HGEN Hydrogenone Capital Growth Plc

LEI: 213800PMTT98U879SF45   

16 September 2024                                                                              

HydrogenOne Capital Growth plc

HALF-YEARLY REPORT 2024

Company Overview

HydrogenOne Capital Growth Plc ("HGEN", the "Company") is the first London-listed fund investing in clean hydrogen for a positive environmental impact.

The Company was launched in 2021 with an investment objective to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focussed assets whilst integrating core ESG principles into its decision making and ownership process. The Company is an Article 9 climate impact fund under the Sustainable Finance Disclosure Regulation (the "SFDR").

·      A unique offering to investors - leadership in a new green energy technology sector from the first London-listed hydrogen fund.

·      Strong orientation to ESG mandates, investing capital in low-carbon growth and enabling the avoidance of GHG emissions.

·      High quality portfolio with potential to deliver 10-15% average NAV growth, including exits*.

·      First mover advantage in the Hydrogen sector, which is accelerating faster than anticipated with positive growth outlook.

·      Investment Adviser's track record in energy and capital markets.

*       For an investor in HGEN at IPO. The total NAV return target is a target only and not a profit forecast.

£133.5m

Net Asset Value

SFDR Article 9

Climate impact fund

157,868 tCO2e

Cumulative greenhouse gas emissions avoided since IPO

Highlights and key metrics

Financial and operational highlights

·      NAV per share increased by 0.6% from 31 December 2023 to 30 June 2024 (102.99p to 103.60p). NAV grew by 0.6% from £132.7 million to £133.5 million and the share price increased by 7.8% over the same period;

·      Positive progress on revenue growth from portfolio companies, delivering an aggregate £76 million in total revenue in the 12-month period to 30 June 2024, an increase of 44% compared to the 12-month period to 30 June 2023;

·      Strategic industrial and major financial investors have backed HydrogenOne portfolio companies in 2024, totalling EUR 670 million, including investment from Baker Hughes and GIC;

·      Consolidation of HH2E adds interest in Lubmin green hydrogen project for HGEN;

·      The Company estimates the carrying value of the private portfolio is in line with comparable listed hydrogen companies, underlining HGEN focus on private assets and robust valuation methodology;

·      Investment activity centred on follow-ons. During the six months ended 30 June 2024, the Company made further investments in five Private Hydrogen Assets in its portfolio, totalling £2.6 million;

·      The portfolio weighted average discount rate at 30 June 2024 was 13.3% (31 December 2023: 14.2%) resulting in a 1.67 pence per share increase in NAV between 31 December 2023 and 30 June 2024;

·      The Company has retained an uncommitted cash position of £1.6 million as at 30 June 2024, and £0.3 million of listed hydrogen companies at the end of the period; and

·      The fundamentals of the clean hydrogen sector continued to strengthen, despite continued weak macroeconomic conditions. The Investment Adviser has tracked a 50% increase in green hydrogen production over the last year, and a 25% increase in investment in the sector so far this year, compared to all of 2023, underpinning further growth.

Environmental, Social and Governance ("ESG") highlights

·      HGEN is an SFDR Article 9 impact fund with a sustainable investment objective aligned with the climate change mitigation goal of the EU Taxonomy;

·      £116.3 million deployed in low-carbon growth (since fund inception);

·      157,868 tCO2e cumulative greenhouse gas emissions avoided since IPO;

·      62,282 MWh potential lifetime clean energy of products installed in HY2024 and 859,576 MWh since IPO;

·      88.1% alignment with EU taxonomy for sustainable activities (the "EU Taxonomy") assessment on Private Hydrogen Assets at 30 June 2024;

·      Produced the Company's first standalone Sustainability Report aligned with the International Sustainability Standards Board as an early adopter, including the S2 Climate Standard that incorporates the Taskforce on Climate-related Financial Disclosures recommendations;

·      Reported to the Principles of Responsible Investment ("PRI") and the Carbon Disclosure Project ("CDP"); and

·      Continued stewardship activity with private portfolio companies to further enhance ESG credentials and reporting.

Key metrics

1      These are alternative performance measures

2      Total absolute percent return in sterling for the six months to 30 June 2024

Alternative Performance Measures ("APMs")

Alternative Performance Measures ("APMs"). The disclosures above are considered to represent the Company's APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found below..

Portfolio at a glance

Chair's statement

On behalf of the Board, I am pleased to present the third Interim Report of the Company, covering the six-month period to 30 June 2024 and the Company's financial position at that date.

Performance

The Company's NAV per share at 30 June 2024 was 103.60p, a 0.6% gain across the period under review (102.99p at 31 December 2023) and a 2.9% gain since 30 June 2023. Overall NAV per share has continued to increase in every half year reporting period since the Company's IPO in 2021 due principally to valuation uplifts in multiple portfolio companies, as those management teams deliver on their respective growth plans.

The Company's top performing investments were: HiiROC, HH2E and Bramble all of which have demonstrated notable progress.

The macroeconomic climate continues to be a challenging one, reflected in the discounted valuations of the investment trust sector and in capital outflows from UK equities, in turn preventing the majority of investment trusts from raising further capital. Higher market discount rates and reduced risk appetite have also resulted in investors re-allocating capital away from growth sectors in particular. As is the case for many of our peers, this has impacted your Company's share price which remains at a steep discount to the value of its assets, despite steady continued growth in the underlying value of the portfolio. The Board is acutely aware that the current share price does not reflect the ongoing tangible value creation we have witnessed across our investments and their significant potential for further growth. We trust that maintaining our stewardship of the portfolio, supported by selective investments, will continue to see steady growth in the value of our portfolio and over time improve the share price. We are also working diligently towards successful divestments that will result in a positive cash return for the Company from these realisations and prove the value that lies in our unique portfolio.

By contrast, the outlook for the clean hydrogen sector remains positive, underpinning our view that the portfolio will generate attractive returns over time. The rapid adoption of green hydrogen underscores our view that the Company is investing in a budding sector with a favourable outlook and substantial growth potential.

Our investment case continues to be reinforced by increasingly supportive regulatory regimes in the clean hydrogen sector. New regulations and funding for clean hydrogen are being rolled out in the USA, UK and EU. The EU, where the Company has 60% of its NAV, has reshaped its energy policy to the REPowerEU 2030 plan, which calls for over 300GW of clean hydrogen by 2030, compared to 80GW in previous plans. Germany is a leader in clean hydrogen developments and has incorporated the RED III Delegated Act into national law, which confirmed a 42% target for use of renewable hydrogen in industry by 2030, and announced plans for more stringent measures to curb GHG emissions for use of renewable hydrogen in industry.

The newly elected UK government has pledged to deliver 10GW of low-carbon hydrogen production by 2030. Investment companies such as HydrogenOne could provide much needed private capital to help achieve the government's decarbonisation targets whilst improving energy security by supporting clean tech companies and projects.

Portfolio

Our portfolio comprises nine private investments in green hydrogen innovation companies and is highly diversified across the sector's full value chain from green hydrogen production developers to hydrogen applications, supply chain and storage and distribution. Six of the Company's private investments are revenue generating, producing equipment and technology solutions for green hydrogen production. The aggregate revenue from these investments was £76m in the 12‑month period to 30 June 2024, an increase of 44% from the 12-month period to 30 June 2023. This growth is a result of portfolio companies receiving an increasing number of customer orders for their unique technologies.

With the Company's capital now fully deployed, our approach is focused on incremental investments in existing portfolio companies, with £2.6 million of total follow-on investments during the period backing these management teams to deliver their growth plans.

