AIM Rule 26

Corporate Governance Report

To the extent able (given the current size and structure of the Company and its Board) the Company has adopted the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’). The QCA Code sets out 10 principles that should be applied.  Details of how the Company complies with the QCA Code, and reasons for any non-compliance, are set out below together with a short explanation of how the Company applies each of the principles:

1. Principle One

Business Model and Strategy

Scirocco Energy is a natural resources investment company whose strategy is to acquire a diverse portfolio of direct and indirect interests in attractive production and development opportunities within the European energy market. In 2020, the Board announced its plan to review and augmented its strategy to invest in a broader European energy market strategy targeting attractive growth opportunities predominantly within the European gas and energy transition market whilst maximising value for shareholders from the Company’s existing portfolio.

The Board is seeking opportunities which meet the following criteria:

• cash generative, with the potential to re-invest operational cash flow in further growth;

• situated within the broad energy space, a market which the Board knows well;

• primary targets within the natural gas space, augmented by opportunities which may benefit from low carbon and electrification dynamics;

• assets which can attract the necessary investment capital, taking appropriate account of growing investor sentiment towards ESG and SRI indicators; and

• assets which deliver stable returns, with lower exposure to global commodity prices.

In February 2021, the Company and its Board announced a strategy update in which it provided additional information on its strategy. In particular, Scirocco is focused on three core areas of investment:

• Energy – assets which generate energy for sale as gas/biogas or power;
• Circular – assets which recover a valuable component of an industrial, municipal or agricultural waste stream for re-use, generally reducing system carbon footprint; and
• Vector – assets involved in the storage, transmission or delivery of energy within a low carbon context.

2. Principle Two

Understanding Shareholder Needs and Expectations

The Board is committed to maintaining good communication and having constructive dialogue with all its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend, where possible, the Company’s Annual General Meeting. Investors also have access to current information on the Company though its website, www.sciroccoenergy.com, and via Tom Reynolds (CEO) and Doug Rycroft (COO) , who are available to answer investor relations enquiries. The Company in conjunction with its investor relations advisor has developed a Communications Strategy to formalise how shareholder communications are managed.

3. Principle Three

Considering wider stakeholder and social responsibilities

The Board recognises that the long term success of the Company is reliant upon its ability and willingness to engage with the broader range of stakeholders to positively influence the development of the Company and the communities we interact with operationally and corporately. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships.

Given that Scirocco Energy is a small company there is close interaction between the Board and Executive Management to help ensure successful two way communication with agreement on goals, targets and aspirations for the Company. Scirocco Energy through its advisers and JV partners has developed close ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company.

4. Principle Four

Risk Management

It is critical that Scirocco Energy has a robust view of its risk profile and appetite so as to ensure both its existing and new investments are managed within acceptable margins of risk. The processes are in place to understand the Company’s key drivers for success and to be able to assess the associated risks in delivering on its strategy successfully. Given the specialised nature of investing in, and being involved in, the operations of development and production assets in the natural resource sector, it is imperative that the Board considers at all times that it has the appropriate risk management system including both people and processes to successfully mitigate these risks.

The Board encourages a dynamic and constructive dialogue between Executive Management, its advisers and the Board including the willingness to challenge assumptions and the consideration of emerging and interrelated risks for its investment portfolio.

In addition to its other roles and responsibilities, the Audit Committee is responsible to the Board for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Company. The risk assessment matrix below sets out those risks, and identifies the controls that are currently in place. This matrix is updated as changes arise in the nature of risks or the controls that are implemented to mitigate them. The Audit Committee reviews the risk matrix and the effectiveness of scenario testing on a regular basis. The Board has a comprehensive review of the risks every six months and works with Executive Management to understand and agree on the types and format of risk information that the Board requires. In addition the Board periodically assesses the risk oversight processes and ensure suitability with/and alongside its current policies. The following principal risks and controls to mitigate them, have been identified:

The Directors have established procedures, for the purpose of providing a system of internal control. An internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the CEO and COO. However, the Board will continue to monitor the need for an internal audit function. The Board works closely with and has regular ongoing dialogue with the outsourced finance function and has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. The outsourced finance function reports directly to the CEO who has responsibility at the board level for the finance function.

5. Principle Five

A Well-Functioning Board of Directors

The Board is currently comprised of four Directors; Alastair Ferguson, Non-Executive Chairman; Don Nicolson, Independent Non-Executive Director, Muir Miller, Independent Non-executive Director, and Tom Reynolds, CEO. Biographical details of the current Directors are set out within Principle Six below.

