REG - Aquila Energy Effcn. - Annual Financial Report
30/04/2024 15:15
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RNS Number : 6613M Aquila Energy Efficiency Trust PLC 30 April 2024
LEGAL ENTITY IDENTIFIER ('LEI'): 213800AJ3TY3OJCQQC53
AQUILA ENERGY EFFICIENCY TRUST PLC
Aquila Energy Efficiency Trust Plc (the "Company" or "AEET") is pleased to
announce its audited results for the year ended 31 December 2023.
Investment Objective
Further to the adoption of a new investment policy at the 2023 AGM, Aquila
Energy Efficiency Trust Plc is being managed with the intention of realising
all remaining assets in the portfolio in a prudent manner consistent with the
principles of good investment management and with a view to returning cash to
shareholders in an orderly manner.
Highlights (Consolidated figures)
As at As at
31 December 31 December
Financial information 2023 2022
NAV per Ordinary Share (pence)(1) 94.28 95.23
Ordinary Share price (pence) 57.25 71.00
Ordinary Share price discount to NAV(1) (%) (39.3) (25.4)
Dividends per Ordinary Share (pence)(2) - 3.5
Net assets (in £ million) 94.28 95.23
Ongoing charges(1) (%) 3.5 2.6
Performance summary % change % change
NAV total return per Ordinary Share(2) 0.3 0.1
Share price total return per Ordinary Share(1,2) (17.6) (23.5)
1 These are Alternative Performance Measures (''APMs'') for
the year ended 31 December 2023. Definitions of these APMs and other
performance measures used, together with how these measures have been
calculated can be found at the end of this announcement.
2 Including dividends declared relating to the year under
review.
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to present the annual report (the "Annual
Report") for Aquila Energy Efficiency Trust Plc, for the year ended 31
December 2023.
Investment Performance
The Company's NAV at 31 December 2023 was £94.28 million (£95.23 million as
at 31 December 2022). The principal change in the NAV was caused by the
payment of a dividend of £1.25 million on 20 March 2023 in respect of the
quarter ended 31 December 2022. The Company declared no dividends in respect
of the quarter periods in 2023 and the Company's share price, in the context
of the failure of the Continuation Vote on 28 February 2023 and the subsequent
successful combined Continuation Managed Run-Off Resolution on 14 June 2023,
traded at a significant discount to NAV over the year to 31 December 2023
resulting in a share price total return of minus 17.6%.
As at 31 December 2023, the Company had investments of £65.48 million and
legal contractual obligations to fund committed investments of £5.58 million.
During the year, due to the Managed Run-Off status of the Company,
relationships have become strained with some of the Energy Services Companies
("ESCOs") which have been the intermediaries to the Company's investments. If
these relationships deteriorate further there may need to be additional
impairment to the value of some of the Company's investments. Meanwhile, the
Investment Adviser continues to monitor the performance of the Company's
investments closely.
In light of the successful Continuation Managed Run-Off Resolution, the Board
has been working with its financial advisers to ensure that the Company is in
a position to present Shareholders with a proposal to return cash. This has
been a complex process and I will discuss this in some detail later in my
letter. We have, however, operated during the year with the principal
intention to preserve cash. This has resulted in decisions not to proceed
(where it was legally possible) with £14.6 million of potential investments.
This has left only £5.58 million to be invested, the majority of which was
deployed by the end of April 2024.
The difficulty of ensuring a return of capital from assets that are
individually small in size, geographically spread, contractually complex and
in many instances of a long maturity should not be underestimated. Our
advisers have run an extensive process to seek offers from market participants
for the portfolio of assets which would deliver value to Shareholders in a
shorter time frame than a Managed Run-Off. The Board has also been open to
entertaining structural proposals which would address the Company's size and
liquidity, mindful always of the Shareholders' desire to see a full return of
capital. However, it has not yet proved possible to find an asset sale or a
structural solution that provides sufficient value in comparison with the
Managed Run-Off. The Board, with the support of its advisers, continues to
seek alternatives to increase the value returned to Shareholders via the
Managed Run-Off. As announced on 6 March 2024 and detailed fully in the notice
of General Meeting dated 19 April 2024, the first successful return of capital
under the Managed Run-Off is to be achieved by way of a tender offer at a
fixed price of 94.28 pence per share, subject to the approval of Shareholders
at the General Meeting to be held on 13 May 2024.
As mentioned, the Company has been managed over the year with the principal
objective to preserve cash and, accordingly, we will now, as part of the
Managed Run-Off process, return £17.5 million to Shareholders under the
tender offer. We have decided to return capital to Shareholders by way of a
tender offer as we believe it is in the interests of the majority of
Shareholders and provides an equitable distribution. We will, however,
continue to keep under review the method of distribution, including the
payment of dividends. Whilst further distributions will be made as
unrestricted cash becomes available, I wish to stress that a significant part
of the portfolio may take a considerable time to realise.
Costs
I am very mindful of the significant annual additional costs incurred in the
running of the Company. In part, these costs are a consequence of the
substantial processes involved in working towards a return of capital to
shareholders. Whilst a first tender offer was announced on 19 April, this only
reflects one outcome from the work to return capital and the Board continues
to work with its advisers to identify other means of delivering greater value
to shareholders. In addition, a further significant operational cost element
derived from the financial statement preparation process for the year to
31 December 2022 on the part of the Company's service providers which was not
as efficient as the Board had anticipated, which remains under review and for
which the Company may seek an element of cost recovery at the appropriate
time. The Board is mindful of the ongoing risks and costs of managing the
run-off process, and is working to find ways to mitigate these risks.
Dividends
Following the failure of the Continuation Vote in February 2023 we announced
that future dividends will only be paid from net income, and after reviewing
cash flow forecasts, only in respect of six-month periods. The Board announced
on 6 March 2024 that, subject to Shareholder approval, it will return capital
to Shareholders by way of a tender offer. As a result, no dividend has been
declared in respect of the year ended 31 December 2023. The Board will
continue its policy on future dividends, while also mindful of the regulations
regarding the retention of Investment Trust status which impact the
declaration and payment of annual dividends.
Miriam Greenwood OBE DL
Chair of the Board
30 April 2024
INVESTMENT ADVISER'S REPORT
Investment Adviser's Background
The Company's AIFM, FundRock Management Company (Guernsey) Limited (formerly
Sanne Fund Management (Guernsey) Limited), has appointed Aquila Capital
Investmentgesellschaft mbH as the Investment Adviser to the AIFM in respect of
the Company.
The Investment Adviser offers advice on potential Energy Efficiency
Investments in line with the Company's Investment Policy as approved by the
Continuation Managed Run-Off Resolution. Aquila Capital Investmentgesellschaft
mbH is part of Aquila Group, an investment and asset development company
focused on generating and managing essential assets on behalf of its clients.
Founded in 2001 by Dieter Rentsch and Roman Rosslenbroich, Aquila Group
currently manages and/or advises assets worth around €14.6 billion on behalf
of institutional investors worldwide (as at 31 December 2023). Daiwa, one of
Asia's largest investors, is a minority shareholder in the Aquila Group.
By investing in clean energy and sustainable infrastructure, Aquila Group
contributes to the global energy transition and strengthens the world's
infrastructure backbone. The Company initiates, develops and manages essential
assets along their entire value chain and lifetime. Aquila Group's primary
objective is to generate performance for its clients by managing the
complexity of essential assets.
Currently, Aquila Group manages wind energy, solar photovoltaic ("PV") and
hydropower assets of 19.8 gigawatts ("GWs"). Additionally, 2.2 million square
metres of sustainable real estate and green logistics projects have been
completed or are under development. Aquila Group also invests in energy
efficiency, carbon forestry and data centres. Aquila Group has been committed
to climate change for more than 15 years. Sustainability has always been part
of the company's value system and is an integral part of its investment
strategies, processes and management of its assets. The company has around 750
employees from 60 nations, operating in 19 offices in 17 countries worldwide.
Investment Advisory Team
Alex Betts - Senior Investment Manager: Alex Betts has over 30 years'
experience in private equity and over 15 years in resource efficiency and has
invested in a range of industries, geographies and stages. Based in London, he
joined Aquila Capital from Adaxia Capital Partners ("Adaxia"). Prior to Adaxia
Alex was a member of the private equity team at Climate Change Capital
("CCC"), which span out into Adaxia. Prior to CCC he was Head of Royal Dutch
Shell's corporate venture capital unit and a former partner of Montagu Private
Equity. He is British and graduated in Classics from Oxford University.
Franco Hauri - Senior Investment Manager: Franco Hauri has over 20 years'
experience in private equity with over 15 years in resource efficiency, of
which the last six years have been focused on investing in energy efficiency
projects. Based in Zurich, he joined Aquila Capital from Adaxia. Franco is a
former member of the private equity team at CCC, an Investment Adviser at
NanoDimension, a venture capital firm investing in nanotechnology, and a
consultant with Bain & Company. Franco holds an MBA from Harvard Business
School and a master's degree in finance, accounting and controlling from the
University of St. Gallen (HSG). He is Swiss and speaks English, German,
Italian, Spanish and French.
Investment Activity
At the start of 2023, the Investment Adviser was focused on achieving full
deployment of the Company's capital. However, after the failure of the
Continuation Vote on 28 February 2023 and following the success of the
Continuation Managed Run-Off Resolution on 14 June 2023, the Investment
Adviser has supported the managed run-off of the Company's portfolio and
preparations for a potential sale of the Company's assets announced on 16
August 2023. While pre-existing legally binding commitments are being
honoured, the Investment Adviser has taken opportunities where possible to
withdraw the Company from £14.6 million of commitments extant as at 31
December 2022 to invest into three Spanish projects. In addition, in October
2023 an agreement was reached to withdraw from a partially invested Solar PV
investment, which was valued at £2.1 million at 31 December 2022 and had an
unfunded commitment of £4.5 million (see "Investments in Spain" section
below), and receive repayment of the original investment of £1.5 million plus
interest.
During 2023, £21.8 million was deployed, taking total invested capital,
before redemptions and value adjustments, to £69.5 million. £14.4 million
was deployed in 13 commitments which had already been made as at 31 December
2022 and the balance of £7.4 million to nine new commitments that were
concluded by 28 February 2023, the date of the failed Continuation Vote. These
new investments comprised:
· three Spanish Solar PV investments with three new ESCOs for
a total commitment of £4.7 million, of which £4.2 million was deployed as
at 31 December 2023;
· two additional rooftop Solar PV projects in Italy, with a
total investment of £1.3 million; these projects are with Noleggio Energia
with whom a further deployment of £0.7 million, committed to in 2022, was
made during 2023 with the final deployment of £0.5 million completed in
January 2024. The Company has completed seven projects with this ESCO
involving total deployment of £4.2 million.
· three lighting investments in the UK with two new ESCOs
involving total commitments of £1.8 million, of which £1.6 million was
deployed as at 31 December 2023; and
· a third UK wind power project involving an additional £0.3
million investment, taking total commitments with this ESCO to £2.0 million.
The Company now forecasts a further £5.6 million (including expected
transaction costs) will be invested into existing commitments after 31
December 2023. The majority of this capital was deployed by the end of April
2024, leaving only £1.2 million to be deployed through the remainder of 2024.
Overall, the remaining investments have been performing satisfactorily with
only a small number of exceptions, which have required significant provisions,
including:
· a full provision of £1.4 million against a Solar PV
investment, which was being developed in Spain due to the insolvency of the
ESCO developing the project and refusal of the ESCO's client to proceed with
the project which had been partly funded by the Company;
· a provision of £1.1 million, equal to 82% of the
investment value, prior to the provision, as at 31 December 2023, against the
sub-metering investment in Germany due to the insolvency of the company
servicing the contracts which were financed by the Company; and
· an additional provision against the EGA Energy investment
of £0.4 million, taking the total provision to 50% of the investment cost.
Two of the provisions were caused by the insolvency of the ESCO as opposed to
the counterparty making payments under the contracts financed by the Company.
The Investment Adviser continues to monitor closely not only the receipt of
payments due under contracts and the financial status of the counterparties
making the payments but also the status of the ESCOs which developed or which
are developing and managing the Company's investments in those particular
projects. This oversight of ESCOs and the maintenance of relationships with
the ESCOs remains an important activity since the ESCOs in many cases had been
expecting, before the failure of the Continuation Vote, that the Company would
finance multiple other projects.
As at 31 December 2023, the Company's cash position, including cash held as
collateral for foreign exchange hedging, was £29.1 million. Notwithstanding
the remaining investment commitments, the cash position is forecast to
increase significantly due to the expected realisations of Superbonus
investments, which were valued at £30.9 million as at 31 December 2023 and
which are forecast to be realised in full by 31 December 2024. Realisations of
Superbonus investments continue to be subject to timing uncertainties due to
the bureaucracy inherent in the schemes - see further below under "Investments
in Italian "Superbonus" projects".
Portfolio Overview
As at 31 December 2023, the Company's portfolio of 35 Energy Efficiency
Investments was diversified across geographies (Italy, Spain, Germany and the
United Kingdom), technologies, counterparties and ESCO partnerships. The
Company's portfolio is characterised by projects with (i) a low technology
risk through the use of proven technologies; (ii) medium to long-term
contracts providing for predictable cash flows; and (iii) counterparties with
good creditworthiness.
Approximately 72% of the Company's investments by value at the year end had
investment grade counterparties, as assessed using either the Investment
Adviser's credit analysis or external agencies. For projects which are
non-investment grade, there are typically additional protections. These
protections include the ability to export power to the grid, and to extend the
maturity of a contract with the ESCO and the underlying counterparty to
recover missed payments. The latter is possible because the Company's
financing agreements are of a shorter duration than the useful life of
equipment installed and, in many cases, of a shorter duration than the
contract between the ESCO and the counterparty. The credit quality and
performance of the Company's portfolio is discussed further below in respect
of valuations and expected credit loss provisions.
