CORPORATE GOVERNANCE

The Directors of PowerHouse Energy Group plc support high standards of corporate governance and have adopted procedures which the Directors believe demonstrate good corporate governance for the size of the Company

Whilst PowerHouse Energy Group plc (PowerHouse) has always applied an appropriate approach to governance and communications, recent changes to the AIM Rules for Companies require AIM companies to apply a recognised corporate governance code.

PowerHouse is a company with a clear business model and growth strategy. Our objective is to be a leading developer of IP and technology that allows the rapid deployment of modular distributed electricity, distributed hydrogen, and other valuable chemical precursors produced from non-recyclable and end-of-life waste material. The members of the Board believe strongly in the importance of solid and exemplary corporate governance to help achieve our corporate goals. The Board takes its accountability to each of PowerHouse’s stakeholders very seriously. In the statements that follow, we highlight our approach to governance, and how the Board and its committees operate.

The corporate governance framework within which the Company operates, including Board leadership and effectiveness, Board remuneration, and internal control is based upon practices which the Board believes are proportional to the current size, risks, complexity and operations of the business and is reflective of the Company’s values. Of the two most widely recognised formal codes of Corporate Governance, we have selected the Quoted Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted companies (QCA Code) which was revised in April 2018 to meet the new requirements of AIM Rule 26.

The QCA Code makes clear it is the prime responsibility of the Chairman to ensure the Company applies the QCA Code to best advantage of all stakeholders of the Company.

The QCA Code is constructed around ten principles, appropriate disclosures, and prudent transparency. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide its explanation as to how they are adhering to the principles. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each.

Our compliance with the QCA Code is based on the Company’s current practices and intended governance improvements.

We trust that the result of our communication efforts to date has provided, and will continue to allow all stakeholders with access to an appropriate level of information. The Board of PowerHouse believes that corporate governance compliance is integral to the Company’s growth and ultimate success.

Establish a strategy and business model which promote long-term value for shareholders

Our purpose

The principal activity of the Company is to continue the exploitation of the newly engineered and developed PHE Waste-to-Energy system, DMG®, and associated advances in its Intellectual Property and know-how, in order to achieve full commercial roll-out of DMG® and ultimate financial success. The system’s thermal conversion process converts waste materials such as non-recyclable plastic, biomass, and other waste streams into a high-quality, clean, EcoSynthesis gas composed primarily of hydrogen, methane, and carbon monoxide. The previously developed, and constructed, PHE G3-UHt Process Demonstration system is operational at Thornton Science Park near Chester, UK.

We have created what we believe to be a distinct and evolutionary philosophy with DMG® and the IP that underscores it: distributed waste destruction; distributed electrical generation; distributed hydrogen production, and the extraction of chemical precursors from heretofore wasted resources. The Company is developing commercial interest in the DMG® System and is in negotiations and conversations with numerous parties regarding the deployment of our initial System. We believe that the completion of our first commercial system will precipitate significant demand for the DMG® System in multiple geographical regions.

PowerHouse Energy Group plc no longer sees itself as a developer of Waste-to-Energy technology, but also as a pioneer in the nascent process of deriving hydrogen, and other chemical precursors, from waste. We are convinced that DMG® technologies will help fuel our future, cleanly and profitably.

Our strategy

The Company’s long-term strategy is to contribute its engineering and operational know-how and to license its Intellectual Property, to assist in the building of profitable waste eradication, energy recovery, and distributed electrical and hydrogen production operations utilising the Company’s proprietary thermal conversion technology (DMG®) in conjunction with a variety of third-party owner/operators, noted industry partners, and others including waste management companies, material recovery facilities, landfill operators, technology providers, and a suite of external project development partners.

Additionally, the Company will seek to exploit associated opportunities where the Board believes it can add significant value and contribute towards the success of the Company as a whole.

At present the Company’s principal assets are its G3-UHt process demonstrator, currently located at the University of Chester Thornton Science Park, the test data derived, and the Commercial Design materials developed during the on-going Engineering process.