Executive and Non-Executive Directors are subject to re-election at intervals of no more than three years. The letters of appointment of all Directors are available for inspection at the Company’s registered office during normal business hours.  The Executive Director is considered to be a full time employee whilst the Non-Executive Directors are considered to be part time but are expected to provide as much time to the Company as is required.  The Board elects a Chairman to chair every meeting.

The Board notes that the QCA recommends that the Chairman’s responsibilities should be devolved from the day-to-day running of the business in order to ensure independence. Following the resignation of the former Managing Director in February 2019, Alastair Ferguson temporarily assumed the role of Executive Chairman in order to maintain a balance between executive and non-executive roles on the Board and to ensure the Company has sufficient executive oversight. The appointment of Tom Reynolds as CEO in October 2019 enabled Alastair Ferguson to step back into the role of Non-Executive Chairman.

The Board meets at least four times per calendar year. It has established an Audit Committee, a Remuneration Committee and an AIM Rules Compliance and Disclosures Committee, which are set out in more detail below. The Company is currently, per the update announced in February 2020 establishing a Sustainability Committee. At this stage, the Board does not consider it necessary to establish a separate Nominations Committee. It shall continue to monitor the need to match resources to its operational performance and costs and the matter will be kept under review going forward.

Attendance at Board and Committee Meetings

The Company reports annually on the number of Board and Committee meetings held during the year and the attendance record of individual Directors. To date in the current financial year the Directors have a good record of attendance at such meetings. In order to be efficient, the Directors meet formally and informally both in person and by telephone. To date there have been at least quarterly meetings of the Board, and the volume and frequency of such meetings is expected to continue at this rate.

6. Principle Six

Appropriate Skills and Experience of the Directors

The Board currently consists of four Directors. The Company believes that the current balance of skills and experience in the Board as a whole, reflects a very broad range of commercial and professional skills across geographies and industries and all of the Directors have experience in public markets.

The Board recognises that it currently has a limited diversity and this will form a part of any future recruitment consideration if the Board concludes that replacement or additional directors are required.

The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal.

Alastair Ferguson (Non-Executive Chairman)

Mr Ferguson is a Chartered Engineer and has over 40 years’ experience in the oil and gas industry, the last seven of which have been spent in various Chairman and non-executive director positions. Mr Ferguson has considerable commercial management experience and has specific expertise in business development and managing projects in complex political environments.

Don Nicolson (Independent Non-Executive Director)

Mr Nicolson is a senior business leader with more than 35 years experience in oil, gas, mining and natural stone sectors. During this time, he has held multiple board roles, executive & non-executive, in both publicly-listed and private companies. Between 2016 and 2019, Mr Nicolson held the role of Chairman and interim CEO for mining and quarrying firm Levantina Natural Stone Co., having previously held Vice Chairman, non-Executive Director and Advisor roles. Mr Nicolson spent more than 26 years with BP Exploration, during which he held roles including Director of BP North Sea, Chief of Staff to BP CEO (E&P), Vice President for BP Alaska and Vice President for BP Canada. Mr Nicolson is skilled in strategy development, asset management, business planning, investment decision making, and business restructuring and has significant fund-raising experience, including main market IPO and debt refinancing.

Muir Miller (Independent Non-executive Director)
Mr Miller is a Chartered Engineer and Member of the Institution of Mechanical Engineers with over two decades of senior executive experience, with particular focus on the renewable energy sector. Most recently, Mr Miller was Managing Director of Peel Energy, part of the privately owned, diverse and entrepreneurial Peel Group, a leading infrastructure, transport and real estate investor in the UK, with collective investments owned and under management of more than £5 billion. Prior to joining Peel Energy, he was Business Development Manager at Energy Power Resources, with an installed capacity of 113MW of dedicated biomass assets, 70MW of landfill gas assets, and 100 MW of wind assets in France, UK and Sweden. Between 2005 and 2007, Mr Miller was CEO of Novera Macquarie Renewable Energy, a joint venture with annual turnover of £32 million and one of the largest independent renewable energy operators in the UK with a total installed generating capacity of 117.5MW across 53 geographically diverse sites.

Tom Reynolds (CEO)

Mr Reynolds is a Chartered Engineer with over 25 years’ experience in the energy sector, including a range of technical and commercial roles with BP plc, Total SA and British Nuclear Fuels plc. He has also held management positions at private equity investment and advisory firms, including 3i plc, and specialises in strategic planning, investment management and cross-border M&A transaction execution in the oil, gas, energy and infrastructure sectors.