The Company's portfolio also benefits from a combination of fixed and variable
return cash flows. While approximately 84% of the total investment value
provides a fixed rate of return from contractual cash flows, approximately 16%
by investment value has variable cash flows linked to power production and
power prices, or inflation indexation. In many cases, these variable return
investments have significant fixed income elements, for example feed-in
tariffs or fixed power prices in Power Purchase Agreements. In addition,
certain investments have downside protections, for example, minimum
contractual returns in order to reduce the risk of lower than forecast cash
flows. The Company's portfolio of investments is expected to achieve an
unleveraged average return of 8.6% per annum, an increase from the yield of 8%
per annum reported in the audited Annual Report and Accounts for the year
ended 31 December 2022.
Investments in Italy (£34.9 million value at year end)
In the year ended 31 December 2023, the Company committed £1.3 million to two
new rooftop Solar PV projects developed by Noleggio Energia, with which the
Company has now made seven investments. During the year, £13.0 million was
deployed to both these new investments and other existing commitments in
Italy, the majority of which, £10.9 million, was deployed into Superbonus
projects.
As at 31 December 2023, total investment value in Italy was £34.9 million
across a total of 13 investments and there was £0.5 million of outstanding
commitments, which was deployed in January 2024.
1) Investments in Italian "Superbonus" projects (£30.9 million value at year
end)
The net cash deployed in Superbonus projects increased from £18.1 million as
at 31 December 2022 to £29.0 million as at 31 December 2023. Significant
progress has been made on the 109 individual projects within the five clusters
such that construction has been completed on 105 of these projects to date,
with the remaining four projects forecast to be completed by the end of June
2024. Fourteen projects have been fully completed with payments totalling
£2.9 million for those tax credits received, of which £0.9 million was
received in 2023 and £2.0 million in January, February and April 2024.
Regarding the remaining projects, the ESCOs are experiencing delays in
receiving certification of the tax credits although as at the end of April
2024 a large majority of the 109 projects had secured tax
credit certification, significant progress from the position as at the end of
September 2023. The ESCOs are also experiencing delays with final payments
from the buyers of the tax credits, which is understood to be primarily due to
the large number of tax credits which buyers are processing. As a result of
the delays, the ESCOs are expecting the majority of the capital deployed to be
redeemed by the end of 2024. The Investment Adviser has considered whether
these delays represent a significant increase in the credit risk of these
investments and, following detailed enquiries with the ESCOs managing these
projects, has concluded that at this stage there has been no significant
change in credit risk. See note 4 to the financial statements for further
information regarding the assessment of Superbonus projects.
"Superbonus" is an incentive measure introduced by the Italian Government
through Decree "Rilancio Nr. 34" on 19 May 2020, which aims to make
residential buildings (condominiums and single houses) more energy efficient
through improvements to thermal insulation and heating systems. When
qualifying measures are completed, ESCOs delivering the measures are awarded a
tax credit equal to 110% of the cost of the measures. These tax credits can
then be sold to banks, insurance companies and other corporations and, thus,
projects can be financed without the need for a financial contribution from
landlords. The projects which the Company committed to finance are being
managed by three ESCOs: Enerstreet, Enerqos Energy Solutions and Sol Lucet.
The projects involve a range of energy efficiency measures including
insulation, the replacement of heating systems with more efficient solutions
and energy efficient windows.
2) Solar PV investments for self-consumption in Italy (£4.0 million value at
year end)
As at 31 December 2023, the Company had invested £4.6 million in eight
rooftop Solar PV projects with an aggregate capacity of 5.1 MWp. Following
completion of the final project in January 2024 with an investment of £0.5
million, all of these projects are operational and cash paying such that as at
31 December 2023, £0.5 million of capital had been redeemed. These projects
enable companies to reduce their energy expenses and CO(2) emissions and avoid
grid losses through the self-consumption of the electricity produced.
2.i) Projects with Noleggio Energia
Of these eight Solar PV projects which the Company has committed to finance,
seven projects have been developed by the ESCO Noleggio Energia, which was
established in 2017 and is an Italian company that specialises in providing
operating leases for energy efficiency and renewable energy projects for
commercial and industrial clients in Italy. These projects are all structured
as the purchase of receivables from operating leases with maturities of seven
or ten years, with a weighted average maturity of eight and a half years
outstanding, and all use very similar documentation. Noleggio Energia has
transferred to the SPV the monthly receivables from these operating lease
agreements, which provide for fixed rates of return with a weighted average
return of 7.9% per annum.The projects with Noleggio Energia at year end are
summarised below:
Counterparty Description Investment Capacity Credit Rating Initial Term
Value kWp Yrs
£k
Acetificio Galletti Producer of vinegars, dressings, pickles and other food products 208 238 BB- 7
Enofrigo Manufacturer of wine cabinets and hot and cold food display units 89 127 BBB+ - BBB- 7
Tecnocryo Manufacturer of machines for handling cryogenic fluids 1,130 1,000 BB+ - BB 10
Ali Group Manufacturer of food service equipment 294 443 BBB+ - BBB- 7
Orlandi Manufacturer of non-woven products for a range of applications 355 876 BB+ - BB 10
Marangoni Manufacturer of tyre retreading systems and products 809 1,000 BB+ - BB 10
Carpigiani Manufacturer of machinery to produce ice cream 427 479 BBB+ - BBB- 5
Total 3,312 4,163
2.ii) Project with CO-VER Power Technologies
In January 2022, the Company refinanced the acquisition of an existing rooftop
Solar PV plant in Ascoli Piceno (Central Italy) with a generating capacity of
902 kWp. The investment, with an original cost of £0.7 million, is based
on the purchase of receivables generated by an energy service contract
between the leading Italian engineering firm CO-VER Power Technologies
("CO-VER") and its subsidiary Futura APV S.r.l. ("Futura"). The contract
governs the management of an operating roof-mounted Solar PV plant until April
2028. Thereafter, the investment is based on a feed-in tariff for an
additional six years, aggregating to a twelve-year tenor. The investment,
which generated total cash receipts of £0.2 million in the period from
inception of the investment until the year end, is forecast to generate a
return of 6.5% per annum based on the year end valuation of £0.7 million. The
valuation remains equal to the original cost due to the discount rate used for
the valuation at the year end being lower than the forecast return at the time
of the original investment.
CO-VER has a successful 20-year history in developing industrial projects in
the areas of energy storage systems, co/tri-generation plants and renewable
energies. Futura is the owner of the PV plant which benefits from feed-in
tariffs payable by Gestore dei Servizi Energetici ("GSE"). GSE is a joint
stock company managed by the Italian Government which is responsible for
promoting and developing the growth of renewable assets in Italy. GSE
currently has a credit rating of BBB+ from the Italian Government.
Investments in Spain (£8.6 million value at year end)
In the year ended 31 December 2023, the Company deployed £6.8 million into
projects in Spain, to complete five projects which were committed as at 31
December 2022 and to finance a further three Solar PV projects in Spain with
three new project developers. The largest of these projects was a £3.4
million project at the site of a Spanish agricultural company. At the year end
there were unfunded commitments to investments in Spain of £1.2 million.
£0.6 million is forecast to be deployed before the end of the third quarter
of 2024 to complete a building energy efficiency investment programme, which
received investment of £2.1 million in the year ended 31 December 2023. The
balance of £0.5 million will complete the financing of Solar PV projects for
an ESCO with whom the Company completed on the first tranche of its commitment
in March 2023.
1) Solar PV investments in Spain (£6.3 million value at year end)
The Company has committed capital to finance the development of ten Solar PV
installation projects throughout Spain with nine project developers. Two of
the projects have been structured to provide fixed rates of return while the
remaining eight projects have been structured under Power Purchase Agreements
("PPAs") with maturities of up to 18 years and have variable revenues, often
subject to a combination of production fluctuations, power price changes and
inflation. In addition, excess production beyond the on-site demand may be
injected into the grid.
These variable revenue risks are mitigated by conducting technical due
diligence prior to making commitments and by contracted prices within the
PPAs.
Seven of these investments are now fully operational while one project is
operating at one site and the Company has an outstanding commitment of £0.5
million to another site. This commitment is payable at completion of the
project provided that certain conditions are met. As referred to in the
Investment Activity section above, one project has been realised and one
project will not proceed and it has been necessary to take a £1.4 million
provision, equal to 100% of the cost, against this investment. The developer
of this project filed for insolvency protection in November 2023 having
received £1.4 million as a down payment on the estimated full project cost of
£2.8 million.
2) Building Energy Efficiency Investments in Spain (£2.3 million value at
year end)
The Spanish Government has established incentive schemes to promote energy
efficiency measures in buildings, including the "Programa de Rehabilitacion
Energetica de Edificios" ("PREE"). PREE is a €402.5 million incentive scheme
in Spain which is designed to promote and reward energy efficiency
improvements for condominiums and other buildings, improving their energy
rating by at least one energy class. Under this scheme, the Company has
committed £2.8 million to fund the refurbishment of condominiums, which is
being managed by a leading ESCO specialised in designing and implementing
energy efficiency and renewable energy projects in Spain. The investment cash
flows are based on the purchase of receivables generated by the underlying
energy saving contracts between the ESCO and the "Comunidad de Proprietarios";
the legal entities which represent each of the owners of the apartments in a
residential building. The receivables have been rated with the S&P
equivalent of A+/A. £2.2 million has been deployed as at 31 December 2023 and
the balance is forecast to be deployed in full by the end of June 2024.
Investments in Germany (£17.3 million value at year end)
In the year ended 31 December 2023, no further investments were made in
Germany except for the settlement of £0.1 million of transaction costs. The
Company has four investments in Germany, across four distinct technologies
including sub-metering technologies, water management solutions, heat pumps
and Bio-LNG. There remained an outstanding legal commitment at the Year End to
invest £3.7 million to finance the installation of liquefaction equipment at
a biogas plant in Northern Germany. This amount was deployed in April 2024
following receipt of all necessary permits.
Three of the investments in Germany provide for fixed rates of return while
the other, a biogas investment, has a variable return above a fixed rate of 5%
per annum, which is equivalent to 8% of revenue generated by the project,
capped at £1.1 million across eight years. This arrangement results in an
overall forecast return from this project of 7.6% per annum based on the year
end valuation of £4.8 million.
Three of the investments are performing in line with the contracts. However,
the sub-metering investment, which had a book value of £1.5 million as at 30
June 2023, before the receipt of £0.2 million in July 2023, required a
significant provision of £1.1 million to reduce the holding value to £0.2
million following the insolvency of the service provider in October 2023.
While the Company's investment is through a special purpose subsidiary of the
service provider ("SPV"), which owns sub-metering and other services contracts
with various landlords and which is not in insolvency, the insolvency requires
the SPV to secure an alternative company to service the contracts. This search
is in progress with the support of an industry expert. Unfortunately, it is
likely that a new servicer will not wish to take on one of the major
contracts, as a result of which the SPV is likely to lose c.35% of the
contractual income stream due to the difficulties of servicing the contract,
reducing total future revenue to £1.1 million. In addition, an alternative
servicer is likely to require a higher percentage of revenues than the service
provider required, which combined with the likely loss of income requires a
provision against the investment.
Investments in the United Kingdom (£4.7 million value at year end)
In the year ended 31 December 2023, the Company committed £2.0 million to
four new investments. The four new investments, developed by two new and one
existing ESCO relationship, comprised:
· two groups of lighting investments for an industrial
company and schools, totalling £1.2 million, of which £0.1 million remains
to be deployed;
· another group of 17 lighting investments for a range of
schools and industrial companies, totalling £0.5 million, which has been
fully deployed; and
· an investment of £0.3 million into a fifth operating wind
power project.
As at 31 December 2023, total cash deployed to investments in the UK was £5.3
million, with £0.1 million of commitments outstanding for lighting
investments. Deployment is expected in the first half of 2024.
The CHP investment for a food producer, Vale of Mowbray, to which £0.9
million had been deployed and, as previously reported in the Half-Yearly
Financial Report for the six months to 30 June 2023 and in the 2022 Annual
Report, this investment remains on hold because Vale of Mowbray was placed
into administration. Discussions continue between Ega Energy, the developer of
the original project, and the new owner of the site, a cold store logistics
business. However, the new owner of the site has not yet decided whether or
how to proceed with the CHP investment. Ega Energy remains confident that it
will be able to deploy the CHP equipment either at this site or at the sites
of other potential clients in the UK. Nevertheless, the Company has increased
the provision against this investment from £0.06 million as at 31 December
2022 to £0.48 million at the year end and the Company is forecasting that no
further capital will be deployed to this investment.
The UK investments in the wind power projects are variable return investments
due to the variability of power production and export tariffs, which are
renewed each year, although a significant percentage of revenue is based on
feed-in tariffs which benefit from annual inflation adjustments. The other UK
investments which are in CHP and lighting projects are all fixed return
investments albeit the lighting projects with one of the ESCOs have annual
inflation adjustments.
Valuations and Expected Credit Loss Provisions as at 31 December 2023
As at 31 December 2023, the Company's investments had a book value of £65.5
million, with investments held at amortised cost valued at £55.0 million and
investments held at fair value through profit or loss valued at £10.5 million
(see Note 3 of the Accounts).
The investments held at amortised cost are net of expected credit loss
provisions of £1.9 million, which increased by £1.8 million from £0.1
million as at 31 December 2023. The principal reasons for the increase were
the provision of £1.1 million made against the sub-metering investment in
Germany, and a provision of £0.5 million against the Ega Energy Vale of
Mowbray investment. Apart from these projects, the Company has not experienced
payment issues of material significance on the receivables due to be paid to
it in the year.
The change in valuation of the investments held at fair value through profit
or loss was impacted primarily by: (i) the realisation of a partially
completed investment in a Spanish Solar PV project; and (ii) a full provision
of £1.4 million against another Solar PV investment in Spain.
In October 2023, the Company received repayment in full plus interest of an
investment in a partially completed investment in a Spanish Solar PV project.
This investment had involved an initial investment of £1.5 million in August
2022, which was part of a total commitment of £6.3 million as at 31 December
2022. The valuation as at 31 December 2022 was marked up from its cost of
£1.5 million to £2.1 million but as at 30 June 2023 was marked down to
£0.8 million, primarily due to lower forecast power prices. The repayment of
the cost of the investment plus interest, totalling £1.7 million, has
resulted in a capital loss over the year but a capital gain from the position
as at 30 June 2023 of £0.8 million.
The Company has taken a full provision of £1.4 million against a Solar PV
investment, which was being developed in Spain due to the insolvency of the
ESCO developing the project and refusal of the ESCO's client to proceed with
the project which had been partly funded by the Company.