We are pleased to report that our portfolio companies continue to attract substantial fresh capital from strategic investors, with over £560 million of investment completed during the period; a successful equity funding round by Sunfire as part of a wider funding package totalling more than EUR 500 million in fresh capital; the Baker Hughes investment in Elcogen marking the close of a EUR 140 million funding round; and Strohm, completing a EUR 30 million raise. The growing number of investments by global industrial companies and private equity investors once again underscores the attraction of these distinctive clean hydrogen growth technologies.

The Investment Manager's Report (below) includes a more detailed review of the performance of the portfolio companies.

Outlook

As we continue to navigate these challenging markets, our focus remains on nurturing our portfolio companies to achieve their full growth potential whilst protecting invested capital, preserving cash and realising returns. Our goal remains to exit these positions over three to five years holding periods, at multiples of invested capital, in order to generate 10-15% NAV growth over time.

The Company continues to assess potential divestment opportunities to demonstrate the value of the portfolio and provide a capital injection for the Company. Given that share registers of portfolio companies include numerous strategic investors, some of which have increased their stakes considerably, the Investment Adviser remains optimistic on achieving realisations in this calendar year.

On behalf of the Board, I would like to thank all of our shareholders for their support during this challenging period, as we continue to develop our unique portfolio of clean hydrogen investments. I hope the solid NAV performance of our portfolio, growing track record of revenue growth and delivery of key operational milestones will in time be catalysts for appreciation in our share price.

​

Simon Hogan

Chair

13 September 2024

​

Investment objective and policy

Investment objective

The Company's investment objective is to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focussed assets whilst integrating core ESG principles into its decision making and ownership process.

Investment policy

The Company will seek to achieve its investment objective through investment in a diversified portfolio of hydrogen and complementary hydrogen focussed assets, with an expected focus in developed markets in Europe, North America, the GCC and Asia Pacific, comprising:

i.    assets that produce clean hydrogen;

ii.    large scale energy storage assets;

iii.   carbon capture, use and storage assets;

iv.   hydrogen distribution infrastructure assets;

v.   assets involved in hydrogen supply chains, such as electrolysers and fuel cells; and

vi.   businesses that utilise hydrogen applications such as transport, power generation, feedstock and heat (together "Hydrogen Assets").

The Company intends to implement its investment policy through the acquisition of hydrogen and complementary hydrogen focussed assets.

Private Hydrogen Assets

The Company invests in unquoted Hydrogen Assets, which may be operational companies or hydrogen projects (completed or under construction) ("Private Hydrogen Assets"). Investments are expected to be mainly in the form of equity, although investments may be made by way of debt and/or convertible securities. The Company may acquire a mix of controlling and non-controlling interests in Private Hydrogen Assets, however the Company intends to invest principally in non-controlling positions (with suitable minority protection rights to, inter alia, ensure that the Private Hydrogen Assets are operated and managed in a manner that is consistent with the Company's investment policy).

Given the time frame required to fully maximise the value of an investment, the Company expects that investments in Private Hydrogen Assets will be held for the medium to long term, although short term disposals of assets cannot be ruled out in exceptional or opportunistic circumstances. The Company intends to re-invest the proceeds of disposals in accordance with the Company's investment policy.

The Company observes the following investment restrictions, assessed at the time of an investment, when making investments in Private Hydrogen Assets:

·      no single Private Hydrogen Asset will account for more than 21 per cent. of Gross Asset Value;

·      Private Hydrogen Assets located outside developed markets in Europe, North America, the GCC and Asia Pacific will account for no more than 20 per cent. of Gross Asset Value; and

·      at the time of an investment, the aggregate value of the Company's investments in Private Hydrogen Assets under contract to any single Offtaker will not exceed 40 per cent. of Gross Asset Value.

The Company will initially acquire Private Hydrogen Assets via HydrogenOne Capital Growth Investments 1 LP (the 'HydrogenOne Partnership'), a wholly owned subsidiary undertaking of the Company structured as an English limited partnership which is controlled by the Company and advised by the Investment Adviser. The HydrogenOne Partnership's investment policy and restrictions are the same as the Company's investment policy and restrictions for Private Hydrogen Assets and cannot be changed without the Company's consent. In due course, the Company may acquire Private Hydrogen Assets directly or by way of holdings in special purpose vehicles or intermediate holding entities (including successor limited partnerships established on substantially the same terms as the HydrogenOne Partnership) or, if the Company is considered a 'feeder fund' under the Listing Rules, other undertakings advised by the Investment Adviser and, in such circumstances, the investment policy and restrictions will also be applied on a look-through basis and such undertaking(s) will also be managed in accordance with the Company's investment policy.

Listed Hydrogen Assets

The Company also invests in quoted or traded Hydrogen Assets, which will predominantly be equity securities but may also be corporate debt and/or other financial instruments ("Listed Hydrogen Assets"). The Company is free to invest in Listed Hydrogen Assets in any market or country with a market capitalisation (at the time of investment) of at least US$100 million. The Company's approach is to be a long-term investor and will not ordinarily adopt short-term trading strategies. As the allocation to Private Hydrogen Assets grows the Listed Hydrogen Assets are expected to include strategic equity holdings derived from the listing of operational companies within the Private Hydrogen Assets portfolio over time.

The Company observes the following investment restrictions, assessed at the time of an investment, when making investments in Listed Hydrogen Assets:

·      no single Listed Hydrogen Asset will account for more than 3 per cent. of the Gross Asset Value;

·      each Listed Hydrogen Asset must derive at least 50 per cent. of revenues from hydrogen and/or related technologies; and

·      the target allocation to Listed Hydrogen Assets will be approximately 10 per cent or less of Gross Asset Value, subject to a maximum allocation of 30 per cent of Gross Asset Value.

Cash

During the initial Private Hydrogen Asset investment period after a capital raise and/or a realisation of a Private Hydrogen Asset, the Company intends to hold the relevant net proceeds of such capital raise/realisation in cash (in accordance with the Company's cash management policy set out below) pending subsequent investment in Private Hydrogen Assets.

Investment restrictions

The Company, in addition to the investment restrictions set out above, comply with the following investment restrictions when investing in Hydrogen Assets:

·      the Company will not conduct any trading activity which is significant in the context of the Company as a whole;

·      the Company will, at all times, invest and manage its assets

i.    in a way which is consistent with its object of spreading investment risk; and

ii.    in accordance with its published investment policy;

·      the Company will not invest in other UK listed closed-ended investment companies; and

·      no investments will be made in companies or projects that generate revenues from the extraction or production of fossil fuels (mining, drilling or other such extraction of thermal coal, oil or gas deposits).

Compliance with the above restrictions is measured at the time of investment and non-compliance resulting from changes in the price or value of Hydrogen Assets following investment will not be considered as a breach of the investment policy or restrictions.

Borrowing policy

The Company may take on debt for general working capital purposes or to finance investments and/or acquisitions, provided that at the time of drawing down (or acquiring) any debt (including limited recourse debt), total debt will not exceed 25 per cent of the prevailing Gross Asset Value at the time of drawing down (or acquiring) such debt. For the avoidance of doubt, in calculating gearing, no account will be taken of any investments in Hydrogen Assets that are made by the Company by way of a debt investment.

Gearing may be employed at the level of a special purpose vehicle ("SPV") or any intermediate subsidiary undertaking of the Company (such as the HydrogenOne Partnership) or, if the Company is considered a 'feeder fund' under the Listing Rules, other undertakings advised by the Investment Adviser in which the Company has invested or the Company itself. The limits on debt shall apply on a consolidated and look-through basis across the Company, the SPV or any such intermediate holding entities (such as the HydrogenOne Partnership) or, if the Company is considered a 'feeder fund' under the Listing Rules, other undertakings advised by the Investment Adviser in which the Company has invested but intra-group debt will not be counted.

