29 September 2023

i(x) Net Zero PLC

 

("i(x) Net Zero" or the "Company")

 

Half Year Results for the Six Months Ended 30 June 2023

 

i(x) Net Zero PLC (AIM: IX.), the investing company which focuses on the Energy Transition, is pleased to announce its half year results for the six months ended 30 June 2023 ("HY 2023", "H1 2023"). All amounts are in USD unless otherwise stated.

 

Financial and Investment Highlights

·    Fair value of investments in i(x)'s portfolio companies ("Portfolio NAV") as at 30 June 2023 increased by 133.56% to $149.11 million (31 December 2022: $63.84 million), largely driven by WasteFuel Global Inc. ("WasteFuel") investment from bp;

 

·    Portfolio NAV per share at 30 June 2023, including cash of $4.35 million (£3.43 million), of $1.79 per share (£1.41 per share) (31 December 2022: $0.90 per share (£0.75 per share);

 

·    $81.05 million profit before non-cash deferred tax provision and share-based compensation (H1 2022: $0.50 million);

·    As at 30 June 2023, the Company had $0.8 million borrowings and cash of $4.35 million (31 December 2022: no borrowings and cash of $7.48 million); and

 

·    In the first six months of the year, i(x) made portfolio investments of $0.55 million (H1 2022: $0.50 million).

Corporate and Portfolio Highlights

·    Pär Lindström, the Company's Chief Investment Officer, appointed as CEO; Jonathan Carpenter Stearns appointed as CFO

 

·    Strategic refresh to focus firmly on growing the Net Asset Value ("NAV") of the Company's investments, by sourcing high growth investment opportunities and identifying and executing profitable investment realisations from the existing investment companies in the short term and

 

·    Set near term target of reducing operating expenditure to 2% of NAV, down more than 50% from the 2022 operating expenditure

 

·    Entered into new secured $7.5 million 2 year term loan facility with European Depositary Bank S.A.

 

·    WasteFuel secured a $10 million investment from bp, to further assist WasteFuel's plans to develop a global network of plants to convert municipal and agricultural waste into bio-methanol, a biofuel which could play a significant role in decarbonising hard-to-abate sectors like shipping. Pre money valuation was $400 million and conservatively valued through i(x) Net Zero's third party valuation group at $387 million which increased the NAV of the Company's holding in WasteFuel by $84.78 million

·    Sustainable Living Innovations, Inc. ("SLI"), the building technology and product development company, entered into a non-binding letter of intent in relation to a proposed business combination with NYSE listed Churchill Capital Corp V, in a potentially transformative combination for SLI that, if completed, will provide the ideal platform to execute the next stage of SLI's growth strategy and significantly improve access to capital

 

·    Made $0.55 million follow on investments, including $0.4 million into EMC and an additional $0.15 million into SLI via an Unsecured Convertible Promissory Note

 

Events subsequent to HY 2023

The following are key developments subsequent to the six-month period end:

 

·    Commitment to invest an additional US$2.5 million into Enphys Management Company ("EMC"), for budgeted working capital, certain other approved costs and investments into new assets as it initially progresses towards a merger opportunity for its SPAC, Enphys Acquisition Corp, with the intention of forming a major renewables energy group that can be a regional champion for sustainability

 

·    Conditional agreement reached for the sale of Carbon Engineering Ltd. ("Carbon Engineering"), to Occidental Petroleum Corporation ("Occidental"), the international energy company

 

·    Enphys signed a non-binding letter of intent for a business combination with a leading and well-established advanced biofuels company in Latin America

 

·    The Company added an additional company to its portfolio via a $0.6 million investment into Citron Energy Inc ("Citron Energy"), a US based alternative fuels business. This investment will result in i(x) Net Zero owning approximately 34% of Citron Energy

 

Pär Lindström, CEO, commented:

 

"The first six months of the year have seen us make significant progress towards our aim of growing our NAV and creating a more streamlined business. In the six months to June 2023 and in the months since, we have seen exciting developments in our portfolio companies, with WasteFuel securing a meaningful investment from bp and Enphys signing a letter of intent ("LoI") for a business combination with a leading and well-established advanced biofuels company in Latin America. SLI has signed a LoI for a business combination and we have reached a conditional agreement for the sale of Carbon Engineering and we recently made an investment in a new company, Citron, that continues our focus on opportunities in energy transition.