As we enter the commercialisation phase for our proprietary DMG® technology platform, our strategy is to target licensing revenues to move PowerHouse towards becoming a profitable and sustainable business meeting the ever growing global needs for efficient elimination of plastic waste and end of use tyres, the production of clean energy, and the extraction of other useful resources from waste.

Our business model

The Company intends to further develop its DMG® process into a fully operational commercial unit capable of processing a nominal 25 tonnes per day of waste. It is expected that activities will commence in the UK in partnership with Waste2tricity Ltd, an experienced Waste-to-Energy project development organisation. The Company has entered into an MOU with Peel Environmental to negotiate for the siting of its first commercial facility at Ellesmere Port near Chester and the Thornton Science Park. The Company is currently evaluating a number of other potential sites for the roll-out and licensing of future DMG® Systems.

Over the longer term the Company will look to exploit its proprietary know-how, technology developments and other processes to develop economical, environmentally sound, and efficient solutions to capture even more energy from the growing waste-steam generated by humanity. Operations will be rolled-out beyond the UK as opportunities present themselves.

The commercialisation phase is now underway and we are making positive progress by taking a customer-led approach, involving a combination of strategic alliances, commercial partnering and working directly with potential customers of our IP. Our flexibility combined with the modular design of our DMG® System allows us to tailor our technology to meet the most specific of partner and customer requirements. We are on track with the engineering design of the DMG® process and the latest performance and modelling data is showing strong results in terms of the outputs from a variety of feedstocks. The generic Front End Engineering Design (FEED) Engineering is now complete, allowing initial safety design reviews and independent third party design reviews to be initiated on schedule.

We are now focussing on specific applications and targeting commercial customers for our IP. The build and commissioning of the first DMG® system is expected to be completed, depending on specific customer requirements and funding being in place by Q3 2019 with full commercial operation commencing shortly thereafter.

We believe we have the right strategy in place to deliver growth over the medium to long term and to deliver sustainable shareholder value.

Further details of the Company’s operations and strategy are set out in the Chief Executive Officer’s Statement and the Strategic Report in the 2017 Annual Report and Accounts.

Key challenges and how they will be addressed:

The Company is subject to various risks relating to political, economic, legal, social, industrial, general business, and financial conditions. Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control system.

The Board is establishing a comprehensive risk register relating to significant aspects of the Company’s business using effective internal control systems to identify risks and implement appropriate processes to monitor, manage and mitigate known risks. There are a number of potential risks and uncertainties that could challenge the execution of the Company’s strategy and these are set out in the Principal Risks section of the Strategic Report of the Annual Report and Accounts.

The Board is committed to the maintenance of high standards of corporate governance and seeks to implement best practice as appropriate for smaller listed companies by reference to the provisions of the QCA Code.

Seek to understand and meet shareholder needs and expectations

PowerHouse is committed to open communication with all its shareholders. The Company believes it is important to explain business development and financial results to its shareholders and to ensure that suitable arrangements are in place so that the issues and concerns of major shareholders are heard and understood.

Copies of the Annual Report and Accounts are issued to all shareholders who have requested them and copies are available on the Company’s website at www.powerhouseenergy.net. The Company’s interim results are also made available on the Company’s website. The Company makes full use of its website to provide information to shareholders, other stakeholders, potential customers, and other interested parties.

Shareholders are given the opportunity to raise questions at the Annual General Meeting and the Directors are available both before and after the meeting for further discussion with shareholders. As a matter of policy, the level of proxy votes (for, against and vote withheld) lodged on each resolution is declared at the meeting. In the event there were a significant number of votes against a resolution, the directors would seek to communicate with the shareholder concerned to discuss their issues.

The CEO is primarily responsible for shareholder liaison. The Company’s shareholder base is currently largely comprised of retail shareholders. The CEO attends and presents at shareholder events from time to time where investors have the opportunity to discuss the Company’s progress and performance. Trading updates and press releases are issued as appropriate.

The Board receives regular share register analysis reports to monitor the Company’s shareholder base and help identify the types of investors on the register.

Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Company regards its shareholders, employees, industry bodies and regulators, consultants and advisors, business partners and suppliers as forming part of the wider stakeholder group. The Company recognises the contribution of each of these stakeholder groups and seeks to build meaningful and mutually beneficial relationships with them all.