Gearing of one or more Hydrogen Assets in which the Company has a non-controlling interest will not count towards these borrowing restrictions. However, in such circumstances, the matter will be brought to the attention of the Board who will determine the appropriate course of action.

Currency and hedging policy

The Company has the ability to enter into hedging transactions for the purpose of efficient portfolio management. In particular, the Company may engage in currency, inflation, interest rates, energy prices and commodity prices hedging. Any such hedging transactions will not be undertaken for speculative purposes.

Cash management

The Company may hold cash on deposit and may invest in cash equivalent investments, which may include short-term investments in money market type funds ("Cash and Cash Equivalents").

There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may be times when it is appropriate for the Company to have a significant Cash and Cash Equivalents position. In particular, the Company anticipates holding cash to cover the near-term capital requirements of the Pipeline of Private Hydrogen Assets and in periods of high market volatility. For the avoidance of doubt, the restrictions set out above in relation to investing in UK listed closed-ended investment companies do not apply to money market type funds.

Investment Adviser's report

About the Investment Adviser

The Company's Alternative Investment Fund Manager ("AIFM"), FundRock Management Company (Guernsey) Limited, (part of Apex Group), has appointed HydrogenOne Capital LLP as the Investment Adviser to the AIFM in respect of the Company. Its key responsibilities are to originate, analyse, assess and recommend suitable investments within the hydrogen sector, and advise the AIFM accordingly. Additionally, the Investment Adviser performs asset management services in relation to the investments in the portfolio or, to the extent asset management is delegated to third parties, oversees and monitors such asset management.

HydrogenOne Capital LLP was founded in 2020 as an alternative investment firm focussed specifically on investing in hydrogen assets and their role in the energy transition. As a responsible investor, HydrogenOne Capital LLP is committed to contributing to the energy transition through the financing of sustainable investments and by providing investment solutions that reduce carbon emissions.

HydrogenOne Capital LLP employs a fully integrated investment and asset management approach and incorporates its focus on ESG criteria throughout the entire investment process.

The Principals of the Investment Adviser

The Principals of the Investment Adviser have in excess of 60 years of combined experience and a track record of success in the energy industry and capital markets which are directly applicable to the hydrogen industry, including acquisitions, mergers and divestments, development of growth energy projects, supervision of profitable energy production, ESG, investments in both listed and private companies and board advisory. Their biographies are included in the annual report.

The Investment Adviser's team

The Principals have assembled an experienced team to support the Company. This group brings a mixture of finance, technical and sector skills to support the Investment Adviser in its day-to-day activity. The Investment Adviser has established a team which is responsible for financial modelling, corporate and asset valuation analysis, and opportunity assessment for the Company.

Advisory Board of the Investment Adviser

The Principals of the Investment Adviser are supported by an experienced team which comprises the Advisory Board.

The Advisory Board has been carefully selected to provide expert advice to the Investment Adviser on the hydrogen sector, project finance and capital markets. The Investment Adviser has appointed the members of the Advisory Board to provide it with advice from time to time. No members of the Advisory Board are directors, officers, employees or consultants of the Company, the AIFM or the Investment Adviser. It is envisaged that the Advisory Board will evolve over time, with additional experts being added or substituted as and when required.

Portfolio

Portfolio summary

The Company invests mainly in Private Hydrogen Assets, through the Limited Partnership as detailed below. The Company also held £311,000 in Listed Hydrogen Assets at 30 June 2024.

Valuation

As set out in note 4 of the Financial Statements, the Investment Adviser has carried out fair market valuations of the Private Hydrogen Assets at 30 June 2024, which have been reviewed by the Valuation Committee, and the Directors have satisfied themselves as to the methodology used, the discount rates and key assumptions applied.

Private Hydrogen Assets at 30 June 2024 have been valued using either the discounted cash flow ('DCF') methodology, recent third party investment, or net asset values consistent with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines. The valuations are also benchmarked against listed peer group valuations.

Listed Hydrogen Assets are valued at fair value, which is the bid market price, or, if bid price is unavailable, last traded price on the relevant exchange.

Our approach to valuation remains consistent and unchanged. Valuations are updated for all Private Hydrogen Assets on a quarterly basis and approved by the AIFM, the Valuation Committee and the Board, and are audited annually by the Company's auditor, KPMG.

Discount rates are calculated using market parameters for each investment domicile. The weighted average discount rate for 30 June 2024 was 13.3% compared with 14.2% at 31 December 2023, as a result of easing country base rates and lower small company premiums. This has led to a NAV increase of 1.6% since 31 December 2023.

The Company notes that its NAV has been steadily increasing over the last 12 months, increasing by 2.9% from 30 June 2023 to 30 June 2024. This has been driven by organic growth in the Company's private assets and lower discount rates, despite headwinds from lower share prices of the listed portfolio companies. The share prices of listed hydrogen companies, which we track with the Solactive Hydrogen Economy Index ("SOLGHYD"), have been volatile and declining since Q3 2021. This decline is due to market allocation away from early-stage technology businesses as interest rates have risen, and a correction to the high valuations seen in the market in 2020-21.

The Company's own share price has tracked this decline in listed hydrogen companies, and listed funds in general, and, despite the growth in NAV, declined by 16% in the 12 months to 30 June 2024. In 2021-22, the Company assessed that many listed hydrogen companies were trading on higher valuations than its private portfolio companies, based on forward multiples of revenues. The revenue multiples of the listed hydrogen sector and the Company's private portfolio have converged in 2023-24, as the listed hydrogen sector had de-rated.

·      Listed hydrogen company valuations have decreased in 2022-24, whereas the Company's NAV has been steady, reflecting our consistent valuation methodology

·      The performance of our portfolio companies by theme has continued to outperform the SOLGHYD index of listed hydrogen companies since our first investments in Q4 2021

·      Forward revenue multiple of c. 5.5x (revenue weighted, 2025E) for private portfolio is in line with listed hydrogen companies

Hydrogen industry landscape

The outlook for the clean hydrogen sector remains positive. The COP 28 meeting in Dubai at the end of 2023 concluded with a call to transition away from polluting fossil fuels and accelerate growth in renewables, in order to mitigate the impact of climate change. At the same time, government policies and funding in many regions remain supportive of growth in clean hydrogen, as part of the push to 'net zero'.

The Russia-Ukraine war continues to keep political emphasis on energy security, which results in growing policy support for domestic energy supplies, including renewables and nuclear power in Europe, which is supportive for the hydrogen sector. However, targets to phase out fossil fuels from the transport sector have been postponed and reduced in several European countries. The new UK Government has put more emphasis on policy support for renewables, including a new £500 million funding package for clean hydrogen. At the same time, many oil & gas companies have slowed their investments into renewables and re-emphasised fossil fuels. These are complex and sometimes conflicting market signals for investors in the hydrogen sector.

The Investment Adviser has tracked a 50% increase in green hydrogen production over the last 12-months, now standing at 1.2GW of production, and an increase of more than 25% in investment in the sector so far in 2024, compared to all of 2023, underpinning further growth. Some 39GW of new green hydrogen capacity is under development world-wide, with 9GW of this past Final Investment Decision. All of this underscores the Investment Adviser's view that the outlook for investment in clean hydrogen remains positive, despite headwinds in markets more generally.

Performance and outlook

NAV per share increased by 0.6% from 31 December 2023 to 30 June 2024 (102.99p to 103.60p), with NAV growing from £132.7 million to £133.5 million over the period.

