all scheduled meetings throughout the year under review. Annual Report and Accounts 2021 15 Corporate Governance Report continued The Audit Committee is required to meet not less than three times a year at appropriate times in the ﬁnancial reporting and audit cycle and whenever otherwise necessary to fulﬁl its responsibilities. The Audit Committee’s role is to assist the Board in discharging its responsibilities with regard to monitoring the integrity of ﬁnancial reporting, overseeing the relationship with the external auditor, making recommendations to the Board regarding the appointment of the external auditor, and reviewing the adequacy and effectiveness of the Company’s internal controls and risk management systems. The ultimate responsibility for reviewing and approving the Annual Report and Accounts and the half-yearly reports remains with the Board. The Audit Committee met six times during 2021 and four times post year end. It has subsequently advised the Board that this Annual Report and Accounts, taken as a whole, is fair, balanced and understandable for shareholders to assess the Company’s performance, strategy and business model. The report from the Audit Committee is set out on pages 19 to 21. Remuneration Committee Chairman: John Woodley (Prior to 26 October 2021: Mark Elborne) Members: Duncan Black and Andrew Dagley The Remuneration Committee is required to meet at least twice a year and whenever otherwise necessary to fulﬁl its responsibilities. The Remuneration Committee is responsible for reviewing the performance of the Executive Directors and setting the remuneration policy for Executive Directors. The objective of the policy is to attract, retain and motivate executive management of suitable calibre without paying more than necessary, having regard to the views of shareholders and stakeholders. The Remuneration Committee monitors and makes recommendations to the Board on matters relating to level and structure of executive management remuneration. The Remuneration Committee will also make recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time. The Remuneration Committee met on four occasions during 2021. The Directors’ Remuneration Report from the Remuneration Committee is set out on pages 22 to 25. Nomination Committee Chairman: Duncan Black (Prior to 18 August 2021: John Neill) Members: John Woodley, Graham Reid The Nomination Committee is required to meet at least twice a year and whenever otherwise necessary to fulﬁl its responsibilities. The role of the Nomination Committee is to assist the Board in determining its composition, and that of the Committees of the Board. It is also responsible for periodically reviewing the Board’s structure and identifying potential candidates to be appointed as Directors as the need arises. The Nomination Committee is responsible for evaluating the balance of skills, knowledge, experience and diversity of the Board and keeps under review the leadership needs of the Company. It makes appropriate recommendations to the Board on such matters. The Nomination Committee met twice during the year. No external consultants were engaged during this period. The Nomination Committee is mindful of the need to maintain an appropriate balance of skills, experience and personalities to shape the direction of the Company going forward. Building a diverse Board that is reflective of our Company as a whole is one of the factors that will be taken in consideration when appointing new Directors. An evaluation of the effectiveness and performance of the Board and its Committees is carried out on an annual basis with leadership from the Nomination Committee. 16 Simec Atlantis Energy Limited and its subsidiaries Corporate Governance Report continued Technology Committee Chairman: John Woodley Members: Duncan Black, Andrew Dagley The Technology Committee is responsible for monitoring the integrity of the regular internal reporting on the status of technology development within the Company and for sanctioning the external reporting of key technology milestones. The Technology Committee also keeps under review the adequacy and effectiveness of the Company’s internal engineering, internal management controls and risk management systems and ensures that core technology is being developed to plan and within agreed risk parameters. The Technology Committee met three times during the year. Internal Controls and Risk Management The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness. With the active involvement of the executive management team, it approves all aspects of the overall risk management framework, including the strategic direction of the business, annual budgets and business plans, the risk management policy and delegations of authority. There is an agreed risk tolerance which is reflected in the Group’s strategy and risk management activities are geared towards achieving business plans whilst safeguarding the Group’s assets. This system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement, loss and the prevention and detection of fraud and other irregularities. The Group’s system of internal control includes an on-going process of identifying, monitoring and managing risks by executive management, who ensure that adequate systems, processes and controls are in place. Reports are provided by management to the Audit Committee on internal control and risk management policies, and the Board monitors risk exposures, risk management activities and the effectiveness of controls. In particular, Health and Safety (“H&S”) has been identiﬁed as a key area of risk to the business. The Company maintains a CEO Safety Committee to monitor the systems used by the Company to manage H&S across all aspects of the business, as well as promoting strategic health, safety and environment issues throughout the Company. The Group’s internal ﬁnancial control procedures and monitoring systems include: l ﬁnancial policies and approval procedures with proper authorisation levels and segregation of duties for ﬁnancial management; l maintenance policies and approval procedures with proper authorisation levels and segregation of duties for ﬁnancial management; l l l l an annual budgetary process to set the appropriate target for monitoring the progress of the Group; a detailed monthly ﬁnancial reporting system that reports on operating results, cash flows, assets and liabilities; reporting on any non-compliance with internal ﬁnancial controls and procedures; and review of the audit ﬁndings report issued by the external auditor. In addition, the Board carries out a periodic assessment of the principal risks facing the Company, as maintained in the Company’s Risk Register. Our People Our people are integral to our success and their fulﬁlment and development is core to our people proposition. The COVID-19 pandemic brought a whole new range of challenges for our employees but with the introduction of flexible working patterns, wellbeing toolkits and the creation of a support group for line managers, we were successful in facing these new challenges head-on and keeping a highly engaged and productive workforce. Annual Report and Accounts 2021 17 Corporate Governance Report continued We focused throughout the year on maximizing the use of transferable skills across the Group. This saw our colleagues in the tidal and hydro businesses come together with the Uskmouth conversion team to drive the planning and permitting process as well as provide input into the design and engineering of the project. This allowed us to further demonstrate our commitment to the on-going development of our staff, providing new opportunities to share learning and develop new skills. We continued working on implementing the core competencies across the Group to support our people with their professional development and to further embed our Company values of Innovation, Collaboration and Safety. These competencies also underpin our approach to recruitment where we continue to adopt recruitment best practice, focusing on an inclusive and equitable process. Shareholder and Social Responsibilities The Directors are aware of the importance of considering the Company’s impact on its wider stakeholders. Where appropriate, the Company endeavours to take account of feedback received from stakeholders. The Group has worked closely with the local community as part of the pre-application consultation on the Uskmouth conversion project. The Group has spent time with local schools in Scotland to promote STEM education. The Meygen project has engaged extensively with its stakeholders, most recently on the subject of marine mammal monitoring and the innovation of new monitoring devices to track ﬁne-scale marine movement around our underwater turbines. Shareholder Engagement The Company is committed to ensuring that there is effective and regular communication with shareholders on matters such as governance and strategy so that the Board understands the views of shareholders on these issues and shareholders receive a balanced and consistent view of the Company’s performance. Communication is primarily through the AGM, which provides an opportunity for all shareholders to meet and ask questions of Directors and management, and at which the CEO presents a detailed presentation to shareholders on the Group’s business. The Company continues its dialogue with investors through periodic public correspondence between the management and the shareholders, via the use of the Company website and social media. A range of corporate information is also available to shareholders, investors and the public on the Company’s website www.simecatlantis.com. All shareholders will receive a copy of the audited ﬁnancial statements, either via hardcopy or the website. The Company’s Annual Report and Accounts are made available on the Company’s website. The Company’s website is regularly updated and announcements or details of presentations and events are posted onto this website. Major Shareholder and Shareholder Arrangement On 21 May 2018, the Company and SIMEC, which at the end of May held 29.7% of the Company’s share capital, entered into a relationship agreement. The principal purpose of this agreement is to ensure that the Company is capable at all times of carrying on its business independently of SIMEC and its connected persons and to ensure all transactions and relationships between them and the Group are conducted at arm’s length and on normal commercial terms. The relationship agreement includes restrictions on Board voting rights of the two SIMEC representative Directors on SIMEC related matters. At the time of writing, SIMEC has no appointed Directors on the Board or representatives appointed to any Committees. The relationship agreement between the Company and SIMEC formally terminated as a result of SIMEC’s shareholding in the Company falling below 30.0%, however, certain provisions, including the right to appoint two Directors, continue to apply until SIMEC’s shareholding falls below certain further lower thresholds. By order of the Board of Directors Duncan Black Chairman of the Board 28 June 2022 18 Simec Atlantis Energy Limited and its subsidiaries Audit Committee Report The Board has delegated responsibility to the Audit Committee to oversee ﬁnancial reporting, including the ﬁnance function, internal control, risk management and the effectiveness of the audit process. The Audit Committee provides independent oversight of both the senior management team and the external auditors. It regularly reports to the Board on the execution of its duties and responsibilities. The Audit Committee comprises three Non-Executive Directors (the “Members”), appointed by the Board. All Members of the Audit Committee are considered to have relevant experience in the industry in which the Company operates. The Board is also satisﬁed that at least one Member of the Audit Committee has recent and relevant ﬁnancial experience. Further details on the Audit Committee’s membership and attendance records can be found in the Corporate Governance Report on page 15. No individual who is not a Member of the Audit Committee is entitled to attend or to vote at its meetings. The Company’s Chief Executive Ofﬁcer and Chief Financial Ofﬁcer may attend meetings by invitation and other members of the senior management team attend as required. The audit partner and audit manager from the Company’s external auditor are invited to attend meetings on a regular basis. Role of the Audit Committee The principal duties of the Audit Committee, which reports its ﬁndings to the Board, are to: l monitor the integrity of the Company’s ﬁnancial reporting and signiﬁcant ﬁnancial accounting policies and judgements; l review the content of the Annual Report and audited ﬁnancial statements where requested by the Board, and advise on whether it is fair, balanced, understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy; l monitor the effectiveness of the Company’s internal controls and risk management framework; l l l l l consider annually whether the Company should initiate an internal audit function and make a recommendation to the Board accordingly; consider and make recommendations to the Board, to be put to shareholders for approval at the Company’s AGM, in relation to the appointment, re-appointment and removal of the Company’s external auditor; advise the Board on the appointment, terms of engagement and remuneration of the external auditor and monitor their independence and effectiveness; review the effectiveness of the Company’s systems for the detection of fraud and the prevention of bribery; and review the adequacy and security of the Company's arrangements for its employees and contractors to raise concerns, in conﬁdence, about possible wrongdoing in ﬁnancial reporting or other matters. The Audit Committee works closely with the Chief Financial Ofﬁcer and senior management to ensure the Committee is provided with the necessary information it requires to discharge its duties. The Audit Committee’s meeting agendas are based on annual reporting requirements and other ad-hoc issues which arise during the course of the year. Matters Considered During the year The Audit Committee met on six occasions during the year and four times post year end until the date of this report. At these meetings, the Audit Committee has considered the following: l l l Group operational risks; Resignation of external auditor; Appointment of external auditor; Annual Report and Accounts 2021 19 Audit Committee Report continued l l l l l l l l l l l Internal controls and risk management; Group tax considerations; Going concern and cash flow projections; Financial statements and key assumptions; Review of the audit plan and fees; Review of external audit services; External auditor’s report to the Committee; The effectiveness of the audit process; External auditor reappointment; Assessment of the need for an internal audit function; and Terms of Reference of the Audit Committee. Insights into the Audit Committee’s Activities During the year The Audit Committee has reviewed, analysed and challenged the signiﬁcant assumptions within the audited ﬁnancial statements with an independent mind-set. It has considered the application of materiality, the auditor’s assessment of risks of material misstatements and how management has been responsive to the audit. The Company’s external auditors, Moore Stephens LLP, were engaged to perform an audit on the ﬁnancial statements of the Company and Group for the year ended 31 December 2021, which are presented in this annual report to shareholders. The Audit Committee reviews and approves both the external auditor’s audit plan and its ﬁndings in respect of its audit of the Company’s ﬁnancial statements, carefully monitoring these to ensure completeness, accuracy, clarity and integrity. The Audit Committee regularly monitors the objectivity and independence of the external auditor to ensure its continued effectiveness, value for money and compliance with statutory duties. The Audit Committee met with the auditors two times prior to year-end (and four times post year-end) to discuss the risk assessment, audit planning matters and results from the audit. The primary areas of review by the Audit Committee, and the key assumptions, estimates and judgments considered and addressed in relation to the ﬁnancial statements were as follows: l l Going concern and long-term viability – the Audit Committee reviewed the Group’s liquidity position, management’s ﬁnancial forecasts including stress testing of potential risks, and management’s conclusion that there was a reasonable expectation that the Company and Group have sufﬁcient resources to continue in operation for the period of going concern assessment. The Audit Committee concurred with the material uncertainties highlighted in Note 3(a) and concluded that the disclosures in this Annual Report and Accounts 2021 regarding the Group’s going concern and future viability were balanced and understandable. Carrying value of intangible assets and property, plant and equipment – the review for impairment of intangible assets and property, plant and equipment was based on cash flow projections to calculate a fair value less cost to sell for each of the Group’s projects. The achievability of the forecast is a risk, given the inherent uncertainty within any ﬁnancial projection. The Audit Committee evaluated a paper from management detailing the results of the impairment assessment. Key assumptions were reviewed and challenged by the Audit Committee, including discount rates, business risk factors and cash flow projections based on the most recent budget and strategic reviews. Actions and factors likely to influence levels of impairment were reviewed with alternative scenarios requested for further analysis. Taking into account the documentation presented, the Audit Committee was satisﬁed with the approach and judgements made. 20 Simec Atlantis Energy Limited and its subsidiaries Audit Committee Report continued l l l Adequacy of decommissioning provisions – the Audit Committee considered a paper prepared by management to support estimates of the various elements of decommissioning obligations required for the projects in which the Group is engaged. The key assumptions and independently veriﬁed costs presented were deemed to be appropriate. Carrying value of the parent company