At the year end the remaining ten fair value investments comprised:
· the Bio-LNG investment in Germany with a value of £4.8
million;
· six Solar PV projects in Spain with an aggregate value of
£3.1 million;
· two wind projects in the United Kingdom with an aggregate
value of £1.9 million; and
· a Solar PV project in Italy with a value of £0.7 million.
The performance of these remaining ten fair value investments with a value as
at year end of £10.5 million resulted in an increase in fair value of 2.1%.
The valuation increase was driven primarily by:
· valuation timing, which is the time value of money effect
between the two valuation dates, which had a positive effect of +7.4%; and
· an overall reduction in the discount rates applied to the
valuations, which had a positive effect of +2.3%.
Lower discount rates were primarily due to the completion of construction of
Solar PV projects in Spain and thus a reduction in construction risk, together
with reductions in risk-free rates.
Offsetting these factors were:
· distributions from these investments, -3.3%;
· FX effects, -1.4%; and
· business plan updates, -3.0%.
Business plan updates comprise changes to power price, inflation and
production forecasts. The principal change was lower forecast power prices in
the short term, which reversed a positive increase in valuations as at 31
December 2022. The impact of this was softened by the relatively low exposure
of the Company's projects to power prices due to PPA terms and FiTs.
Summary of Investments as at 31 March 2024
Description Receivables Term Technology Status Country Value Commitment
Weighted Years £k o/s
Avg. Credit £k
Rating
Receivables (fixed) from a 238 kWp rooftop Solar PV project installed on the BB- 7 Solar PV Operating Italy 208 0
production facilities of a food manufacturer in Lombardy.
Receivables (fixed) from a 127 kWp Solar PV project installed on the BBB+ / BBB- 7 Solar PV Operating Italy 89 0
production facilities of a manufacturer in Veneto.
Receivables (fixed) from sales of tax credits generated under the Italian BB+ / BB 2 Building Construction Italy 5,326 0
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings. Retrofit
Receivables (fixed) from sales of tax credits generated under the Italian BBB+ / BBB- 2 Building Construction Italy 9,846 0
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings. Retrofit
Receivables (fixed with RPI) from lighting as a service contracts with six UK BBB+ / BBB- 5 Lighting Operating United 232 0
companies.
Kingdom
Receivables (fixed/variable) from a 901.6 kWp rooftop Solar PV project at a BBB+ / BBB- 12 Solar PV Operating Italy 694 0
site in Ascoli Piceno, Central Italy.
Receivables (fixed) from sales of tax credits generated under the Italian A+ / A 2 Building Construction Italy 1,332 0
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings. Retrofit
Receivables (fixed) from a 1,000 kWp rooftop Solar PV project to be installed BB+ / BB 10 Solar PV Operating Italy 1,130 0
at a manufacturer's production facility in Lombardy.
Receivables (fixed) from sub-metering hardware and services contracts with Default 9 Sub-meters Operating Germany 245 107
landlords of multi-occupancy buildings.
Receivables (fixed) from CHP Energy Services Agreement with a major conference BBB+ / BBB- 6 CHP Operating United 139 0
centre in Wales.
Kingdom
Receivables (fixed) from CHP Energy Services Agreement with a food Default 7 CHP Construction United 475 0
manufacturer in North East England.
Kingdom
Receivables (fixed) from sales of tax credits generated under the Italian BB+ / BB 2 Building Construction Italy 7,402 0
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings. Retrofit
Receivable from a PPA with a poultry producer for three Solar PV Plants around BB+ / BB 15 Solar PV Construction Spain 319 0
Zaragoza, Northern Spain, with a total capacity of c. 400 kWp.
Receivables (fixed) from CHP Energy Services Agreement with a hotel near BB+ / BB 8 CHP Operating United 429 0
Birmingham.
Kingdom
Receivables (fixed) from sales of tax credits generated under the Italian BBB+ / BBB- 2 Building Construction Italy 6,965 0
Superbonus, which supports energy efficiency retrofits (insulation, more
efficient heating etc) of residential buildings. Retrofit
Receivables from PPAs with a manufacturer of irrigation products and a BBB+ / BBB- 18 Solar PV Operating Spain 652 0
manufacturer of doors and kitchen cabinets for 3 solar PV plants with a total
capacity of c.950 kWp in Valladolid and Toledo.
Receivables (fixed) from two solar PV plants around Barcelona, Spain, with a BB+ / BB 10 & Solar PV Operating Spain 133 0
total capacity of c.210 kWp, between a Spanish developer and a manufacturer of
bread and pastry products and a provider of IT services to universities. 12
Receivables (fixed) from a 443 kWp rooftop Solar PV project installed on the BBB+ / BBB- 7 Solar PV Operating Italy 294 0
production facilities of a food service equipment manufacturer in Veneto,
Northern Italy.
Purchase of receivables generated by PPA form a Solar PV plant with a capacity BBB+ / BBB- 15 Solar PV Operating Spain 1,000 0
of c.1,600 kWp between a Spanish developer and a Spanish ceramic tiles
manufacturer near Valencia.
Receivables of FiTs and export tariffs generated from three operating wind BBB+ / BBB- 10.6 Wind Operating United 410 0
turbines in the UK with a total capacity of 166 kWp, of which the generated
energy is used for self-consumption and for export to the grid. Kingdom
Subscription for a Note for the refinancing of an operating biogas plant in A- 8.25 Biogas / Operating Germany 4,770 3,704
north-eastern Germany and an upgrade to a Bio-LNG facility. The Note provides
for a fixed return plus an agreed share of revenues from the facility. Bio-LNG (Phase 2
construction)
Receivables (PPA with fixed price) from a rooftop Solar PV project with a BB- 15 Solar PV Operating Spain 311 0
capacity of c.350 kWp for an agricultural cooperative specialised in the
production and marketing of extra virgin olive oils in Granada.
Receivables (fixed) from Solar PV plant in self-consumption for a total BB+ / BB 10 Solar PV Operating Italy 799 0
installed capacity of 875.6 kWp located at the site of a non-wovens
manufacturer in Lombardy, Northern Italy.
Receivables from service agreements related to the water management between BBB+ / BBB- 10 Water Operating Germany 10,044 0
the developer and condominiums and multi-family homes, mainly managed by large
property managers via a Note structure. management
Receivables generated by two energy saving contracts between the developer and A+ / A 15 Building Construction Spain 2,306 584
five Spanish condominiums located in the proximity of Madrid, Guadalajara and
Gerona, as well as subsidies generated under the incentive scheme. Retrofit
Acquisition of receivables of FiTs and export tariffs generated from 4 A- 14 Wind Operating United 1,531 0
operating wind turbines in Scotland, with a total capacity of c.250 kWp.
Kingdom
Subscription for a Junior Note issued by the largest heating installer in AAA / AA- 15 Heating Operating Germany 2,233 0
Germany, entitling the Noteholder to receivables generated through service and
maintenance contracts for heat pump systems for the residential sector
throughout Germany.
Receivables (fixed) from Solar PV installations for a leading agricultural BBB+ / BBB- 10 Solar PV Operating Spain 3,044 67
business engaged in the cultivation of grapevines, cereals, onions, olives,
almonds and peas with a total capacity of c.4,000 kWp near Valencia.
Receivables from PPAs with a manufacturer of acoustical insulation products BB+ / BB 14 & Solar PV Operating Spain 659 0
and a manufacturer of textiles for two Solar PV plants in self-consumption for
a total installed capacity of c.870 kWp located around Alicante. 15
Purchase of receivables generated from PPA and grid sales agreement for a BB+ / BB 18 Solar PV Operating Spain 145 509
Solar PV plant with a capacity of c.200 kWp for a perfume retailer in Malaga.
Receivables (fixed) generated from the installation and operation of metering BB+ / BB 5 to 7 Various Operating United 716 41
and LED projects with eleven different counterparties in the UK.
Kingdom
Receivables (fixed payments indexed to CPI) from a roof-mounted Solar PV plant BB+ / BB 10 Solar PV Operating Italy 809 7
with a total capacity of c.1,000 kWp for a developer and distributor of
materials and technologies for tyre re-treading in Central Italy.
Receivables (fixed) from a roof- mounted Solar PV plant with a total capacity BBB+ / BBB- 5 Solar PV Operating Italy 427 7
of c.480 kWp for an ice cream machine manufacturer in Northern Italy.
Receivables (fixed) generated from refinancing the installation of LED BBB+ / BBB- 10 Lighting Operating United 407 0
lighting projects for 17 different clients in the UK. The various operating
lease agreements range from five to ten years. Kingdom
Receivables (fixed) generated from refinancing the installation of a LED BBB+ / BBB- 5 Lighting Operating United 411 0
lighting project for a UK logistics business. The lease agreement has a
five-year maturity. Kingdom
Notes:
The values in the table above are as at 31 December 2023 plus, where
applicable, the cost of investment made in the period from 1 January 2024 to
31 March 2024 using the foreign exchange rate as at 31 December 2023 of
EUR1.1535:£1.
The term is the original maturity of the investment.
Status and commitment outstanding are the positions as at 31 March 2024.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Introduction
The Company's goal is to generate attractive returns for investors by reducing
Primary Energy Consumption ("PEC"). The Company seeks to achieve this through
investing principally in a diversified portfolio of energy efficiency projects
with high-quality counterparties. The Company investments positively impact
the environment by reducing the amount of carbon dioxide produced, by
decreasing PEC and by increasing the amount of renewable energy used.
The synergies(1) generated by the reduction of PEC and simultaneously using
renewable energy sources further decrease CO(2) emissions.
This is reflected across the investment philosophy and approach of both the
Company and its Investment Adviser, Aquila Capital, who are both of which
dedicated to the green energy transition. The Company is committed to being a
responsible investor, ensuring that environmental, social and governance
criteria are incorporated into day-to-day investment decisions as well as
generating a positive impact for society. By reducing PEC, the Company often
improves life standards for end users; for example, better lights, easier
maintenance, reduced danger, security of supply and, very importantly, the
reduction of emissions like Nitrogen Oxides.
Over the year ended 31 December 2023, the portfolio performed as follows(2):
· 6,566 tonnes of avoided CO(2) emissions ("tCO(2)e"); and
· 23,639 MWh of energy saved,
· for total emission savings equivalent to 2,873 passenger
flights around the world.
Method of Calculation for Energy Savings (kWh) and Avoided CO(2) Emissions
(tCO(2)e)
The energy savings (in kWh) and avoided CO(2) emissions (in tCO(2)e) are
reported to Aquila Capital by third parties, including the development
companies, ESCOs and other third parties. These reports are supported by
asset-level documentation of individual methodologies. Aquila Capital has
reviewed the individual methodologies for technical consistency and reconciled
the reported values for plausibility. Where quantification of likely energy
savings and avoided CO(2) emissions is not clear, for example, with the
Superbonus projects in Italy and the Bio-LNG, water metering and heat pump
projects in Germany, no estimations are included in the avoided CO(2)
emissions and energy savings statistics above.
Only energy savings and avoided CO(2) emissions for operational projects are
considered on a pro-rata basis for the time of operation during the reporting
period. Avoided CO(2) emissions are estimated in gross terms and derived
from energy savings in kWh using a conversion factor (except CHP, see below)
which measures the grid's emission intensity. Emissions incurred during the
life cycle of the light bulbs such as materials sourcing, manufacturing,
installation, maintenance etc. are not available. The reported metrics are
estimations based on assumptions. For technical reasons, it is not possible or
feasible to observe or measure actual energy or emission avoidance in
real‑time.
· LED/Lighting: Savings estimates are derived based on
technical, product-specific attributes provided by the product manufacturer.
Lighting assets are typically not connected to a distinct circuit. These
solutions are designed according to the requirements of a given functional
unit, i.e. office, street or space, which varies on asset level. Changes in
the number of light bulbs or lumen are not considered.
· Solar PV: Electricity production is translated into
emissions avoidance with a conversion factor (see above). Production estimates
for Solar PV assets are evaluated during technical due diligence processes.
· CHP: Avoided CO(2) emissions are calculated directly by
comparing the asset's emissions based on the feedstock used for a specific
plant with a reference co-generation unit's emission factor.
· Metering: Metering solutions are being applied to a large
portfolio of individual households. Annual average household consumption is
estimated, and a developer's specific savings estimate is applied to the
average household consumption.
ESG Approach
The Company has adopted Aquila Capital's ESG Integration Policy(3), ensuring
that environmental, social and governance criteria were incorporated into
day-to-day investment decisions as well as generating a positive contribution
for society. The Company investment approach is focused on investments in
energy efficiency projects located primarily in Europe. These investments are
predominantly into proven technologies that deliver energy savings for
commercial, industrial and public sector buildings. Prior to the adoption of
the New Investment Policy, the Company sought to invest in projects for the
long term with a focus on optimising and improving the assets' PEC (and, of
course, the Company's investments continue to meet this initial objective).
Technologies include:
· LED Lighting Systems;
· Solar PV;
· HVAC/Buildings;
· Smart Metering/Sub-metering; and
· Bio LNG.
Environmental Contribution
The Company's investments are focused on reducing PEC, which should lead to
significant reductions in greenhouse gas emissions. In addition, local
production of energy (CHP, biomass boilers, Solar PV) reduces transportation
energy losses and grid over-utilisation. Smart meters and other control
technologies enable a better visibility and management of energy and therefore
represent a basis for energy savings.
Social Contribution
Energy efficiency measures not only reduce PEC, but typically also have a
positive impact on health and quality of life for different stakeholders, such
as employees and users of public facilities. This is largely achieved through
the installation of advanced solutions for lighting, heating, cooling,
ventilation and the associated control units. All project developers are
required to adhere to local, regional and national health and safety laws, to
train and educate employees accordingly, to make sure casualties and injuries
are avoided. Aquila Capital's ESG Integration Policy, as adopted by the
Company, has sought to exclude suppliers and manufacturers that do not meet
Aquila Capital's criteria (exclusion of certain sectors/subsectors, or
companies that, for example, use unfavourable labour conditions). For all
counterparties a rating has been performed (in collaboration with a
third-party rating agency) assessing the creditworthiness of the relevant
counterparty as well as a "Know Your Client" check for the relevant parties
involved to increase transparency of the counterparties' activities.