 

"As policy-makers in the US and the Americas advance their plans for achieving net zero, i(x) is perfectly positioned to grant shareholders exposure to the exciting and growing companies which are engaged in the journey towards a more sustainable future. We continue to streamline and sharpen the business, and we look forward to reporting further progress for the year as a whole."

 

 

For further information visit https://ixnetzero.com/ or contact:

i(x) Net Zero	Via Buchanan below
Pär Lindström - Chief Executive Officer
Canaccord Genuity Limited Nominated Adviser & Broker	+44 20 7523 8000
Max Hartley
Harry Pardoe
Buchanan
Helen Tarbet	+44 7872 604 453
Simon Compton	+44 7979 497 324

 

 

 

 

Notes to Editors

About i(x) Net Zero PLC

i(x) Net Zero PLC is an AIM quoted investing company that seeks to provide its shareholders with the opportunity to create long-term capital growth with positive, scalable, measurable and sustainable impact on the environment and on the communities it serves.

 

In accordance with its belief that the world's biggest problems are also the biggest market opportunities, i(x) Net Zero focuses on two critical areas in which it aims to make a positive impact: (i) Energy Transition and (ii) Sustainability in the Built Environment.

 

The Company uses a multi-strategy investment approach, providing the companies in which it invests with the expertise and catalytic capital to help them grow. To date, i(x) Net Zero has invested in biofuels, direct air capture (carbon removal), renewable energy, sustainable workforce housing and net zero construction technology.

 

i(x) Net Zero is a signatory to the UN Principles for Responsible Investing. 

 

The Company has received the London Stock Exchange's Green Economy Mark.

 

Operational Review

 

 

 

NAV Update

 

 

		$m	$m	$m
Investee Company	Equity interest (30/6/2023)	Unaudited Portfolio NAV as at (30/6/2023)	Audited Portfolio NAV as at (31/12/2022)	Increase/ (Decrease) during H1 2023
WasteFuel Global, Inc.	34.8%	131.69	46.91	84.78
Enphys Management Company, LLC	14.5%	10.92	10.34	0.58
MultiGreen Properties, LLC	10.0%	2.19	2.26	-0.07
Sustainable Living Innovations ("SLI")	0.1%	0.77	0.74	0.03
Carbon Engineering Ltd	0.5%	2.64	2.58	0.06
Context Labs B.V.	0.5%	0.50	0.51	-0.01
Simple Agreement For Future Equity (SAFE) with WasteFuel Global, Inc.		-	0.25	-0.25
Convertible note of MultiGreen Properties, LLC		0.25	0.25	-
Unsecured Convertible Promissory Note of SLI		0.15	-	0.15
Total		149.11	63.84	85.26

 

 

Portfolio Review

 

WasteFuel Global, Inc. ("WasteFuel") is focused on developing renewable, non-fossil fuels to help reduce the carbon emissions of the transportation sector with a particular focus on waste to energy for trucks, planes and ships.

 

In July 2023, WasteFuel announced that it had secured a $10 million investment from bp, the multi-national energy company, as part of the first close of a Series B fundraise. The investment will further assist WasteFuel's plans to develop a global network of plants to convert municipal and agricultural waste into bio-methanol, a biofuel which could play a significant role in decarbonizing hard-to-abate sectors like shipping.

 

bp's $10 million investment, leading the Series B investment round, resulted in a material uplift in the NAV attributable to the Company's holding in WasteFuel.  Following bp's investment, the unaudited NAV of the Company's equity interest in WasteFuel is $131.69 million, a 181% uplift from the last reported audited NAV ($46.91 million as at 31 December 2022). This NAV uplift is included in the Company's H1 2023 results.

 

Also, WasteFuel announced that it entered a partnership including a memorandum of understanding with bp for the offtake of WasteFuel's bio-methanol and a technical collaboration to improve bio-methanol production efficiency, yields and economics. As part of this agreement, the business will be able to leverage bp's proprietary technology to help optimise and improve its low-carbon, bio-methanol production.

 

In August 2023, WastFuel announced the strengthening of its management team with the appointment of Peter Votkjaer Jorgensen, former Partner in Maersk Growth, the venture arm of the A.P. Moller - Maersk Group, as Chief Financial Officer (CFO) effective October 1, 2023.