Management identifies key relationships and effort is directed to ensuring they are managed appropriately.

The Company’s internal stakeholders are its employees and its consultants. The Company is committed to employment policies and respectful communications which follow best practice, based on equal opportunities for all employees, irrespective of ethnic origin, religion, political opinion, gender, marital status, disability, age or sexual orientation.

All of the Company’s stakeholders have access to contact information for communication with the Company. Feedback is respectfully acknowledged by the Company and appropriately dealt with.

The Board believes that its investment in the wider stakeholder network is expected to assist the Company’s management in achieving its long-term goals creating an environment of trust and communication which will have positive implications for the long term success of the Company.

Embed effective risk management, considering both opportunities and threats, throughout the organisation

Risk assessment and evaluation is an essential part of the Company’s planning and an important aspect of the Company’s internal control system.

The Board is establishing a comprehensive risk register relating to significant aspects of the Company’s business. Periodically, however, the Board considers the appropriateness of the risks identified and the mitigating action taken by management on a risk by risk basis focusing on those deemed most critical.

For further details of the Company’s approach to risk and its management, please refer to the Principal Risks section of the Strategic Report and to the details of the Audit Committee and AIM Compliance Committee in the Corporate Governance section of Annual Report and Accounts.

Maintain the board as a well-functioning, balanced team led by the chair

The Board, chaired by Dr Cameron Davies, comprises two executive and three non-executive directors and it oversees and implements the Company’s corporate governance programme. The executive directors are Keith Allaun and David Ryan. The non-executive directors are Dr Cameron Davies, Brent Fitzpatrick and James Greenstreet.

As chairman, Dr Davies is responsible for the Company’s approach to corporate governance and the application of the principles of the QCA Code. Dr Davies, Brent Fitzpatrick and James Greenstreet are the Company’s independent directors and, as such, are independent of management and any business or other relationships which would interfere with the exercise of their independent judgment. Further details pertaining to the Board will be set out in the Corporate Governance section of future Annual Report and Accounts.

Each board member commits sufficient time to fulfill their duties and obligations to the Board and the Company. They attend board meetings and join ad hoc board calls and offer availability for consultation when needed. The contractual arrangements between the directors and the Company specify the minimum time commitments which are considered sufficient for the proper discharge of their duties. However, in exceptional circumstances all board members understand the need to commit additional time.

Board packs include information on business developments, progress and risks faced as well as financial performance and are circulated ahead of board meetings. Key issues are highlighted and explained, providing board members with sufficient information to enable a relevant discussion in the board meeting. From time to time, members of the Company’s senior management present to the Board to update them on issues and developments. The number of Board meetings held throughout the course of the financial year are set out in the Corporate Governance section of the Annual Report and Accounts.

The Board is supported by its Audit Committee, its Remuneration Committee and its AIM Compliance Committee. Further details of these committees are set out in the Corporate Governance section of the Annual Report and Accounts.

Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The Corporate Governance report included in the Annual Report and Accounts identifies each member of the Board and describes the Board’s responsibilities. To date, the relevant experience, skills and personal capabilities and qualities that each member brings to the Board has not been specifically disclosed in the Annual Report and Accounts. This will be rectified in the next published Annual Report and Accounts.

The Board comprises two executive directors and three non-executive directors, three of whom are independent.

The Chairman believes that the Board should always have a suitable mix of skills and competencies covering all essential disciplines bringing a balanced perspective that is beneficial both operationally and strategically.

The nature of the Company’s business requires the Directors to keep their skillset up to date. Periodic advice on regulatory matters is given by the Company’s professional advisers.

The Board is supported by senior management and by its key partners and professional advisers. The advice provided to the Board is often commercially sensitive and used by the Board to inform their decisions but typically will not be disclosed.

The Company Secretary is a non-executive director of the Company and reports directly to the Chairman on governance matters.

Executive Directors

Keith Allaun, Chief Executive Officer

Mr Allaun has a background in alternative energy, venture capital and management consulting and has worked with leading companies in emerging technologies for over 25 years.