The NAV increase was driven primarily by valuation uplifts in six private companies, positively contributing 2.9 pence per share. The main factors behind this increase were roll-forward of discounted cash flow ("DCF") valuations, and improving financial and growth confidence, hence de-risking future financials and growth, from the portfolio companies. Discount rates also had a positive impact on valuation in the 12-month period. The portfolio weighted average discount rate at 30 June 2024 was 13.3%, lower than 31 December 2023 (14.2%), increasing NAV by 1.7 pence per share, or £2.1 million.

During the 12-months to 30 June 2024, private portfolio companies delivered an aggregate unaudited £76 million in revenue, a 44% increase compared to the 12-months to 30 June 2023, on a pro-forma basis. Six of the nine private companies are revenue generating. Project developers such as Gen2 Energy and technology innovators such as HiiROC are inherently pre-revenue businesses at this stage. These positive financial trends reflect the build out of capacity to meet strong order books for hydrogen supply chain equipment.

Investments in the six months ended 30 June 2024 totalled £2.6 million in six existing portfolio companies.

Cash and cash equivalents were £1.6 million, with an additional liquid portfolio of listed hydrogen companies worth £0.3m at the end of the period. The Company continues to focus on portfolio realisations and cash preservation.

We continue to see strong investment interest from industrial strategic and major financial investors in portfolio companies and the hydrogen industry broadly in 2024 and note that Baker Hughes and the Government of Singapore Investment Corporate ("GIC") invested in HydrogenOne businesses during 2024 which underpin the investment cases.

At 30 June 2024, the Company is invested in nine private investments, in the UK and Europe, representing 99.8% of its invested portfolio by value. Additional investment in strategic, global hydrogen equities represented 0.2% of the invested portfolio.

The Investment Adviser has exited from the majority of the Company's listed hydrogen investments during 2024, as we implement the strategy to focus on private investments over time. As the Company enters its third full year of trading, following its 2021 IPO, the Investment Adviser is engaging with portfolio companies for full or partial exits from the private portfolio. Several portfolio companies have engaged investment banks for this purpose.

The portfolio continues to perform in line with the expectations of the Investment Adviser, HydrogenOne Capital LLP, despite the challenging conditions in private equity fundraising currently.

Key portfolio milestones

·      Sunfire successfully completed Series E financing round, totaling over EUR 500 million, making it one of the best capitalised electrolyser manufacturers in the industry;

·      Elcogen secured a strategic investment by Baker Hughes, part of an overall funding package totaling EUR 140 million to continue to scale up Elcogen's leading solid oxide cell technology for green hydrogen;

·      HiiROC completed a new strategic investment to accelerate its expansion and sales into the US;

·      Strohm successfully completed a new EUR 30 million capital raise, including EUR 1.2 million from HydrogenOne, and was awarded a landmark ultra-deep water, high CO2 pipeline contract by Totalenergies in Brazil;

·      Cranfield Aerospace announced that Stratus 9, an innovator in private aviation and fractional ownership plans to acquire up to 15 of CAeS hydrogen propulsion conversion kits for the B-N Islander aircraft - the deal is valued at over US$20 million;

·      Bramble Energy launched PCBFC™ Gen. 2, a fuel cell system that represents a 30% cost reduction from Gen 1;

·      HH2E completed its consolidation process for enhanced efficiency and growth preparation. The restructured corporate model exchanged interests in five SPVs including Thierbach, and interests in a new SPV, Lubmin, for equity in HH2E; and

·      Gen2 Energy, signed a new collaboration agreement with Norsk e-Fuel, whereby the two companies plan production facilities on neighbouring plots at the Nesbruket industrial site in Mosjøen, Norway.

Our portfolio

Pressurized alkaline electrolyser used for green hydrogen production

Sunfire GmbH

www.sunfire.de

A German industrial electrolyser producer of pressure alkaline (AEL) and solid oxide electrolysers (SOEC).

Elcogen's cells, stacks and modules

Elcogen plc

www.elcogen.com

Fuel cell and electrolyser manufacturer with presence in Estonia and Finland

Pilot units installed at Centrica's Scawby site, near Brigg

HiiROC Limited

www.hiiroc.com

UK-based thermal plasma electrolysis developer, with world-leading (IP-protected) technology for low-cost, zero-emission hydrogen, also enabling flare/waste gas mitigation and CO2 capture using biomethane

Strohm's Thermoplastic Composite Pipeline

Strohm Holding B.V

www.strohm.eu

The Netherlands-based hydrogen pipeline company

Bramble Energy Electrolyzer

Bramble Energy Limited

www.brambleenergy.com

UK-based fuel cell and portable power solutions company

Cranfield hydrogen airplane

Cranfield Aerospace Solutions Limited

www.cranfieldaerospace.com

UK-based passenger flight innovator, powering turboprop flight with hydrogen

Future HH2E-Werk Lubmin, located in the Baltic coast of Germany

HH2E AG

www.hh2e.de

German green hydrogen project developer with a focus on industrial customers

Gen2 planned hydrogen plant

Gen2 Energy

www.gen2energy.com

Norwegian green hydrogen project developer

Net assets

Net assets increased from £132.7 million at 31 December 2023 to £133.5 million at 30 June 2024. The increase is principally due to an uplift in the value of the Private Hydrogen Assets of £4.2 million.

The net assets of £133.5 million comprise £131.9 million portfolio value of investments, including the holding in the HydrogenOne Capital Growth Investments (1) LP ("Limited Partnership"), and the Company's cash balances of £1.6 million, and net liabilities of £0.2 million.

The Limited Partnership's net assets of £131.6 million comprise £131.6 million portfolio value of investments, cash balances of £0.1 million, and other net liabilities of £0.1 million.

Cash

At 30 June 2024, the Group had a total cash balance of £1.7 million, including £1.6 million in the Company's balance sheet and £0.1 million in the Limited Partnership, which is included in the Company's balance sheet within 'investments held at fair value through profit or loss' (31 December 2023: £4.7 million).

The Company had cash and cash equivalents of £1.6 million, and £0.3 million of listed hydrogen companies at the end of the period.

Gain for period

The Company's total gain before tax for the period ended 30 June 2024 is £0.8 million, generating gains of 0.61 pence per Ordinary Share.

In the period to 30 June 2024, the gains on fair value of investments were £1.5 million.

The expenses included in the income statement for the year were £0.6 million, in line with expectations. These comprise Investment Adviser fees and operating expenses. The details on how the Investment Adviser fees are charged are as set out in note 5 to the financial statements.

Ongoing charges

The 'ongoing charges' ratio is an indicator of the costs incurred in the day-to-day management of the Company.

The ongoing charges percentage for the six-month period to 30 June 2024 was 2.41% (30 June 2023: 2.62%). The ongoing charges have been calculated, in accordance with AIC guidance, as annualised ongoing charges (i.e. excluding acquisition costs and other non-recurring items) divided by the average published undiluted Net Asset Value in the period. The ongoing charges percentage has been calculated on the consolidated basis and therefore takes into consideration the expenses of Limited Partnership as well as the Company.

​

Richard Hulf, Dr JJ Traynor

HydrogenOne Capital LLP

13 September 2024

Environmental, social and governance ("ESG")

Displace fossil fuels

Most of the Company's investments either directly or indirectly displace fossil fuels, making a clear contribution to achieving the Paris Accords target of limiting global temperature rises to below 2 degrees and ideally limiting them to 1.5 degrees.

