EMPOWER_COMMUNITY_SOLAR_L - Accounts

The members present their annual report and financial statements for the year ended 31 December 2019.

The principal activity of Empower Community Solar LLP (the "LLP") in the year continued to be that of production of electricity.

The LLP owns an operational portfolio of 998 rooftop solar systems around the North Wales and York areas which were installed between June 2012 and August 2013. A 20 year lease has been granted to the LLP by the relevant housing authority for the roof access of each installation site.

The main source of income from these installations is the government backed feed in tariff ('FIT') and export tariff ('ET'), both of which are currently protected by UK government legislation and are increased annually in line with the Retail Price Index ('RPI') increases. All income is paid by the FIT licensee, based upon the generation data figures for each installation.

The members' drawing policy allows each member to draw a proportion of their profit share, subject to the cash requirements of the business.

All members must contribute their proportion of the initial capital to the LLP. There is no opportunity for appreciation of the capital subscribed. Just as incoming members introduce their capital at "par", so the retiring members are repaid their capital at "par".

The designated members who held office during the year and up to the date of signature of the financial statements were as follows:

The auditor, KPMG LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.

Each of the members in office at the date of approval of this annual report confirms that:

•     so far as the members are aware, there is no relevant audit information of which the limited liability partnership's auditor is unaware, and

•     the members have taken all the steps that they ought to have taken as members in order to make themselves aware of any relevant audit information and to establish that the limited liability partnership's auditor is aware of that information.

The COVID-19 pandemic has grown to become an unprecedented global event, creating severe social and economic disruption which in turn has resulted in significant volatility in global markets. The members acknowledge the wider market uncertainties from COVID-19 but consider the impact on the business to be limited. Any potential implications arising as a result of the pandemic are considered post balance sheet events and will be reflected in the next period of accounts. See note 1 for further details.

This report has been prepared in accordance with the special provisions relating to small companies within Part 15 of the Companies Act 2006.

The members are responsible for preparing the Members’ Report and the financial statements in accordance with applicable law and regulations.

The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 require the members to prepare financial statements for each financial year.  Under that law the members have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including Section 1A of FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland.

Under Regulation 8 of the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 the members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the LLP and of its profit or loss for that period. In preparing these financial statements, the members are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• assess the LLP’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend to liquidate the LLP or to cease operations, or have no realistic alternative but to do so.

Under Regulation 6 of the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, the members are responsible for keeping adequate accounting records that are sufficient to show and explain the LLP’s transactions and disclose with reasonable accuracy at any time the financial position of the LLP and enable them to ensure that its financial statements comply with those regulations. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the LLP and to prevent and detect fraud and other irregularities.

We have audited the financial statements of Empower Community Solar LLP (“the LLP”) for the year ended 31 December 2019 which comprise the Profit and Loss Account, the Balance Sheet, the Reconciliation of Members’ Interests and related notes, including the accounting policies in note 1.

In our opinion the financial statements:

•     give a true and fair view, of the state of affairs of the LLP as at 31 December 2019 and of its loss for the year then ended;

•     have been properly prepared in accordance with UK accounting standards, including FRS 102 and

•     have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the LLP in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Going concern

The members have prepared the financial statements on the going concern basis as they do not intend to liquidate the LLP or to cease its operations, and as they have concluded that the LLP’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements. In our evaluation of the members’ conclusions, we considered the inherent risks to the LLP’s business model and analysed how those risks might affect the LLP’s financial resources or ability to continue operations over the going concern period. We have nothing to report in these respects.

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor's report is not a guarantee that the LLP will continue in operation.

Other information

The members are responsible for the other information, which comprises the members’ report. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work, we have not identified material misstatements in the other information.

Under the Companies Act 2006 as applied to limited liability partnerships we are required to report to you if, in our opinion:

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

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

• we have not received all the information and explanations we require for our audit; or

• the members were not entitled to prepare financial statements in accordance with the small limited liability partnerships’ regime.

We have nothing to report in these respects.

As explained more fully in their statement set out on page 3 the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the LLP’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the LLP or to cease operations, or have no realistic alternative but to do so.

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

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the members of the LLP, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006, as required by Regulation 39 of the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008. Our audit work has been undertaken so that we might state to the LLP’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the LLP and the LLP’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

These financial statements have been prepared in accordance with the provisions applicable to limited liability partnerships subject to the small limited liability partnerships regime.

Empower Community Solar LLP is an LLP incorporated in England and Wales. The registered office is Craven House, 16 Northumberland Avenue, London, United Kingdom, WC2N 5AP.

The LLP's principal activities are disclosed in the Members' Report.

These financial statements have been prepared in accordance with the Statement of Recommended Practice "Accounting by Limited Liability Partnerships" issued in January 2017, together with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.

The financial statements are prepared in sterling, which is the functional currency of the LLP. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.

Notwithstanding net liabilities of £509,609 as at 31 December 2019 and a loss for the year then ended of £5,239, the financial statements have been prepared on a going concern basis which the members consider to be appropriate for the following reasons.