Governmental Contribution
The Company's business partners are required to adhere to the requirements of
the relevant social security and tax authorities. The Company's business
partners are required to provide evidence that they adhere to anti-bribery and
corruption laws.
Due Diligence
The Investment Adviser performed detailed ESG due diligence for each asset
prior to investment. The investment management team followed a structured
screening, due diligence and investment process designed to ensure that
investments are reviewed and compared on a consistent basis. Execution of this
process was facilitated by the team's deep experience in energy efficiency
project investing. As part of this process, the Investment Adviser, as
relevant for each investment, considered:
· total PEC reduction, and implied CO(2) emissions reduced
and/or avoided; and/or
· total energy production from renewable and non-renewable
sources.
Governance Framework
The Company has an independent Board of Directors, with FundRock Management
Company (Guernsey) Limited (formerly Sanne Fund Management (Guernsey) Limited)
as the AIFM. The Board of Directors supervises the AIFM, which is responsible
for making recommendations in relation to any investment proposals put forward
by the Investment Adviser. The Investment Adviser is fully regulated and
supervised by BaFin in Germany. The Company maintains a comprehensive risk
register which is regularly updated and reviewed by the AIFM and the Board of
Directors. The Company has established procedures to deal with any potential
conflicts of interest in circumstances where Aquila Capital (or any affiliate)
is advising both the AIFM (for the Company) and other Aquila Capital managed
funds. In the context of an investment decision, these procedures may include
a fairness opinion in relation to the valuation of an investment, which is
obtained from an independent expert.
Monitoring of ESG
The Company's commitment to and compliance with the Company's established ESG
approach is monitored on a continuous basis throughout the lifecycle of
investments, as they become operational. This includes:
· ongoing monitoring of the PEC based on the energy
consumption and deriving from that the CO(2) savings, where appropriate,
monitoring additional environment and ESG relevant developments both at the
portfolio and asset level; and
· annual reporting, including ESG aspects, to relevant
stakeholders including ad-hoc reporting of any material and urgent issues
identified in the monitoring process.
The Company has been awarded the Green Economy Mark from the London Stock
Exchange. The Green Economy Mark identifies London-listed companies and funds
that generate between 50% and 100% of total annual revenues from products and
services that contribute to the global green economy.
1 International Renewable Energy Agency (Irena), "Synergies
between renewable energy and energy efficiency" (2017), available at:
https://www.irena.org/ publications/2017/
Aug/Synergies-between-renewable-energy-and-energy-efficiency#:~:text=Renewables%20would%20account%20for%20
about,country%2C%20sector%20and%20 technology%20levels
2 Passenger flights around the world: This number is derived
from passenger flight emissions data retrieved on 4 April 2023 from the
International Civil Aviation Organization;
https://applications.icao.int/icec/Home/Index. The total emissions associated
with a passenger flight around the world based on a standard itinerary from
New York to Dubai, Bangkok, Sydney, Los Angeles and back to New York in the
economy class is 2,285.80 kg CO(2).
3 For details please refer to:
https://www.aquila-capital.de/fileadmin/user_upload/
ESG_report/Aquila_Group_ESG_Integration_Policy.pdf
INVESTMENT POLICY
As at the date of this Annual Report, the Company's Investment Policy
(including defined terms) is as adopted at the June 2023 AGM pursuant to the
Continuation Managed Run-Off Resolution, which replaced the previous
investment objective and policy in its entirety and is set out below.
The Company will be managed with the intention of realising all remaining
assets in the portfolio in a prudent manner consistent with the principles of
good investment management and with a view to returning cash to Shareholders
in an orderly manner.
The Company will pursue its investment objective by effecting an orderly
realisation of its assets in a manner that seeks to achieve the best balance
for Shareholders between maximising the value received from those assets and
making timely returns of capital to Shareholders. This process might include
sales of individual assets, mainly structured as loans/receivables, or groups
of assets, or running off the portfolio in accordance with the existing terms
of the assets, or a combination.
The Company will cease to make any new investments or to undertake capital
expenditure except where, in the opinion of both the Board and the Investment
Adviser (or, where relevant, the Investment Adviser's successors):
· the investment is a follow-on investment made in connection
with an existing asset in order to comply with the Company's pre-existing
obligations; or
· failure to make the follow-on investment may result in a
breach of contract or applicable law or regulation by the Company; or
· the investment is considered necessary to protect or
enhance the value of any existing investments or to facilitate orderly
disposals,
and in these circumstances the Company will observe the following restrictions
when making any such investments:
· no more than 20 per cent. of its Gross Asset Value will be
invested in any single asset;
· no more than 20 per cent. of its Gross Asset Value will be
invested in Energy Efficiency Investments with the same counterparty;
· no investments will be made outside of Europe; and
· no more than 7.5 per cent. of its Gross Asset Value, in
aggregate, will be invested in Equity Investments, and at all times such
investments will only be made with appropriate Shareholder protections in
place.
Any cash received by the Company as part of the realisation process prior to
its distribution to Shareholders will be held by the Company as cash on
deposit and/or as cash equivalents.
The Company will not undertake new borrowing.
As required by the Listing Rules, any material change to the Investment Policy
of the Company will be made only with the approval of Shareholders by way of
ordinary resolution.
Currency and Hedging
The Company does not use hedging or derivatives for investment purposes. The
functional currency of the Company is Sterling. With many of its investment
assets in euros the Company uses a series of regular forward foreign exchange
contracts to provide protection against movements in the Sterling exchange
rate. Under these arrangements the Company is required to provide £2.5
million in cash as collateral for these forward foreign exchange contracts.
Cash Management
Cash held pending investment in Energy Efficiency Investments or for working
capital purposes will either be held in cash or invested in cash, cash
equivalents, near cash instruments, bearer bonds and/or money market
instruments ("Cash and Cash Equivalents"). There is no restriction on the
amount of Cash and Cash Equivalents that the Company may hold and there may be
times when it is appropriate for the Company to have a significant Cash and
Cash Equivalents position. For the avoidance of doubt, the restrictions set
out above in relation to investing in UK listed closed-ended investment
companies do not apply to money market type funds.
Changes To and Compliance With the Investment Policy
As required by the Listing Rules, any material changes to the Company's
Investment Policy as set out above will require the approval of Shareholders
by way of an ordinary resolution at a General Meeting and the approval of the
FCA.
Compliance with the above restrictions will be measured at the time of
investment and non-compliance resulting from changes in the price or value of
assets following investment will not be considered as a breach of the
investment restrictions.
In the event of a breach of the investment guidelines and the investment
restrictions set out above, the AIFM shall inform the Board upon becoming
aware of the same and if the Board considers the breach to be material,
notification will be made to a Regulatory Information Service.
KEY PERFORMANCE INDICATORS
The Board measures the Company's success in achieving its investment objective
by reference to the Key Performance Indicators ("KPIs") described below:
Efficient Return of Capital
In line with the Managed Run-Off status of the Group, the Board is focused on
the efficient return of capital to Shareholders.
As announced on 6 March 2024, the Board proposes to return no less than £17.5
million to Shareholders by way of a tender offer at a fixed price of 94.28
pence per share which is the Company's last published NAV per share (the
"Tender Offer"). Eligible Shareholders will each be able to elect to tender
that proportion of their holding, at the time, as is represented by their
entitlement under the Tender Offer, or such lower number as they wish.
On 19 April 2024, the Board published a circular, which includes further
details of the Tender Offer (including the amount to be returned to
Shareholders in the Tender Offer and the maximum number of shares to be
acquired). A General Meeting will be convened on 13 May 2024 to approve the
Tender Offer.
As and when sufficient cash has been accumulated, the Board's current
intention is there will be further tender offers to Shareholders.
Discount of Share Price to NAV
The Board monitors the price of the Company's shares in relation to their NAV
and the premium or discount at which they trade. The share price closed at a
39.3% discount to the NAV as at 31 December 2023.
Following the failed Continuation Vote in February 2023, a new Investment
Policy to reflect the managed run-off of the Company was put to Shareholders
at the AGM in June. Following the approval of the Continuation Managed Run-Off
Resolution, the Board continued to review the strategic options for the
portfolio. On 16 August 2023, the Company announced a process to market-test a
portfolio sale which was conducted by Stifel Nicolaus Europe Limited
("Stifel"). As announced on 6 March 2024, despite interest from a number of
parties who entered into the sale process, the Board has not received a
definitive proposal which it believes could deliver greater value to
Shareholders than the Managed Run-Off. Given the complexity and the very
long-dated nature of some of the investments, the Board is continuing to seek
and evaluate any other strategic proposals which would deliver greater value
to its Shareholders than would otherwise be achieved under the Managed
Run-Off.
Maintenance of a Reasonable Level of Ongoing Charges
The expenses of managing the Group are carefully monitored by the Board. The
Board receives and reviews management accounts which contain an analysis of
expenditure which are reviewed at quarterly Board meetings. The Board reviews
the ongoing charges on a quarterly basis. Expenses were higher in 2023 due to
the cost of the market-testing process announced on 16 August 2023 and the
ongoing significant involvement of advisers following the failure of the
Continuation Vote in February 2023. Based on the Group's average net assets
during the year ended 31 December 2023, the Group's ongoing charges figure
calculated in accordance with the AIC methodology was 3.5% (31 December 2022:
2.6%).
RISK MANAGEMENT
Principal Risks and Uncertainties
During the year under review, the Company has carried out a robust assessment
of its principal and emerging risks and the procedures in place to identify
any emerging risks are described below.
Procedures to identify principal or emerging risks:
The Board regularly reviews the Company's risk matrix, with a focus on
ensuring that the appropriate controls are in place to mitigate each risk. The
experience and knowledge of the Board is important, as is advice received from
the Board's service providers, specifically the AIFM, which is responsible for
the risk and portfolio management services and outsources the portfolio
management to the Investment Adviser. Each service provider has a role with
respect to the identification of risks:
1. Investment Adviser: the Investment Adviser submits a quarterly
report on the investment portfolio to the Board which includes risks faced by
the projects in the portfolio, plus an update on hedging;
2. Alternative Investment Fund Manager: following advice from the
Investment Adviser and other service providers, the AIFM maintains a register
of identified risks including emerging risks likely to impact the Company;
3. Broker: provides advice periodically specific to the Company on
the Company's sector, competitors and the investment company market whilst
working with the Board and Investment Adviser to communicate with
Shareholders;
4. Company Secretary: briefs the Board on forthcoming
legislation/regulatory change that might impact on the Company; and
5. Association of Investment Companies (''AIC''): the Company is a
member of the AIC, which provides regular technical updates as well as drawing
members' attention to forthcoming industry and regulatory issues.
Procedure for oversight
The Audit and Risk Committee undertakes a review at least twice a year of the
Company's risk matrix and a formal review of the risk procedures and controls
in place at the AIFM and other key service providers to ensure that emerging
(as well as known) risks are adequately identified and, so far as is
practicable, mitigated.
Principal Risks
The Board considers the following to be the principal risks faced by the
Company along with the potential impact of these risks and the steps taken to
mitigate them.
Portfolio
Principal Risks Potential Impact/Description Mitigation
Counterparty/ credit The risk that the Company has allocated funds to a counterparty that defaults The Company has sought to invest mostly, although not exclusively, in projects
on its obligations. where the counterparties have an investment grade or near investment grade
rating. The Investment Adviser uses third party credit rating service
This could impact the financial performance of the Company and its ability to providers to support its credit risk assessments.
meet dividends as well as achieving its intended goals and returns for its
investors. Continued monitoring of the investments and the associated
counterparties/service providers, including the use of credit rating data
providers, allows the Investment Adviser to identify and address these risks
early. The Investment Adviser has sought to mitigate credit risks, for
example, in the case of Solar PV investments, by the counterparty having the
opportunity to sell electricity to the grid or other customers where possible.
The Investment Adviser has also sought to structure investments whereby
contracts can be adapted/extended to accommodate periods of payment defaults.
Diversification of counterparties and service providers reduces the potential
impact is limited. In addition, a diversified portfolio provides further
mitigation.
Concentration risk The risk that the concentration of investments in a limited number of The AIFM and the Investment Adviser continuously monitor the existing
countries, counterparties, geographical markets, tenure and currencies could portfolio and any proposed investments (in advance of completion) against the
expose the Company to unnecessary fluctuations in a narrow range of markets. Company's portfolio concentration limits and Investment Policy. This mitigates
This risk could negatively impact the Company's performance and ability to the risk by ensuring that concentration limits and asset diversification
meet strategic targets. limits are observed.
Environmental/ Social/ Governance ("ESG") Failure to adequately consider ESG implications when making and monitoring The Investment Adviser has performed detailed due diligence on ESG for each
investments could lead to reputational risk: exposure to greenwashing claims asset prior to recommendation and continues to capture and monitor ESG data
and potentially have an adverse impact on the portfolio's ability to achieve relating to the operation of the assets.
its targeted returns.
General standards including IFS Performance Standards, IFC Environmental
Health and Safety Guidelines (''EHS'') and Equator Principles as well as local
health and safety and social laws are reviewed on a regular basis for all
assets depending on the location and development status of each asset.
Economic and Markets
Principal Risks Potential Impact/Description Mitigation
Discount management Market sentiment has moved the share price to a persistent discount to Net The Company's Broker monitors the market for the Company's shares and reports
Asset Value. at quarterly Board meetings. The Company has the authority, if appropriate, to
purchase Ordinary Shares in the market with the result of, amongst other
There is a risk that the Company will not be able to find ways to bring the things, enhancing the Net Asset Value per Ordinary Share.
share price back to NAV, leading to Shareholders being unable to realise their
investments through the secondary market at Net Asset Value or at market The Board and Broker maintain engagement with Shareholders and ensure good
price. market information is available to investors.
Loss of market confidence in the Board/Investment Adviser. Following the successful continuation and managed run-off vote in June 2023,
the Board, with its advisers, is considering strategic options to maximise
value for Shareholders. For more information regarding the continuation and
managed run-off of the Company, please see the Chair's Statement in the Annual
Report.