ESG highlights:

·      Produced the Company's first standalone Sustainability Report aligned with the International Sustainability Standards Board as an early adopter, including the S2 Climate Standard that incorporates the Taskforce on Climate-related  Financial Disclosures recommendations;

·      Reported to the Principles of Responsible Investment and scored above median average for the peer group in each of the three reported modules, including: Policy, Governance and  Strategy; Confidence Building Measures; and Direct Private Equity;

·      Submitted its second report to the Carbon Disclosure Project ("CDP"), a global non-profit organisation that runs the world's leading environmental disclosure platform;

·      Undertook a physical climate risk assessment incorporating scenario analysis from the  Intergovernmental Panel on Climate Change Shared Socioeconomic Pathways;

·      Following the period end, the Company received the S&P Global Corporate Sustainability Assessment ("CSA") scores relating to the year ended 31 December 2023.  The scores show that HGEN performs well in ESG, scoring 33 versus an industry average of 22 and putting the Company into the 85th percentile. Performance in the Environmental and Social dimensions is particularly strong, scoring in the 92nd and 94th percentiles, respectively.

Our Impact:

157,868 tCO2e

Cumulative greenhouse gas emissions avoided since IPO (HY2023: 134,076 tCO2e)

£116.3 million

Deployed in low-carbon growth since fund inception (HY2023: £111.1 million)

0.78 MW*

Fuel cell and electrolyser units sold in HY2024 (HY2023: 0.2 MW)

62,282 MWh*

Potential lifetime clean energy of products installed in HY2024 (HY2023: 592 MWh)

859,576 MWh*

Potential lifetime clean energy of products installed since IPO (HY2023: 227,292 MWh)

1,370

jobs supported in HY2024 (HY2023: 1,293)

88.1%

Portfolio alignment with the EU taxonomy at 30 June 2024 (HY2023: 87.6%)

·      The Company's investment objective and investment policy are closely aligned with seven of the United Nations Sustainable Development Goals, namely Good Health and well-being (Goal 3), Affordable and Clean Energy (Goal 7), Industry, Innovation and Infrastructure (Goal 9), Sustainable cities and communities (Goal 11), Responsible Consumption and Production (Goal 12), Life Below Water (Goal 14), and Life on Land (Goal 15);

·      Continued stewardship activity with private portfolio companies to further enhance ESG credentials and reporting; and

·      The Company's Board gender diversity remained at 50%.

*  A greater number of fuel cell and electrolyser units with higher capacity were sold in HY2024 compared to HY2023, which led to a significant increase in the potential lifetime clean energy of products installed. In addition, in HY2024, includes figures from Sunfire which were not included in HY2023.

Methodology

The greenhouse gas emissions have been calculated in accordance with the Greenhouse Gas Protocol. Each portfolio company has been engaged to develop a greenhouse gas inventory. This process includes the identification of appropriate data sources for each inventory item. Data has been collected, reviewed, and processed by an external provider to calculate the emissions. Each portfolio company receives feedback on data quality based on relevance, completeness, timeliness, and accuracy. Recommendations to improve quality are also provided, and their implementation will be monitored on a quarterly basis as data is collected throughout the year.

Estimates form a necessary part of the greenhouse gas emission process, and emission factors are central to this. Primarily, the UK Department for Environment, Food and Rural Affairs ("DEFRA") emission factors have been used or, where more appropriate, the Intergovernmental Panel on Climate Change ("IPPC") emission factors can be relied upon. The Greenhouse Gas Protocol recognises both sources.

Avoided emissions have been calculated on a consequential basis using the International Financial Institution Framework for a Harmonised Approach to Greenhouse Gas Accounting. The membership behind this approach includes the United Nations Climate Change Secretariat, the World Bank, the European Investment Bank, and others, in total constituting 25 financial institutions. This framework produces an updated data set on grid emissions for many countries, and this has been used as a key input into the estimation process. In accordance with the framework, Private Hydrogen Assets which provide products (e.g. fuel cells or electrolysers) take the expected lifetime emissions of those products as sold. During HY2024 none of the Private Hydrogen Assets were producing hydrogen. Once production commences, the annual avoided emissions from the hydrogen produced will also be reported.

*       Scope 1 emissions decreased in HY2024 after one private company confirmed that onsite heating uses renewable electricity.

**     One private company's electricity emissions were reclassified from Scope 3 to Scope 2 in HY2024 due to changes in operational control.

***    Swift Hydrogen (formerly named NanoSUN) was excluded from calculations, which accounts for the decrease in avoided emissions.

Interim management report

The Directors are required to provide an Interim Management Report in accordance with the Financial Conduct Authority ("FCA") Disclosure Guidance and Transparency Rules ("DTR").

The Directors consider that the Chair's Statement and the Investment Adviser's Report of this Half-yearly Financial Report, provide details of the important events which have occurred during the six months ended 30 June 2024 ("Period") and their impact on the financial statements. The following statements on principal and emerging risks and uncertainties, related party transactions, going concern and the Directors' Statement of Responsibility, the Chair's Statement and the Investment Adviser's Report together constitute the Interim Management Report of the Company for the Period. The outlook for the Company for the remaining six months of the year ending 31 December 2024 is discussed in the Chair's Statement and the Investment Adviser's Report.

Details of the Private and Listed Hydrogen Assets held at the Period end are provided above.

Risks and uncertainties

The Company's Annual Report for the year ended 31 December 2023 contains more detail on the Company's principal risks and uncertainties, including the Board's ongoing process to identify, and where possible mitigate, emerging risks (pages 52 to 54). The Annual Report can be found on the Company's website at www.hydrogenonecapitalgrowthplc.com. The Board is of the opinion that these principal risks are equally applicable to the remaining six months of the financial year as they were to the six months being reported on.

Related party transactions

Details of the investment management arrangements were provided in the Annual Report. There have been no changes to the related party transactions described in the Annual Report that could have a material effect on the financial position or performance of the Company. Amounts payable to the Investment Adviser and the Directors in the period are detailed in notes 5 and 12 to the financial statements below.

Going concern

This Half-yearly Financial Report has been prepared on a going concern basis. The Directors consider this to be the appropriate basis as they have a reasonable expectation that the Company and Group has adequate resources to continue in operational existence for at least 12-months from the date of this report.

In reaching this conclusion, the Directors considered the income and expense projections and the liquidity of the investment portfolio and considered the impact to the Company and portfolio of investments from the economic conditions such as higher interest rates and inflationary pressures and market volatility arising from the ongoing conflicts in Ukraine and the Middle East.

The Company and Group continue to meet day-to-day liquidity needs through its cash resources. As at 30 June 2024, the Company and the Group have unrestricted cash of £1.6 million and £1.7 million (31 December 2023: £4.6 million), respectively as well as £0.3 million (31 December 2023: £2.3 million) in Listed Hydrogen Assets. The Company and Group's net assets as at 30 June 2024 were £133.5 million (31 December 2023: £132.7 million) and total annualised expenses for the period ended 30 June 2024 were £3.1 million (30 June 2023: £3.4 million), which represented approximately 2.4% (30 June 2023: 2.6%) of the average net assets value of the Company in the six months to 30 June 2024 of £133.2 million (30 June 2023: £127.9 million).

The Company's share price was 51.10p representing a 50.7% discount to the Net Asset Value (31 December 2023: discount of 51.8%).

The Directors also recognise that the continuation of the Company is subject to the approval of shareholders at the Annual General Meeting ("AGM") in 2026, and every fifth AGM thereafter. The Board has considered the long-term prospects of the Company and has no reason to believe that the continuation vote will fail.

Based on the foregoing, the Directors have adopted the going concern basis in preparing the Financial Statements. The Directors have a reasonable expectation that the Company and Group have adequate operational resources to continue in operational existence for at least 12-months from the date of approval of these Financial Statements.