7. Principle Seven

Evaluation of Board Performance

Internal evaluation of the Board, the Committees and individual Directors is to be undertaken on an annual basis in the form of peer appraisal and discussions to determine their effectiveness and performance as well as testing the Directors’ continued independence. This will be undertaken in conjunction with external advisers as appropriate.

The results and recommendations that come out of the appraisals for the directors shall identify the key corporate and financial targets that are relevant to each Director and their personal targets in terms of career development and training. Progress against previous targets shall also be assessed where relevant.

8. Principle Eight

Corporate Culture

The Board is aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that partners, contractors and advisors behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.

A large part of the Company’s activities is centred upon what needs to be an open and respectful dialogue with partners, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great import on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.

The directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge. The Company has adopted a code for Directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.

9. Principle Nine

Maintenance of Governance Structures and Processes

Ultimate authority for all aspects of the Company’s activities rests with the Board, the respective responsibilities of the Chairman and Executive Director arising as a consequence of delegation by the Board. The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board. The Chairman is responsible for the effectiveness of the Board, while management of the Company’s business and primary contact with shareholders has been delegated by the Board to the Executive Director.

Audit Committee

The Audit Committee is comprised of Don Nicolson (Chairman) and Alastair Ferguson. This committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported. It receives reports from the Executive Management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee shall meet not less than twice in each financial year and it has unrestricted access to the Company’s auditors.

Remuneration Committee

The Remuneration Committee is comprised of Alastair Ferguson (Chairman), Jon Fitzpatrick and Don Nicolson. The Remuneration Committee reviews the performance of the executive directors and employees and makes recommendations to the Board on matters relating to their remuneration and terms of employment. The Remuneration Committee also considers and approves the granting of share options pursuant to the share option plan and the award of shares in lieu of bonuses.

AIM Rules Compliance and Disclosures Committee

The AIM Rules Compliance and Disclosure Committee is responsible for ensuring the Company has at all times sufficient procedures, resources and controls in place to enable compliance with the AIM Rules for Companies and make accurate disclosures to meet its disclosure obligations under MAR. The committee is comprised of Jon Fitzpatrick (Chairman), Don Nicolson, and Tom Reynolds.

Non-Executive Directors

The Board has adopted guidelines for the appointment of Non-Executive Directors which have been in place and which have been observed throughout the year. These provide for the orderly and constructive succession and rotation of the Chairman and non-executive directors insofar as both the Chairman and non-executive directors will be appointed for an initial term of five years and may, at the Board’s discretion believing it to be in the best interests of the Company, be appointed for subsequent terms.

In accordance with the Companies Act 2006, the Board complies with: a duty to act within their powers; to promote the success of the Company; to exercise independent judgement; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties and to declare any interest in a proposed transaction or arrangement.

External Representation

The Company has in the past invested in projects and jurisdictions where it believes it has a competitive advantage in providing early stage capital alongside specialist knowledge to realise potential value. In order to ensure the Company has full visibility and appropriate controls over the projects it has invested in the Company has representative participation in the various operating committees and / or Boards. The detail of which is outlined in the table below;

10. Principle Ten

Shareholder Communication

The Board is committed to maintaining good communication and having constructive dialogue with all of its shareholders. The Company has close ongoing relationships with its private shareholders. Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged, where possible, to attend the Company’s Annual General Meeting. As part of the Communications Strategy the Board has engaged investor relations advisers to guide the Company on best practice methods of communicating through digital, print and verbal mediums.

Investors also have access to current information on the Company though its website and via the Executive Management Team comprising of Tom Reynolds (CEO) and Doug Rycroft (COO), who are available to answer investor relations enquiries. The Company proposes in 2020, subject to the necessary formalities, to move to electronic communications with shareholders.

The Company shall include, when relevant, in its annual report, any matters of note arising from the three Board committees.

Corporate Governance Statement can be viewed in the Scirocco Annual Report and Accounts for Year Ending 31/12/21 – view pdf

The Board is responsible for creating value for shareholders, determining strategy, investment and acquisition policy, approving significant items of expenditure and consideration of significant financing and legal matters.