investments in subsidiary companies – following review of the investment values and the appropriate adjustment to values proposed by management, the Audit Committee concluded that the values recorded in the 2021 Annual Report and Accounts were appropriate. Revenue recognition – the Audit Committee considered the methodology of income recognition, particularly in terms of major projects, and was satisﬁed that the approach taken was appropriate and in accordance with the Group’s accounting policy. Internal Audit Function The Audit Committee considered the need for an internal audit function and has determined that there is no current need given the limited size of the Group and the Group’s existing robust internal controls. It has been agreed that the Audit Committee will consider the need for an internal audit function on at least an annual basis, or more frequently as may be appropriate. Auditor Objectivity and Independence The Audit Committee monitors and reviews the effectiveness of the external audit process, including a review of the audit plan and the audit results report. The Audit Committee has assessed the performance of the external auditor in respect of the 2021 audit. The Audit Committee has satisﬁed itself that safeguards were in place to protect the objectivity and independence of the external auditor. Moore Stephens LLP has expressed its willingness to remain in ofﬁce as the Company’s external auditor and a recommendation to approve their re-appointment will be put forward at the Company’s AGM. Following the consideration of the above matters and its detailed review, the Audit Committee was of the opinion that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Terms of Reference The Audit Committee keeps its terms of reference under review and makes recommendations for changes to the Board. The full terms of reference are available on the Company’s website at www.simecatlantis.com. John Woodley Chairman of the Audit Committee 28 June 2022 Annual Report and Accounts 2021 21 Directors’ Remuneration Report This report includes details of the Directors’ remuneration in 2021. Shareholders will be asked to approve the Directors’ Remuneration Report at the forthcoming AGM. Remuneration Committee The members of the Remuneration Committee and the Remuneration Committee’s role are set out on page 16. Remuneration Framework The overall aim of the Company’s remuneration framework is to provide appropriate incentives that reflect the Company’s performance, culture and values. The Company also attempts to ensure the remuneration guidelines and culture are sustainable, transparent and appropriate. The Company’s framework aims to attract and retain high-performing employees and reward both short-term and long-term contributions to the Company. The Remuneration Committee is satisﬁed that this framework successfully aligns the interests of Executive Directors, senior managers and other employees with the Shareholders’ long-term interests, by ensuring that an appropriate proportion of remuneration is directly linked to overall performance, in both the long and short term. In determining the practicalities of the approach, the Remuneration Committee considers a range of internal and external factors and appropriate market comparisons against other companies of a similar size and nature. Arrangements to Enable Directors to Acquire Shares During and at the end of the ﬁnancial year, neither the Company nor any of its subsidiaries was a party to any arrangement whose purpose was to enable the Directors to acquire beneﬁts by acquiring shares in, or debentures of, the Company or any other body corporate, except as disclosed in this report. Directors’ Interests in Shares According to the Register of Directors’ Shareholdings kept by the Company under Section 164 of the Singapore Companies Act 1967 (the “Act”), none of the Directors of the Company holding ofﬁce at the end of the ﬁnancial year had any interests in the shares or debentures of the Company and its related corporations, except as follows: Shareholdings in which Shareholdings registered Directors are deemed to in the name of Directors have an interest At beginning of the year At end At beginning At end of the year of the year of the year Ordinary shares Duncan Black 1,042,419 1,042,419 – – Executive Directors’ Service Contracts and Payments for Loss of Ofﬁce The Chief Executive Ofﬁcer and Chief Financial Ofﬁcer are employed under a service contract with a ﬁxed period of notice of termination. Their services may be terminated on a maximum of six months’ notice by either party. Non-Executive Directors’ Letters of Appointment The Company’s Non-Executive Directors are not committed by service contracts to the Company and are engaged by letters of appointment. These provide for a maximum of three months’ notice of termination by either party at any time, with no pre-determined amounts of compensation. Payments to Past Directors In addition to the payments noted in the table below, Tim Cornelius was paid £66,000 via a personal services company during 2021. These payments were for consultancy support to provide a managed transition with the new CEO Graham Reid. 22 Simec Atlantis Energy Limited and its subsidiaries Directors’ Remuneration Report continued Payments for Loss of Ofﬁce There have been no payments made to Directors for loss of ofﬁce during the year. Annual Remuneration of Directors The table below sets out the annual remuneration of the Directors for the years ended 31 December 2021 and 31 December 2020. This includes any pension and employer’s National Insurance contributions and excludes share-based payments. During 2021, to support the Company and preserve liquidity through the period of uncertainty, the Chairman and Non-Executive Directors deferred payments for 3 months. Director John Neill(3) John Woodley(2) Andrew Dagley(2) Mark Elborne(4) Duncan Black Tim Cornelius(1) Graham Reid(1) Andrew Charters(5) Annual Remuneration 2021 2020 £’000 £’000 55 80 39 39 119 170 32 39 48 8 72 353 290 – 13 – (1) (2) Timothy Cornelius was employed by Atlantis Operations (UK) Limited and resigned as Chief Executive Ofﬁcer and Director on 18 January 2021. Graham Reid was appointed as his replacement on the same date and is also employed by Atlantis Operations (UK) Limited. John Woodley and Andrew Dagley were remunerated in Singapore dollars. Figures shown above are Great British Pounds equivalents, converted at the prevailing exchange rate. (3) John Neill resigned from the Board on 18 August 2021 (4) Mark Elborne resigned from the Board on 26 October 2021 (5) Andrew Charters was appointed to the Board on 29 November 2021 Long Term Incentive Plan (“LTIP”) On 11 December 2013, it was agreed, contingent on admission of the Company’s shares to trading on AIM, that the Company offered certain senior management and Directors options over shares through an LTIP. In 2015, the rules of the LTIP were amended to allow the Board to determine the date on which awards granted under the LTIP can vest. As at the date of this report, there has been no change to vesting dates. The options granted to Directors as at the end of the ﬁnancial year are shown below: Date of Ordinary Nature Exercise Name grant shares of award price Vesting period Graham Reid 4 January 2021 1,000,000 Option £0.25 Graham Reid 05 February 2021 1,000,000 Option £0.25 Graham Reid 19 March 2021 1,000,000 Option £0.20 Graham Reid 31 December 2021 5,000,000 Option £0.022 Simon Hirst 31 December 2021 1,000,000 Option £0.022 1/3 on each of ﬁrst, second and third anniversary of grant 1/3 on each of ﬁrst, second and third anniversary of grant 1/3 on each of ﬁrst, second and third anniversary of grant 1/3 on each of ﬁrst, second and third anniversary of grant 1/3 on each of ﬁrst, second and third anniversary of grant Awards issues are exercisable up to the tenth anniversary of the date of the grant. Annual Report and Accounts 2021 23 Directors’ Remuneration Report continued Until awards vest or options are exercised, participants have no voting or other rights in the shares subject to the award. Ordinary shares issued or transferred pursuant to the LTIP rank pari passu in all respects with the ordinary shares then in issue except that they will not rank for any dividend/distribution of the Company paid or made by reference to a record date falling before the exercise date. The option is not assignable or transferable. Details of the options granted under the LTIP on unissued ordinary shares of the Company are as follow: Balance Date of grant / at Cancelled / modiﬁcation 1.1.2021 Granted Exercised lapsed Balance Exercise at price Exercisable 31.12.2021 per share period 01.01.2016 350,000 – – (200,000) 30.09.2016 640,000 – – (390,000) 05.12.2016 970,000 – – (970,000) 21.12.2017 336,000 – – (336,000) 21.12.2017 300,000 – – (300,000) 15.06.2018 600,000 – – (300,000) 15.06.2018 75,480 – – – 29.06.2020 1,400,000 – – (1,400,000) 29.06.2020 100,000 – – – 04.12.2020 60,000 – – – 04.12.2020 300,000 – – – 04.01.2021 1,500,000 (500,000) 05.01.2021 3,000,000 – (1,000,000) 19.03.2021 1,750,000 – (500,000) 31.12.2021 20,300,000 – – 150,000 £0.50 01.01.2016 to 01.01.2026 250,000 £0.50 30.09.2016 to 30.09.2026 – £0.50 05.12.2016 to 05.12.2026 – £0.50 21.12.2017 to 03.08.2027 – £0.50 21.12.2017 to 29.09.2027 300,000 £0.35 15.06.2018 to 15.06.2028 75,480 £0.50 15.06.2018 to 15.06.2028 – £0.30 29.06.2020 to 29.06.2030 100,000 £0.50 29.06.2020 to 29.06.2030 60,000 £0.20 04.12.2020 to 04.12.2030 300,000 £0.30 04.12.2020 to 04.12.2030 1,000,000 £0.25 04.01.2021 to 04.01.2031 2,000,000 £0.25 05.02.2021 to 05.02.2031 1,250,000 £0.20 19.03.2021 to 19.03.2031 20,300,000 £0.02 31.12.2021 to 31.12.2031 Total 5,131,480 26,550,000 – (5,896,000) 25,785,480 24 Simec Atlantis Energy Limited and its subsidiaries Directors’ Remuneration Report continued Company Share Option Plan (“CSOP”) On 10 November 2016, the Company established a Company Share Option Plan (“CSOP”) to offer share options to employees. Under this programme, holders of the vested options are entitled to purchase shares at the proposed exercise price. The options are fully vested on the third anniversary of the date of the grant, and exercisable up until the tenth anniversary of the date of the grant. The shares acquired on the exercise of the option shall rank pari passu with all other shares then in issue except that they will not rank for any dividend/distribution of the Company paid or made by reference to a record date falling before the exercise date. The option is not assignable or transferable. Details of the options granted under the CSOP on unissued ordinary shares of the Company are as follow: Balance Date of grant / at Cancelled / modiﬁcation 1.1.2021 Granted Exercised lapsed Balance Exercise at price Exercisable 31.12.2021 per share period 10.11.2016 285,700 – – – 19.08.2019 2,950,000 – – (850,000) 25.03.2021 – 6,999,993 – (2,333,331) 285,700 £0.70 11.11.2026 to 11.11.2026 2,100,000 £0.20 19.08.2019 to 19.08.2029 4,666,662 £0.09 25.03.2021 to 25.03.2031 Total 3,235,700 6,999,993 – (3,183,331) 7,052,362 Other than the above, no option to take up unissued shares of any corporation in the Group was granted and there were no shares of any corporation in the Group issued by virtue of the exercise of an option to take up unissued shares. At the end of the ﬁnancial year, other than the above and the share placing agreement discussed in Note 26 to the ﬁnancial statements, there were no unissued shares of any corporation in the Group under option. Shareholder Vote at the Annual General Meeting The 2021 Directors’ Remuneration Report will once again be put to an advisory shareholder vote at the 2022 AGM. The 2020 Directors’ Remuneration Report was approved by shareholders at the Company’s AGM held on 18 August 2021. Approved and signed on behalf of the Board. John Woodley Chairman of the Remuneration Committee 28 June 2022 Annual Report and Accounts 2021 25 Directors’ Responsibility Statement We are pleased to submit this Annual Report to the members of the Company together with the audited ﬁnancial statements for the ﬁnancial year ended 31 December 2021. In our opinion: l the ﬁnancial statements set out on pages 29 to 32 are drawn up so as to give a true and fair view of the ﬁnancial position and changes in equity of the Group and of the Company as at 31 December 2021 and the ﬁnancial performance and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act 1967, Singapore Financial Reporting Standards (International) and International Financial Reporting Standards; and l at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The Board of Directors has, on the date of this statement, authorised these ﬁnancial statements for issue. On behalf of the Board of Directors Duncan Black Chairman of the Board Graham Reid Chief Executive Ofﬁcer 28 June 2022 28 June 2022 26 Simec Atlantis Energy Limited and its subsidiaries Independent Auditor’s Report to the Members of Simec Atlantis Energy Limited Report on the Audit of the Financial Statements Disclaimer of Opinion 1. We were engaged to audit the ﬁnancial statements of SIMEC Atlantis Energy Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the statement of ﬁnancial position of the Group and the Company as at 31 December 2021, the statement of changes in equity of the Group and the Company and the consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the year then ended and notes to the ﬁnancial statements, including a summary of signiﬁcant accounting policies. 2. We do not express an opinion on the accompanying ﬁnancial statements. Because of the signiﬁcance of the matters described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufﬁcient appropriate audit evidence to provide a basis for an audit opinion on these ﬁnancial statements. Basis for Disclaimer of Opinion Going Concern 3. For the year ended 31 December 2021, the Group incurred a net loss after tax of ₤71,594,000 and for the same period had net operating cash outflows of ₤6,658,000. As at 31 December 2021, the Group’s current liabilities (which included loans and borrowings of ₤4,914,000) exceeded its current assets by ₤7,143,000 and the Company’s current liabilities exceeded its current assets by ₤6,285,000. These and the other matters discussed in Note 3(a) to the ﬁnancial statements indicate the existence of material uncertainties that cast signiﬁcant doubt about the ability of the Group and the Company to continue as going concerns. 4. 5. The directors have prepared the ﬁnancial statements on a going concern basis based on the assumptions as disclosed in Note 3(a) to the ﬁnancial statements. The validity of the going concern basis on which the ﬁnancial statements are prepared is dependent on certain assumptions and the successful outcome of the Group’s various efforts as disclosed in Note 3(a) to the ﬁnancial statements. The assumptions are premised on future events, the outcome of which is inherently uncertain. Based on the information available to us, we were unable to obtain sufﬁcient appropriate audit evidence regarding the ability of the Group and the Company to pay their debts as and when they fall due. We were therefore unable to conclude whether the use of the going concern assumption, which has been adopted for the preparation of the accompanying ﬁnancial statements is appropriate. If the Group and the Company are unable to obtain the necessary funding to continue in operational existence for the foreseeable future, adjustments would have to be made to the accompanying ﬁnancial statements to reflect the situation that assets may need to be realized other than in the normal course of business and at amounts which could differ signiﬁcantly from the amounts at which they are currently recorded. In addition, the Group and the Company may have to provide for further liabilities that might arise and to reclassify non- current assets and non-current liabilities as current assets and current liabilities respectively. The accompanying ﬁnancial statements do not reflect these adjustments. Responsibilities of Management and Directors for the Financial Statements 6. Management is responsible for the preparation of ﬁnancial statements that give a true and fair view in accordance with the provisions of the Companies Act 1967 (the “Act”), Singapore Financial Reporting Standards (International) (“SFRS(I)”) and International Financial Reporting Standards (“IFRS”), and for devising and maintaining a system of internal accounting controls sufﬁcient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair ﬁnancial statements and to maintain accountability of assets. Annual Report and Accounts 2021 27 Independent Auditor’s Report to the Members of Simec Atlantis Energy Limited continued 7. In preparing the ﬁnancial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. 8. The Directors’ responsibilities include overseeing the Group’s ﬁnancial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements 9. Our responsibility is to conduct an audit of the Group’s and Company’s ﬁnancial statements in accordance with Singapore Standards on Auditing and to issue an auditor’s report. However, because of the matter described in the Basis for Disclaimer of Opinion section of our report, we were not able to obtain sufﬁcient appropriate audit evidence during the course of our audit to provide a basis for an audit opinion on these ﬁnancial statements. 10. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (“ACRA”) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together with the ethical requirements that are relevant to our audit of the ﬁnancial statements in Singapore, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements and the ACRA Code. Other Matter 11. The ﬁnancial statements for the ﬁnancial year ended 31 December 2020 were audited by another auditor whose report dated 30 June 2021 expressed a disclaimer opinion on those ﬁnancial statements. Report on Other Legal and Regulatory Requirements 12. In view of the signiﬁcance of the matter referred to in the “Basis for Disclaimer of Opinion” section of our report, we do not express an opinion on whether the accounting and other records required by the Act to be kept by the Company and by the subsidiary corporations incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act. 13. The engagement partner on the audit resulting in this independent auditor’s report is Mr Christopher Bruce Johnson. Moore Stephens LLP Public Accountants and Chartered Accountants Singapore 28 June 2022 28 Simec Atlantis Energy Limited and its subsidiaries Consolidated Statement of Comprehensive Income For the ﬁnancial year ended 31 December 2021 Revenue Other income Employee beneﬁts expense Subcontractor costs Depreciation and amortisation Impairment loss on property, plant & equipment Impairment loss on intangible assets Other operating expenses Share of loss of equity-accounted investees Total operating expenses before non-recurring items Loss on write down of current assets Gain on disposal of subsidiary Results from operating activities Finance costs Loss before income tax Income tax (expense) Loss for the year Other comprehensive income Items that are or may be reclassiﬁed subsequently to proﬁt or loss: - Exchange differences on translation of foreign operations Total comprehensive income for the year Loss for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year attributable to: Owners of the Company Non-controlling interests Loss per share: Basic and diluted loss per share The accompanying notes form an integral part of the ﬁnancial statements Note 5 6 7 11 - 13 11 12 15 14 8 9 10 2021 £’000 7,511 1,789 9,300 (5,793) (6,562) (10,656) (45,312) (7,836) (4,279) (106) (80,544) (890) 1,502 (70,632) (3,450) (74,082) 2,488 (71,594) 2020 £’000 12,234 1,274 13,508 (6,080) (7,987) (10,624) – – (4,349) – (29,040) – – (15,532) (3,889) (19,421) (263) (19,684) 41 1 (71,553) (19,683) (67,623) (3,971) (67,582) (3,971) (19,079) (605) (19,078) (605) 24 (0.12) (0.04) Annual Report and Accounts 2021 29 Statements of Financial Position As at 31 December 2021 Group Company 2021 2020 Note £’000 £’000 2021 £’000 2020 £’000 Assets Non-current asset Property, plant and equipment 11 76,796 131,085 Intangible assets 12 4,178 15,434 Right of use assets 13 779 1,739 Investments in subsidiaries 14 – – Investment in joint venture 15 405 511 Loans receivable 16 592 – Trade and other receivables 17 – – 82,750 148,769 Current Assets Trade and other receivables 17 1,348 3,216 Inventory 18 – 861 Cash and cash equivalents 19 3,771 5,814 5,119 9,891 – 153 – 19,096 – 592 – 19,841 111 – 2,444 2,555 – 1,307 – 64,040 – 12,294 49,893 127,534 137 – 732 869 Total Assets 87,869 158,660 22,396 128,403 EQUITY AND LIABILITIES Capital and Reserves Share capital 20 201,496 195,375 Capital reserve 21 12,665 12,665 Translation reserve 22 7,121 7,080 Share option reserve 23 576 787 Accumulated losses (206,910) (139,841) Total equity attributable to owners of the Company 14,948 76,066 Non-controlling interests 14 1,739 5,710 16,687 81,776 LIABILITIES Non-current Liabilities Lease liabilities 13 697 1,350 Provisions 25 13,546 14,879 Loans and borrowings 26 43,906 43,041 Deferred tax liabilities 27 771 3,582 58,920 62,852 Current Liabilities Lease liabilities 13 62 327 Provisions 25 172 162 Loans and borrowings 26 4,914 5,488 Trade and other payables 28 7,114 8,055 12,262 14,032 Total Liabilities 71,182 76,884 201,496 – (227) 576 (188,712) 13,133 – 13,133 195,375 – (227) 787 (80,238) 115,697 – 115,697 – – 423 – 423 – 30 95 8,715 8,840 9,263 – – 408 – 408 – 94 1,833 10,371 12,298 12,706 Total Equity and Liabilities 87,869 158,660 22,396 128,403 The accompanying notes form an integral part of the ﬁnancial statements 30 Simec Atlantis Energy Limited and its subsidiaries Statements of Changes in Equity For the ﬁnancial year ended 31 December 2021 Share Non- Share Capital Translation option Accumulated controlling capital reserve reserve reserve losses Total interest Total Note £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Group At 1 January 2021 195,375 12,665 7,080 787 (139,841) 76,066 5,710 81,776 Loss for the ﬁnancial year – – – – (67,623) (67,623) (3,971) (71,594) Other comprehensive income – – 41 – – 41 – 41 Total comprehensive income for the ﬁnancial year – – 41 – (67,623) (67,582) (3,971) (71,553) Transactions with owners, recognised directly in equity Issue of ordinary shares, net of issue costs 20 6,121 – – – – 6,121 – 6,121 Recognition of share-based payments 23 – – – 343 – 343 – 343 Transfer between reserves 23 – – – (554) 554 – – – Total transactions with owners 6,121 – – (211) 554 6,464 – 6,464 At 31 December 2021 201,496 12,665 7,121 576 (206,910) 14,948 1,739 16,687 At 1 January 2020 188,018 12,665 7,079 740 (120,786) 87,716 6,315 94,031 Loss for the ﬁnancial year – – – – (19,079) (19,079) (605) (19,684) Other comprehensive income – – 1 – – 1 – 1 Total comprehensive income for the ﬁnancial year – – 1 – (19,079) (19,078) (605) (19,683) Transactions with owners, recognised directly in equity Issue of ordinary shares, net of issue costs 20 7,357 – – – – 7,357 – 7,357 Recognition of share-based payments 23 – – – 71 – 71 – 71 Transfer between reserves 23 – – – (24) 24 – – – Total transactions with owners 7,357 – – 47 24 7,428 – 7,428 At 31 December 2020 195,375 12,665 7,080 787 (139,841) 76,066 5,710 81,776 Share Share Translation option Accumulated capital reserve reserve losses Total Note £’000 £’000 £’000 £’000 £’000 Company At 1 January 2021 195,375 (227) 787 (80,238) 115,697 Loss for the ﬁnancial year – – – (109,029) (109,029) Other comprehensive income – – – – – Total comprehensive income for the ﬁnancial year – – – (109,029) (109,029) Transactions with owners, recognised directly in equity Issue of ordinary shares, net of issue costs 20 6,121 – – – 6,121 Recognition of share-based payments 23 – – 344 – 344 Transfer between reserves 23 – – (555) 555 – Total transactions with owners 6,122 – (211) 555 6,465 At 31 December 2021 201,496 (227) 576 (188,712) 13,133 At 1 January 2020 188,018 (227) 740 (75,833) 112,698 Loss for the ﬁnancial year – – (4,429) (4,429) Other comprehensive income – – – – Total comprehensive income for the ﬁnancial year – – (4,429) (4,429) Transactions with owners, recognised directly in equity Issue of ordinary shares, net of issue costs 20 7,357 – – – 7,357 Recognition of share-based payments 23 – – 71 – 71 Transfer between reserves 23 – – (24) 24 – Total transactions with owners 7,357 – 47 24 7,428 At 31 December 2020 195,375 (227) 787 (80,238) 115,697 The accompanying notes form an integral part of the ﬁnancial statements Annual Report and Accounts 2021 31 Consolidated Statement of Cash Flows For the ﬁnancial year ended 31 December 2021 Cash Flows from Operating Activities Loss before income tax Adjustments for: Grants income Depreciation of property, plant and equipment Amortisation of intangible assets Interest income Finance costs Share-based payments Impairment loss on property, plant & equipment Impairment loss on intangible assets Movement in provisions Loss on write down of current assets Gain on sale of subsidiary Share of loss of joint venture Net foreign exchange Operating cash flow before working capital changes Changes in working capital: Movements in trade and other receivables Movements in trade and other payables Net cash used in operating activities Cash Flows from Investing Activities Purchase of property, plant and equipment Disposal of ﬁxed assets Proceeds from grants received Investment in joint venture Loan to joint venture Net cash from disposal of subsidiary Net cash generated from/ (used in) investing activities Cash Flows from Financing Activities Proceeds from grants received Proceeds from issue of shares Share issuance cost Proceed from borrowings Repayment of borrowings Loan to related party Interest paid Payment of lease liabilities Deposits released/(pledged) Net cash generated from ﬁnancing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the ﬁnancial year Effect of foreign exchange rates on the balance of cash held in foreign currencies Note 6 11,13 12 6 8 7 11 12 25 14 15 15 16 14 20 20 26 26 16 26 13 19 Cash and cash equivalents at the end of the ﬁnancial year 19 The accompanying notes form an integral part of the ﬁnancial statements 32 Simec Atlantis Energy Limited and its subsidiaries 2021 £’000 2020 £’000 (74,082) (19,421) (402) 8,972 1,684 – 3,450 343 45,312 7,836 223 890 (1,502) 106 194 (6,976) 1,169 (851) (6,658) (1,542) (21) 296 – (544) 3,104 1,293 402 2,600 (203) 2,000 (55) (258) (1,096) (214) 732 3,908 (1,457) 4,315 146 3,004 (274) 8,980 1,644 (3) 3,889 71 – – 187 – – – 289 (4,638) 584 (1,878) (5,932) (5,027) – 1,629 (464) – – (3,862) 274 11,530 (323) 3,056 (1,753) – (1,099) (464) (580) 10,641 847 3,602 (134) 4,315 Notes to the Financial Statements For the ﬁnancial year ended 31 December 2021 These notes form an integral part of and should be read in conjunction with the accompanying ﬁnancial statements: 1 General SIMEC Atlantis Energy Limited (the “Company”) is a company incorporated in Singapore. The address of the Company’s registered ofﬁce is Level 4, 21 Merchant Road, #04-01, Singapore 058267. The principal place of business is 26 Dublin Street, Edinburgh, EH3 6NN, United Kingdom. The principal activity of the Group is to develop and operate as a global sustainable energy provider. The Company is an inventor, developer, owner, marketer and licensor of technology, intellectual property, trademarks, products and services and an investment holding company. The principal activities of the subsidiaries are disclosed in Note 14 to the ﬁnancial statements. The ﬁnancial statements of the Group as at and for the year ended 31 December 2021 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in equity-accounted investees. 2 Application of International Financial Reporting Standards (“IFRSs”) (a) Application of new and revised IFRSs On 1 January 2021, the Group adopted the new or amended IFRSs that are mandatory for application for the ﬁnancial year. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the respective IFRS. The adoption of these new or amended IFRS did not result in substantial changes to the Group’s accounting policies and had no material effect on the amounts reported for the current or prior ﬁnancial year. IFRSs issued but not yet effective (b) At the date of authorisation of these ﬁnancial statements, the following standards have been issued and are relevant to the Group and Company but not yet effective: Description Amendments to IFRS 16: COVID-19 Related Rent Concessions beyond 30 June 2021 Amendments to: Effective for annual periods beginning on or after 1 April 2021 l l l IFRS 3: Business Combinations (Reference to the Conceptual Framework) 1 January 2022 IAS 16: Property, Plant and Equipment (Proceeds before Intended Use) IAS 37: Provisions, Contingent Liabilities and Contingent Assets (Onerous Contracts - Cost of Fulﬁlling a Contract) Annual Improvements to IFRS Standards 2018-2020 Amendments to: l l l l IAS 1: Presentation of Financial Statements (Classiﬁcation of Liabilities as Current or Non-current) IAS 1: Presentation of Financial Statements and SFRS(I) Practice Statement 2 (Disclosure of Accounting Policies) IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (Deﬁnition of Accounting Estimates) IFRS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction 1 January 2023 The Directors do not expect that the adoption of these new and revised standards above will have a material impact on the ﬁnancial statements in the period of initial application. Annual Report and Accounts 2021 33 Notes to the Financial Statements continued 3 Summary of signiﬁcant accounting policies (a) Going concern In adopting the going concern basis for preparing these ﬁnancial statements, the Board has considered the Group’s business activities, together with factors likely to affect its future development, its performance and principal risks and uncertainties. The Board of Directors is required to state whether it is appropriate to adopt the going concern basis of accounting in preparing the ﬁnancial statements, and to identify any material uncertainties as to the Company’s ability to continue as a going concern over a period of at least 12 months from the date of approval of the ﬁnancial statements. The period of management’s going concern assessment is the period to 31 August 2023. The Board of Directors has undertaken the assessment of the going concern assumptions using ﬁnancial forecasts for the period to 31 August 2023. Due to the development stage of the business with relatively modest cashflow from operations, in the event that one or more of the Group’s already contracted projects does not achieve completion as anticipated, the Company may require external ﬁnancing during 2022. In line with previous practice, the Company funds its short and medium-term funding requirements through a combination of equity and debt. Details of the Group’s loans and borrowings at year end can be found in Note 26 of the ﬁnancial statements. During the current ﬁnancial year, the Company terminated the share placement with New Technology Capital Group LLC. All outstanding debt under this arrangement was settled via the issue of new equity as required under the terms of the agreement. As at the 31 December 2021 there were no undrawn loan facilities. Going concern assessment Management has prepared a forecast through to 31 August 2023 based on contractually committed revenues and costs, an estimate of additional costs required and the income and costs arising from development projects that are expected to be delivered within the forecast period. The forecast has been subject to stress testing. The Directors consider, following their review of the ﬁnancial projections, the following matters to be material uncertainties during the going concern period: l l Delivery of a Battery Energy Storage System (BESS) project at the Uskmouth site during the period. The Group has entered into an option agreement with Energy Optimisation Solutions for a BESS project. Under the terms of the arrangement, the Group will receive a development premium of £10 million plus index linked rental payments under a 30-year lease agreement for land at the site. These cashflows will provide the funds to repay debt obligations falling due in the year and provide the necessary funding for future operating costs and project development expenditure. The Group will have insufﬁcient liquidity without raising further funding during the going concern period if the project does not reach ﬁnancial close. Repayment of the Abundance bond principals falling due in June 2022 and March 2023. During the going concern period, £4.9 million of Abundance Bonds are repayable in March 2023 with a further £4.9m repayable in June 2023. Management has been in dialogue with Abundance since the beginning of 2022 in relation to the deferral of principal and interest payment due in relation to the Abundance Bonds in order to allow sufﬁcient time for income to be delivered from the BESS project. For one of the Abundance bonds that was originally due for repayment in June 2022, the bond holders agreed on 9 June 2022 to accept a deferral of 12 months for the repayment of the principal (to June 2023) and for a delay of 3 months on the interest payable for that bond falling due on that date. The Company has formally requested a 3-month delay on the interest payments falling due on the Atlantis Future Energy debentures on 30 June 2022. The remaining two bonds will mature in March 2023 and September 2024. The Company may either seek to extend the repayment date of these bonds or repay the bonds, either through a reﬁnancing with new debt, from additional cashflows from the business, or by raising further equity. Failure to repay the principal repayments on these bonds would put the Group in a position where it would default on the bonds. 34 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued l Timing of the potential repayment of EU grant funding. As at the date of these accounts, the Group is in discussion with the EU funding authority over the potential clawback of an amount of €3.9 million (£3.4 million) relating to a grant received and which the EU has notiﬁed the Group may be subject to clawback. The Board and management are of the view that there are grounds for disputing any clawback of this grant and the Company has evidence to support this position. Discussions with the EU in this regard are continuing however the outcome is not fully within the control of management and as such an uncertainty remains over whether these amounts will be required to be repaid. Whilst the Board and management are of the view that if any clawback were to be payable that a reasonable payment plan could be agreed with the EU, if the EU monies were to be required to be repaid in full in the going concern period, this could lead to a €3.9m (£3.4m) reduction in liquidity in the going concern period. Mitigating actions In the event that cashflows are limited due to delays in the BESS project, failure to agree debt repayment deferrals with Abundance or reﬁnance the bonds, or a requirement to repay the EU grant funding coupled with then a failure to agree an appropriate repayment plan with the EU , controllable mitigating actions such as reducing the Group’s cost base, suspension of Directors fees, and taking the full beneﬁt of payment terms with suppliers would be available but would likely be insufﬁcient to remove the material uncertainties in relation to going concern. In such a situation, the Company could seek to raise further equity given its listing on AIM, for which it has a demonstrated successful track record and a supportive shareholder base. Material uncertainties related to going concern After reviewing the current liquidity position, ﬁnancial forecasts and stress testing of risks and based on the current funding facilities outlined and considerations noted above, the Board has a reasonable expectation that the Company and the Group have sufﬁcient resources to continue in operational existence for the foreseeable future, which is the period to 30 June 2023. As a result, the Board continues to adopt the going concern basis of accounting in preparing the Company’s and Group’s ﬁnancial statements. The Board has, however, identiﬁed material uncertainties arising that may cast doubt upon the Company and Group’s ability to continue as a going concern, which are described on pages 34 and 35 above and are summarised as follows: l Successful development of a BESS project at the Uskmouth site during the going concern review period; l The possible need to agree deferral of debt repayments due in March 23 with Abundance bond holders if the Company is unsuccessful in reﬁnancing or otherwise repaying the bonds; and l Any requirement for the repayment of EU grant funding and the timing thereof The ﬁnancial statements do not include the adjustments that would result if the Company and the Group were unable to continue as a going concern. (b) Basis of preparation The ﬁnancial statements have been prepared in accordance with Singapore Financial Reporting Standards (International) (“SFRS(I)”) and IFRS. SFRS(I)s are issued by Accounting Standards Council Singapore, which comprise standards and interpretations that are equivalent to IFRS issued by International Accounting Standards Board. All references to SFRS(I)s and IFRSs are subsequently referred to as IFRS in these ﬁnancial statements unless otherwise speciﬁed. The ﬁnancial statements have been prepared on the historical cost basis, except as otherwise disclosed in the accounting policies below. The accounting policies set out below have been applied consistently to all periods presented in these ﬁnancial statements. Annual Report and Accounts 2021 35 Notes to the Financial Statements continued Foreign currencies (c) The individual ﬁnancial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated ﬁnancial statements of the Group and the statement of ﬁnancial position and statement of equity of the Company are presented in Great British Pounds (“GBP”), which is the functional currency of the Company, and the presentation currency for the consolidated ﬁnancial statements. Transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the end of the reporting period. All exchange differences are recognised in proﬁt or loss. At each reporting date, for presentation purposes, the assets and liabilities of the Group’s entities that do not use GBP as their functional currency are translated into GBP at exchange rates presiding at the reporting date, with gains or losses on retranslation being recognised through the translation reserve. Income and expense transactions are translated at the average exchange rates for the period, where average rates are a reasonable approximation of actual rates. The ﬁnancial statements are presented in GBP (£), rounded to the nearest thousand. (d) Basis of consolidation The consolidated ﬁnancial statements incorporate the ﬁnancial statements of the Company and entities controlled by the Company (its subsidiaries) at the reporting date. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated ﬁnancial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. When necessary, adjustments are made to the ﬁnancial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity (capital reserve) and attributed to the owners of the Company. In the Company’s ﬁnancial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in proﬁt or loss. (e) Business combination The acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity interests issued by the Group in exchange for control of the acquiree. Acquisition related costs are recognised in proﬁt or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classiﬁed. Contingent consideration that is classiﬁed as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration classiﬁed as an asset or a liability that is a ﬁnancial instrument and within the scope of IFRS 9 Financial Instruments is measured at fair value with the changes in fair value recognised in the statement of proﬁt or loss in accordance with IFRS 9. Other contingent consideration that is not within the scope of IFRS 9 is measured at fair value at each reporting date with changes in fair value recognised in proﬁt or loss. 36 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in proﬁt or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassiﬁed to proﬁt or loss, where such treatment would be appropriate if that interest were disposed of. The acquiree’s identiﬁable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS are recognised at their fair value at the acquisition date, except that: l l l deferred tax assets or liabilities and liabilities or assets related to employee beneﬁt arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Beneﬁts respectively; liabilities or equity instruments related to the replacement by the Group of an acquiree’s share-based payment awards are measured in accordance with IFRS 2 Share-based Payment; assets (or disposal groups) that are classiﬁed as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale; and Discontinued Operations are measured in accordance with that Standard. Goodwill The Group measures goodwill at the acquisition date as: l l l the consideration transferred; plus the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree, less the net recognised amount (generally fair value) of the identiﬁable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in proﬁt or loss. Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to beneﬁt from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash- generating unit is less than its carrying amount, the impairment loss is allocated ﬁrst to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the proﬁt or loss on disposal. Investment in joint venture (equity-accounted investee) A joint venture is an arrangement in which the Group has joint control, whereby the Group has a right to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. Investments in joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated ﬁnancial statements include the Group’s share of the proﬁt or loss and other comprehensive income of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that signiﬁcant influence or joint control commences until the date that signiﬁcant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of the investment, together with any long-term interest that forms part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the investee’s operations or has made payments on behalf of the investee. If the equity-accounted investee subsequently reports proﬁts, the Group resumes recognising its share of those proﬁts only after its share of the proﬁts equals the share of losses not recognised. Annual Report and Accounts 2021 37 Notes to the Financial Statements continued Financial instruments (f) Financial assets and ﬁnancial liabilities are recognised on the Group’s statement of ﬁnancial position when the Group becomes a party to the contractual provisions of the instrument. Financial assets All ﬁnancial assets are recognised and de-recognised on the trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value plus transaction costs except for those ﬁnancial assets classiﬁed as fair value through proﬁt and loss, which are initially measured at fair value. Financial assets comprise loans and receivables. Loans and receivables Trade and other receivables that have ﬁxed or determinable payments and that are not quoted in an active market are classiﬁed as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less any allowance for expected credit losses. Interest is recognised by applying the effective interest method, except for short-term receivables where the recognition of interest would be immaterial. Trade receivables that do not contain a signiﬁcant ﬁnancing component or for which the Group has applied the practical expedient are measured at the transaction price. The classiﬁcation of ﬁnancial assets at initial recognition depends on the ﬁnancial asset’s contractual cash flow characteristics and the Group’s business model for managing them. In order for a ﬁnancial asset to be classiﬁed and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are ‘solely payments of principal and interest’ (“SPPI”) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classiﬁed and measured at fair value through proﬁt or loss, irrespective of the business model. The Group’s business model for managing ﬁnancial assets refers to how it manages its ﬁnancial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the ﬁnancial assets, or both. Financial assets classiﬁed and measured at amortised cost are held within a business model with the objective to hold ﬁnancial assets in order to collect contractual cash flows while ﬁnancial assets classiﬁed and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Cash and cash equivalents Cash and cash equivalents comprise cash at bank, short-term bank deposits with an original maturity of 3 months or less and cash on hand. For the purposes of the consolidated statement of cashflows, pledged deposits are excluded. Impairment of ﬁnancial assets IFRS 9 requires the Group to recognise an allowance for expected credit loss (“ECLs”) for ﬁnancial assets measured at amortised cost. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms. ECLs are recognised in two stages. For credit exposures for which there has not been a signiﬁcant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a signiﬁcant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). 38 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued For trade receivables and contract assets, the Group applies a simpliﬁed approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors speciﬁc to the debtors and the economic environment. Additional information about how the Company measures the allowance for impairment is described in Note 32. Derecognition of ﬁnancial assets The Group derecognises a ﬁnancial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the ﬁnancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred ﬁnancial asset, the Group continues to recognise the ﬁnancial asset and also recognises a collateralised borrowing for the proceeds received. Financial liabilities and equity instruments Classiﬁcation as debt or equity Financial liabilities and equity instruments issued by the Group are classiﬁed according to the substance of the contractual arrangements entered into and the deﬁnitions of a ﬁnancial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Other ﬁnancial liabilities Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the effective interest rate method, with interest expense recognised on an effective yield basis. Loans and borrowings (except for ﬁnancial guarantee contract liabilities) are initially measured at fair value and are subsequently measured at amortised cost using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for ﬁnance costs (see Note 3 (o)). Financial guarantee contract liabilities are measured initially at their fair values and, if not designated as fair value through proﬁt and loss, subsequently at the higher of the amount of the loss allowance determined in accordance with section 5.5 of IFRS 9, and the amount initially recognised less, when appropriate, the cumulative amount of income recognised in accordance with IFRS 15. Derecognition of ﬁnancial liabilities The Group derecognises ﬁnancial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. (g) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of self-constructed assets includes: l l l l the cost of materials and direct labour; any other costs directly attributable to bringing the assets to a working condition for their intended use; when the Group has an obligation to remove the asset or restore the site, an estimate of the discounted costs of dismantling and removing the items and restoring the site on which they are located; and capitalised borrowing costs. Annual Report and Accounts 2021 39 Notes to the Financial Statements continued The power plant assets are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and accumulated impairment losses. Revaluations are performed at such regularity on this class of assets so that the carrying amounts do not differ materially from those that would be determined using fair values at the end of the reporting period. Any revaluation increase is recognised in other comprehensive income and accumulated in equity except to the extent that it reverses a revaluation decrease for the same asset previously recognised in proﬁt or loss, in which case the increase is credited to proﬁt or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such power plant, land and buildings and plant and machinery is recognised in proﬁt or loss to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Depreciation of these assets, on the same basis as other assets, commences when the assets are ready for their intended use. Depreciation is charged to the statement of proﬁt or loss using the straight-line method over the estimated useful life of the asset on the following basis: Leasehold improvements Plant, property and equipment Furniture, ﬁxtures and equipment Computer equipment and software Motor vehicles Power plant – – – – – – 20% 4% - 7% 25% - 33% 25% - 33% 20% 4% - 6 % Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Freehold land is stated at cost, less any subsequent accumulated impairment losses. (h) Intangible assets Internally-generated intangible assets - research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. Capitalisation of an internally generated asset is only permitted during the development phase. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic beneﬁts are probable, and the Group intends to and has sufﬁcient resources to complete development and to use or sell the asset. The cost of capitalised development activities should include all directly attributable costs necessary to create, produce and prepare an asset for a business purpose in the manner intended by management. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset ﬁrst meets the recognition criteria listed above. Where no internally- generated intangible asset can be recognised, development expenditure is charged to proﬁt or loss in the period in which it is incurred. Intellectual property Intellectual property is measured initially at purchase cost. Intellectual property is tested for impairment annually, or more frequently when there is an indication that it may be impaired (see below for impairment testing). Intangible assets acquired in a business combination Intangible assets acquired in a business combination are identiﬁed and recognised separately from goodwill. The cost of such intangible assets is their fair value at the acquisition date (see note 12). Intangible assets are derecognised on disposal or when no future economic beneﬁts are expected from its use or disposal. 40 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Amortisation Subsequent to initial recognition, each class of intangible asset is reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over the expected estimated useful life of that class of asset. Amortisation will begin when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. Impairment of Non-Financial Assets (i) At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, testing for impairment is undertaken. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in proﬁt or loss, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. For assets excluding goodwill, a previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in proﬁt or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Intangible assets with indeﬁnite useful lives and intangible assets not yet available for use are tested for impairment annually. Provisions (j) Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of reporting period, taking into account the risks and uncertainties surrounding the obligation. If the effect of the time value of money is material, discounting is applied. Provision for decommissioning is recognised when the related facilities are installed. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related property, plant and equipment. The amount recognised is the estimated cost of decommissioning, discounted to its net present value using a risk-free rate, and is re-assessed each year. Changes in the estimated timing of decommissioning or decommissioning cost estimates are dealt with prospectively by recording an adjustment to the provision, and a corresponding adjustment to property, plant and equipment. The unwinding of the discount on the decommissioning provision is included as a ﬁnance cost. Share-Based payments (k) The Group issues equity-settled share-based payments to certain employees and Directors. Equity-settled share-based payments are measured at fair value of the equity instruments (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 23. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the number of equity instruments that will eventually vest. At the end of each reporting Annual Report and Accounts 2021 41 Notes to the Financial Statements continued period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in proﬁt or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee beneﬁts reserve. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Government grants (l) Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attached to them and the grants will be received. Government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are presented as a deduction from the carrying amount of the related assets and recognised as income over the useful lives of the assets by way of a reduced depreciation or amortisation charge. Other government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate ﬁnancial support to the Group with no future related costs are recognised in proﬁt or loss in the period in which they become receivable. (m) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable, net of sales related taxes. Consulting fees and Operation and Maintenance Contracts are recognised in proﬁt or loss in proportion to the stage of completion of the transaction at the reporting date. Revenue from power generation sales and the associated Renewables Obligation Certiﬁcates (ROCs) are recognised based on the quantity of electricity exported and the contracted rate on the date of generation. ROCs are awarded to the Group from Ofgem based on generation of power. These ROCs are sold on receipt of certiﬁcates from Ofgem allowing transfer of title. The amount of revenue recognised on sale is in accordance with a contractual agreement where the pricing is based on Ofgem’s minimum ROC value (the buy-out). (n) Retirement beneﬁt obligations Payments to deﬁned contribution retirement beneﬁt plans are charged as an expense when employees have rendered the services entitling them to the contributions. Payments made to state-managed retirement beneﬁt schemes, such as the Singapore Central Provident Fund, are dealt with as payments to deﬁned contribution plans where the Group’s obligations under the plans are equivalent to those arising in a deﬁned contribution retirement beneﬁt plan. Income tax (o) Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt differs from proﬁt as reported in the consolidated statement of proﬁt or loss and other comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate by the end of the reporting period. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the ﬁnancial statements and the corresponding tax bases used in the computation of taxable proﬁt, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable proﬁt nor the accounting proﬁt. 42 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufﬁcient taxable proﬁts against which to utilise the beneﬁts of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufﬁcient taxable proﬁts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in proﬁt or loss, except when they relate to items credited or debited outside proﬁt or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside proﬁt or loss (either in other comprehensive income or directly in equity, respectively), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identiﬁable assets, liabilities and contingent liabilities over cost. Finance costs and Income (p) Finance costs comprise interest expense on borrowings. All borrowing costs are recognised in the proﬁt or loss using the effective interest method, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate applicable. Leases (q) The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for consideration. Group as a lessee The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Right-of-use Assets The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. Annual Report and Accounts 2021 43 Notes to the Financial Statements continued Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include ﬁxed payments (including in-substance ﬁxed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period during which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the interest rate implied in the lease agreements, or if that rate cannot be readily determined, the Group’s incremental borrowing rate at the lease commencement date. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modiﬁcation, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payments), or a change in the assessment of an option to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of ofﬁce equipment that are considered of low value (i.e., individually below £5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Group as a Lessor Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classiﬁed as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of proﬁt or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Segment reporting (r) The Group is currently focused on generating energy from renewable power generation projects, development of these projects, and in developing its turbines for installation in tidal projects. It currently considers its business as three operating segments: power generation; turbine and engineering services; and project development. 4 Critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. (a) Critical judgements in applying the group’s accounting policies and key sources of estimation uncertainty In the process of applying the Group’s accounting policies, which are described in Note 3, the critical accounting judgements that will have a signiﬁcant effect on the amounts recognised in the ﬁnancial statements and the key sources of estimation uncertainty at the end of the reporting period that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year, are discussed below: Recoverability of property, plant and equipment and investment in subsidiaries The Group tests its property, plant and equipment related to the MeyGen project and Uskmouth, annually for impairment, or more frequently if there are indicators that it might be impaired. The Company also tests its investment 44 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued in subsidiaries for impairment where indicators of impairment exist. The recoverable amounts for the Group’s property, plant and equipment and the Company’s investment in subsidiaries are supported by the estimated value-in-use of these assets. The value-in-use is calculated using a net present value cash flow model which compares the costs of completing each of the respective projects, including ﬁnancing costs, with expected revenues, net of operating and maintenance expenditure, over its operating life. The key assumptions used to determine the MeyGen project’s value-in-use are the expected capital costs to further develop the project, the ﬁnancing structure and cost, forecast operating and maintenance costs, revenue per MWh and the discount rate to calculate present values. The model is based on probability and risk weighted sensitised cash flows using discount rates ranging from 8% to 12% (2020: 8.5% to 13%). Capital and operating and maintenance costs are based upon experience gained from the development and fully operational phase of MeyGen 1A. On 28 April 2022, the Company announced that it would no longer pursue the project to convert Uskmouth Power Station from coal to use a waste-derived fuel pellet and that it would withdraw the associated permit variation application. The Company will instead develop the Uskmouth site into a sustainable energy park, that will include as a ﬁrst step the delivery of a Battery Energy Storage Project (BESS). As a result, a full review has been carried out of the expected value in use of the Uskmouth site. The value-in-use calculations are now based on the planned transition of the Uskmouth site into a sustainable energy park, which will include revenues from at least 350MW of BESS projects along with additional leases and wayleaves to allow third party grid connections. The key assumptions used to determine the Uskmouth project’s value-in-use are, as applicable depending on the business model adopted, the upfront fees, expected capital costs to develop the project, the ﬁnancing structure and cost, forecast operating and maintenance costs, revenue per MWh and the discount rate to calculate present values. The model is based on probability and risk weighted sensitised cash flows using discount rates ranging from 5% to 8%. The recoverable amounts for the MeyGen project and for Uskmouth were determined to be less than the carrying values of both the property, plant and as a result, an impairment value has been recognised in the year (Note 11). In testing the investment in subsidiaries for impairment, using the methodology outlined above, the value of the investments was determined to be less than their carrying value and as a result, an impairment value has been recognised in the year (Note 14). Useful lives of intangible assets The useful lives are based on similar assets in the industry and taking into account anticipated technological changes. Judgement is required to determine the period over which the proprietary technology (to which the intangible assets relate) will continue to have economic value. Amortisation will commence upon the commercialisation of the assets. The Group reviews the useful lives of the intangible assets at the end of each reporting period. Recoverability of intangible assets The Group tests its intangible assets as detailed in Note 12 annually for impairment, or more frequently if there are indicators that they might be impaired. The recoverable amount is determined using value-in-use calculations for each separate cash generating unit. The value-in-use is determined by discounting expected future cash flows. The cash flow forecasts are based on probability and risk weighted sensitised cash flow forecasts using discount rates ranging from 8% to 12%. For the license, turbine technology and intellectual property cash generating unit, the value in use is based upon an estimate of cash flows to be generated from forecast turbine sales volumes, sales price and achievable margin. The key assumption is the forecast turbine sales, which is based upon those sales expected to be generated internally and reasonably possible external sales which are estimated from current negotiations and opportunities that the Group is pursuing. The Directors concluded that as at 31 December 2021, limited value could be ascribed to the Global Technology Licence and to Development Costs. As a result, both of these assets have been fully impaired (Note 12). Annual Report and Accounts 2021 45 Notes to the Financial Statements continued Provision for decommissioning costs Provision for decommissioning costs is recognised as an amount equal to the Directors’ best estimate of the expenditure required to settle the Group’s obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that reflects current market assessment of the time value of money and risk speciﬁc to the liability as set out in the summary of signiﬁcant accounting policies 3(j) on page 41. The unwinding of the discount is recognised as a ﬁnance cost. The Uskmouth Power Station decommissioning provision is the present value of the best estimate of direct costs that may be incurred to restore the site of the Uskmouth Power Station to a condition that complies with applicable legislation, which is anticipated to take place in approximately 2042. The provision was recognised on acquisition of the Uskmouth Power Station in 2018 and conversion of the ﬁnancial statements to IFRS. 5 Revenue Consulting fees recognised over the year Operation and Maintenance Contracts Power sales Group 2021 £’000 3,567 2,316 1,628 7,511 2020 £’000 6,553 2,487 3,194 12,234 Consulting fees were earned on the Japan tidal turbine contract delivered by the Company’s subsidiary, Atlantis Operations UK Limited. Power sales are for MeyGen Phase 1A and includes the associated revenue from renewable obligation certiﬁcates (“ROCs”). 6 Other income Interest income Grant income Other income Insurance proceeds Group 2021 £’000 – 402 1,072 315 1,789 2020 £’000 3 274 857 140 1,274 Other income relates to research and development expenditure credits and charges of shared costs to third parties. Employee beneﬁts 7 The average number of employees (including Executive Directors) was: Average number of employees (including Executive Directors) Group 2021 £’000 81 2020 £’000 96 46 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Their aggregate remuneration comprised: Wages, salaries and other short-term beneﬁts Social security costs Share-based payments (Note 23) Contributions to deﬁned contribution plan Other related costs Group 2021 £’000 4,482 419 343 476 73 5,793 2020 £’000 4,762 585 71 559 103 6,080 During 2021, the Group received £0.06 million (2020 - £0.4 million) under the UK government COVID-19 furlough scheme. 8 Finance costs Interest expense arising from: - loans from a related party - long term loans - secured long term loans - long term debentures - lease liabilities Unwinding of discount on decommissioning provision Other ﬁnance costs 9 Tax expense Tax Expense Group Group 2021 £’000 294 292 1,302 1,096 94 107 265 3,450 2021 £’000 2,488 2020 £’000 311 308 1,310 1,099 119 195 547 3,889 2020 £’000 (263) As a result of the Company’s management and control moving from Singapore to the United Kingdom on 1 January 2016, the Company became tax resident of the United Kingdom and all ﬁling requirements are met in both jurisdictions. In the United Kingdom, the applicable rate of tax is computed at 19% (2020: 19%). As a result of the Finance Bill 2021 the future tax rate in the United Kingdom is set to increase to 25% from 1 April 2023. Singapore domestic income tax is calculated at 17% (2020: 17%) of the estimated assessable loss for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. Annual Report and Accounts 2021 47 Notes to the Financial Statements continued Reconciliation of effective tax rate Loss before tax Tax at the domestic rates applicable to losses in the country concerned Non-allowable items at rates concerned Non-taxable income at rates concerned Tax effect of deferred tax asset not recognised Tax effect of unwinding deferred tax Tax effect of asset impairment on deferred tax Income tax payable Tax effect of rate change on deferred tax (Note 27) Group 2021 £’000 2020 £’000 (74,082) (19,421) (14,076) 12,351 (66) 1,795 196 3,310 – (1,022) 2,488 (3,552) 1,921 (35) 1,666 156 – (25) (394) (263) At the end of the reporting period, the Group has unutilised tax losses of £171.3 million (2020: £166.1 million) available for offset against future proﬁts. The amount of the Company’s unutilised tax losses available for offset against future proﬁts is £31.3 million (2020: £30.7 million). No deferred tax asset has been recognised due to the unpredictability of future proﬁt streams. Included in the Group and Company losses are £27.3 million (2020: £27.3 million) of losses relating to Singapore corporation tax, which will only be utilised against taxable income realised in Singapore. 10 Loss for the Year The following items have been included in arriving at the loss for the year: Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets Impairment of property, plant and equipment Impairment of intangible assets Auditor’s remuneration: - Audit and audit related fees Share-based payments Operating lease expenses Net foreign exchange losses Group 2021 £’000 8,734 238 1,684 45,312 7,836 186 344 – 191 2020 £’000 8,628 352 1,644 – – 333 71 6 289 48 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued 11 Property, plant and equipment Freehold Leasehold land improvements £’000 £’000 Property, plant and equipment £’000 Furniture, ﬁxture and equipment £’000 Motor vehicles £’000 Computer equipment and software £’000 Power plant £’000 Total £’000 Group Cost At 1 January 2020 20 Additions – Reimbursed by grants – At 31 December 2020 20 Additions – Disposals – Reimbursed by grants – At 31 December 2021 20 Accumulated depreciation At 1 January 2020 – Depreciation for the year – At 31 December 2020 – Depreciation for the year – Disposal – Impairment loss – At 31 December 2021 – Net book value At 31 December 2020 20 At 31 December 2021 20 87 – – 87 – (87) – – 24 9 33 54 (87) – – 54 – 67,916 2,996 (1,629) 69,283 (139) (25) (296) 68,823 5,538 2,693 8,231 2,775 133 6 – 139 – (122) – 17 107 19 126 2 55 22 – 77 – (77) – – 18 13 31 10 (20) (111) (41) 13,236 24,222 61,052 44,601 – 17 13 – – – 46 – 81 5 86 3 (2) – 87 40 17 57 17 (2) – 82,819 151,111 1,998 – 5,027 (1,629) 84,817 154,509 241 – – 105 (313) (296) 85,058 154,005 9,069 5,877 14,946 5,876 14,796 8,628 23,424 8,734 – (261) 32,076 45,312 72 52,898 77,209 29 15 69,871 131,085 32,160 76,796 (a) Plant, property and equipment In 2020, MeyGen was awarded £1.545 million from the Scottish Government’s Saltire Tidal Energy Challenge Fund and £0.1 million from Highlands and Islands Enterprise to develop and install a subsea tidal turbine connection hub. Prior to the 2020 award, aggregate grants of £13.3 million, comprising a £10 million grant from the United Kingdom’s Department of Energy and Climate Change, and two grants from Scotland’s Highlands and Islands Enterprise totalling £3.3 million, were awarded to MeyGen in August 2014. Grants received where the conditions attached to them have been complied with were recorded as a deduction from the carrying amount of the project-under-construction in accordance with the accounting policy stated in Note 3. As disclosed in Note 4, a value-in-use calculation is undertaken each year to determine the need for impairment of the asset. An impairment of £13.2 million has been recognised in the current year, reflecting operational difﬁculties with the turbines during 2021 and a cautious approach to the pace of future development of the Meygen site. (b) Power plant As disclosed in Note 4, a value-in-use calculation is undertaken each year to determine the need for impairment of the asset. As a result of the decision in April 2022 by the Board to withdraw from the Uskmouth Power Station conversion project, the value-in-use calculation has been carried out based on the development of Uskmouth as a sustainable energy park with revenue streams from BESS projects and leases and wayleaves for third party access to connect to the National Grid. As a result of this change, an impairment charge of £32.1 million has been recognised in the year. Security (c) At 31 December 2021, assets of subsidiaries with carrying amounts of £76.8 million (2020: £60.5 million) were pledged as security on long term loans (Note 26). Annual Report and Accounts 2021 49 Notes to the Financial Statements continued 12 Intangible assets Group Cost At 1 January 2020 Exchanges differences At 31 December 2020 Disposal Exchanges differences At 31 December 2021 Accumulated depreciation At 1 January 2020 Amortisation for the year Exchange differences At 31 December 2020 Amortisation for the year Disposal Impairment loss Exchanges differences At 31 December 2021 Net book value At 31 December 2020 At 31 December 2021 Global technology licence £’000 Intellectual Development costs £’000 property £’000 Tidal data £’000 Customer contracts £’000 Total £’000 8,223 – 8,223 – – 8,223 4,769 495 – 5,264 493 – 2,466 – 8,223 2,959 – 3,133 – 3,133 – – 3,133 344 38 – 382 38 – – – 420 2,751 2,713 15,987 55 16,042 – (46) 15,996 8,575 997 35 9,607 1,048 – 5,370 (29) 15,996 6,435 – 1,465 – 1,465 – – 1,465 1,938 – 1,938 (1,938) – 30,746 55 30,801 (1,938) (46) – 28,817 – – – – – – – – – – 114 – 114 105 (219) – – 13,688 1,644 35 15,367 1,684 (219) 7,836 (29) – 24,639 1,465 1,465 1,824 15,434 – 4,178 Intellectual property £’000 Development costs £’000 Company Cost At 1 January 2020, 31 December 2020 and 31 December 2021 573 Accumulated depreciation At 1 January 2020 344 Amortisation for the year 38 At 31 December 2020 382 Amortisation for the year 38 Impairment loss – At 31 December 2021 420 Net book value At 31 December 2020 191 At 31 December 2021 153 3,347 2,008 223 2,231 223 893 3,347 1,116 – Total £’000 3,920 2,352 261 2,613 261 893 3,767 1,307 153 (a) Global technology licence This licence grants the Group an exclusive, perpetual, world-wide licence of the rights to use, deploy and manufacture certain proprietary technology in respect of turbines and related infrastructure used in tidal energy generation. The Directors have reviewed the future cashflows expected to arise from the Global Technology Licence and have concluded that a full impairment of the asset should be recognised in the year. 50 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Intellectual property (b) Intellectual property includes technical know-how, international patent applications and registered trademarks of the Company. The Group estimated that the intellectual property costs have a useful life of approximately 15 years with approximately 11 years remaining. (c) Development costs Development costs include expenditure relating to designing activities for the production of new or substantially improved tidal turbine products and processes. The Directors have reviewed the future cashflows expected to arise as a result of these tidal turbine related development costs and have concluded that a full impairment of the asset should be recognised in the year. (d) Tidal data Tidal data relates to key information on tidal flows that is crucial to the development of the MeyGen project and little or no obsolescence is expected. The tidal data will be amortised over the life of the project upon ﬁnal commissioning of the project. (e) Customer contracts Customer contracts relates to the fair value of customer contracts recognised on acquisition of GHR SIMEC Ltd. (“GHR”) in October 2019. GHR was disposed during the year and as a result the intangible asset was derecognised at the point of disposal. 