Educated at Stanford University in Palo Alto, CA, Mr Allaun has an extensive background in management and brings a wealth of results-driven experience to PowerHouse. Mr Allaun has helped build or revitalize dozens of companies & organisations throughout his career including Apple, Yahoo, Amazon and Hewlett-Packard.

David Ryan, Executive Director

Mr Ryan was the former CEO and Managing Director of Thyssenkrupp Industrial Solutions’ Oil & Gas Business Unit for the UK. Prior to his employment with Thyssenkrupp, he founded and built a successful engineering consulting organisation, Energy & Power Limited, which was acquired by Thyssenkrupp in 2012.

Mr Ryan has over 30 years of increasingly complex engineering, business development, and project management experience. An expert in sophisticated design engineering, he brings a breadth of project delivery, international business management, and general engineering acumen to the Board.

Non-Executive Directors

Dr Cameron Davies, Non-Executive Chairman

Dr Davies is a capable business leader who has successfully grown revenues and profits in a quoted alternative energy company. As founder, CEO, and Executive Director of AIM-quoted Alkane Energy plc (now Alkane Energy Limited), he led that company through each phase of its development. He built Alkane from its initial concept to the point of providing over 160MW of connected power generation, and a successful exit for his shareholders – a c. £60 million sale to Balfour Beatty Infrastructure Partners in October 2015. Prior to Alkane Dr Davies led a number of other start-up companies and is currently a Non-executive Director of AIM-quoted Ascent Resources plc.

Dr Davies was awarded a PhD in Applied Geochemistry from Imperial College London. Over the course of the past 20 years Dr Davies has evaluated numerous gasification technologies and projects. He is also a Fellow of the Geological Society of London a member of the European Petroleum Negotiators Group, and the Petroleum Exploration Society of Great Britain.

Brent Fitzpatrick, Non-Executive Director

Mr Fitzpatrick has over 20 years experience as a corporate finance consultant. In the last 15 years he has been instrumental in advising a number of companies on their acquisitions and subsequent flotations.

Mr Fitzpatrick was Non-Executive Chairman of Global Marine Energy plc- an AIM listed oil services company and Non-Executive Chairman of Risk Alliance plc, an insurance broker consolidator. Mr Fitzpatrick is also an adviser to ECO Capital, a global clean tech fund and is a member of the Audit Committee Institute.

James Greenstreet, Non-Executive Director

Mr Greenstreet has over 20 years of corporate and structured finance experience. Having started his career at Arthur Andersen, he joined BAE Systems in 1994 to work in the corporate finance team.

After leaving BAE, Mr Greenstreet held corporate finance positions at IBM and XL Capital, once more focussing on asset and lease finance. In 2001 he co-founded Orbis Capital a successful corporate and structured finance business. Over the past 10 years Mr Greenstreet has been instrumental in sourcing, structuring, packaging and managing transactions for a number of high profile clients across a wide range of sectors.

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Board performance effectiveness process

The assessment of the Board’s performance has to date been largely focused on the achievement of the Company’s financial and strategic goals. To date, the Company has not highlighted the processes by which it evaluates Board performance. However, it intends to address this in the next Annual Report and Accounts.

Each Board member is subject to a review by the Remuneration Committee based on their professional contribution as well as their contribution to the performance of the Company.

The terms and conditions of the arrangements, including remuneration are currently set by the entire Board of PowerHouse. The Board intends to highlight its process of review and progress against company objectives. The Board will consider proportionate use of external consultants to carry out this role.

Board appointments

The Remuneration Committee meets as and when necessary to consider the appointment of new directors. Board members all have appropriate notice periods so that if a board member indicates his intention to step down, there is sufficient time to appoint a replacement, whether internal or external.

Board appointments are made after consultation with advisers in all cases. The Nomad undertakes due diligence on all new potential board candidates.

Each director is required to offer themselves for re-election at least once every three years as per the Company’s articles of association.

Succession planning

Succession planning is currently undertaken on an informal basis by the CEO in consultation with the Board. The Board is satisfied that this is appropriate for this stage in the Company’s development.