Directors' Responsibility Statement

The Directors confirm to the best of their knowledge that:

·      The condensed set of financial statements contained within the Half-yearly Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and its subsidiary undertakings;

·      The Interim Management Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six months, their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the year); and

·      The Interim Financial Report includes a fair review of the information required by Disclosure and Transparency Rule 4.2.8R (disclosure of related party transactions and changes therein).

For and on behalf of the Board

​

Simon Hogan, Chair

For and on behalf of the Board

13 September 2024

Condensed parent and consolidated statement of comprehensive income

For the six months ended 30 June 2024

There is no other comprehensive income and therefore the 'Profit/(loss) for the period' is the total comprehensive income for the period.

The total column of the above statement is the Parent and Consolidated Statement of Comprehensive Income, including the return per Ordinary Share, which has been prepared in accordance with IFRS. The supplementary revenue and capital columns, including the return per Ordinary Share, are prepared under guidance from the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes form part of these financial statements.

Condensed parent and consolidated statement of financial position

At 30 June 2024 (Unaudited)

Approved by the Board of Directors and authorised for issue on 13 September 2024 and signed on their behalf by:

Simon Hogan

Chair

13 September 2024

HydrogenOne Capital Growth plc is incorporated in England and Wales with registration number 13340859. The accompanying notes form part of these financial statements.

Condensed parent and consolidated statement of changes in equity

For the six months ended 30 June 2024 (Unaudited)

For the six months ended 30 June 2023 (Unaudited)

The accompanying notes form part of these financial statements.

Condensed parent and consolidated statement of cash flows

For the six months ended 30 June 2024

The accompanying notes form part of these financial statements.

Notes to the parent and consolidated financial statements

1. General information

Company information

HydrogenOne Capital Growth plc (the "Company" or "Parent") was incorporated in England and Wales on 16 April 2021 with registered number 13340859 as a public company limited by shares and is an investment company within the terms of Section 833 of the Companies Act 2006 (the "Act"). The Company is listed and began trading on the Main Market of the London Stock Exchange and was admitted to the premium segment of the Official List on 30 July 2021 (the "IPO"). The Company has applied for and been accepted as an approved investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999.

FundRock Management Company (Guernsey) Limited acts as the Company's Alternative Investment Fund Manager ("AIFM").

Apex Listed Companies Services (UK) Limited (the "Company Secretary and Administrator") provides administrative and company secretarial services to the Company.

The Company's Investment Adviser is HydrogenOne Capital LLP.

The Company's registered office is 6th Floor, 125 London Wall, London, EC2Y 5AS.

Investment objective

The Company's investment objective is to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focused assets whilst integrating core environmental, social and governance ("ESG") principles into its decision making and ownership process.

Company structure

The Company makes its investment in unquoted Hydrogen Assets ("Private Hydrogen Assets") through HydrogenOne Capital Growth Investments (1) LP (the "Limited Partnership"), in which the Company is the sole Limited Partner. The Limited Partnership is registered as a private fund limited partnership in England and Wales under the Limited Partnerships Act 1907 with registered number LP021814. The Limited Partnership has been established pursuant to a Limited Partnership Agreement dated 5 July 2021 as amended and restated on 26 November 2021 (the "Limited Partnership Agreement") in order to make investments pursuant to the investment policy of the Limited Partnership. The Limited Partnership's investment policy and restrictions are consistent with the Company's investment policy and restrictions for Private Hydrogen Assets.

The General Partner of the Limited Partnership is HydrogenOne Capital Growth (GP) Limited (the "General Partner"), a wholly owned subsidiary of the Company. The General Partner was incorporated in England and Wales on 19 May 2021 with registered number 13407844. The General Partner undertakes the responsibility for the management, operation and administration of the business and affairs of the Limited Partnership. The General Partner's Profit Share for each accounting period shall be an amount equal to 1.5% per annum of the prevailing NAV of the Limited Partnership, which shall be allocated to the General Partner as a first charge on the profits of the Limited Partnership. For so long as the Company is the sole Limited Partner, the General Partner's Profit Share shall be allocated and distributed to the Company rather than the General Partner.

The carried interest partner of the Limited Partnership is HydrogenOne Capital Growth (Carried Interest) LP (the "Carried Interest Partner") which, in certain circumstances, will receive carried interest on the realisation of Private Hydrogen Assets by the Limited Partnership. The Carried Interest Partner has been set up for the benefit of the principals of the Investment Adviser.

The Company may also make investment in Private Hydrogen Assets through HydrogenOne Capital Growth Investments (1A) LP ("Limited Partnership 1A") in which the Limited Partnership is the sole Limited Partner. The Limited Partnership 1A is registered as a private fund limited partnership in England and Wales under the Limited Partnerships Act 1907 with registered number LP023743. Limited Partnership 1A has been established pursuant to a Limited Partnership Agreement dated 19 June 2024 (the "Limited Partnership Agreement 1A") in order to make investments pursuant to the investment policy of the Limited Partnership. 1A Limited Partnership IA's investment policy and restrictions are consistent with the Company's investment policy and restrictions for Private Hydrogen Assets.

The General Partner of Limited Partnership 1A is HydrogenOne Capital Growth Investments (1A) GP LLP (the "General Partner 1A"), a wholly owned subsidiary of the Company. The General Partner 1A was incorporated in England and Wales on 3 June 2024 with registered number OC452544. The General Partner 1A undertakes the responsibility for the management, operation and administration of the business and affairs of Limited Partnership 1A. All income and profits of Limited Partnership 1A (if any) shall be allocated and distributed to the Limited Partner after deducting a prior profit amount of £100 per annum to the General Partner 1A.

Private Hydrogen Assets

The Company invests via Limited Partnerships in Private Hydrogen Assets, which may be operational companies or hydrogen projects. Investments are mainly in the form of equity, although investments may be made by way of debt and/or convertible securities. The Company may acquire a mix of controlling and non-controlling interests in Private Hydrogen Assets, however the Company invests principally in non-controlling positions (with suitable minority protection rights to, inter alia, ensure that the Private Hydrogen Assets are operated and managed in a manner that is consistent with the Company's investment policy).

The Company acquires Private Hydrogen Assets via Limited Partnerships, directly or by way of holdings in special purpose vehicles or intermediate holding entities (including successor limited partnerships established on substantially the same terms as the Limited Partnership) or, if the Company is considered a 'feeder fund' under the Listing Rules, other undertakings advised by the Investment Adviser and, in such circumstances, the investment policy and restrictions will also be applied on a look-through basis and such undertaking(s) will also be managed in accordance with the Company's investment policy.

Listed Hydrogen Assets

The Company also invests directly in quoted or traded Hydrogen Assets, which are predominantly equity securities but may also be corporate debt and/or other financial instruments ("Listed Hydrogen Assets"). The Company has the ability to invest in Listed Hydrogen Assets in any market or country with a market capitalisation (at the time of investment) of at least US$100 million. The Company's approach is to be a long-term investor and will not ordinarily adopt short-term trading strategies.

Liquidity reserve

During the initial Private Hydrogen Asset investment period after a capital raise and/or a realisation of a Private Hydrogen Asset, the Company intends to allocate the relevant net proceeds of such capital raise/realisation to cash (in accordance with the Company's cash management policy) and/or additional Listed Hydrogen Assets and related businesses pending subsequent investment in Private Hydrogen Assets (the ''Liquidity Reserve'').

The Company anticipates holding cash to cover the near-term capital requirements of the pipeline of Private Hydrogen Assets and in periods of high market volatility.

2. Basis of preparation and accounting policies

The principal accounting policies are set out below:

Reporting entity

These Parent and Consolidated Financial Statements (the "Financial Statements") present the results of both the Parent; and the Parent and the General Partner and General Partner 1A (together referred to as the "Group").