Interest rates/ inflation Changes to interest rates may impact the valuation of the investment portfolio The Company's investments, which provide in many cases for fixed returns, are
by impacting the valuation discount rate. This in turn may have an adverse not significantly exposed to inflation and interest rate movements because the
impact on the attractiveness of returns. income streams from investments are not subject to significant deductions for
operating costs associated with the investments. While there may be O&M
Although energy prices have fallen from the heights they reached in mid-2022, costs these are not a high percentage of revenues and so any inflationary
the current geopolitical environment uncertainty in Europe could in turn lead pressures on such costs are not expected to have a significant impact.
to increased price volatility again in the future. Furthermore, the Company has not taken on indebtedness to finance its
investments and so there is no risk of the costs of indebtedness negatively
impacting the revenues from investments. Were the Company to take on
indebtedness it may use derivative instruments such as futures, options and
swaps to protect the Company from fluctuations in interest rates.
The Investment Adviser manages the correlation of cash flows to inflation and
resilience to the economic environment.
The Investment Adviser has sought to incorporate RPI adjustments in investment
documentation where possible.
In addition, investing in energy efficiency assets can in some cases provide
an effective protection against inflation, as many such assets benefit from
rising electricity prices with no burden on the cost side in relation to the
use of resources.
Changes to subsidies or other support mechanisms for the Company's investments The value of the Company's investments may be adversely affected if subsidies Diversification of investments by technology and geography mitigates the
or other support mechanisms, on which such investments may depend, are changed impact of any such risks. Many of the investments which the Investment Adviser
negatively. seeks do not rely on subsidies or other support mechanisms.
Act of war/ sanctions As evidenced with conflict in the Ukraine and the Middle East, various The Company does not have any direct exposure in Ukraine, Russia or the Middle
sanctions may be imposed. There is a possibility that there could be supply East, there are also no direct business relationships with counterparties from
delays for Operations and Maintenance ("O&M"), sanction considerations, these countries; therefore assessments lead the Company to the conclusion that
volatile markets and general uncertainty. More difficult energy markets are its investments in Europe are not impacted directly at this time.
expected along with inflationary pressures on inputs.
It has also led to short-term price increases and more focus on renewable
energy infrastructure.
Possible change to the world order and globalisation.
Conflict brings uncertainty to the commodities market and how price levels of
modules and other hardware will be impacted directly or indirectly.
Operational
Principal Risks Potential Impact/Description Mitigation
Service provider risk Risks that the Company's third party service providers do not perform to the The Board continues to monitor the quality of services provided by all of its
appropriate standards. service providers, and in particular the Investment Adviser. Where it is
deemed that work carried out by any service provider is of insufficient
Potential lack of resource, experience or depth in the Investment Adviser's quality, the Board will procure additional services from other service
team to manage the Company's investments. This may be exacerbated by the providers with a view to ensuring the required standard of portfolio
Managed Run-Off status of the Company which will lead, in time, to reduced management and reporting is maintained. The Board will reserve its right to
fees for the Investment Adviser. recover the cost of such additional services from the current service
providers.
Possible conflicts with other private Aquila clients and private investing
vehicles which Aquila cannot disclose to the Board or the AIFM. Additionally, through the Management Engagement Committee, the Board conducts
a formal assessment of each key service provider's performance once a year. To
The Investment Adviser is dependent on key people to identify, acquire and assist its ability to properly oversee the Company's service providers, the
manage the Company's investments. Board requires each service provider to notify it as soon as reasonably
practicable following any material breach of its contract with the Company.
The Investment Adviser has substantial resources.
The Company and AIFM are made aware of and review potential conflicts of
interest at the time of each investment being made.
Conflicts of interest and investment allocation policies are in place and
agreed with the Board.
The strength and depth of the Investment Adviser's resources mitigate the risk
of a key person departure and provides the ability to draw skills from other
areas if needed.
IT security A hacker or third party could obtain access to the Investment Adviser or any Service providers have been carefully selected for their expertise and
other service provider and destroy data or use it for malicious purposes reputation in the sector. Each service provider has provided assurances to
resulting in reputational damage and possible GDPR concern. both the AIFM and the Company on their cyber policies and business continuity
plans along with external audit reviews of their procedures where applicable.
Data records could be destroyed, resulting in an inability to make investment
decisions and/or monitor investments. The AIFM, Administrator and Board include Cyber Risk in their reviews of
counterparties.
Financial
Principal Risks Potential Impact/Description Mitigation
Portfolio valuation The principal component of the Company's balance sheet is its portfolio of The Investment Adviser has experience in undertaking valuations of renewable
energy efficiency assets. The Investment Adviser is responsible for preparing sustainability/energy transition assets.
a fair market value of the investments where such investments have variable
returns. Fair value calculations rely on projections, which involve estimates The AIFM and the Board review and interrogate the valuations and underlying
of the future, which are inherently judgemental. assumptions provided by the Investment Adviser.
There is a risk that these valuations and underlying assumptions such as It should be noted that valuations are held at fair value and at amortised
discount rates being applied are not a fair reflection of an open market cost and not at net realisable value.
valuation, therefore the investment portfolio could be over or under valued.
Investments with fixed returns are measured at amortised cost and subject to
expected credit loss provisions, which are based on numerous assumptions and
judgements.
Emerging Risks
Principal Risks Potential Impact/Description Mitigation
Capital Preservation During the run-off, there is a risk that overdistribution of cash will leave The Board, Investment Adviser and AIFM will review the ongoing liquidity
the Company short of sufficient liquidity to meet ongoing expenditure. requirements and cashflow forecasts of the Company prior to making
distributions to ensure that sufficient funds are maintained throughout the
run-off process.
Relations with ESCOs during managed run-off Entering a managed run-off has strained relations with some ESCOs who may have Communications with the ESCOs from the Investment Adviser take into account
expected further business from AEET over time, giving rise to further these considerations and professional advice has been sought by the Company
counterparty/credit risk for the Company. where needed.
The Board and Investment Adviser will continue to monitor relations with ESCOs
as the run-off progresses.
Viability Statement
In accordance with the UK Corporate Governance Code ("UK Code") and the
Listing Rules, the Directors have assessed the prospects of the Company over a
longer period than the 12 months required by the 'Going Concern' provision.
In reviewing the Company's viability, the Directors have assessed the
viability of the Company for the period to 31 December 2026 (the
"Look-forward Period").
Following the AGM held in June 2023, and in accordance with the New Investment
Policy, the Company entered a managed run-off of its portfolio, meaning that
it is not making any new investments (save for in limited circumstances as set
out in the New Investment Policy) and its investing activity is solely in
respect of funding legal commitments to existing investments (the "Managed
Run-Off"). The Board has continued and will continue to review strategic
options in respect of the Company's assets to realise the maximum value for
Shareholders in the shortest possible time, recognising the inherent
difficulties in the construction of the portfolio, including the number of
individual investments, multiple geographies and long tenors. On 16 August
2023, the Company announced a process to market-test a portfolio sale which
was conducted by Stifel Nicolaus Europe Limited ("Stifel"). An extensive
number of UK and international investors were approached through this process
which completed in early February. As announced on 6 March 2024, despite
interest from a number of parties who entered into the sale process, the Board
did not receive a definitive proposal which it believed could deliver greater
value to shareholders than the Managed Run-Off. As announced on 6 March 2024
and 19 April 2024, the Board has proposed to return £17.5 million to
shareholders by way of a tender offer at a fixed price of 94.28 pence per
share (the "Tender Offer"). This is subject to the approval of Shareholders at
the General Meeting on 13 May 2024.
As referred to above, the Company is operating currently under a Managed
Run-Off with the term of some of the Company's assets being several years.
While the Company is continuing to explore other strategic options, there
remains no certainty that any of these options will materialise and be put to
Shareholders for consideration. Accordingly, the Directors recognise that
these conditions indicate the existence of material uncertainty which may cast
significant doubt about the Group and Company's viability over the look
forward period.
Notwithstanding the above, the Board believes that the Look-forward Period,
being approximately three years, is an appropriate time horizon over which to
assess the viability of the Company, particularly when taking into account the
long-term nature of the maturity of the Company's assets, which is modelled
over three years and the principal risks outlined above. In considering the
prospects of the Company, the Directors looked at the key risks facing the
Company, focusing on the likelihood and impact of each risk as well as any key
contracts, future events or timescales that may be assigned to each key risk.
The Directors have a reasonable expectation that the Company has adequate
resources to: continue in operation; realise the Company's assets in an
orderly manner; and meet its liabilities as they fall due, over the
Look-forward Period.
Going Concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through
their cash resources. The Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of this document.
In reaching this conclusion, the Directors have considered the Group's
investment commitments, cash position, income and expense flows. As at 31
March 2024, the latest practicable date before publication of this report, the
total commitments were £4.92 million. The value of investments as at 31
December 2023 was £65.5 million and has not changed materially since that
date. The investments are mostly fully operational and income producing. As at
31 March 2024, the Group had cash of £31.2 million (including the £2.5
million held as collateral for FX hedging). The Directors reviewed downside
scenarios which assumed some delay in cash receipts and are satisfied that the
Group and the Company would continue to meet its obligations as they fall due.
Total expenses for the year were £3.30 million (excluding impairment losses)
(2022: £2.4 million), which represented approximately 3.49% of average net
assets during the year (2022: 2.63%). At the date of approval of this
document, based on the aggregate of investments and cash held, the Group and
Company have substantial operating expenses cover.
At the Annual General Meeting of the Company (the "AGM") held on 14 June 2023,
Shareholders voted in favour of the Company's change of investment policy (the
"New Investment Policy"). Following the AGM, and in accordance with the New
Investment Policy, the Company entered a continuation and managed run-off of
its portfolio ("Managed Run-Off"), meaning that it is not making any new
investments (save for the limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments.
The Continuation and Managed Run-Off Resolution was put forward as a
resolution to Shareholders in response to the outcome of the Company's
Continuation Vote held in February 2023, which did not pass.
On 6 March 2024, the Company announced, subject to the approval of
Shareholders, a return of capital to Shareholders by way of a tender offer of
not less than £17.5 million.
As referred to above, the Company is operating currently under a Managed
Run-Off with the term of some of the Company's assets being several years.
While the Company is continuing to explore other strategic options, there
remains no certainty that any of these options will materialise and be put to
Shareholders for consideration.
Accordingly, while the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Group and Company's ability to continue as a going concern. Based on the
assessment and considerations above, the Directors have concluded that the
financial statements of the Group and the Company should be prepared on a
going concern basis. The financial statements do not include the adjustments
that would result if the Group and the Company were unable to continue on a
going concern basis.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group's and the
Company's financial statements in accordance with UK-adopted international
financial reporting standards in conformity with the requirements of the
Companies Act 2006.
Under company law, Directors 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 Group and the Company and of the profit or loss of the Group and the
Company for that year. In preparing the financial statements, the Directors
are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international financial
reporting standards in conformity with the requirements of the Companies Act
2006 have been followed, subject to any material departures disclosed and
explained in the financial statements;
· make judgements and accounting estimates that are
reasonable and prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006.
The Directors have delegated responsibility to the Investment Adviser for the
maintenance and integrity of the corporate and financial information included
on the Company's website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' Confirmations
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for Shareholders to assess the Group's and the Company's position and
performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Corporate
Governance section, confirm that, to the best of their knowledge:
· the Group's and the Company's financial statements, which
have been prepared in accordance with UK-adopted international financial
reporting standards in conformity with the requirements of the Companies Act
2006, give a true and fair view of the assets, liabilities, financial position
and loss of the Group and the Company; and
· the Strategic Report includes a fair review of the
development and performance of the business and the position of the Group and
the Company, together with a description of the principal risks and
uncertainties that it faces.
In the case of each Director in office at the date the Directors' report is
approved:
· so far as the Director is aware, there is no relevant audit
information of which the Group's and Company's auditors are unaware; and
· they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant audit
information and to establish that the Group's and the Company's auditors are
aware of that information.
For and on behalf of the Board
Miriam Greenwood OBE DL
Chair of the Board
30 April 2024
Financial Statements
Aquila Energy Efficiency Trust Plc
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year ended For the year ended
31 December 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Unrealised (loss)/gain on investments 4 - (2,380) (2,380) - 1,211 1,211
Unrealised gain/(loss) on derivatives - 122 122 - (1,016) (1,016)
Realised gain on derivatives - 1,713 1,713 - - -
Net foreign exchange (loss)/gain - (64) (64) - 282 282
Investment income 5 5,948 - 5,948 2,197 - 2,197
Investment advisory fees 6 (808) - (808) (615) - (615)
Impairment loss 4 (1,735) - (1,735) (136) - (136)
Other expenses 7 (2,492) - (2,492) (1,786) - (1,786)
Profit/(loss) on ordinary activities before taxation 913 (609) 304 (340) 477 137
Taxation 8 - - - - - -
Profit/(loss) on ordinary activities after taxation 913 (609) 304 (340) 477 137
Return per Ordinary Share 9 0.91p (0.61p) 0.30p (0.34p) 0.48p 0.14p
The total column of the Consolidated Statement of Profit or Loss and
Comprehensive Income is the profit and loss account of the Group.
All revenue and capital items in the above consolidated statement derive from
continuing operations. No operations were discontinued during the year.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the year".
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year ended For the year ended
31 December 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Unrealised gain on investments 4 - 961 961 - 2,144 2,144
Net foreign exchange loss - (37) (37) - (99) (99)
Investment income 5 4,080 - 4,080 697 - 697
Investment advisory fees 6 (808) - (808) (615) - (615)
Other expenses 7 (1,912) - (1,912) (1,375) - (1,375)
Impairment loss (2,041) - (2,041) - - -
(Loss)/profit on ordinary activities before taxation (681) 924 243 (1,293) 2,045 752
Taxation 8 - - - - - -
(Loss)/profit on ordinary activities after taxation (681) 924 243 (1,293) 2,045 752
Return per Ordinary Share 9 (0.68p) 0.92p 0.24p (1.29p) 2.05p 0.75p
The total column of the Company Statement of Profit or Loss and Comprehensive
Income is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
Profit/(loss) on ordinary activities after taxation is also the "Total
comprehensive income/(expense) for the year".
