Gresham House Renewable Energy VCT 2 : Half Year Report

31 March

2023

Gresham House Renewable Energy VCT2 plc

Half-Yearly Report for the six months ended 31 March 2023

Overview

1. Shareholder information
2. Chairman's statement

1. Investment Adviser's report

Financial Statements

1. Unaudited income statement
2. Unaudited balance sheet
3. Unaudited statement of changes in equity
4. Unaudited statement of cash flows
5. Summary of investment portfolio and movements
6. Notes to the unaudited financial statements

Other Information

1. Shareholder information
2. Company information

The 34.3MWp of renewable energy projects

co-owned by Gresham House Renewable Energy VCT 1 plc (VCT1) and Gresham House Renewable Energy VCT2 plc (VCT) generated 9,188,369 kilowatt-hours of electricity over the six month period, sufficient to meet the annual electricity consumption of circa 2,300 homes. The Investment Adviser estimates that the carbon dioxide savings achieved by generating this output from solar and wind versus gas-fired power, are equivalent to what circa 5,300 mature trees would remove from the atmosphere.

Investment objectives

Gresham House Renewable Energy VCT2 plc is a Venture Capital Trust established under the legislation introduced in the Finance Act 1995. Following the adoption of the new Investment Policy from 13 July 2021 (the New Investment Policy), the VCT's principal objective is to manage the VCT with the intention of realising the sale or monetisation otherwise of all remaining assets in the portfolio in a prudent manner consistent with the principles of good investment management and with a view to returning value to Shareholders in an orderly manner, whilst protecting the tax position of Shareholders.

The VCT will pursue its investment objective by effecting an orderly realisation of its assets in a manner that seeks to achieve a balance between maximising the value received from those assets and making timely returns of capital to Shareholders. This process might include sales of individual assets or running of the portfolio in accordance with the existing terms of the assets, or a combination of both.

The detailed investment policy adopted to achieve the investment objectives was set out in the VCT's Strategic Report of the Annual Report on pages 22 to 29.

For more information visit https://greshamhouse.com/real-assets/

Overview		Financial
Governance	Statements

Shareholder information

Performance summary
	27June	31 March	30 September	31 March
	2023	2023	2022	2022
	Pence	Pence	Pence	Pence
Net asset value per Ordinary Share		87.6	91.2	90.0
Net asset value per 'A' Share		0.1	0.1	0.1
Cumulative dividends*		59.1	57.1	57.1
Total Return*		146.8	148.4	147.2
Share Price - Ordinary (GV2O)	85.0	85.0	85.0	87.0
Share Price - A Shares (GV2A)	5.05	5.05	5.05	5.05

* for a holding of one Ordinary Share and A Share

Dividends

2011 Final

2012 Final

2013 Special

2013 Final

2015 Interim

2016 Interim

2017 Interim

2018 Interim

2019 Interim

2020 Interim

2022 Interim

	Ordinary Shares	'A' Shares	Total
	Pence	Pence	Pence
30 March 2012	3.5	-	3.5
28 March 2013	5.0	-	5.0
28 February 2014	7.3	3.7	11.0
28 March 2014	5.0	-	5.0
18 September 2015	5.0	-	5.0
16 September 2016	5.0	-	5.0
15 September 2017	5.0	-	5.0
14 December 2018	5.5	0.5	6.0
20 December 2019	5.3	0.5	5.8
31 December 2020	5.3	0.5	5.8
27 January 2023	2.0	-	2.0
	53.9	5.2	59.1

The next dividend is payable in July 2023. For further details, please see page 3 of the Chairman's Statement.

Dividends are paid by the registrar on behalf of the VCT. Shareholders who wish to have dividends paid directly into their bank account and did not complete these details on their original application form can complete a mandate form for this purpose. Forms can be obtained from Link Asset Services, whose contact details are shown on page 18.

Shareholder information is continued on page 17.

Gresham House Renewable Energy VCT2 plc

01

Chairman's statement

I am pleased to present the Half-Yearly Report of Gresham House Renewable Energy VCT2 plc (VCT) for the period ended 31 March 2023.