 

Enphys Management Company, LLC ("EMC") is i(x) Net Zero's partnership with the Latin America Investment Group, a business development and investment group. EMC pursues private and public opportunities focused on renewables and energy transition in Latin America and has a direct ownership in Enphys Acquisition Sponsor, LLC ("EAS"), the sponsor company of Enphys Acquisition Corp. ("EAC"), a NYSE-listed SPAC targeting renewable energy businesses in Latin America, in which EMC also has an ownership. Its strategy is to create a regional champion in the Americas for alternative energy through the aggregation of existing, cash-flow positive wind and solar assets. Latin America provides a rapidly growing energy market where alternative energy production is often the lowest cost source. This provides Enphys the opportunity to execute at scale and become a significant publicly traded leader in energy transition.

 

In August 2023, the Company announced that it had committed to invest an additional $2.5 million into EMC and that its wholly owned subsidiary i(x) Investments LLC had entered into a revised EMC LLC Agreement with LAIG Investments.

 

The investment, the cost of which will be spread over the next four years and immediately took the Company's ownership in Enphys from its previous level of 14.5% to 30.0%. The additional cash investment, together with the increased valuation at which the investment was agreed generated an uplift in the Net Asset Value of the Company's total holding in EMC from $10.3 million to $16.7 million, based on the valuation as at 31 December 2022.

 

The new funding will provide additional support to EMC for budgeted working capital, certain other approved costs and investments into new assets as it initially progresses towards a merger opportunity for its SPAC, Enphys Acquisition Corp, with the intention of forming a major renewables energy group that can be a regional champion for sustainability in the Americas and later expanding its assets under management with new assets and new investment structures.

 

Enphys Acquisition Corp. (NYSE: NFYS, "EAS", EMC is the sponsor of EAS and has a direct ownership in EAS) filed its intial preliminary proxy statement in August 2023 in connection with an extraordinary general meeting of shareholders of EAS for the purpose of, among other things, extending the time by which it has to consummate an initial business combination from October 8, 2023 to February 8, 2024 (the "Extension"), as well as other documents filed by EAS with the U.S. Securities and Exchange Commission. The Extension is subject to approval by EAS shareholders and a further announcement will be made in due course.

 

EAS has also signed a non-binding letter of intent for a business combination with a leading and well-established advanced biofuels company in Latin America.

 

Carbon Engineering Ltd. ("Carbon Engineering") has developed a proprietary Direct Air Capture ("DAC") technology that removes carbon dioxide directly from the atmosphere for sequestration and storage. With its DAC and carbon-to-value proposition, it represents the next generation of industrial scale decarbonisation. The company has a clear path to global growth and is focused on licensing its technology to industrial partners to build and operate.

 

In August 2023, the Company announced that a conditional agreement had been reached for the sale of Carbon Engineering, to Occidental Petroleum Corporation ("Occidental"), the international energy company.

 

Occidental is an existing strategic partner of Carbon Engineering. The acquisition would see Occidental acquire the outstanding shares in Carbon Engineering for a total cash consideration of $1.1 billion, payable in three approximately equal annual payments with the first to be made at closing.

 

i(x) Net Zero holds an indirect circa 0.45% interest in Carbon Engineering through two special purpose vehicles. If the sale completes on the agreed terms, the Company's indirect interest would equate to approximately $7.2 million, and subject to the distribution of the proceeds over the three years following completion by those SPVs, this would generate a 7.2x return on the Company's initial investment of $1 million before any costs of the SPVs. On this basis the sale price would also represent a 2.8x multiple on the current holding value of the Company's investment in Carbon Engineering, of $2.6 million.

 

Context Labs B.V. ("Context Labs") is an impact software company whose blockchain technology platform enables the harvesting and processing of data to help businesses track their carbon emissions and their compliance with regulatory frameworks.

 

In April 2023, Context Labs and EQT Corporation ("EQT") announced the establishment of a strategic partnership to advance the commercialisation of verified low carbon intensity natural gas products and carbon credits. The partnership will bring together EQT, the largest natural gas producer in the U.S., and Context Labs, an expert in distributed ledger technology, advanced climate data and analytics, machine learning and AI-capabilities. EQT is a leading independent natural gas production company with operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin. 

 

Through tracking, reporting and verification of critical emissions data, the strategic partnership will support EQT in achieving its industry-leading emissions reduction targets, which include a commitment to reach net-zero greenhouse gas (GHG) emissions by 2025. With a focus on emissions quantification, operational analysis, and the certification of natural gas production, the companies will work to scale emissions mitigation across the full energy value chain.