At 30 June 2024, the statement of financial position of both the General Partner and General Partner 1A consisted each of issued share capital and corresponding share capital receivable in the amount of £1. The General Partners had no income, expenditure or cash flows for the period.

Due to the immaterial balances of the General Partners there is no material difference between the results of the Parent and the results of the Group. As a result, the Financial Statements as presented represent both the Parent's and the Group's financial position, performance, and cash flows.

Basis of accounting

The Financial Statements have been prepared in accordance with UK-adopted international accounting standards ("IFRS") and the applicable legal requirements of the Companies Act 2006.

The Financial Statements have also been prepared as far as is relevant and applicable to the Company and Group in accordance with the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC") in July 2022.

The Financial Statements are prepared on the historical cost basis, except for the revaluation of financial instruments measured at fair value through profit or loss.

Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company and Group take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these Financial Statements is determined on such a basis.

The Financial Statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Company and Group operate.

The accounting policies applied in these Financial Statements are consistent with those applied in the last Annual Audited Financial Statements for the year ended 31 December 2023. These condensed financial statements do not include all information and disclosures required in the annual financial statements and should be read in conjunction with the Company's annual financial statements as of 31 December 2023. The audited annual accounts for the year ended 31 December 2023 have been delivered to Companies House and the audit report thereon was unqualified.

Going concern

Having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing these Financial Statements. Details of the Directors' assessment of the going concern status of the Company and Group, which considered the adequacy of resources and the impacts of economic conditions and market volatility arising from the conflicts in Ukraine and the Middle East are given above.

Critical accounting judgements, estimates and assumptions

There have been no changes to the critical accounting judgements estimates and assumptions from those applied in the Company's Audited Annual Financial Statements for the year ended 31 December 2023.

Comparatives

Comparative information is included for the six months ended 30 June 2023 and as at 31 December 2023.

3. Segmental reporting

The Board has considered the requirements of IFRS 8 - 'Operating Segments'. The Company has entered into an Investment Advisory Agreement with the Investment Adviser under which the Investment Adviser is responsible for the management of the Company's investment portfolio, subject to the overall supervision of the Board of Directors. Subject to its terms and conditions, the Investment Advisory Agreement requires the Investment Adviser to manage the Company's investment portfolio in accordance with the Company's investment guidelines as in effect from time to time, including the authority to purchase and sell investments and to carry out other actions as appropriate to give effect thereto. However, the Board retains full responsibility to ensure that the Investment Adviser adheres to its mandate. Moreover, the Board is fully responsible for the appointment and/or removal of the Investment Adviser. Accordingly, the Board is deemed to be the 'Chief Operating Decision Maker' of the Company.

The Directors are of the opinion that the Company is engaged in a single segment of business being investment into the hydrogen focused investments. Segment information is measured on the same basis as that used in the preparation of the Company's Financial Statements.

4. Investments held at fair value through profit or loss

(a) Summary of valuation

(b) Movements in valuation

(c) Gain/(loss) on investments

Under IFRS 13 'Fair Value Measurement', an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision.

The following shows the analysis of financial assets recognised at fair value based on:

Level 1

The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2

Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.

Level 3

Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

Transfers between levels of the fair value hierarchy are recognised at the end of the reporting period during which the change has occurred. There have been no transfers between levels during the period ended 30 June 2024. (December 2023: no transfers).

The classification of the Company and Group's investments held at fair value through profit or loss is detailed in the table below:

The Company and Group's Level 3 investment is the investment in the Limited Partnership. The NAV of the Limited Partnership as of 30 June 2024 is £131,635,000 (31 December 2023: £125,861,000). The movement on the Level 3 investments during the period is shown below:

Look-through financial information

The NAV of the Limited Partnership consists of the fair value of its Private Hydrogen Assets and the carrying value of its assets and liabilities. At the period end, the Limited Partnership held nine Private Hydrogen Assets (31 December 2023: ten).

The following table reconciles the fair value of the Private Hydrogen Assets and the NAV of the Limited Partnership.

The Level 3 Private Hydrogen Assets are valued by the Investment Adviser using the valuation techniques as outlined below.

At 30 June 2024, the valuations of the Limited Partnership's underlying investments in Private Hydrogen Assets were determined as follows:

1.     This is the effective discount or premium to the full DCF valuation, as a result of application of the weighted valuation in line with the valuation methodology. A negative percentage denotes that the weighted valuation is at a discount to the full DCF valuation; whilst a positive percentage denotes that the weighted valuation is at a premium to the full DCF valuation.

At 31 December 2023, the valuations of the Limited Partnership's underlying investments in Private Hydrogen Assets were determined as follows:

*       In deriving the fair value of NanoSUN a probability weighted approach was applied whereby a valuation for the investment was derived from each technique (DCF, indicative offers and assets), each of which represented management's assessment of the fair value for the investment in the reasonable possible scenarios that may have transpired, as of the valuation date. A percentage likelihood (aggregating to 100% across each of the three techniques) was then applied to each of these valuations, which represented management's view of the probability of each scenario transpiring, as of the valuation date. The range of inputs disclosed represent the lowest and highest discreet percentages applied to the three scenarios.

The following table shows the Directors best estimate of the sensitivity of the Level 3 Private Hydrogen Assets to changes in the principle unobservable input, with all other variables held constant.

The European Central Bank ('ECB') and the Bank of England ('BOE') base rates at 30 June 2024 were 4.25% and 5.25% respectively. We anticipate that the base rates will ease and fall (based on independent research) reaching 2.50% for ECB and 3.00% for BOE by end of 2025. Since long term gilt yields already factor in long term forecasts, we have performed sensitivities of +/- 1% on the discount rate assumptions for any shock events. At 31 December 2023, the ECB and the BOE base rates were 4.5% and 5.25% respectively. We anticipate that the terminal base rate would ease and fall (based on independent research) reaching 2.5% for ECB and 3.0% for BOE and as such, performed sensitivities of +/- 1% on the discount rate assumptions.

For the period ended 30 June 2024, where noted in the table above, valuations are weighted towards the full DCF valuation based on the time since the price of recent investment until the full DCF valuation is applied. We have applied a sensitivity of +/- 15% weighting to DCF as this is deemed a reasonable assumption by which the weighting may move on a quarterly basis.

For the year ended 31 December 2023, the NanoSUN Limited valuation was weighted between DCF, indicative offers and Net assets based on the expected likelihood of each scenario occurring. We applied a sensitivity of +/- 10% weighting to each scenario, with the movement being shared equally with the remaining two scenarios, as this was deemed to be a reasonable possible shift in the scenario weightings as of the valuation date.

For those investments that have been fair valued using the price of a recent investment based on unadjusted third-party pricing information, the Company is not required to disclose any quantitative information regarding the unobservable inputs as they have not been developed by the Company and are not reasonably available to the Company.

In April 2024, the Company agreed to a restructuring of HH2E, ahead of planned material third party fund raising for green hydrogen projects in Germany.  As part of this transaction the Company exchanged its development rights in five project SPVs, including the Thierbach SPV, for equity in HH2E in a non-cash transaction for the Company.  Under the terms of the transaction the Company may be required to contribute future investments in the project SPVs up to a maximum value of £3.9m to HH2E as deferred consideration for the exchange of development rights.  The timing and total quantum of SPV shares to be contributed in settlement of this consideration is still to be confirmed.

5. Investment adviser fee

At 30 June 2024 no fees were payable to the Investment Adviser in respect of the Investment Adviser fee (31 December 2023: nil).