Christian Yates

Chairman

As reported in the Annual Report, the Board has continued to work towards the Shareholder approved objective of realising the Company's portfolio of assets in a manner that achieves

a balance between maximising net value received from the sale of assets and making a timely return of capital. The Board is pleased to report that in April 2023, a sale of two ground- mounted solar sites and approximately 1,600 commercial and residential solar installations to Downing Renewables & Infrastructure Trust plc for a cash consideration of £12.6mn was concluded. The sale resulted in a £0.7mn and 2.7p uplift in NAV per 'pair' of shares (before taking into account costs associated with the sale that amounted to £0.4mn per VCT) compared with the value held at 30 September 2022. The valuation of these assets in the NAV at 31 March 2023 reflects the consideration obtained for the sale of these assets, including funds received at the SPV level. The Board continues to market the remaining assets

in the portfolio, and, subject to resolving the questions in relation to the security of the grid connection at South Marston (details below), is endeavouring to reach a conclusion in an as timely manner as possible.

In terms of the performance of the portfolio, the conclusion of extensive remedial works carried out at several sites in the previous year has continued to yield benefits, with technical performance across all sites matching forecasts. Despite this, and the strong gain on the part sale of assets, the

value of the portfolio has fallen due to lower cashflows than forecast over the last six months from the portfolio, a downgrade in inflation expectations and longer term power price forecasts, as well as the reductions

in the value of the non-renewable assets. These falls, coupled with the payment of a 2.0p dividend in January has resulted in a NAV per 'pair' of shares of 87.7p at 31 March 2023 compared with 91.3p per share at 30 September 2022.

Inflation has remained high throughout the six month period but expectations for the future rate of inflation have decreased; and although wholesale power prices have begun to fall, the portfolio will continue to benefit from high power prices which have been locked in for one to two years at the elevated levels of 2022. This higher income per unit of generation, subject to technical performance and consistent weather patterns, should result in higher cash-flows available for dividends whilst the Company holds these assets. The higher revenue is countered, to some degree, by the debt service of the remaining debt facility also being indexed to inflation, with an increase in inflation resulting in higher interest charges and higher principal repayments.

Investment portfolio

In April 2023, the sale of two ground-mounted solar sites and the rooftop solar portfolio consisting of five assets held directly by the VCT were sold for proceeds of £4.9mn, and

represented an uplift of £0.7mn or 16.9% over their valuation at the start of the financial year and this valuation has been used in these accounts as the sale occurred so close to the period end. Excluding the assets sold in April 2023, the remaining VCT portfolio consisted of eleven investments, which were valued

at £22.0mn. There have been no follow-on investments and no further disposals during the six month period.

The VCT portfolio as at 31 March 2023 is analysed (by value) between the different types of assets as follows:

Ground mounted solar	84.8%
Rooftop solar*	11.0%
Small wind	4.2%
Non-renewable assets**	0.0%

• The full rooftop solar portfolio was sold in April 2023
• Non-renewableassets were fully impaired at 31 March 2023

The Board has reviewed the investment valuations at the half-year and notes that the valuation of the remaining renewable asset portfolio has decreased by £1.4mn or 6.0%. As indicated earlier, the expectations for both the future rate of inflation and power prices have fallen, but the portfolio also generated less cash than expected.

02	Gresham House Renewable Energy VCT2 plc

Overview	Financial	Other
Statements	Information

The ground-mounted solar assets which account for most of the value, performed under budget for the period, with that underperformance being due entirely to lower than forecast irradiation. The assets in fact exhibited better than forecast technical performance when adjusted for the level of irradiation.

Significantly higher power prices, compared to previous years, have been locked into the VCT portfolio which will generate stronger returns from the remaining portfolio in the near term. On the other hand, the discount rates applied have increased in line with recent rises in the Bank of England base rate. In addition, the UK Government's levy on exceptional electricity generation revenues of qualifying generating undertakings from the sale of electricity, the Electricity Generator Levy (EGL), effectively increases the marginal rate of taxation on electricity revenues above £75 per megawatt-hour to 70%. Whilst the Company is below the de minimis threshold at which the EGL applies, any future buyer of the Company's solar farms is likely to be within the scope of the EGL and therefore this could reduce the fair market value at which any disposal would be likely to take place.