 

Context Labs' enterprise data fabric platform, DaaS™,will enable certification and verification of the carbon intensity of EQT's operating assets, with certificates registered in Context Labs' CLEAR Path™ Repository. Additionally, the relationship will afford EQT the opportunity to integrate carbon credit projects into CLEAR Path™ in support of generating asset-grade data-backed carbon credits.

 

In September 2023, Context Labs and Viridios AI  announced a strategic partnership to de-risk and re-build carbon markets. Viridios AI, a Viridios Group company and leader in global carbon market analytics through data and technology, to create the safest, most trusted platform for environmental attribute discovery, evaluation, and pricing.

 

Context Labs joins Viridios AI's solutions development and deployment ecosystem as a key strategic partner focusing on data integrity, transparency, and scalability. Sharing a vision for how to re-build and de-risk the emerging and ongoing needs of the global carbon markets, the companies will help organizations meet their climate and net-zero targets with the world's safest carbon credits available to offset residual emissions. Each company will collaborate with a select group of partners from their respective networks to identify specific opportunities to provide data-driven, more effective decarbonisation and monetisation methods.

 

Sustainable Living Innovations ("SLI") is a construction technology and product development company producing panelised buildings to address housing affordability, while delivering a new standard in sustainable living.  SLI continues to capture market share as a leader in delivering net zero buildings at scale. Its factory-assembled and cost-effective steel panel technology addresses both the inflationary pressure on material costs and supply chain issues.

 

In March 2023, SLI signed a non-binding letter of Intent in relation to a proposed business combination with NYSE listed Churchill Capital Corp V ("Churchill V").  With the signing of this LOI, i(x) made a follow on investment of $0.15 million that will allow SLI to complete the combination and cover the costs associated with its underlying projects development.

 

 

MultiGreen Properties, LLC ("MultiGreen") is a developer of sustainable, multi-family properties that aims to supply affordable workforce rental housing by reducing construction costs and duration. MultiGreen intends to become the first net zero energy operator of multi-family projects in the US by 2025. The company is delivering on its mission to provide attainable, tech-enabled rental apartments in supply-constrained US markets. We will continue to monitor this investment closely as it weathers these turbulent real estate markets.

 

Citron Energy Inc ("Citron Energy")

In September 2023, the Company added an additional company to its portfolio via a $0.6 million investment into Citron Energy Inc ("Citron Energy"), a US based alternative fuels business.

 

Citron Energy aims to replace the use of fossil fuels by processing non-recyclable municipal and commercial waste into a combustible fuel. The use of CitronFuel will allow the replacement of coal as well as helping to reduce landfill usage and significantly lower CO2 emissions. The $0.6 million investment will be in the form of a subscription for new shares in Citron Energy and will result in i(x) Net Zero owning approximately 34% of Citron Energy. Jonathan Stearns, the Company's Chief Financial Officer, has a non-controlling holding in Citron Energy and is the chairman of Citron Energy.

 

Financial Review

 

The Company continued delivering an improvement in the fair value of investments in its portfolio companies ("Portfolio NAV") which increased by 133.55% or, $85.26 million to $149.11 million as at 30 June 2023 (31 December 2022: $63.84 million).

 

The increase in Portfolio NAV over the period of $85.26 million (H1 2022: $5.20 million) comprises unrealised gains of $84.72 million (H1 2022: $4.70 million) due to the change in fair value of portfolio investments and $0.55 million of additions to investments (H1 2022: $0.50 million). The majority of unrealised gains relates to an increase in fair value of WasteFuel as a result of bp's investment entered into on 30 June 2023. As at 30 June 2023, Portfolio NAV per share, including cash of $4.35 million (£3.43 million), was $1.79 per share (£1.41 per share) based on the issued number of shares at 30 June 2023 (31 December 2022: $0.90 per share (£0.75 per share) based on the issued number of shares at 31 December 2022).

 

Profit before non-cash deferred tax provision and share-based compensation was $81.05 million in H1 2023 (H1 2022: $0.50 million) ($81.05 million is derived as profit before tax of $82.09 million (H1 2022: loss $0.28 million) minus share-based compensation credit of $1.04 million (H1 2022: expense $0.78 million)).

 

During H1 2023, stock options were granted to management employees under the Company's Equity Incentive Plan while stock options issued in 2022 were forfeited and surrendered resulting in non-cash share-based compensation credit of $1.04 million being recognised (H1 2022: share-based compensation expense $0.78 million).

                                                                              

General and administrative costs decreased by $2.36 million to $2.61 million (H1 2022: $4.96 million), largely due to non-cash share-based compensation credit, lower compensation costs as a result of a smaller team and cost reductions.