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
2023 2022
Notes £'000 £'000
Fixed assets
Investments at fair value through profit or loss 4 10,492 11,742
Investments at amortised cost 4 54,990 38,550
65,482 50,292
Current assets
Trade and other receivables 10 652 70
Derivative financial instrument 4 122 -
Cash and cash equivalents 29,082 46,625
29,856 46,695
Creditors: amounts falling due within one year 11 (1,057) (904)
Derivative financial instrument - (856)
Net current assets 28,799 44,935
Net assets 94,281 95,227
Capital and reserves: equity
Share capital 12 1,000 1,000
Special reserve 13 93,500 94,750
Capital reserve (178) 431
Revenue reserve (41) (954)
Shareholders' funds 94,281 95,227
Net assets per Ordinary Share 14 94.28p 95.23p
No. of Ordinary Shares in issue 100,000,000 100,000,000
Approved by the Board of Directors and authorised for issue on 30 April 2024.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
2023 2022
Notes £'000 £'000
Fixed assets
Investment in subsidiaries 4 45,654 31,220
Current assets
Cash and cash equivalents 22,548 32,714
Intercompany receivable 10 - 32,966
Shareholder loan receivable 17 27,293 -
Trade and other receivables 10 255 33
50,096 65,713
Creditors: amounts falling due within one year 11 (874) (1,050)
Net current assets 49,222 64,663
Net assets 94,876 95,883
Capital and reserves: equity
Share capital 12 1,000 1,000
Special reserve 13 93,500 94,750
Capital reserve 2,923 1,999
Revenue reserve (2,547) (1,866)
Shareholders' funds 94,876 95,883
Approved by the Board of Directors and authorised for issue on 30 April 2024.
Signed on behalf of the Board of Directors
Miriam Greenwood OBE DL
Aquila Energy Efficiency Trust Plc is incorporated in England and Wales with
Company number 13324616.
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Special Capital Revenue
capital reserve reserve reserve Total
For the year ended 31 December 2023 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 94,750 431 (954) 95,227
Dividends paid 15 - (1,250) - - (1,250)
(Loss)/profit for the year - - (609) 913 304
Closing equity as at 31 December 2023 1,000 93,500 (178) (41) 94,281
Share Special Capital Revenue
capital reserve reserve reserve Total
For the year ended 31 December 2022 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2022 1,000 97,000 (46) (573) 97,381
Impact of the acquisition of subsidiaries on 1 January 2022 - - - (41) (41)
Dividends paid 15 - (2,250) - - (2,250)
Profit/(loss) for the year - - 477 (340) 137
Closing equity as at 31 December 2022 1,000 94,750 431 (954) 95,227
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Special Capital Revenue
capital reserve reserve reserve Total
For the year ended 31 December 2023 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2023 1,000 94,750 1,999 (1,866) 95,883
Dividends paid 15 - (1,250) - - (1,250)
Profit/(loss) for the year - - 924 (681) 243
Closing equity as at 31 December 2023 1,000 93,500 2,923 (2,547) 94,876
Share Special Capital Revenue
capital reserve reserve reserve Total
For the year ended 31 December 2022 Notes £'000 £'000 £'000 £'000 £'000
Opening equity as at 1 January 2022 1,000 97,000 (46) (573) 97,381
Dividends paid 15 - (2,250) - - (2,250)
Profit/(loss) for the year - - 2,045 (1,293) 752
Closing equity as at 31 December 2022 1,000 94,750 1,999 (1,866) 95,883
The notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Notes For the year ended 31 December 2023 For the year ended 31 December 2022
£'000
£'000
Operating activities
Profit on ordinary activities before taxation 304 137
Adjustments for:
Unrealised loss/(gain) on investments 4 2,380 (1,211)
Unrealised loss/(gain) on derivative instruments 4 (122) 1,016
Realised gains on derivative instruments (108) -
Impairment loss 1,735 136
Net foreign exchange loss 116 -
(Increase)/decrease in trade and other receivables (310) 34
Increase in creditors: amounts falling due within one year 968 570
Interest receivable from amortised cost investments (2,420) (1,349)
Net cash flow from/(used in) operating activities 2,543 (667)
Investing activities
Purchase of investments 4 (21,834) (47,602)
Repayment of investments 4 3,050 264
Net cash received on acquisition of Attika Holdings Ltd. - 5,000
Net cash received on acquisition of SPV Project 2013 S.r.l. - 11,751
Net cash flow used in investing activities (18,784) (30,587)
Financing activities
Dividends paid 15 (1,250) (2,250)
Net cash flow used in financing activities (1,250) (2,250)
Decrease in cash and cash equivalents (17,491) (33,504)
Cash and cash equivalents at start of year 46,625 80,129
Effect of foreign currency exchange translation (52) -
Cash and cash equivalents at end of year 29,082 46,625
The notes are an integral part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
For the year For the year
ended ended
31 December 31 December
2023 2022
Notes £'000 £'000
Operating activities
Profit on ordinary activities before taxation 243 752
Adjustments for:
Unrealised gain on investments 4 (961) (2,144)
Net foreign exchange loss (17) -
Shareholder loan interest income (1,912) -
Impairment loss 2,041 -
Increase in intercompany receivables (1,901) (27,796)
(Increase)/Decrease in trade and other receivables (91) 71
(Decrease)/Increase in creditors (175) 544
Net cash flow used in operating activities* (2,773) (28,573)
Investing activities
Purchase of investments 4 (4,808) (16,592)
Repayment of investments 1,306 -
Net cash flow used in investing activities (3,502) (16,592)
Financing activities
Loan to subsidiary 10 (4,437) -
Shareholder loan interest income received 1,782 -
Dividends paid 15 (1,250) (2,250)
Net cash flow used in financing activities (3,905) (2,250)
Decrease in cash and cash equivalents (10,180) (47,415)
Cash and cash equivalents at start of year 32,714 80,129
Effect of foreign currency exchange translation 14 -
Cash and cash equivalents at end of year 22,548 32,714
*Cash flows from operating activities were presented after the below non-cash
transactions:
Conversion of intercompany receivables to investment in subsidiary 11,791 -
Conversion of intercompany receivable to shareholder loan 23,076 -
34,867 -
The notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
1. GENERAL INFORMATION
Aquila Energy Efficiency Trust Plc (the "Company") is a public company limited
by shares incorporated in England and Wales on 9 April 2021 with registered
number 13324616. The Company is domiciled in England and Wales. The Company is
a closed-ended investment company with an indefinite life. The Company
commenced its operations on 2 June 2021 when the Company's Ordinary Shares
were admitted to trading on the London Stock Exchange. The Directors intend,
at all times, to conduct the affairs of the Company as to enable it to qualify
as an investment trust for the purposes of section 1158 of the Corporation Tax
Act 2010, as amended.
The Company owns 100% of its subsidiary, Attika Holdings Limited (the "HoldCo"
or ''AHL'') and 100% of the notes issued by one compartment of SPV Project
2013 S.r.l. (the ''SPV'' or ''Italian SPV'') issued to the Company, which
entitles the Company to a 100% economic interest in the receivables purchased
through the proceeds of these notes, together the ''Group''.
The registered office address of the Company is 6th Floor, 125 London Wall,
London, EC2Y 5AS.
Further to the adoption of a new investment policy at the 2023 AGM, the
Company is being managed with the intention of realising all remaining assets
in the Portfolio in a prudent manner consistent with the principles of good
investment management and with a view to returning cash to Shareholders in an
orderly manner.
FundRock Management Company (Guernsey) Limited (formerly Sanne Fund Management
(Guernsey) Limited) acts as the Company's Alternative Investment Fund Manager
(the "AIFM") for the purposes of Directive 2011/61/EU on alternative
investment fund managers ("AIFMD").
The Group's Investment Adviser is Aquila Capital Investmentgesellschaft mbH,
authorised and regulated by the German Federal Financial Supervisory
Authority.
Apex Listed Companies Services (UK) Limited (the "Administrator") (formerly
Sanne Fund Services (UK) Limited) provides administrative and company
secretarial services to the Group under the terms of an administration
agreement between the Company and the Administrator. The Italian SPV is
administered by Zenith Service S.p.A.
2. BASIS OF PREPARATION
Group financial statements
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
The consolidated financial statements have also been prepared as far as is
relevant and applicable to the Group in accordance with the Statement of
Recommended Practice ("SORP") issued by the Association of Investment
Companies ("AIC") in July 2022.
The consolidated financial statements are prepared on the historical cost
basis, except for the revaluation of certain financial instruments at fair
value through profit or loss. The principal accounting policies adopted are
set out below. These policies are consistently applied.
The financial statements are presented in Sterling rounded to the nearest
thousand. They have been prepared on the basis of the accounting policies,
significant judgements, key assumptions and estimates as set out below.
Company financial statements
The financial statements have been prepared in accordance with the UK-adopted
international accounting standards in conformity with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards.
The financial statements have also been prepared as far as is relevant and
applicable to the Company in accordance with the Statement of Recommended
Practice ("SORP") issued by the AIC in July 2022.
The financial statements are prepared on the historical cost basis, except for
the revaluation of certain financial instruments at fair value through profit
or loss. The principal accounting policies adopted are set out below.
These policies are consistently applied.
The functional currency of the Company is Sterling. The capital of the Company
was raised in Sterling and the majority of its expenses are in Sterling. The
liquidity of the Company is managed in Sterling as the Company's performance
is evaluated in that currency. Accordingly, the financial statements are
presented in Sterling, rounded to the nearest thousand. They have been
prepared on the basis of the accounting policies, significant judgements, key
assumptions and estimates as set out below.
Basis of consolidation
The Group's financial statements consolidate those of the Company and of its
subsidiaries at 31 December 2023. The subsidiaries have a reporting date of
31 December. AHL's functional currency is Sterling. The Italian SPV's
functional currency is Euro. However, to align with the Group's functional
currency, the balances of the Italian SPV have been converted to Sterling at a
year-end rate for the Statement of Financial Position accounts and at an
average rate during the year for the Statement of Profit or Loss and
Comprehensive Income accounts.
All transactions and balances between Group companies are eliminated on
consolidation. The accounting policies adopted by the Group are consistent
with those adopted by the Company and the subsidiaries.
Characteristics of an investment entity
Under the definition of an investment entity, the Company should satisfy all
three of the following tests:
I. the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management services;
II. the Company commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income, or both; and
III. the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
Investment entity status
The Directors determined that the Company does not meet the characteristics of
an investment entity for the following reasons:
I. the Company is in full control of its subsidiary AHL and the
notes in the Italian SPV;
II. the majority of the investments held and added to during the
year for the Italian SPV are valued at amortised cost rather than on a fair
value basis; and
III. the majority of the investments held and purchased during the
year in AHL are valued at amortised cost rather than on a fair value basis.
The financial statements are presented on a consolidated basis of the Company,
AHL and the Italian SPV.
Accounting for wholly owned entities
AHL
The Company owns 100% of its subsidiary, AHL. The registered office address of
AHL is Leaf B, 20th Floor, Tower 42, Old Broad Street, London, England, EC2N
1HQ. The Company has acquired Energy Efficiency Investments through its
investment in the subsidiary. The Company will finance the subsidiary through
a mix of equity and debt instruments. The Company consolidates the subsidiary.
Italian SPV
The Italian SPV is a company established under the laws of Italy to hold
securitised receivables. The Company does not hold any equity in the SPV.
However, it does own 100% of the notes issued by one compartment of the SPV
which entitles the Company to a 100% economic interest in the receivables
purchased through the proceeds of this notes. The Company does not have an
economic interest in any of the other securities receivables issuances by the
Italian SPV. The notes subscribed by the Company, issued by the Italian SPV,
and the receivables purchased from the proceeds of these notes, together with
all associated assets and liabilities and income and costs, are ring-fenced
from other assets and liabilities of the Italian SPV and thus the Company's
holdings have been deemed a silo under IFRS 10 paragraph b 77. The Company
consolidates the results of the Italian SPV in respect of the performance of
the receivables in the silo.
Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. The following is a summary of the Directors' assessment of the
going concern status of the Group and Company.
The Group and Company continue to meet day-to-day liquidity needs through
their cash resources. The Directors have a reasonable expectation that the
Group and Company have adequate resources to continue in operational existence
for at least twelve months from the date of approval of these financial
statements.
In reaching this conclusion, the Directors have considered the Group's
investment commitments, cash position, income and expense flows. As at 31
March 2024, the latest practicable date before publication of this report, the
total commitments were £4.92 million. The value of investments as at 31
December 2023 was £65.5 million and has not changed materially since that
date. The investments are mostly fully operational and income producing. As at
31 March 2024, the Group had cash of £31.2 million (including the £2.5
million held as collateral for FX hedging). The Directors reviewed downside
scenarios which assumed some delay in cash receipts and are satisfied that the
Group and the Company would continue to meet its obligations as they fall due.
Total expenses for the year were £3.30 million (excluding impairment losses)
(2022: £2.4 million), which represented approximately 3.49% of average net
assets during the year (2022: 2.63%). At the date of approval of these
financial statements, based on the aggregate of investments and cash held, the
Group and Company have substantial operating expenses cover.
At the Annual General Meeting of the Company (the "AGM") held on 14 June 2023,
Shareholders voted in favour of the Group's change of investment policy (the
"New Investment Policy"). Following the AGM, and in accordance with the New
Investment Policy, the Company entered a continuation and managed run-off of
its portfolio ("Managed Run-Off"), meaning that it is not making any new
investments (save for the limited circumstances as set out in the New
Investment Policy) and its investing activity is solely in respect of funding
legal commitments to existing investments.
The Continuation and Managed Run-Off Resolution was put forward as a
resolution to Shareholders in response to the outcome of the Company's
Continuation Vote held in February 2023, which did not pass.
On 6 March 2024, the Company announced, subject to the approval of
Shareholders, a return of capital to Shareholders by way of a tender offer of
not less than £17.5 million.
As referred to above, the Group is operating currently under a Managed Run-Off
with the term of some of the Group's assets being several years. The Company
is continuing to explore other strategic options, such as an asset sale or
structural solution. There remains no certainty that any of these options will
materialise and be put to Shareholders for consideration, or on the potential
timing of other strategic options.