As reported in the Annual Report, the Company continues to make progress to resolve the grid connection issue at the site in South Marston. The appropriate planning permissions have now been granted, and the effect of this is that it largely removes the impediment to the potential sale of the asset and others within the same debt facility, and thus should allow sale negotiations

to progress without this obstruction.

Venture Capital investments

The VCT also holds two investments outside the renewable energy space and with a significantly higher risk profile namely bio-bean Limited and Rezatec Limited. Disappointingly, due

to sustained poor trading conditions for its product, bio-bean entered administration in April 2023 after the period end. Rezatec was also forced to enter administration in May

2023 after unsuccessful capital raising and trade sale processes. Both these investments have been recognised in full as realised losses at 31 March 2023 and represented

a £0.4mn reduction in net asset value.

Further detail on the investment portfolio is provided in the Investment Adviser's Report on pages 4 to 8.

Net asset value and results

At 31 March 2023, the Net Asset Value (NAV) per Ordinary Share stood at 87.6p and the NAV per 'A' Share stood at 0.1p, producing a combined total of 87.7p per 'pair' of shares. The movement in the NAV per 'pair' of shares during the half-year is detailed in the table below:

	Pence per
	'pair' of
	shares
NAV as at 1 October 2022	91.3
Less payment of 30 September
2022 dividend on 27 January
2023	(2.0)
Valuation increase on assets
held at 31 March 2023 and sold
in April 2023	2.7
Valuation decrease on assets
still held	(6.9)
Income less expenses	2.6
NAV as at 31 March 2023	87.7

Total dividends paid to date for a combined holding of one Ordinary Share and one 'A' Share stand at 59.1p (September 2022: 57.1p). The NAV Total Return (NAV plus cumulative dividends) has decreased by 1.1% in the six months and now stands at 146.8p. Excluding the initial 30% VCT tax relief, this is compared to the cost to investors in the initial fundraising of £1.00 or 70.0p net of income tax relief.

The loss on ordinary activities after taxation for the half-year was £435,000 (March 2022: £192,000 profit), comprising a revenue profit of £702,000 (March 2022: £307,000) and

a capital loss of £1,137,000 (March 2022: £115,000) as shown in the Income Statement.

Dividends

On 21 December 2022, the Board declared a dividend in respect of the year ended

30 September 2022 of 2.0p per Ordinary Share. This dividend was paid on 27 January 2023 to Shareholders on the register at 6 January 2023.

To increase the Company's distributable reserves and facilitate future dividend payments, the Directors obtained Shareholder approval for a reduction of certain non- distributable reserves at the AGM held on

27 April 2023. The implementation of such a reduction of reserves is a Court led process and has taken some months to enact. The Board is pleased to report that Court approval for the cancellation took place on 23 May

2023 and following the anticipated filing of relevant accounts, sufficient distributable reserves will be available for dividend distributions to resume in July 2023.

As a result of the partial sale of assets, the Board has declared a dividend of 16.5p per share payable on 28 July 2023 to Shareholders that are on the Register of Members on 7 July 2023. The total dividends paid to date for a combined holding of one Ordinary Share and one 'A' Share will, including the 2.0p paid in January, increase to 75.6p (September 2022: 57.1p).

2023 Annual General Meeting (AGM) The VCTs twelfth AGM was held on

27 April 2023 at 11.30 a.m. All resolutions were passed by way of a poll.

Outlook

With a part sale of assets having been concluded in April 2023, the Board will continue to make every effort to progress the sale of the remaining assets in accordance with Shareholders' wishes as expressed

in the Continuation Vote in March 2021. The Board continues to believe that the Company's Managed Wind-Down is in the Shareholders' interests, so long as the assets are sold for a price that reflects their value. That value could be adversely affected if interest rates continue to rise and long term power prices continue their downward trend. However in the meantime, high power prices and high near term inflation, and better technical performance, subject to any unforeseen events, will generate good dividends for Shareholders in the near term.

Christian Yates

Chairman

27 June 2023

Gresham House Renewable Energy VCT2 plc

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