	Name	Title
	Alastair Ferguson	Non-Executive Chairman
Biography Extensive experience within blue-chip energy firms Board roles in growing AIM-listed vehicles Gas commercialisation expertise Mr. Ferguson has more than 40 years of commercial and business experience in the oil and gas industry. He has developed international gas projects throughout EMEARC and has specific expertise in M&A, turnarounds and developing new business. He has proven leadership skills and an ability to operate in challenging business and political environments. Alistair has spent the last 8 years in various Non-Executive Director and Chairman positions with JKX Oil and Gas, KazMunaiGas Exploration and Production and Zoltav Resources. He has 33 years of experience in E&P with BP. Between 2003 and 2011 he was Executive VP for Gas and Power at TNK BP in Moscow, where he developed the company’s gas and power business in Russia and Ukraine. He is a Chartered Engineer and holds a BSc (Hons) in Mining Engineering from Strathclyde University and an MBA from Warwick University. He became non-executive Chairman in August 2018 and took on the role of Executive Chairman in February 2019.
	Tom Reynolds	Chief Executive Officer
Biography Experienced executive director of AIM-listed companies Industry knowledge with private equity and investment experience Acquisition expertise in focus geographies Mr. Reynolds is a Chartered Engineer with more than 30 years of experience in the energy sector, specialising in strategic planning, investment management and cross-border M&A transaction execution in oil, gas, energy and infrastructure. He has held a range of technical and commercial roles with BP, Total and British Nuclear Fuels, as well as management positions at private equity investment and advisory firms, including 3i. Most recently, Tom was CEO of Iona Energy, having previously been CEO of Bridge Energy, which he grew through a series of acquisitions before listing the group in both Oslo and London, prior to its c.US$150m sale to HitecVision-backed Spike Exploration Holding in 2013.
	Don Nicolson	Independent Non-Executive Director
Biography Extensive experience managing gas assets Board and Executive roles in extractive businesses Experienced in strategy, business planning and performance management Mr Nicolson is a senior business leader with over 35 years’ experience in the oil, gas, mining and natural stone sectors. He has held multiple Board and senior executive roles both in the UK and internationally. This included 26 years with BP where he ran oil and gas businesses in the UK, United States and Canada. Key roles included Director North Sea where he was accountable for a multi-billion-US dollar turnover and a workforce of c.2000; Chief of Staff to BP’s CEO (E&P); Vice President BP Alaska and Vice President BP Canada. Don holds an MA (Hons) in Economics and International Relations from the University of St. Andrews.
	Matt Bower	Non-Executive Director
Biography Experienced executive director and Company Secretary of AIM, CSX & TSX listed and private equity backed companies. Extensive financial and commercial experience, including funding and structuring hi-growth companies Strategic board advisor and mentor to multiple successful start-up technology and innovation companies Mr. Bower has more than 40 years’ experience in the Marine and Energy sector in senior management and leadership roles with an expertise in restructuring companies, strategic planning and business optimisation of SME’s focusing on sustainable processes and technologies. Since 2017 he has fulfilled a key leadership role during the restructuring of a listed company and led the business in an executive capacity and Company Secretary during a highly challenging market environment through to a fully funded going concern and subsequent company sale maximising shareholder value. More recently he has focused on technology commercialisation and business optimisation at a strategic and operational level having received The 2023 Green Solution Provider Award for work on reducing NOx emissions. Matt is a Class 1 Master Mariner having gained his qualification from the Solent University; Southampton

The Board has established the following committees, each which has its own terms of reference:

Audit committee
The Audit Committee considers the Group’s financial reporting (including accounting policies) and internal financial controls. The Audit Committee comprises two Directors, Don Nicolson (Chairman) and Alastair Ferguson are responsible for ensuring that the financial performance of the Group is properly monitored and reported on.

Remuneration committee
The Remuneration Committee is responsible for making recommendations to the Board of Directors’ and senior executives’ remuneration. It comprises three Directors, Jon Fitzpatrick (Chairman), Alastair Ferguson and Don Nicolson. Non-Executive Directors’ remuneration and conditions are considered and agreed by the Board. The Committee will also have regard to the terms which may be required to attract an experienced executive to join the Board from another company.

AIM Rules Compliance and Disclosures Committee
The AIM Rules Compliance and Disclosure Committee will be responsible for ensuring the Company has at all times sufficient procedures, resources and controls in place to enable compliance with the AIM Rules for Companies and make accurate disclosures to meet its disclosure obligations. The committee will comprise of Jon Fitzpatrick (Chairman), Don Nicolson, and Tom Reynolds.

Shareholder Information. View Circulars
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Scirocco Energy is operated from the United Kingdom. Incorporated in England and Wales, with its main operations in Tanzania.

The Company’s shares are admitted to trading on AIM and it is not listed on any other exchanges or trading platforms.

In addition the Company has 265,324,634 deferred shares of 0.69p each. These deferred shares are non-voting, are not admitted to trading on AIM and are not entitled to any participation in the profits or the assets of the Company. These shares resulted from the reverse takeover of Emersion Technology International plc and have no material significance to the current publicly traded shares.

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There are no restrictions on the transfer of the Company’s AIM securities.

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