13 Leases As a lessee The Group has lease contracts for land and buildings and IT equipment. Leases of land and buildings generally have lease terms of between 5 and 100 years while ofﬁce equipment has lease terms of 3 years. Land and buildings have a remaining useful life between 1-93 years. The Group has certain leases of ofﬁce equipment of low value. The Group applies the ‘lease of low-value assets’ recognition exemptions for these leases. Set out below are the carrying amount of right-of-use assets recognised and the movements during the period: Land and buildings £’000 Ofﬁce equipment £’000 Group At 1 January 2020 1,429 Additions 642 Depreciation expense (345) RPI rate change 13 At 31 December 2020 1,739 Depreciation expense (238) Adjustments 79 Disposals (801) At 31 December 2021 779 7 – (7) – – – – – – Total £’000 1,436 642 (352) 13 1,739 (238) 79 (801) 779 Annual Report and Accounts 2021 51 Notes to the Financial Statements continued Set out below are the carrying amount of lease liabilities and movements during the period: At 1 January Additions Accretion of interest Payments Adjustments Disposals At 31 December Current Non-current The maturity analysis of lease liabilities is disclosed in Note 32(b). The following are the amounts recognised in the proﬁt or loss: Depreciation expense of right-of-use assets Interest expense on lease liabilities Expense relating to lease of low value assets (included in other operating expenses) Variable lease payments (included in other operating expenses) At 31 December Group Group 2021 £’000 1,677 – 94 (214) 39 (837) 759 62 697 759 2021 £’000 238 94 4 2 338 2020 £’000 1,367 599 119 (421) – 13 1,677 327 759 1,677 2020 £’000 352 119 4 2 477 The Group had total cash outflows for leases of £0.2 million (2020: £0.5 million). The Group also had non-cash additions to right-of-use assets and lease liabilities of £nil (2020: £0.6 million). The Group has leases which contain variable lease payment terms that are linked to power generation. Variable lease payments had the following effect: Fixed rent Variable payment Group 2021 £’000 12 2 14 2020 £’000 12 2 14 Overall, the variable payments constitute 1% (2020: 1%) of the Group’s entire lease payments. The variable lease payments depend on generation, and whilst the Group expects the ratio to remain constant in future years, a 5% increase in variable payments would result in a £1,000 increase to lease payments. 52 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued As a lessor At the end of the reporting period, the Group had amounts due to it under non-cancellable operating leases, which fall due as follows: Within one year Between two and ﬁve years More than ﬁve years Group 2021 £’000 – – 96 96 2020 £’000 – – 97 97 One of the subsidiaries of the Group, SIMEC Uskmouth Power Limited (“SUP”), leases excess land available at the Uskmouth Power Station site to a related party, SIMEC Power 4 Limited. The lease is agreed on a 999-year basis and includes a lease premium of £1.5 million, which is recognised in advanced receipts (Note 28). 14 Investments in subsidiaries Unquoted equity shares, at cost Less: Impairment loss Details of the subsidiaries are as follows: Name of Subsidiaries Held by the Company Atlantis Turbines Pte. Limited(3) Atlantis Projects Pte. Ltd.(3) Atlantis Resources (Gujarat Tidal) Pte Limited(1)(6) ARC Operations Pty Limited(4) Atlantis Resources (Scotland) Limited(5) Atlantis Ocean Energy PLC(5) Atlantis Future Energy PLC(5) SIMEC Uskmouth Power Limited(5) SIMEC GHR Limited Country of incorporation/ registration Principal activities and operation Investment holding Singapore Investment holding Singapore Dormant Singapore Provision of operational Australia services to the Group Provision of project management and consulting services United Kingdom Financial services United Kingdom Financial services United Kingdom Development of renewable United Kingdom energy generation project Provision of hydro United Kingdom development, project management and operations and maintenance services Company 2021 £’000 63,337 (44,241) 19,096 2020 £’000 64,040 – 64,040 Effective equity interest held by the Company 2021 % 100 100 50 100 100 100 100 100 – 2020 % 100 100 50 100 100 100 100 100 100 Annual Report and Accounts 2021 53 Notes to the Financial Statements continued Name of Subsidiaries Held by Atlantis Projects Pte. Ltd, Tidal Power Scotland Limited(5) Stroma Tidal Power Limited(5) Wide Range Developments(5) Limited Held by Tidal Power Scotland Limited MeyGen Holdings Limited(5) Islay Holding Limited(5)(7) Duncansby Tidal Power Limited(5) Held by MeyGen Holdings Limited MeyGen PLC(2)(5) Held by Islay Holding Limited Islay Tidal Power Limited(5)(7) Held by Atlantis Turbines Pte Limited Atlantis Operations (UK) Limited(5) Marine Current Turbines Limited(5) Held by Atlantis Operations (UK) Limited Atlantis Operations Japan Good Kaisha(4) Country of incorporation/ registration Principal activities and operation Effective equity interest held by the Company 2021 % 2020 % Investment holding United Kingdom Development of tidal United Kingdom power generation project Investment Holding United Kingdom Investment holding United Kingdom Investment holding United Kingdom Dormant United Kingdom Development of tidal power United Kingdom generation project 92 100 100 83 100 100 100 92 100 100 83 100 100 100 Development of tidal United Kingdom power generation project 100 100 Provision of operational United Kingdom services to the Group Development of United Kingdom turbines and projects 100 100 100 100 Provision of operational United Kingdom services to the Group 100 100 Held by Marine Current Turbines Limited Sea Generation Limited(5) Development of tidal power United Kingdom generation project 100 100 (1) Not required to be audited as the subsidiaries are dormant. (2) As at 31 December 2021 and 31 December 2020, shares in MeyGen PLC were pledged as security on long term loans (see Note 26). (3) Audited by Moore Stephens LLP, Singapore. (4) Not required to be audited by law in its country of incorporation. (5) Audited by Kreston Reeves LLP, United Kingdom. (6) The Company has control over the entity through shareholder voting rights (7) On 31 March 2021, Tidal Power Scotland Limited signed heads of terms to sell Islay Holdings Limited and its subsidiary Islay Tidal Power Limited. Neither entity is material to the Group. 54 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Impairment in investment in subsidiaries (a) The Directors reviewed the value of the investments in subsidiaries held by the Company at year end and concluded that the following investment carrying values should be impaired in full: Investment in Atlantis Resources (Scotland) Limited Investment in Atlantis Turbines Private Limited Investment in Marine Current Turbines Limited £0.252m £4.255m £0.105m In addition, the investment in SIMEC Uskmouth Power Limited was impaired by £39.6m, reducing the investment carrying value to £18.1 million. Share-Based payments (b) During the ﬁnancial year, share-based payments granted by the Company to the employing subsidiaries, Atlantis Resources (Scotland) Limited (“ARSL”), Marine Current Turbines Limited (“MCT”), SIMEC Uskmouth Power Limited (“SUP”) and Atlantis Operations (UK) Limited (“AOU”) resulted in an increase to the deemed investments by the Company in those subsidiaries totalling £343,890 (2020: £65,000). (c) Non-Controlling interest in subsidiaries Tidal Power Scotland Limited (“TPSL”) As at 31 December 2021, Scottish Power Renewables (“SPR”) has an equity investment of 6% of the shareholding in TPSL. The Group retains a 92% (2020: 92%) shareholding of TPSL. MeyGen Holdings Limited (“MGHL”) In a prior reporting period Scottish Enterprise, as administrator of the Renewable Energy Investment Fund, had made an equity investment of £12.1 million in MGHL, while the Company, via Atlantis Projects Pte Ltd (“APPL”) and TPSL, had subscribed for a total of £9.7 million in new shares of MGHL. As a result, Scottish Enterprise has a 16.55% shareholding in MGHL, with APPL retaining the remaining shareholding of 83.45% via TPSL. The following table summarises the information relating to the material non-controlling interest (“NCI”) in MeyGen PLC, based on its ﬁnancial statements prepared in accordance with IFRS, modiﬁed for fair value adjustments on acquisition and differences in the Group’s accounting policies. NCI percentage Non-current assets Current assets Non-current liabilities Current liabilities Net assets Net assets attributable to NCI Cash flows from/(used in) operating activities Cash flows used in investing activities Cash flows used in ﬁnancing activities Net decrease in cash and cash equivalents Loss for the year Total comprehensive income Attributable to NCI: Loss for the year Total comprehensive income Group 2021 £’000 23.22% 46,864 1,698 (38,685) (2,387) 7,491 1,739 (1,363) 296 (60) (1,127) (17,093) (17,093) (3,971) (3,971) 2020 £’000 23.22% 61,158 3,615 (37,770) (2,419) 24,584 5,710 1,697 (901) (497) 299 (2,603) (2,603) (605) (605) Annual Report and Accounts 2021 55 Notes to the Financial Statements continued (d) Disposal of SIMEC GHR Limited (GHR) On 13 December 2021 the Group disposed of its entire shareholding in GHR, a company that provided hydro development, project management and operations and maintenance services, for a cash consideration of £3.6 million. The Group recognised a gain on disposal of £1.5 million as a non-recurring item in the consolidated income statement. Following the disposal, GHR ceased to be a subsidiary of the Group. The following table summarises the carrying amount of the major classes of identiﬁable assets and liabilities disposed: Cash and cash equivalents Property, plant and equipment Other receivables Other payables and liabilities Net assets disposed Net fair value adjustments disposed Gain on disposal of a subsidiary Total consideration from disposal of a subsidiary Less: Cash and cash equivalents from disposed subsidiary Net cash inflow on disposal of a subsidiary 15 Investment in joint venture Investment in joint venture, at cost Share of post-acquisition results The detail of the Company’s equity interests in joint ventures is as follows: Country of incorporation/ registration Name of joint venture Principal activities and operation NPA Fuels Ltd(1) Normandie Hydroliennes(2) Marketing, production and United Kingdom delivery of waste derived fuel pellets Development of tidal power France generation project (1) Audited by Kreston Reeves LLP, United Kingdom. (2) Not required to be audited by law in its company of incorporation £’000 480 107 502 (399) 690 1,392 1,502 3,584 (480) 3,104 2020 £’000 511 – 511 Group 2021 £’000 511 (106) 405 Effective equity interest held by the Company 2021 % 50 2020 % 50 51 51 The summarised ﬁnancial information for the jointly controlled entities as set out below is not adjusted for the percentage of ownership held by the Company. 56 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued NPA Fuels Ltd Normandie Hydroliennes Group 2021 2020 2021 2020 2021 2020 £’000 £’000 £’000 £’000 £’000 £’000 Assets and liabilities: Non-current assets – – – – Current assets 5 8 411 81 Total assets 5 – 411 81 Non-current liabilities (161) (47) (474) – Current liabilities (2) – – – Total liabilities (163) (47) (474) – Net (liabilities)/assets (158) (39) (63) 81 Group’s share of joint venture’s net (liabilities)/ assets (79) (19) (32) 41 Other adjustments Carrying amount of the investment as at 31 December 405 Results Revenue – – 392 – Proﬁt for the year (117) (39) (142) (21) Group’s share of joint ventures’ proﬁt for the year (59) (19) (72) (11) 511 (a) NPA Fuels Ltd In the prior reporting period, on 22 December 2020, Atlantis Projects Pte. Ltd., a subsidiary of the Group, entered into a Joint Venture agreement with N&P Holdings 2, a subsidiary of N+P Group, to create NPA Fuels Ltd (“NPA”) a company domiciled in the UK. Each partner has a 50% interest in the joint venture. The purpose of the joint venture is to principally be involved in the marketing, production and delivery of waste derived fuel pellets to convert coal ﬁred power stations throughout the UK. The initial cost of investment is £463,981. The Group’s interest in NPA is accounted for using the equity method in the consolidated ﬁnancial statements due to the terms of the joint venture agreement. In 2021, the Group’s share of NPA’s loss for the year totalling £58,935 has been recognised (2020: nil) reducing the value of investment as at 31 December 2021 to £405,047. In addition, as at 31 December 2021, the Group has a loan receivable from NPA of £61,632 (2020: nil) which has been provided against in full. The ﬁnancial statements of NPA are prepared under IFRS in GBP. (b) Normandie hydroliennes On 3 July 2019, Wide Range Developments Limited, a subsidiary of the Group, entered into a joint venture agreement with Normandie Participations and Eﬁnor to create Normandie Hydroliennes (“NH”), a company domiciled in France. The purpose of the joint venture is to commence site development, permitting and consenting work to allow for the construction of a phased array of tidal energy projects. The Group has a 51% interest in NH resulting from €76,000 investment in the share capital of the joint venture. The Group’s interest in NH is accounted for using the equity method in the consolidated ﬁnancial statements due to the terms of the joint venture agreement. This resulted in a loss of £46,766 on equity accounted investee in 2021 (2020: £nil). As a result of the recognition of losses to date, the value of investment at 31 December 2021 is £nil. During 2021, Wide Range Developments Ltd, a subsidiary of the Group, entered into a facility agreement to provide Normandie Hydroliennes with funding of up to €1.2 million to support development activities at the Raz Blanchard site. As at 31 December 2021, £483,309 of funding has been made available. A provision of £149,908 has been made against the recoverability of this loan. Financial statements of Normandie Hydroliennes are prepared under IFRS in Euros. The ﬁnancial statements have been translated into GBP in line with the Group foreign currencies policy in Note 3(c). Annual Report and Accounts 2021 57 Notes to the Financial Statements continued 16 Loans receivable Group Company 2021 £’000 2020 £’000 Loans to subsidiaries - Interest bearing (a) – - Non-interest bearing (b) – Less: provision for impairment – Loans to joint ventures 545 Less: Impairment loss (d) (211) Related Party Loan (c) 258 Loans receivable 592 – – – – – – – 2021 £’000 1,283 11,075 (12,358) 545 (211) 258 592 2020 £’000 1,219 11,075 – – – – 12,294 Interest bearing (a) The Company has provided a loan to MeyGen PLC which is interest-bearing with an interest rate of 12-month LIBOR plus 5% per annum, unsecured and repayable in February 2030. The Company has provided in full against the potential non-repayment of this loan. (b) Non-interest bearing In 2014, the Company extended a loan to APPL, which is interest-free and unsecured. The loan is repayable on demand. Management has no current intention to recall this loan in the foreseeable future and has provided in full against the potential non-repayment of this loan. Related party loan (c) In 2021, the Company extended a loan to a former employee of its subsidiary Green Highland Renewables. The loan is unsecured, interest free and repayable in December 2026. Loans to joint ventures (d) As disclosed in Note 15, the Company has extended a loan of £61,632 to NPA. The loan is interest bearing at a ﬁxed rate of 10% per annum, is unsecured and the repayment is subject to the distribution arrangements in the joint venture agreement. The loan has been impaired in full. The Company has extended a loan of £483,309 to Normandie Hydroliennes (Note 15). The loan is interest bearing at a ﬁxed rate of 2% per annum, is unsecured and repayment can be made at the discretion of the borrower, subject to all outstanding amounts being repaid by the later of the ﬁnancial close of the Raz Blanchard demonstration tidal array or 25 June 2025. Neither of the joint venture entities (NPA and Normandie Hydroliennes) currently have sufﬁcient forecast revenues to repay the joint venture loans in full and as a result the Company has recognised an impairment in the amounts receivable. 58 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued 17 Trade and other receivables Group Company 2021 £’000 Trade receivables 47 Deposits 52 Accrued revenue 417 Other receivables 391 Amounts due from a related party – Non-trade receivables due from subsidiaries – Less: Impairment loss – Financial assets at amortised cost under IFRS 9 907 Prepayments 432 Value added tax recoverable 9 1,348 Non-current – Current 1,348 1,348 2020 £’000 1,284 178 684 760 – – 2021 £’000 – 3 – – – 71,687 2020 £’000 – 3 – – – 67,474 (390) (71,687) (17,580) 2,516 700 – 3,216 – 3,216 3,216 3 93 15 111 – 111 111 49,897 84 49 50,030 49,893 137 50,030 The non-current receivables due from subsidiaries are unsecured, interest-free, and settlement is neither planned nor likely to occur in the foreseeable future. The balances are stated at cost less impairment losses, if any. At the end of the reporting period, the Company had a provision for impairment loss of £71.7 million (2020: £17.6 million) in relation to balances receivable from subsidiaries as recovery of the amounts due is not considered probable. The Group’s and the Company’s exposure to credit and currency risks are as set out in Note 32. 