The members have prepared cash flow forecasts for a period of 12 months from the date of approval of these financial statements which indicate that, taking account of reasonably possible downsides, the LLP will have sufficient funds, funding from its ultimate controlling party, Hermes Infrastructure Fund I LP, to meet its liabilities as they fall due for that period.

Those forecasts are dependent on Hermes Infrastructure Fund I LP not seeking repayment of the amounts currently due to the group, which at 31 December 2019 amounted to £233,163 and providing additional financial support during that period. Hermes Infrastructure Fund I LP has indicated its intention to continue to make available such funds as are needed by the LLP, and that it does not intend to seek repayment of the amounts due at the balance sheet date, for the period covered by the forecasts. As with any LLP placing reliance on other group entities for financial support, the members acknowledge that there can be no certainty that this support will continue although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.

The members have considered the impact of the emergence and spread of COVID-19 and potential implications on the LLP’s future operations. This consideration included, but is not limited to; the liquidity of the LLP, covering an assessment of the impact of a temporary reduction in income, and the business contingency plans to cope with sustained periods of remote working.

 The members further considered the impact of COVID-19 on the underlying portfolio investment, and concluded that whilst the investment is impacted it is deemed to be sufficiently robust to remain operational. The members acknowledge that the investment is subject to various challenges from COVID-19 but deems the investment to be ultimately based on fixed power pricing arrangements, thus mitigating exposure. Whilst there are significant wider market uncertainties which may impact investments and investors, the members do not believe this will significantly impact the liquidity of the LLP over the next 12 months. For these reasons, the members have adopted the going concern basis in preparing these financial statements.

Turnover is generated from feed in tariff ('FIT') and export tariff ('ET') under a UK government scheme associated with electricity export to the grid. It is recognised net of VAT, trade discounts, and other sales taxes when the electricity is physically exported.

Members' participation rights are the rights of a member against the LLP that arise under the members' agreement (for example, in respect of amounts subscribed or otherwise contributed remuneration and profits).

Members' participation rights in the earnings or assets of the LLP are analysed between those that are, from the LLP's perspective, either a financial liability or equity, in accordance with section 22 of FRS 102. A member's participation rights including amounts subscribed or otherwise contributed by members, for example members' capital, are classed as liabilities unless the LLP has an unconditional right to refuse payment to members, in which case they are classified as equity.

All amounts due to members that are classified as liabilities are presented within 'Loans and other debts due to members' and, where such an amount relates to current year profits, they are recognised within ‘Members' remuneration charged as an expense’ in arriving at the relevant year’s result. Undivided amounts that are classified as equity are shown within ‘Members' other interests’. Amounts recoverable from members are presented as debtors and shown as amounts due from members within members’ interests.

Once an unavoidable obligation has been created in favour of members through allocation of profits or other means, any undrawn profits remaining at the reporting date are shown as ‘Loans and other debts due to members’ to the extent they exceed debts due from a specific member.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

At each reporting period end date, the LLP reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the LLP estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The LLP has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the LLP's statement of financial position when the LLP becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the limited liability partnership after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Equity instruments issued by the LLP are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the LLP.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to the profit and loss account so as to produce a constant periodic rate of interest on the remaining balance of the liability.

In the application of the LLP's accounting policies, the members are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The following judgements and estimates have had the most significant effect on amounts recognised in the financial statements.

Revenue is generated under a UK government scheme associated with electricity exported to the grid, and is recognised when the electricity is physically exported.

Accrued income is estimated based on the value of electricity which has been generated but is yet to be invoiced, based on the tariff prices in effect at the balance sheet date.

Tangible fixed assets are measured at cost less depreciation and impairment losses.

Determining whether tangible fixed assets are impaired requires an estimation of the value in use of these assets. The value in use calculation requires the LLP to estimate the future cash flows expected to arise from the assets and a suitable discount rate in order to calculate the present value. On this basis, no impairment loss has been recognised in the current year.

Included in amounts falling due within one year are amounts due to group undertakings. These amounts are repayable on demand and will be recalled once it is determined that sufficient funds are available to make the repayment.

Finance lease payments represent rentals payable by the LLP for plant and machinery, under a lease agreement with HGPE ASG2 Assetco LLP. The average lease term is 20 years and the lease carries an interest rate of 6.2% per annum.

The LLP has taken advantage of the exemption contained within Section 33 of FRS 102 from the requirement to disclose details of transactions within the group.

HGPE Steel Limited and HGPE Steel Nominee Limited are members and designated members of the LLP. The registered office of each of these entities is Craven House, 16 Northumberland Avenue, London, WC2N 5AP. The ultimate controlling party is Hermes Infrastructure Fund I LP, whose registered office 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ.

In early 2020, the existence of a new coronavirus (COVID-19) was confirmed and since this time has grown to become an unprecedented global event, creating social and economic disruption which in turn results in significant volatility in global markets. The members consider the emergence and spread of COVID-19 to be a non-adjusting post balance sheet event. The members acknowledge the wider market uncertainties from COVID-19 but consider the impact on the business to be limited. Given the inherent uncertainties, it is not practicable at this time to determine the impact of COVID-19 on the LLP or to provide a quantitative estimate of this impact. The LLP will closely monitor the development of this situation and its impact on the underlying asset in order to initiate mitigating actions where required.