Promote a corporate culture that is based on ethical values and behaviours

Consistent with Principle 3 above, the Company operates with an inclusive, transparent and respectful culture. The Board places particular emphasis on operating to the highest ethical and environmental standards. HS&E is a specific agenda item at every board meeting.

The Company’ objectives include observing the highest level of health and safety standards, developing our staff to their highest potential and being a good corporate citizen in our chosen countries of operations.

The Company is committed to employment policies which follow best practice, based on equal opportunities for all employees, irrespective of ethnic origin, religion, political opinion, gender, marital status, disability, age or sexual orientation.

Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The Board is confident that its processes and culture are appropriate for the Company’s current size and complexity, but is aware that it must continue to review its practices as the Company evolves and grows.

The executive members of the Board have overall responsibility for managing the day to day operations of the Company and the Board as a whole is responsible for implementing the Company’s strategy. The Board comprises:

  • Dr Cameron Davies, independent Non-Executive Chairman, who is responsible for leadership of the Board and for corporate governance and a member of the Audit, Remuneration and AIM Compliance committees.
  • Keith Allaun, Chief Executive Officer, who has overall responsibility for managing the Group’s affairs, including the activities arising from PowerHouse being a publicly quoted company, funding and investor relations. Keith is a member of the AIM Compliance Committee and has responsibility for HS&E reporting.
  • David Ryan, Executive Director, who has overall responsibility for Programme Development, oversees the technical operations of the Company. David is a member of the AIM Compliance Committee and has responsibility for HS&E reporting.
  • Brent Fitzpatrick, who is the Group’s senior independent Non-Executive Director, and chairman of the Audit and Remuneration committees and a member of the AIM Compliance Committee. Brent is the Company Secretary.
  • James Greenstreet, independent Non-Executive Director, who is a member of the Audit, Remuneration and AIM Compliance committees.

The Company has established an Audit Committee, an AIM Compliance Committee and a Remuneration Committee with formally delegated duties and responsibilities.

Audit Committee

The duties of the Audit Committee include reviewing, in draft form, the Company’s annual and half-yearly report and accounts and providing advice to the board. Members of the Audit Committee are also responsible for reviewing and supervising the financial reporting process and internal control systems of PowerHouse. The Audit Committee is comprised of the Non-Executive Directors of the Board.

Remuneration Committee

The Remuneration Committee is responsible for reviewing the scale and structure of the executive Directors’ remuneration and the terms of their service contracts with the Company, including share option schemes and any bonus arrangements. The terms and conditions of the arrangements, including remuneration, with non-executive Directors are set by the entire Board of PowerHouse.

AIM Compliance Committee

The AIM Compliance Committee has the primary responsibility for ensuring procedures, resources and controls are in place to enable compliance with the AIM Rules for Companies, in particular concerning the disclosure of information. The AIM Compliance Committee works closely with the Board to ensure that it consults with the Company’s Nominated Adviser on an ongoing basis. The entire Board is appointed to the AIM Compliance Committee.

The appropriateness of the Company’s governance structures will be reviewed annually in light of further developments of accepted best practice and the development of the Company.

Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company maintains a regular dialogue with stakeholders including shareholders to enable interested parties to make informed decisions about the Company and its performance. Regular communication enables the Board to receive shareholders’ views by various means as set out in Principle 2 above.

The Company regularly releases appropriate price sensitive information regarding its activities and progress to the market. The CEO and other management team members regularly participate in industry forums and investor conferences to keep stakeholders apprised of company developments.

The Board discloses the result of general meetings by way of announcement and discloses the proxy voting numbers to those attending the meetings. In order to improve transparency, the Board has committed to announcing proxy voting results in future and disclosing them on the Company’s website. In the event that a significant portion of voters have voted against a resolution, an explanation of what actions it intends to take to understand the reasons behind the vote will be included.

The roles and responsibilities of the committees supporting the Board are set out in the Corporate Governance section of the Annual Report and Accounts. The Company undertakes to provide all relevant committee reports in future Annual Report and Accounts.

Updated: 27 September 2018