Accordingly, the Directors recognise that these conditions indicate the
existence of material uncertainty which may cast significant doubt about the
Group and Company's ability to continue as a going concern. Based on the
assessment and considerations above, the Directors have concluded that the
financial statements of the Group and the Company should be prepared on a
going concern basis. The financial statements do not include the adjustments
that would result if the Group and the Company were unable to continue on a
going concern basis.
Critical accounting judgements, estimates and assumptions
The preparation of the consolidated financial statements requires the
application of estimates and assumptions which may affect the results reported
in the consolidated financial statements. Estimates, by their nature, are
based on judgement and available information.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities are those
used to determine the fair value of the investments and expected credit loss
as disclosed in Note 4 to the consolidated financial statements.
Investment fair value
The key assumptions that have a significant impact on the value of the Group's
investments are discount rates, energy yield, power prices and capital
expenditure factors, the price at which the power and associated benefits can
be sold and the energy yield are expected to produce. The impact of risks
associated with climate change is assessed on an investment-by-investment
basis and factored into the underlying cash flows where relevant.
The discount factors are subjective and therefore it is feasible that a
reasonable alternative assumption may be used resulting in a different value.
The discount factors applied to the cash flows are reviewed semi-annually by
the Investment Adviser to ensure they are at the appropriate level. The
Investment Adviser will take into consideration market transactions, where
they are of similar nature, when considering changes to the discount factors
used.
The operating costs of the operating companies are frequently partly or wholly
subject to indexation and an assumption is made that inflation will increase
at a long-term rate.
The values of Energy Efficiency Investments are not significantly sensitive to
fluctuations in future revenues if a fixed indexation clause is applied to its
cash flow schedule.
Expected credit loss (''ECL'') allowance for financial assets measured at
amortised cost
The calculation of the Group's ECL allowances and provisions against
receivable purchase agreements under IFRS 9 is complex and involves the use of
significant judgement and estimation. Loan impairment provisions represent an
estimate of the losses incurred in the loan portfolios at the balance sheet
date. Individual impairment losses are determined as the difference between
the carrying value and the present value of estimated future cash flows,
discounted at the loans' original EIR. The calculation involves the
formulation and incorporation of multiple conditions into ECL to meet the
measurement objective of IFRS 9. Refer to Note 4 for more details.
Investment entity status assessment
Refer to the assessment within this note above.
Adoption of new IFRS standards from 1 January 2023
A number of new standards and amendments to standards are effective for the
annual periods beginning after 1 January 2023. None of these have a
significant effect on the measurement of the amounts recognised in the
financial statements of the Group.
New standards and amendments issued but not yet effective or adopted early by
the Group
The relevant new and amended standards and interpretations that are issued,
but not yet effective, up to the date of issuance of the Group's financial
statements are disclosed below. These standards are not expected to have a
material impact on the entity in future reporting periods and on foreseeable
future transactions.
Amendments to IAS 1 Presentation of Financial Statements - Classification of
Liabilities as Current or Non‑current
The amendments to IAS 1 clarify that the classification of liabilities as
current or non-current is based on rights that are in existence at the end of
the reporting period, specify that classification is unaffected by
expectations about whether an entity will exercise its right to defer
settlement of a liability, explain that rights are in existence if covenants
are complied with at the end of the reporting period, and introduce a
definition of 'settlement' to make clear that settlement refers to the
transfer to the counterparty of cash, equity instruments, other assets or
services. The amendments are applied retrospectively for annual periods
beginning on or after 1 January 2024, with early application permitted.
Amendments to IAS 1 Presentation of Financial Statements - Non‑current
Liabilities with Covenants
The amendments specify that only covenants that an entity is required to
comply with on or before the end of the reporting period affect the entity's
right to defer settlement of a liability for at least twelve months after the
reporting date (and therefore must be considered in assessing the
classification of the liability as current or non-current). Such covenants
affect whether the right exists at the end of the reporting period, even if
compliance with the covenant is assessed only after the reporting date (e.g. a
covenant based on the entity's financial position at the reporting date that
is assessed for compliance only after the reporting date). The amendments are
applied retrospectively for annual reporting periods beginning on or after 1
January 2024. Earlier application of the amendments is permitted.
Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
The amendments add a disclosure objective to IAS 7 stating that an entity is
required to disclose information about its supplier finance arrangements that
enables users of financial statements to assess the effects of those
arrangements on the entity's liabilities and cash flows. In addition, IFRS 7
was amended to add supplier finance arrangements as an example within the
requirements to disclose information about an entity's exposure to
concentration of liquidity risk. The amendments, which contain specific
transition reliefs for the first annual reporting period in which an entity
applies the amendments, are applicable for annual reporting periods beginning
on or after 1 January 2024. Earlier application is permitted.
3. MATERIAL ACCOUNTING POLICIES
Financial instruments
Financial assets
The Group's financial assets principally comprise of cash and cash
equivalents, investments held at fair value through profit and loss,
investments held at amortised cost, derivative financial instruments, interest
income receivables, shareholder loan receivables and other receivables.
Interest income receivables, prepayments and other receivables are initially
recognised at fair value and subsequently measured at amortised cost using the
effective interest rate method.
The Group's investments are debt instruments held at fair value through profit
or loss and debt instruments at amortised cost. Gains or losses resulting from
the movements in the fair value are recognised in the Group's Consolidated
Statement of Profit or Loss and Comprehensive Income under capital column.
Debt instruments at amortised cost are revalued with the functional currency
exchange rate at each valuation point and recognised in the Group's
Consolidated Statement of Profit or Loss and Comprehensive Income and are
subject to ECL.
Derivatives comprise of currency forward transactions used to hedge the
Group's foreign currency exposure. The fair value of the currency forward
transactions is the difference between the spot rate and the forward rate at
the date of the Consolidated Statement of Financial Position.
Derivatives
Derivatives comprise of foreign currency swaps used to hedge the Group's
foreign currency exposure. The fair value of the foreign currency swaps is the
difference between the spot rate and the forward rate that were applied at the
date of the Statement of Financial Position. Realised gains/(losses) on
derivatives relates to actual cash received/(paid) at the end of the term of
foreign currency swaps and are recognised upon settlement.
Investment in subsidiaries
The Company's investment in its subsidiary, AHL, is composed of equity shares.
The Company's investments in AHL is held at cost less impairment in the
Company's Statement of Financial Position. Impairment charge has been
determined to be the net liability amount of AHL less any impairment
associated with the shareholder loan receivable.
The Company's investment in its subsidiary, SPV, is composed of loan notes
receivables. The Company's investments in the SPV is held at fair value
through profit or loss. The fair value of SPV as at 31 December 2023 has been
determined through an aggregation of the fair value of SPV's individual
investments adjusted for the cash and liabilities of SPV as at 31 December
2023. The fair values of SPV's individual investments take account of
projections of future cash flows and discount rates which seek to take account
of the risk profile of the counterparty, and other areas of judgement.
Financial liabilities
The Group's financial liabilities include trade and other payables and other
short-term monetary liabilities which are initially recognised at fair value
and subsequently measured at amortised cost using the effective interest rate
method. The Group's financial liabilities also include derivative financial
instruments.
Recognition and derecognition
Financial assets and financial liabilities are recognised in the Group's
Consolidated Statement of Financial Position when the Group becomes a party to
the contractual provisions of the instrument. Financial assets and financial
liabilities are initially measured at fair value.
At initial recognition, financial instruments classified at fair value through
profit or loss are measured at fair value which is normally the transaction
price. Other financial instruments not classified at fair value through profit
or loss are measured initially at fair value but are adjusted for incremental
and directly attributable transaction costs.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or
deducted from the value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable
to the acquisition of financial assets or financial liabilities at fair value
through profit or loss are recognised immediately in profit or loss.
A financial liability (in whole or in part) is recognised when the Group has
extinguished its contractual obligations, it expires or is cancelled.
Financial assets are recognised when the rights to receive cash flows from the
investments have expired or the Group has transferred substantially all risks
and rewards of ownership.
Classification and measurement of financial assets
IFRS 9 contains a classification and measurement approach for debt instruments
that reflects the business model in which assets are managed and their cash
flow characteristics. For debt instruments two criteria are used to determine
how financial assets should be classified and measured:
· the entity's business model (i.e. how an entity manages its
debt instruments in order to generate cash flows by collecting contractual
cash flows, selling financial assets or both); and
· the contractual cash flow characteristics of the financial
asset (i.e. whether the contractual cash flows are solely payments of
principal and interest).
A debt instrument is measured at amortised cost if it meets both of the
following conditions and is not designated as at fair value through profit and
loss ("FVTPL"):
(a) it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
(b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
A debt instrument is measured at fair value through other comprehensive income
("FVOCI") if it meets both of the following conditions and is not designated
as at FVTPL:
(a) it is held within a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
(b) its contractual terms give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the contractual terms of the instrument are
considered. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition.
Subsequent to initial recognition, financial assets that are classified as
measured at fair value through profit or loss are measured at fair value in
the Consolidated Statement of Financial Position (with no deduction for sale
or disposal costs). Gains and losses resulting from the movement in fair value
are recognised in the Consolidated Statement of Profit or Loss and
Comprehensive Income.
Subsequent to initial recognition, financial assets that are measured at
amortised cost require the use of the effective interest method and are
subject to expected credit loss.
Taxation
Investment trusts which have approval under section 1158 of the Corporation
Tax Act 2010 are not liable for taxation on capital gains. Shortly after
listing the Company received approval as an investment trust by HMRC. Current
tax is the expected tax payable on the taxable income for the year, using tax
rates that have been enacted or substantively enacted at the date of the
Consolidated Statement of Financial Position.
Taxation of subsidiary entities
Income tax expense represents the sum of the tax currently payable and
deferred tax.
The tax payable is based on taxable profit for the year. There is no tax
payable at 31 December 2023 due to the subsidiaries being in a loss position.
Taxable profit differs from profit as reported in the Statement of Profit or
Loss and Comprehensive Income because of items of income or expense that are
taxable or deductible in other years and items that are never taxable or
deductible. The Company's liability for current taxes is calculated using tax
rates that have been enacted or substantively enacted by the end of the
reporting period.
Deferred taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation
of taxable profit and is accounted for using the statement of financial
position liability method. Deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against
which deductible temporary differences can be recognised.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is recognised. Deferred tax
is charged or credited to the Consolidated Statement of Profit or Loss and
Comprehensive Income except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in
equity.
Segmental reporting
The Chief Operating Decision Maker ("CODM"), which is the Board, is of the
opinion that the Group is engaged in a single segment of business, being
investment in energy efficiency assets to generate investment returns whilst
preserving capital. The financial information used by the CODM to manage the
Group presents the business as a single segment.
Income
Income includes investment interest income from financial assets at amortised
cost, dividend income and bank interest income.
Investment interest income for the year is recognised in the Consolidated
Statement of Profit or Loss and Comprehensive Income using the effective
interest method calculation.
Dividend income is recognised when the right to receive it is established and
is reflected in the Consolidated Statement of Profit or Loss and Comprehensive
Income as investment income.
Bank interest income is recognised for the year in the Consolidated Statement
of Profit or Loss and Comprehensive Income on an accruals basis.
Expenses
All expenses are accounted for on an accrual basis. In respect of the analysis
between revenue and capital items presented within the Consolidated Statement
of Profit or Loss and Comprehensive Income, all expenses are presented as
revenue as it is directly attributable to the operations of the Group. Details
of the Group's fee payments to the Investment Adviser are disclosed in Note 6
to the consolidated financial statements. Details of the Group's other
expenses are disclosed in Note 7 to the consolidated financial statements.
These fees are presented under the revenue column in the Consolidated
Statement of Profit or Loss and Comprehensive Income.
Foreign currency
Transactions denominated in foreign currencies are translated into Sterling at
actual exchange rates as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at year end are reported at the
rates of exchange prevailing at the year end. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction is included
as an exchange gain or loss to capital or revenue in the Consolidated
Statement of Profit or Loss and Comprehensive Income as appropriate. Foreign
exchange movements on investments are included in the capital account of the
Consolidated Statement of Profit or Loss and Comprehensive Income.
Cash and cash equivalents
Cash and cash equivalents include deposits held at call with banks and other
short-term deposits with original maturities of three months or less.
Trade and other payables
Trade and other payables are initially recognised at fair value, and
subsequently re-measured at amortised cost using the effective interest method
where necessary.
Share capital and share premium
Ordinary Shares are classified as equity. Costs directly attributable to the
issue of new shares (that would have been avoided if there had not been a new
issue of new shares) are recognised against the value of the Ordinary Share
premium account.
Repurchases of the Company's own shares are recognised and deducted directly
in equity. No gain or loss is recognised in profit or loss on the purchase,
sale, issue or cancellation of the Company's own equity instruments.
Expected credit loss allowance for financial assets measured at amortised cost
Many of the Group's investments are financial assets measured at amortised
cost. These investments are structured as purchases of receivables or
purchases of notes which have the right to receivables. The purchased
receivables derive from energy services agreements for the provision of energy
efficiency and/or renewable energy solutions provided by ESCOs to their
corporate clients and these receivables provide a fixed return for the Group.
The receivables are due to be received over a range of maturities from less
than twelve months to more than fifteen years. Individual agreements provide
for the receivables to be paid mostly on a monthly or quarterly basis.
In addition to past events and current conditions, reasonable and supportable
forecasts affecting collectability are also considered when determining the
amount of impairment in accordance with IFRS 9. Under the IFRS 9 expected
credit loss model, expected credit losses are recognised at each reporting
period, even if no actual loss events have taken place. In addition to past
events and current conditions, reasonable and supportable forward-looking
information that is available without undue cost or effort is considered in
determining impairment, with the model applied to all financial instruments
subject to impairment testing.
At initial recognition, allowance is made for expected credit losses resulting
from default events that are possible within the next 12 months (twelve-month
expected credit losses). In the event of a significant increase in credit
risk, allowance (or provision) is made for expected credit losses resulting
from all possible default events over the expected life of the financial
instrument (lifetime expected credit losses).
Financial assets where twelve month expected credit losses are recognised are
Stage 1; financial assets which are considered to have experienced a
significant increase in credit risk are in Stage 2; and financial assets which
have defaulted or are otherwise considered to be credit-impaired are allocated
to Stage 3. Stage 2 and Stage 3 are based on lifetime expected credit losses.