18 Inventory Group Inventory 2021 £’000 – 2020 £’000 861 Inventory acquired in 2018 as a result of the acquisition of SUP relates to spare parts and consumables. As at 31 December 2021, the Group has written down the value of the inventory held to nil. Annual Report and Accounts 2021 59 Notes to the Financial Statements continued 19 Cash and cash equivalents Group Company 2021 £’000 Cash at bank 3,004 Fixed deposits 767 Cash on hand – Cash and cash equivalents in the statements of ﬁnancial position 3,771 Less: Encumbered deposits (767) Cash and cash equivalents in the statement of cash flows 3,004 2020 £’000 4,313 1,499 2 5,814 (1,499) 4,315 2021 £’000 2,444 – – 2,444 – 2,444 2020 £’000 732 – – 732 – 732 The encumbered deposits serve as collateral on behalf of MeyGen PLC and Atlantis Operations (UK) Limited. MeyGen’s deposit supports the provision of bank guarantees and standby letters of credit as required under the terms of MeyGen’s seabed lease and to secure the MeyGen project’s electricity transmission capacity. Atlantis Operations (UK) Limited’s deposit supports the provision of bank guarantees in relation to grant guarantees. The Group’s exposure to interest rate risks is described in Note 32. 20 Share capital Group and Company 2021 2020 No. of shares with no par value ’000 Issued and fully paid: At the beginning of the ﬁnancial year 494,325 Public offerings issued for cash 104,000 Issue of shares other than cash 124,487 Transaction costs incurred in relation to share issuance – No. of shares with no par value ’000 429,076 62,500 2,749 £’000 195,375 2,600 4,180 £’000 188,018 7,500 180 (659) – (323) At the end of the ﬁnancial year 722,812 201,496 494,325 195,375 On 29 September 2021 the Company raised £2.6 million, before expenses, through the placing of 104,000,000 new ordinary shares at a placing price of £0.025 per share. Pursuant to the share placing agreement with New Technology Capital Group LLC (“Investor”) announced on 16 December 2020, the Company issued 124,487,312 new ordinary shares during the year in satisfaction of subscription amounts totalling £4,180,000. The agreement with the Investor was terminated on 28 September 2021. The Investor continues to hold 1,900,000 warrants with an exercise period of 36 months from the date of issue with an entitlement to subscribe for one new share per warrant at an exercise price of £0.30371 per share. (see Note 26(f) for further details). In the current reporting period, £0.7 million (2020: £0.3 million) of expenses were incurred incidental to the issuance of shares. In the prior reporting period, on 11 August 2020 the Company raised £7.5 million, before expenses, through the placing of 62,499,999 new ordinary shares at a placing price of £0.12 per share. 60 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued 21 Capital reserve The capital reserve consists of the difference between the carrying value of net assets transferred to and the consideration received from the non-controlling interest. 22 Translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the ﬁnancial statements of foreign operations. 23 Share options The share option reserve represents the equity-settled share options granted to employees. The reserve is made up of the cumulative value of services received from employees recorded on grant date. The expense for services received will be recognised over the vesting period. Long Term Incentive Plan (“LTIP”) In 2013, the Company approved an LTIP. During the year, 26.6 million (2020: 1.9 million) share options were granted under the LTIP. The options outstanding at 31 December 2021 have a weighted average contractual life of 9.7 years (2020: 7.49 years). Details of the share options outstanding are as follows: Group and Company 2021 2020 No. of share options ’000 Weighted average exercise price £’000 Outstanding at end of the year 25,785 Exercisable at end of the year 2,175 0.08 0.302 No. of share options ’000 5,131 3,180 Weighted average exercise price £’000 0.43 0.477 The share options on issue as at the reporting date expire between 2026 and 2031. In 2021, £0.55 million (2020: £0.1 million) was transferred from the share option reserve to accumulated losses upon cancellation/expiry of the share options. Company Share Option Plan (“CSOP”) On 10 November 2016, the Company established a CSOP to offer share options to employees. During the year, 6.99 million share options were granted under the CSOP (2020: Nil). The options outstanding at 31 December 2021 have a weighted average contractual life of 8.6 years (2020: 8.40 years). Annual Report and Accounts 2021 61 Notes to the Financial Statements continued No options were exercised in 2021 and 2020. Group and Company 2021 2020 No. of share options ’000 Weighted average exercise price £’000 Outstanding at end of the year 7,053 Exercisable at end of the year 6,152 0.15 0.14 No. of share options ’000 3,236 1,036 Weighted average exercise price £’000 0.240 0.340 The fair values for the above share options were calculated using the Black-Scholes pricing model. The inputs into the model for share options granted are as follows: Fair value of options on date of grant Share price Exercise price Expected volatility Expected life Risk free rate Expected dividend yield 2021 2020 £0.01 - £0.10 £0.02 - £0,24 £0.02 - £0.25 £0.02 - £0.10 £0.18 - £0,23 £0.20 - £0.50 64.29% - 81.14% 55.87% - 62.48% 3 years 0.29% 0% 3 years 0.97% 0% Expected volatility was determined by calculating the historical volatility of the Company’s stock. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group and the Company recognised total expenses of £0.3 million (2020: £0.1 million), related to equity-settled share-based payment transactions during the year and this is included as part of employee beneﬁts expense (Note 7). 24 Earnings per share The calculation of earnings per share is based on the loss after tax attributable to ordinary equity holders of the Company and on the weighted average number of ordinary shares in issue during each year. Total loss attributable to owners of Weighted average the Company Number of shares Loss per share 2021 2020 2021 2020 2021 2020 £’000 £’000 ’000 ’000 £ £ Basic and diluted (67,623) (19,079) 558,725 453,637 (0.12) (0.04) 62 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Company Weighted average number of ordinary shares Issued ordinary shares at beginning of the year Effect of public offerings issued for cash Effect of shares issued other than cash (Note 20) Weighted average number of shares at the end of the year 2021 ‘000 453,637 26,857 78,231 558,725 2020 ‘000 429,076 24,486 75 453,637 The average market value of the Company’s shares for the purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding. 25 Provisions Provision for decommissioning costs £’000 2021 At 1 January 14,901 Provision made during the year – Provision utilised during the year (22) Remeasurement of provision (1,435) Unwinding of discount on decommissioning costs 102 At 31 December 13,546 Non-current 13,546 Current – 13,546 2020 At 1 January 14,564 Provision made during the year 212 Provision utilised during the year (3) Remeasurement of provision (67) Unwinding of discount on decommissioning costs 195 At 31 December 14,901 Non-current 14,879 Current 22 14,901 Group Other provision £’000 140 112 (80) – – 172 – 172 172 95 – (8) 53 – 140 – 140 140 Company Other provision £’000 94 – (64) – – 30 – 30 30 41 – – 53 – 94 – 94 94 Total £’000 15,041 112 (102) (1,435) 102 13,718 13,546 172 13,718 14,659 212 (11) (14) 195 15,041 14,879 162 15,041 Provision for decommissioning costs The provision for decommissioning costs includes the present value of the best estimate of direct costs that may be incurred to remove turbine foundations from the seabed and the decommissioning of the Uskmouth Power Station. The turbine seabed foundations relate to the MeyGen project located in the Inner Sound of the Pentland Firth, which are anticipated to be decommissioned in 2043. Annual Report and Accounts 2021 63 Notes to the Financial Statements continued The Uskmouth Power Station provision is the present value of the best estimate of direct costs that may be incurred to restore the site of the Uskmouth Power Station to a condition that complies with applicable legislation, which is anticipated to take place in approximately 2042. The provision is based upon an estimate of the timing and current cost of this exercise, adjusted for the effects of inflation and discounted to present value using an appropriate discount rate as set out in the summary of signiﬁcant accounting policies 3(j) on page 41. A 5% increase in the estimate of current cost would increase the recorded provision by approximately £0.65 million in each ﬁnancial year, a 0.1% increase in estimated inflation would increase the recorded provision by approximately £0.3 million in each ﬁnancial year and a 0.1% increase in discount rate would decrease the recorded provision by approximately £0.3 million in each ﬁnancial year. Other provisions The other provision represents short term provisions for payroll liabilities and lease dilapidations anticipated to be settled during 2022. 26 Loans and borrowings The Group’s and the Company’s total loans and borrowings are as follows: Group Company 2021 Note £’000 Current loans and borrowings Convertible loan (f) – Secured long term loans (d) – Loans from a related party (b) – Debentures (e) 4,914 Financial guarantees – 4,914 Non-current loans and borrowings Loan from a subsidiary (a) – Loans from a related party (b) 7,842 Long term loan (c) 5,814 Secured long term loans (d) 21,655 Long term debentures (e) 8,595 43,906 Total loans and borrowings 48,820 2020 £’000 1,725 1,681 2,082 – – 5,488 – 5,522 5,522 18,643 13,354 43,041 48,529 2021 £’000 – – – – 95 95 423 – – – – 423 518 2020 £’000 1,725 – – – 108 1,833 408 – – – – 408 2,241 Loan from a subsidiary (a) The loan from a subsidiary is denominated in Great British Pounds, is interest-bearing with an interest rate of 5.0% per annum and unsecured. The loan was due for repayment in 2021 but both parties have agreed to continue the loan under existing terms and there are currently no plans for repayment. The fair value of the loan at the end of the reporting period was approximately £0.4 million (2020: £0.4 million). Loans from related parties (b) Loans from Morgan Stanley Capital Group Inc. (“MSCGI”) totalling £ 5.8 million (2020: £5.5 million) are treated as related party loans, given that MSCGI is a related party of Morgan Stanley Renewables, a shareholder of the Company. The loans from MSCGI are denominated in Great British Pounds with an interest rate of 5.0% per annum plus LIBOR, resulting in aggregate floating interest rates over the year in the range of 5.2% to 5.8% per annum, are unsecured and are repayable in February 2028. At the end of the reporting period, the carrying value of the loans approximate their fair value. 64 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued The loan from SIMEC Group Limited (“SIMEC”) of £2.0 million (2020: £2.0 million) is treated as a related party loan, given that SIMEC is a shareholder of the Company. The loan was acquired on the acquisition of SUP in 2018. The loan is denominated in Great British Pounds, is interest free and repayable on 31 December 2023. In the earlier event of a share fundraise the loan is automatically converted into shares in the Company pursuant to compliance with the contractual relationship agreement requiring SIMEC Group to hold 49.9% or less of share capital in issue. Long-Term loan (c) The loan is denominated in Great British Pounds, with an interest rate of 5.0% plus LIBOR, resulting in aggregate floating rates of interest over the year in the range 5.2% to 5.8% per annum, is unsecured and is repayable in February 2028. At the end of the reporting period, the carrying value of the loan approximates its fair value. (d) Secured Long-Term loans MeyGen PLC (“MeyGen”) In August 2014, as part of the MeyGen Phase 1A project ﬁnancing, Scottish Enterprise (as administrator of the Renewable Energy Investment Fund) extended a loan of £7.5 million to MeyGen to ﬁnance the construction of the project. The Crown Estate Commissioners committed an investment of £9.8 million to MeyGen, also to ﬁnance the construction of the MeyGen Phase 1A project, which will be serviced through the payment of “enhanced rent”, with an exit payment at or before the date 10 years from commissioning of Phase 1A of the project. During 2021 enhanced rent payments of £nil (2020: £0.8 million) were paid. The Scottish Enterprise loan and the Crown Estates Scotland investment to MeyGen are denominated in Great British Pounds, and are repayable in the period from 2018 to 2027. The effective interest rates on these loans are in the range of 7% to 7.8% per annum. During 2021 £Nil (2020: £1.0 million) was repaid. The Group’s secured long-term loans are secured by way of ﬁxed and floating charges over the assets of subsidiaries as well as MeyGen shares and the Company has provided a parent company guarantee for £2 million of the Scottish Enterprise loans. During the period, the performance of the MeyGen Phase 1A project was adversely impacted by maintenance issues on three of the four MeyGen Phase 1A turbines. MeyGen was unable to meet payments on the secured long-term loans as they fell due during the period. MeyGen agreed two separate remedial plans with Scottish Enterprise and Crown Estates Scotland (the senior creditors) which had the effect of suspending all senior debt repayments until 30 June 2022. On 1 April 2022, MeyGen agreed an additional loan facility of £2.5 million with Scottish Enterprise. As part of this arrangement, a new remedial plan has been put in place that suspends any further senior debt repayments until December 2024. At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the guarantee described above. The Group’s and the Company’s exposures to interest rate, foreign currency and liquidity risks are described in Note 32. Long-Term debentures (e) On 25 July 2017, the Group, via its subsidiary company Atlantis Ocean Energy PLC, raised £4.95 million through a ﬁve-year bond with a coupon of 8% per annum, payable semi-annually, and maturing in June 2022. The bond was offered through Abundance Investment Limited, the provider of a regulated green peer-to-peer investment platform. In the period from April to June 2018, the Group, via its subsidiary company Atlantis Future Energy PLC, raised £5.0 million through a ﬁve-year bond with a coupon of 8% per annum, payable semi-annually, and maturing in 2023. This bond was offered through Abundance Investment Limited. In the period from August 2019 to December 2019, the Group, via its subsidiary company Atlantis Future Energy PLC, raised £2.7 million through a ﬁve-year bond with a coupon of 8%, payable semi-annually, and maturing in 2024. This bond was offered through Abundance Investment Limited. The bond closed in February 2020, having raised £3.8 million with £1.05 million received during 2020. Annual Report and Accounts 2021 65 Notes to the Financial Statements continued On 9 June 2022, the Atlantis Ocean Energy debenture holders voted to accept a special resolution to defer the principal repayment of £4.95 million from 30 June 2022 until 30 June 2023. In addition, a three-month deferral of the interest payable on 30 June 2022 was agreed. At the date of these accounts, Atlantis Future Energy debenture holders had been asked to agree to a deferral of the interest payments due on 30 June 2022 until 30 September 2022. Convertible loan (f) On 16 December 2020, the Company announced a share placing agreement with New Technology Capital Group LLC (“Investor”), a US based investor, in relation to the issuance of new ordinary shares in the Company to raise up to £12.0 million. An initial investment of £2m was made during 2020, with a further tranche of £2 million received in Q1 2021. No further drawdowns of funding were made under this agreement. During 2021, the Company issued ordinary shares of 124,487,312 new ordinary shares in satisfaction of subscription amounts totalling £4,180,000. The agreement with the Investor was terminated on 28 September 2021. The Investor continues to hold 1,900,000 warrants with an exercise period of 36 months from the date of issue with an entitlement to subscribe for one new share per warrant at an exercise price of £0.30371 per share. Reconciliation of movements of liabilities to cash flows arising from ﬁnancing activities: Loans and other borrowings At 1 January Proceeds from borrowings Repayment of borrowings** Interest expense* Interest paid Capitalisation of loan issue costs Amortisation of loan costs* At 31 December * non-cash movements 2021 £’000 48,529 2,000 (4,235) 2,985 (1,096) – 637 48,820 2020 £’000 45,221 3,056 (1,753) 3,028 (1,099) (192) 268 48,529 ** £4.18m of this repayment was effected by issue of ordinary shares under the share placement agreement with New Technology Capital (Note 20). 27 Deferred tax liabilities Movements in deferred tax liabilities of the Group are as follows: Group At 1 January Unwind historic fair value adjustment Effect of increase in tax rates Effect of Asset Impairment Disposal of subsidiary At 31 December 2021 £’000 3,582 (196) 1,022 (3,310) (327) 771 2020 £’000 3,344 (156) 394 – 3,582 The deferred tax liabilities were recognised due to the fair valuation of assets upon acquisition of MeyGen in 2013 and are unwinding over MeyGen 1A operating period. 