Investment Adviser fee

The Company has entered into an Investment Adviser Agreement dated 5 July 2021 between the Company, the AIFM and the Investment Adviser (the "Investment Adviser Agreement"), pursuant to which the Investment Adviser has been given responsibility for investment advisory services in respect of any Private Hydrogen Assets the Company invests in directly and the Listed Hydrogen Assets (including Listed Hydrogen Assets forming part of the Liquidity Reserve and uninvested cash) in accordance with the Company's investment policy, subject to the overall control and supervision of the Board and the AIFM.

Under the Investment Adviser Agreement, the Investment Adviser receives from the Company, quarterly in advance, an advisory fee, details of which are given in the Annual Report and which have remained unchanged during the Period.

General Partner's priority profit share

Under the Limited Partnership Agreement, the General Partner of the Limited Partnership shall be entitled to a General Partner's Profit Share ("GPS"). The GPS for each accounting period shall be an amount equal to 1.5% of the prevailing NAV of the Limited Partnership. For so long as the Company is the sole limited partner of the Limited Partnership, the GPS shall be distributed to the Company rather than the General Partner. The Company is currently the sole limited partner of the Limited Partnership. Therefore, under the Investment Adviser Agreement, the investment adviser fee in relation to the Private Hydrogen Assets held by the Limited Partnership is settled by the Company which for the period totalled £960,424 (30 June 2023: £803,722). During the period the Limited Partnership did not call any GPS from the Company as the net effect of the calling and distributing GPS from/to the Company is £nil (30 June 2023: £nil).

Carried Interest Partner Fees

Pursuant to the terms of the Limited Partnership Agreement dated 5 July 2021 as amended and restated on 26 November 2021 (the "Limited Partnership Agreement"), the Carried Interest Partner is, subject to the limited partners of the Limited Partnership receiving an aggregate annualised 8% realised return (i.e. the Company and, in due course, any additional co-investors), entitled to a carried interest fee in respect of the performance of the Private Hydrogen Assets.

Subject to certain exceptions, the Carried Interest Partner will receive, in aggregate, 15% of the net realised cash profits from the Private Hydrogen Assets held by the Limited Partnership once the limited partners of the Limited Partnership (i.e. the Company and, in due course, any additional co-investors) have received an aggregate annualised 8% realised return. This return is subject to a 'catch-up' provision in the Carried Interest Partner's favour. Any realised or unrealised carried interest fee paid or payable to the Carried Interest Partner is reflected through the NAV of the Limited Partnership. During the period no carried interest fees (31 December 2023: £403,343) were accrued as payable to the Carried Interest Partner.

20% of any carried interest received (net of tax) will be used by the principals of the Investment Adviser to acquire Ordinary Shares in the market. Any such acquired shares will be subject to a 12-month lock-up from the date of purchase.

6. Other expenses

During the period to 30 June 2024, no non-audit fees were paid to KPMG LLP UK.

During the period to 30 June 2023, the auditors received £12,000 (including VAT of £2,000) for non-audit services in respect of the Company's equity raise, which were treated as a capital expense and included in 'share issue costs' disclosed in the Statement of Changes in Equity. This service is required by law or regulation and is therefore a permissible non-audit service under the FRC Ethical Standard.

7. Trade and other receivables

8. Trade and other payables

9. Share capital

During the six months ended 30 June 2024 and the year ended 31 December 2023, no shares were issued or repurchased.

Each Ordinary Share held entitles the holder to one vote. All shares carry equal voting rights and there are no restrictions on those voting rights.

10. Return per Ordinary Share

Return per share is based on the weighted average number of Ordinary Shares in issue during the six months ended 30 June 2023 of 128,819,999.

There is no dilution to return per share as the Company has only Ordinary Shares in issue.

11. Net asset value per Ordinary Share

There is no diluted Net Asset Value per share as the Company has only Ordinary Shares in issue.

12. Related party transactions and material contracts

Directors

During the period, fees were payable to the Directors at an annual rate of £68,250 to the Chair, £57,750 to the Chair of the Audit and Risk and Valuation Committees and £47,250 to the Chair of the Management Engagement and Remuneration Committees. Mr Bucknall is not remunerated for his role as a Non-Executive Director. These fees were effective from the 1 January 2024. Details of the Directors remuneration paid during the period is given in note 6. At the period end, the Directors had the following holdings in the Company:

Details of the Company's other material contracts, which remain applicable at 30 June 2024, are given in the Annual Report in note 14 to the Financial Statements.

13. Subsidiary and related entities

Subsidiary

The Company owns 100% of HydrogenOne Capital Growth (GP) Limited and HydrogenOne Capital Growth Investments (1A) GP LLP at 30 June 2024 and owned 100% of HydrogenOne Capital Growth (GP) Limited at 31 December 2023.

Related entities

The Company holds Private Hydrogen Assets through its investment in the Limited Partnership, which has not been consolidated as a result of the adoption of IFRS 10: Investment entities exemption to consolidation. There are no cross guarantees amongst related entities. Below are details of the unconsolidated Private Hydrogen Asset held through the Limited Partnership.

30 June 2024

31 December 2023

The maximum exposure to loss from the unconsolidated entities is the carrying amount of the financial assets held.

During the period the Company did not provide financial support and has no intention of providing financial or other support to the subsidiary and the unconsolidated Private Hydrogen Assets held through the Limited Partnership.

14. Status of this report

These Half-yearly Financial Statements are not the Company's statutory accounts for the purposes of section 434 of the Companies Act 2006. They are unaudited. The unaudited Half-yearly Financial Report will be made available to the public at the registered office of the Company.

The report will also be available in electronic format on the Company's website https://hydrogenonecapitalgrowthplc.com/

The information for the year ended 31 December 2023 has been extracted from the last published audited financial statements, unless otherwise stated. The audited financial statement has been delivered to the Registrar of Companies. KPMG Channel Islands Limited reported on those accounts and their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

The Half-yearly Financial Report was approved by the Board on 13 September 2024.

Alternative performance measures ("APM")

APMs are often used to describe the performance of investment companies although they are not specifically defined under IFRS. APM calculations for the Company are shown below.

(Discount)/Premium

The amount, expressed as a percentage, by which the share price is less than/ more than the Net Asset Value per Ordinary Share.

Ongoing charges

A measure, expressed as a percentage of average net assets during the period, of the regular, recurring annual costs of running an Investment Company.

The ongoing charges percentage is on a consolidated basis and therefore takes into consideration the expenses of the Limited Partnership as well as the Company and is calculated in accordance with the methodology set out by the AIC.

The recurring expenses of the Company and Limited Partnership charged in the six months to 30 June 2024 have been annualised for the ongoing charges calculation.

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date.

1      Share price total return is based on an opening share price of 49.65p.

2      NAV total return is based on an opening NAV 102.99p per Ordinary Share.

n/a = not applicable.

Notes

For further information, please visit www.hydrogenonecapitalgrowthplc.com or contact:

About HydrogenOne Capital Growth plc:

HydrogenOne is the first London-listed hydrogen fund investing in clean hydrogen for a positive environmental impact. The Company was launched in 2021 with an investment objective to deliver an attractive level of capital growth by investing in a diversified portfolio of hydrogen and complementary hydrogen focussed assets. INEOS Energy is a strategic investor in HydrogenOne. The Company is listed on the London Stock Exchange's main market (ticker code: HGEN). The Company is an Article 9 climate impact fund with an ESG policy integrated in investment decisions and asset monitoring.

The Company's Investment Adviser, HydrogenOne Capital LLP (FRN: 954060), is an appointed representative of Thornbridge Investment Management LLP (FRN: 713859) which is authorised and regulated by the Financial Conduct Authority.

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