 

As a result of the corporate inversion and resulting IPO transaction, i(x) Net Zero PLC is being treated as a U.S. domestic corporation for all purposes of the U.S. tax code as of the date of the transaction and there will be non-cash deferred tax implications related to the Company's temporary difference in the book and tax basis of its assets, the most material of which is the difference between the tax basis and the fair value of the Company's investments. For the period ended June 30, 2023, non-cash deferred tax expense of $20.64 million (H1 2022: $12.69 million) was recognised in the consolidated statement of comprehensive income.

 

Profit after tax amounted to $61.45 million in H1 2023 (H1 2022: loss after tax of $12.97 million) primarily as a result of unrealised gains due to the change in fair value of portfolio investments and lower general and administrative costs offset by non-cash deferred tax provision.

 

In April 2023, the Company issued of 6,820,618 new ordinary shares to Mr. Lindström in lieu of cash payment of his CEO and incentive bonuses payable of $0.7 million. Following this transaction the Company has 85,877,429 Ordinary Shares in issue.

 

The Company continues to be in a strong financial position and as at 30 June 2023 had cash of $4.35 million and new $7.5 million 2-year term loans facility ($0.8 million loan was drawn) (31 December 2022: no borrowings and cash of $7.48 million) and net current assets of $3.98 million (31 December 2022: $6.68 million).

 

Outlook

 

With the achievement of a significant increase in NAV and rationalisation of its operating expenses by new management, i(x) Net Zero is now well positioned to selectively add to its investment portfolio.

 

In order to achieve this stated ambition, the Company has identified a number of accretive opportunities for its existing portfolio. These may include near-term opportunities to participate in capital raises or add-on investments. In addition, building on its successes to date, i(x) will look to replicate its strategy of using its operational expertise and catalytic capital via new platforms in the energy transition and built environment to scale proven technology and accelerate new and existing market penetration.

 

The Company also remains open to exploring an investment in, or other potential alliance with, a renewables and circular economy platform that has a mission and purpose that is similar to the Company's; namely to build profitable businesses that support the achievement of the UN Sustainable Development Goals.

 

At the beginning of 2023 the Board of Directors set ambitious NAV and profitability targets for the executive management team, including a near term target of reducing operating expenditure to 2% of NAV and growing NAV by more than 50% over the course of 2023. The business has already started to make good progress towards achieving these challenging targets and is confident of delivering further tangible results in the second half in support of enhancing shareholder value over the near and longer term.

 

 

 

Pär Lindström

 

 

Chief Executive Officer and Chief Investment Officer

29 September 2023

 

 

 

 

 

 

 

(x) Net Zero Plc

Consolidated Statement of Comprehensive Income

For the Six Months Ended 30 June 2023

 

(Expressed in US dollars)

 

 

			(Unaudited)				(Audited)
			For the Six Months Ended				Year Ended
			30 June				31 December
	Notes		2023		2022		2022
Net changes in fair value on financial assets	3		$84,717,302		$4,695,431		$1,413,805
at fair value through profit or loss
Divided, interest and other income			24,145		156		2,645
General and administrative expenses			(2,606,696)		(4,964,208)		(8,246,839)
OPERATING PROFIT/(LOSS) BEFORE
FINANCING ACTIVITIES			82,134,751		(268,621)		(6,830,389)
Finance cost			(41,327)		(15,839)		(27,495)
PROFIT/(LOSS) BEFORE TAX			82,093,424		(284,460)		(6,857,884)
Tax provision - deferred tax expenses			(20,639,572)		(12,685,897)		(11,271,318)
PROFIT/(LOSS) AFTER TAX			$61,453,852		$(12,970,357)		$(18,129,202)
Earnings/(loss) per share:
Basic and diluted	5		$0.76		$(0.16)		$(0.23)

 

 

Notes:

 

a)   There is no comprehensive income or loss for the periods ended 30 June 2023 and 2022 and the year ended 31 December 2022.

b)   As a result of the corporate inversion and resulting IPO on AIM, i(x) Net Zero PLC is being treated as a U.S. domestic corporation for all purposes of the U.S. tax code as of the date of the IPO and there will be non-cash deferred tax implications related to the Company's temporary difference in the book and tax basis of its assets, the most material of which is the difference between the tax basis and the fair value of the Company's investments. For the period ended 30 June 2023, deferred tax expense of $20,639,572 was recognised in the consolidated statement of comprehensive income.