66 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued During 2019, £0.3 million of deferred tax liability was recognised as a result of the fair value adjustments on acquisition of GHR and was being unwound over the life of the non-terminable operations and maintenance contracts. The unamortised element of this adjustment has been reversed in 2021 following the disposal of GHR. During the year the deferred tax liability was adjusted to reflect the changes to future UK corporate tax rates from 19% to 25% as a result of the Finance Act 2021 substantially enacted at the reporting date. 28 Trade and other payables Group Company 2021 £’000 Trade payables 1,304 Other payables 3,697 Accruals 644 Non-trade payables due to subsidiaries – Other ﬁnancial liabilities 5,645 Advance receipts 1,469 Value added tax payable – Corporate tax payable – 7,114 2020 £’000 1,423 3,799 706 – 5,928 2,086 16 25 8,055 2021 £’000 239 27 239 8,210 8,715 – – – 8,715 2020 £’000 234 27 307 9,803 10,371 – – – 10,371 The non-trade balances due to subsidiaries and related parties are unsecured, interest-free and repayable on demand. Other payables include £3.4 million relating to grant income previously received for which the EU has notiﬁed may be subject to clawback. As disclosed in Note 3 under the Going Concern commentary, the Group is in discussions with the EU regarding this potential repayment. Advanced receipts include deferred grant income of £Nil (2020: £0.1 million), deferred revenue £Nil (2020: £0.8 million) and the lease premium of £1.5 million (2020: £1.5 million) received as part of the acquisition of SUP in 2018. The Group’s and the Company’s exposure to currency and liquidity risks related to trade and other payables are described in Note 32. 29 Related company and parties transactions During the year, Group entities were engaged in the following signiﬁcant transactions with related parties/companies: Group Company 2021 £’000 2020 £’000 Interest income from a subsidiary – MeyGen PLC – Service fee income from a subsidiary – Atlantis Resources (Scotland) Limited – Interest expense arising from related party – Morgan Stanley Capital Group Inc. 294 Interest expense arising from a subsidiary – Atlantis Resources (Scotland) Limited – Recharge of costs to related party – SIMEC Power 1 Limited ** (98) – SIMEC Power 4 Limited ** (226) – SIMEC Subcoal Fuels Limited ** (184) – – 310 – 100 226 – 2021 £’000 64 310 – 15 – – – 2020 £’000 64 157 – 15 – – – Annual Report and Accounts 2021 67 Notes to the Financial Statements continued Group Company 2021 £’000 Project management fees to a related party – Kinlochleven Power Ltd * – – Hydropower River Leven Ltd * – Reimbursement of Non-Executive Director fees paid by SIMEC International (UK) Ltd ** 32 2020 £’000 286 172 39 2021 £’000 – – 32 * Related party until 12 October 2020 when the entities changed control to an unrelated party. ** related party by virtue of their relationship to SIMEC UK Energy Holdings Ltd, a signiﬁcant shareholder. Compensation of Directors and Key Management Personnel The remuneration of Directors and other members of key management during the year was as follows: Group Short-term beneﬁts Deﬁned contribution beneﬁts Share-based payments 2021 £’000 645 20 127 792 2020 £’000 – – – 2020 £’000 689 29 12 730 30 Commitments As at 31 December 2021, the Group, through its subsidiary SUP, has capital expenditure contracted but not recognised as liabilities of £ Nil (2020: £1.25 million). 31 Contingent liabilities The Company has guaranteed credit facilities of £3.5 million (2020: £3.5 million) granted to subsidiaries. The Company has provided a parent company guarantee in respect of the debentures issued by its subsidiaries Atlantis Ocean Energy PLC and Atlantis Future Energy PLC. The Company has provided a parent company guarantee in respect of the performance of its subsidiary Atlantis Operations UK Limited under a turbine supply agreement to MeyGen PLC. The maximum liability under this agreement to the end of the latent defect period on 28 March 2024 is £3.3 million (2020 - £3.3 million). 32 Financial instruments The Group is exposed to various ﬁnancial risks arising in the normal course of business. It has adopted ﬁnancial risk management policies and utilised a variety of techniques to manage its exposure to these risks. (a) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in ﬁnancial loss to the Group. There are no signiﬁcant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each ﬁnancial asset as at the end of the reporting period. Loans and receivables Loans and receivables are detailed in section (d) below. 68 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued The Group’s balances are considered to be recoverable and are not past due. The total provision for impairment loss relating to loans and receivables for the Group is insigniﬁcant but the Company is £71.7 million (2020: £17.6 million). See Notes 16 and 17 for further detail of loans and receivables balances. Cash and cash equivalents The Group held cash of £3.7 million (2020: £5.8 million) at 31 December 2021. Cash at bank is held with banks and ﬁnancial institution counterparties that are licensed banks in the countries in which the Group operates and that are rated A+ based on Standard & Poor’s ratings. Guarantees At 31 December 2021 and 2020, the Company issued guarantees to a lender in respect of credit facilities granted to a subsidiary (Note 31). Liquidity risk (b) The Group actively manages its operating cash flows and the availability of funding through maintaining sufﬁcient cash and cash equivalents to ﬁnance its activities. Current ﬁnancial liabilities in 2021 and 2020 are repayable on demand or due within one year from the end of the reporting period. Other than certain loans, the remaining ﬁnancial liabilities are non-interest bearing. Analysis of ﬁnancial instruments by remaining contractual maturities. The table below summarises the maturity proﬁle of the Group’s and the Company’s ﬁnancial liabilities at the end of the reporting period based on the contractual undiscounted repayment obligations. Contractual cash flows Note Carrying amount £’000 Total £’000 One year or less £’000 Two to ﬁve years £’000 Over ﬁve years £’000 Group 2021 Financial liabilities Trade and other payables Loans from a related party Long-term loan Long-term debentures Secured long-term loans Lease liabilities 2020 Financial liabilities Trade and other payables Loans from a related party Convertible loan Long-term loan Long-term debentures Secured long-term loans Lease liabilities 28 26 26 26 26 13 28 26 26 26 26 26 13 5,648 7,842 5,814 13,509 21,655 759 55,227 5,928 7,604 1,725 5,522 13,354 20,324 1,677 56,134 5,648 9,593 7,566 15,232 30,347 3,863 72,249 5,928 9,763 – 7,681 17,683 32,049 4,894 77,998 5,648 – – 5,146 – 60 10,854 5,928 2,082 – – 1,096 2,308 327 11,741 – 2,027 – 10,086 5,944 214 18,271 – – – – 16,587 11,579 1,005 29,171 – 7,566 7,566 – 24,403 3,589 43,124 – 7,681 – 7,681 – 18,162 3,562 37,086 Annual Report and Accounts 2021 69 Notes to the Financial Statements continued Contractual cash flows Note Carrying amount £’000 Total £’000 One year or less £’000 Two to ﬁve years £’000 Over ﬁve years £’000 Company 2021 Financial liabilities Trade and other payables Financial guarantees Loan from a subsidiary 2020 Financial liabilities Trade and other payables Convertible loan Financial guarantees Loan from a subsidiary (c) Market risk 28 26 26 28 26 26 26 8,714 95 423 9,232 10,372 1,725 108 408 12,613 8,714 3,500 423 12,637 10,372 – 3,500 423 14,295 8,714 3,500 – 12,214 10,372 – 3,500 – 13,872 – – 423 423 – – – 423 423 – – – – – – – – – Currency risk The Group transacts business in various foreign currencies, including the Australian dollar, Euro, United States dollar, Singapore dollar and Japanese yen, and is hence exposed to foreign exchange risk. At the end of the reporting period, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective Group entities’ functional currencies are as follows: Group Company Liabilities Assets Liabilities Assets 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 Australian dollars 2 Euros – United States dollars – Singapore dollars – Japanese yen 785 3 24 – – 562 1 19 1 47 213 9 5 – 31 881 – – – – – – 4 1 7 – 80 – – 17 – 70 – – 28 – Foreign Currency Sensitivity The sensitivity rate used when reporting foreign currency risk is 10%, which is the sensitivity rate that represents management’s assessment of the likely potential change in foreign exchange rates. 70 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued If the relevant foreign currencies were to strengthen by 10% against the functional currency of each Group entity, proﬁt and loss (before tax) and equity will increase (decrease) by: Group Equity Proﬁt and loss before tax Company Equity Proﬁt and loss before tax 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 2021 £’000 2020 £’000 Australian dollars – Euros – United States dollars – Singapore dollars – Japanese yen – – – – – – 0 (2) (0) (5) 57 (1) 2 – (3) (32) – – – – – – – – – – (8) – – (2) – (7) – – (3) – If the relevant foreign currency weakens by 10% against the functional currency of each Group entity, the effects on proﬁt and loss and equity will be vice versa. Interest rate risk Interest rate risk arises from the potential change in interest rates that may have an adverse effect on the Group in the current reporting year or in future years. The Group’s exposure to interest rate risk is limited to the effects of fluctuation in bank interest rate on cash and cash equivalents as well as LIBOR rates on certain loans and borrowings. For variable rate ﬁnancial instruments, a change of 100 basis points (bps) in interest rate with all other variables held constant would increase/decrease proﬁt/loss before tax by £0.1 million (2020: £0.1 million). A fundamental ﬁnancial industry reform of interest rate benchmarks is being undertaken globally, including the cessation and replacement of interbank offered rates (“IBORs”) with alternative nearly risk-free rates (referred to as “interest rate benchmark reform”). The Group’s interest rate risk that is directly affected by the interest rate benchmark reform predominantly comprises its variable rate borrowings. As at 31 December 2021, the Group has variable rate borrowings of £11.6 million and the Company has variable rate receivables of £1.3 million that are indexed to LIBOR rates which has yet to transition to an alternative benchmark rate. Equity price risk The Group is not exposed to equity price risks as it does not hold any quoted equity investments. Capital management policies and objectives The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balances. The capital structure of the Group and the Company consists of equity attributable to owners of the parent and loans and borrowings amounting to £63.7 million (2020: £125.2 million) and £13.1 million (2020: £117.1 million), respectively. There are no changes in the Group’s approach to capital management during the ﬁnancial year. The Company is not subject to externally imposed capital requirements. Except for one subsidiary that is subject to loan restrictions and dividend distributions, such restrictions are complied with and capital relating to that subsidiary is ring fenced as required by these capital requirements. None of the other subsidiaries are subject to externally imposed capital requirements. Annual Report and Accounts 2021 71 Notes to the Financial Statements continued (d) Accounting classiﬁcations and fair values Except as detailed in the following table, the Directors consider that the carrying amounts of the ﬁnancial assets and ﬁnancial liabilities recognised in the consolidated ﬁnancial statements approximate their fair values. The fair values of the ﬁnancial instruments have been determined based on discounted future cash flows using Level 3 hierarchy, which are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. Carrying value Note £’000 Fair value £’000 2021 2020 Carrying value £’000 Fair value £’000 Group Financial assets Trade and other receivables 17 907 Cash and cash equivalents 19 3,771 Financial assets at amortised cost under IFRS 9 4,678 Financial liabilities Trade and other payables 28 5,645 Secured long term loans 26 21,655 Other loans and borrowings 26 27,165 Lease liabilities 13 759 Liabilities at amortised cost 55,224 21,275 27,165 Company Financial assets Loans receivables 16 592 Trade and other receivables 17 111 Cash and cash equivalents 19 2,444 Financial assets at amortised cost under IFRS 9 3,147 Financial liabilities Trade and other payables 28 8,714 Loan from a subsidiary 26 423 Other loans and borrowings 26 95 Liabilities at amortised cost 9,232 421 2,516 5,814 8,330 5,928 20,324 28,205 1,677 56,134 12,294 49,893 732 62,919 10,371 408 1,833 12,612 20,999 28,205 401 33 Segment information (a) Operating Segments The Group is principally engaged in generating energy from renewable generation projects, development of these projects, as well as turbine and engineering services for the tidal power industry. In addition to the development of power projects, the power generation division currently focuses on the development of the MeyGen tidal energy project, whereas the turbine and engineering services division focuses on the development and delivery of turbines and technology solutions for projects worldwide. The divisions are managed separately because they require different expertise and marketing strategies. External revenues from power generation relate to MeyGen’s contract to sell generation and ROCS to Smartest Energy Limited. External revenues from project development relate to operations and maintenance contracts for hydro power schemes from GHR. External revenue from the turbine and engineering services relates to the supply of rental tidal generation equipment and offshore construction services in Japan. From 2019 the acquisition of GHR has been included in project development segment. GHR was disposed of in December 2021. The result of its activities up to disposal are included in the segmental analysis. 72 Simec Atlantis Energy Limited and its subsidiaries Notes to the Financial Statements continued Other operations include the provision of corporate services which does not meet any of the quantitative thresholds for determining reportable segments in 2021 and 2020 and is included within unallocated. There are varying levels of integration between the power generation and the turbine and engineering services divisions, including the delivery of the subsea hub from the turbine and engineering services to the power generation division. Information regarding the results of each reportable segment is included below. Unallocated expenditure, assets and liabilities include amounts of a corporate nature as well as corporate and inter-segment elimination and are not speciﬁcally attributable to a segment. Power generation £’000 Turbine and engineering services £’000 Project development £’000 Unallocated £’000 Total £’000 2021 External revenues Inter-segment revenue Interest revenue Interest expense Depreciation and amortisation Impairment of property, plant and equipment Impairment of intangible assets Reportable segment loss before tax Reportable segment assets Capital expenditure Reportable segment liabilities 2020 External revenues Inter-segment revenue Interest revenue Interest expense Depreciation and amortisation Reportable segment loss before tax Reportable segment assets Capital expenditure Reportable segment liabilities 1,628 – – (2,178) (2,016) (13,236) – (18,875) 48,562 26 (36,789) 3,194 (2,410) 2 (2,187) (2,695) (3,587) 66,292 2,532 (38,181) 3,628 – 86 (69) (1,061) – (7,836) (11,382) 16,631 3 (58,098) 6,553 2,410 65 (123) (973) (2,765) 26,741 5 (56,885) 2,316 – 0 (84) (5,886) (32,076) – (43,106) 27,945 1,537 (38,298) 2,458 – – (176) (5,938) (7,523) 66,661 2,345 (36,070) (61) – (86) (1,119) (1,693) – – (719) (5,269) – 62,003 – – (64) (1,403) (1,018) (5,546) (1,034) – 54,252 7,511 – 0 (3,450) (10,656) (45,312) (7,836) (74,082) 87,869 1,566 (71,182) 12,234 – 3 (3,889) (10,624) (19,421) 158,660 4,882 (76,884) (b) Geographical segments Total segment revenue for the Group is £7.5 million (2020: £12.2 million). The Group power generation and project development operations are mostly based in the United Kingdom. Most of the Group’s assets are located in the United Kingdom. The Group’s turbine and engineering services division completed a project in Japan during the year. The capital expenditure during the year is primarily related to the development of the sustainable energy projects located in the United Kingdom. 34 Events after the reporting period On 9 June 2022, the Atlantis Ocean Energy debenture holders voted to accept a special resolution to defer the principal repayment of £4.95 million from June 2022 until June 2023. In addition, a three-month deferral of the interest payable on 30 June 2022 was agreed. Atlantis Future Energy debenture holders have also been asked to agree to a deferral of the interest payments due on 30 June 2022 until 30 September 2022. Annual Report and Accounts 2021 73 COMPANY INFORMATION NON-EXECUTIVE DIRECTORS Duncan Stuart Black John Anthony Clifford Woodley Andrew Luke Dagley BROKER Arden Partners plc 125 Old Broad Street London EC2N 1AR EXECUTIVE DIRECTORS Graham Matthew Reid Simon Matthew Hirst REGISTERED OFFICE AND COMPANY NUMBER c/o Level 4, 21 Merchant Road, #04-01 Singapore 058267 Company Number: 200517551R COMPANY SECRETARY Kelly Tock Mui Han 21 Merchant Road #04-01 Royal Merukh S.E.A Singapore 058267 NOMINATED ADVISER AND BROKER Investec Bank plc 30 Gresham Street London EC2V 7QP AUDITOR Moore Stephens LLP 10 Anson Road #29-15 International Plaza Singapore 079903 REGISTRAR Boardroom Corporate St Advisory Services Ptd Ltd 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 DEPOSITARY Link Group 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL GUERNSEY BRANCH REGISTER Link Market Services (Guernsey) Limited Mont Crevelt House Bulwer Avenue St Sampson Guernsey GY2 4LH WEBSITE www.simecatlantis.com Perivan 263780 (cid:137)(cid:137)(cid:137)(cid:314)(cid:118)(cid:98)(cid:108)(cid:59)(cid:49)(cid:45)(cid:124)(cid:1140)(cid:45)(cid:109)(cid:2462)(cid:118)(cid:314)(cid:49)(cid:111)m (cid:33)(cid:59)(cid:93)(cid:98)(cid:118)(cid:124)(cid:59)(cid:117)(cid:59)(cid:55)(cid:2)(cid:27)(cid:76)(cid:49)(cid:59)(cid:2)(cid:45)(cid:109)(cid:55)(cid:2)(cid:7)(cid:111)(cid:108)(cid:114)(cid:45)(cid:109)(cid:139)(cid:2)(cid:25)(cid:134)(cid:108)(cid:48)(cid:59)(cid:117) c/o Level 4, 21 Merchant Road, #04-01 Singapore 058267 (cid:7)(cid:111)(cid:108)(cid:114)(cid:45)(cid:109)(cid:139)(cid:2)(cid:25)(cid:134)(cid:108)(cid:48)(cid:59)(cid:117)(cid:313)(cid:2)(cid:401)(cid:399)(cid:399)(cid:404)(cid:400)(cid:405)(cid:404)(cid:404)(cid:400)(cid:33)(cid:2)

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