The measurement of expected credit loss, referred to as "ECL", is primarily
based on the product of the instrument's probability of default ("PD"), loss
given default ("LGD"), and exposure at default ("EAD"), taking into account
the value of any collateral held or other mitigants of loss and including the
impact of discounting using the EIR.
· The PD represents the likelihood of a borrower defaulting
on its financial obligation, either over the next twelve months ("12M PD"), or
over the remaining lifetime ("Lifetime PD") of the obligation. This has been
calculated by an external third-party credit rating agency using a wide range
of parameters such as the company's financial statements and the macroeconomic
environment. The external credit rating company has also designed a downside
and upside scenario based on historic data. Company financials are modified to
reflect various factors leading to a deterioration in performance.
· In each of the scenarios, various macro and financial
variables are flexed and applied in the calculation. The macro variables are
GDP growth, inflation, unemployment rate and interest rate. The financial
variables are turnover, net debt, shareholder equity, working capital,
tangible assets, interest expense, EBITDA, EBIT and net income. A base,
optimistic and pessimistic scenario is applied for each of these above
variables to calculate the corresponding expected credit loss.
The probability weighting of the scenarios was based on an analysis of the
level of severity. It was determined that a weighting of 50% for the base case
and 25% for each of the other scenarios was appropriate. The resulting
forecasts are thus neither overly optimistic nor unduly conservative for IFRS
9 purposes.
Optimistic Base case Pessimistic
IFRS 9 probability weighting 25% 50% 25%
· The EAD represents the amounts the Group expects to be owed
at the time of default.
· LGD represents the Group's expectation of the extent of
loss on a defaulted exposure. LGD varies by type of counterparty, type and
seniority of claim and availability of collateral or other credit support. LGD
is expressed as a percentage loss per unit of EAD. LGD is calculated on a
twelve month or lifetime basis, where twelve month LGD is the percentage of
loss expected to be made if the default occurs in the next twelve months and
lifetime LGD is the percentage of loss expected to be made if the default
occurs over the remaining expected lifetime of the loan ("Lifetime LGD").
The ECL is determined by estimating the PD, LGD and EAD for each individual
exposure or collective segment. These three components are multiplied together
and adjusted for the likelihood of survival (i.e. the exposure has not prepaid
or defaulted in an earlier month). This effectively calculates an ECL.
Management is aware that there is a high level of judgement in calculating the
scenarios and the inputs given the assets are relatively recent with minimal
historic data.
The main difference between Stage 1 and Stage 2 is the respective PD horizon.
Stage 1 estimates use a maximum of a twelve month PD, while Stage 2 estimates
use a lifetime PD. The main difference between Stage 2 and Stage 3 is that
Stage 3 is effectively the point at which there has been a default event.
Movements between Stage 1 and Stage 2 are based on whether an instrument's
credit risk as at the reporting date has increased significantly relative to
the date it was initially recognised. Where the credit risk subsequently
improves such that it no longer represents a significant increase in credit
risk since origination, the asset is transferred back to Stage 1.
In assessing whether a counterparty has had a significant increase in credit
risk, the following indicators are considered:
1. Early signs of cash flow/liquidity problems such as an ongoing
delay in servicing of payables;
2. Significant increase in PD;
3. Actual or expected late payments or restructuring of payments
due;
4. Actual or expected significant adverse change in operating
results of the borrower, where this information is available; and
5. Significant adverse changes in business, financial and/or
economic conditions in which the counterparty operates.
Movements between Stage 2 and Stage 3 are based on whether financial assets
are credit-impaired as at the reporting date. The Group uses a rebuttable
presumption that a credit deterioration (i.e. Stage 1 to Stage 2) occurs no
later than when a payment is 90 days past due. The Group uses this 90-day
backstop for all its assets. Assets can move in both directions through the
stages of the impairment model. The Directors do not believe that being 30
days overdue is considered a credit deterioration given the nature and payment
profile of some of its small counterparties. Payments are different from
consumer loan payments and often comprise of a very large quantity of payments
each of a very small amount. There is also significant evidence of catch-up
payments where a counterparty has just passed the 30 days and very rarely have
these counterparties missed the payment completely.
We recognise that individual credit exposures, which define the Company's
investments, are different from, for example, consumer mortgage or consumer
car loan portfolios. Late payments can arise due to the corporate
counterparties refusing to utilise direct debit or standing order payment
processes with the result that payment chasing can be required for relatively
small amounts, e.g., lighting service contracts. Accordingly, we do expect
that in certain cases 90 days late payments may not lead to movements through
the ECL stages.
4. INVESTMENTS
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement.
Financial assets and financial liabilities are classified in their entirety
into only one of the following three levels:
Level 1
The unadjusted quoted price in an active market for identical assets or
liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable
(i.e. developed using market data) for the asset or liability, either directly
or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the
asset or liability.
The classification of the Group's investments held is detailed in the table
below:
31 December 2023 31 December 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments at fair value through profit and loss - - 10,492 10,492 - - 11,742 11,742
Derivative financial instrument - 122 - 122 - (856) - (856)
- 122 10,492 10,614 - (856) 11,742 10,886
There were no transfers between investment levels for the Group during the
year.
The classification of the Company's investments held is detailed in the table
below:
31 December 2023 31 December 2022
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Company £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment in SPV, at fair value through profit or loss - - 35,683 35,683 - - 31,220 31,220
- - 35,683 35,683 - - 31,220 31,220
There were no transfers between investment levels for the Company during the
year.
The movement on the Level 3 unquoted investments of the Group during the year
is shown below:
31 December 31 December
2023 2022
£'000 £'000
Opening balance 11,742 -
Additions during the year 1,675 10,926
Disposals during the year (1,551) (43)
Unrealised (loss)/gain on investments (1,374) 859
Closing balance 10,492 11,742
The movement on the Level 3 unquoted investments of the Company (Investment in
SPV, at fair value through profit or loss) during the year is shown below:
31 December 31 December
2023 2022
Company Company
£'000 £'000
Opening balance 31,220 12,307
Additions during the year 4,808 16,769
Repayments during the year (1,306) -
Unrealised gain on investments 961 2,144
Closing balance 35,683 31,220
Assets and liabilities not carried at fair value but for which fair value is
disclosed
The following table presents the fair value of the Group's assets and
liabilities not measured at fair value through profit and loss at 31 December
2023 but for which fair value is disclosed:
31 December 2023 31 December 2022
Fair market Fair market
Carrying value value Carrying value value
£'000 £'000 £'000 £'000
Assets
Investments at amortised cost 54,990 57,221 38,550 38,755
Total 54,990 57,221 38,550 38,755
For all other assets and liabilities not carried at fair value, the carrying
value is a reasonable approximation of fair value.
Valuation methodology
Debt instruments at fair value through profit or loss
The Group through its subsidiary (AHL) and its notes in the Italian SPV has
continued to acquire debt instruments at fair value through profit or loss.
The Investment Adviser has determined the fair value of debt investments as at
31 December 2023. The Directors have satisfied themselves as to the fair value
of the debt instrument investments as at 31 December 2023.
Valuation assumptions
The Investment Adviser has carried out fair market valuations on some of the
debt instruments held by the subsidiaries as at 31 December 2023 and the
Directors have satisfied themselves as to the methodology used, the discount
rates and key assumptions applied, and the valuation. Investments that are
valued at fair value through profit or loss are valued using the IFRS 13
framework for fair value measurement. The following economic assumptions were
used in the valuation of the investments.
Valuation assumptions
Discount rates The discount rate used in the valuations is derived according to
internationally recognised methods. Typical components of the discount rate
are risk-free rates, country-specific and asset-specific risk premia.
The latter comprise the risks inherent to the respective asset class as well
as specific premia for other risks such as development and construction.
Power price Power prices are based on power price forecasts from leading market analysts.
The forecasts are independently sourced from a provider with coverage in
almost all European markets as well as providers with regional expertise.
Energy yield Estimated based on third party energy yield assessments campaigns as well as
operational performance data (where applicable) by taking into account
regional expertise of a second analyst.
Inflation rates Long-term inflation is based on central bank targets for the respective
jurisdiction.
Capital expenditure Based on the contractual position (e.g., engineering, procurement and
construction agreement), where applicable.
Valuation sensitivities
For each of the sensitivities, it is assumed that potential changes occur
independently of each other with no effect on any other base case assumption,
and that the number of investments remains static throughout the modelled
life.
The Net Asset Value impacts from each sensitivity are shown below.
Discount rates
The Discounted Cash Flow (''DCF'') valuation of the investments which are held
at fair value represents one component of the Net Asset Value of the Group and
the key sensitivities are considered to be the discount rate used in the DCF
valuation and assumptions.
The weighted average valuation discount rate applied to calculate the
investment valuation is 7.7% at 31 December 2023. An increase or decrease in
this rate by 0.5% at investment level has the following effect on valuation.
31 December 2023 31 December 2022
+0.5% -0.5% -0.5% +0.5%
Change Change Change Change
Discount rate £'000 £'000 £'000 £'000
Valuation (242) 250 (488) 512
Power price
Long-term power price forecasts are provided by leading market consultants and
are updated quarterly. The sensitivity below assumes a 10% increase or
decrease in merchant power prices relative to the base case for every year of
the asset life. The sensitivity considers a flat 10% movement in power prices
for all years, i.e. the effect of adjusting the forecast electricity price
assumptions in each of the jurisdictions applicable to the investments down by
10% and up by 10% from the base case assumptions for each year throughout the
operating life of the investment.
A change in the forecast electricity price assumptions by plus or minus 10%
has the following effect on valuation.
31 December 2023 31 December 2022
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Power price £'000 £'000 £'000 £'000
Valuation (64) 66 (542) 547
Energy yield
The base case assumes a ''P50'' level of output. The P50 output is the
estimated annual amount of electricity generation (in MWh) that has a 50%
probability of being exceeded both in any single year and over the long term
and a 50% probability of being under-achieved. Hence the P50 is the expected
level of generation over the long term. The sensitivity illustrates the effect
of a 10% lower annual production (a downside case) and a 10% higher annual
production (upside case). The sensitivity is applied throughout the whole term
of the projects.
The table below shows the sensitivity of the project values to changes in the
energy yield applied to cash flows from projects as explained above.
31 December 2023 31 December 2022
-10.0% +10.0% -10.0% +10.0%
Change Change Change Change
Energy yield £'000 £'000 £'000 £'000
Valuation (555) 533 (1,570) 1,866
Inflation rates
As most payments are fixed and not linked to the inflation rate, a sensitivity
of the inflation rate has only a negligible impact on the NAV.
Capital expenditure
The Company has contractual protections if capex is delayed (i.e. reduce the
capex or increase receivables due) and the Company is not obliged to fund the
overrun costs. Therefore, capex sensitivities are not appropriate for the
Company's type of investments.
Investments at amortised cost
a) Investments at amortised cost
The disclosure below presents the gross carrying value of financial
instruments to which the impairment requirements in IFRS 9 are applied and the
associated allowance for ECL. Please see Note 3 for more detail on the
allowance for expected credit loss (''ECL'') where the Group has classified
the investment portfolio according to stages.
The following table analyses loans by staging for the Group as at 31 December
2023:
31 December 2023 31 December 2022
Gross Net Gross Net
carrying Allowance carrying carrying Allowance carrying
amount for ECL amount amount for ECL amount
Group £'000 £'000 £'000 £'000 £'000 £'000
Fixed value investments at amortised cost
Stage 1 54,399 (259) 54,140 37,735 (77) 37,658
Stage 2 156 (24) 132 951 (59) 892
Stage 3 2,306 (1,588) 718 - - -
Total assets 56,861 (1,871) 54,990 38,686 (136) 38,550
As noted in the Investment Adviser's Report the Superbonus investments, which
in total amount to £30.96 million of the gross carrying amount of £54.40
million of Stage I investments, have been experiencing delays with final
payments from the buyers of the tax credits generated by these projects. The
ECL provisions for Superbonus investments are based on the exposures being
considered as remaining in Stage 1. Payments for validated tax credits in
certain cases have not been made within 90 days of seeking payment from the
buyers of the tax credits. The decision not to move the classification of
these investments from Stage 1 to Stage 2 is based on the judgment that
there has been no significant deterioration in the credit risk for the
following reasons:
· there has been a significant de-risking of the construction risks
in the Superbonus projects;
· the large majority of the 109 projects have now secured tax
credit certification, a significant improvement on the position as at the end
of September 2023;
· the delays in payment are attributable in large part to
bureaucratic delays in processing large volumes of tax credits generated by
other projects/ESCOs and not just those financed by the Company;
· payments for tax credits generated by tranches 1 and 2 of
relevant projects have been made; and
· £2.9m of final payments have been received of which £2.0m in
the year to date.
If the projects identified as experiencing payment delays of over 90 days were
moved to Stage 2 there would be no increase in the allowance for ECL since the
amounts due are within 12 months. Notwithstanding the comments above, by way
of illustration, if the PDs and LGDs were increased by 4 times and 2 times
respectively the allowance for ECL would increase by £0.45 million.
b) Expected credit loss allowance for IFRS 9
Impairment provisions are driven by changes in credit risk of instruments,
with a provision for lifetime expected credit losses recognised where the risk
of default of an instrument has increased significantly since initial
recognition.
The following table analyses Group ECL by stage.
2023 2022
Group £'000 £'000
At 1 January 136 -
Charge for the year - Stage 1 182 77
Charge for the year - Stage 2 (35) 59
Charge for the year - Stage 3 1,588 -
Allowance for ECL at 31 December 1,871 136
Stage 3 losses
The Stage 3 losses relate to two investments: Ega Energy and the sub-metering
investment in Germany.
Ega Energy - (£475,000)
The CHP investment for a food producer, Vale of Mowbray, to which £0.9
million had been deployed, as previously reported, remains on hold because
Vale of Mowbray was placed into administration. Discussions continue between
Ega Energy, the developer of the original project, and the new owner of the
site, a cold store logistics business. However, the new owner of the site has
not yet decided whether or how to proceed with the CHP investment. Ega Energy
remains confident that it will be able to deploy the CHP equipment either at
this site or at the sites of other potential clients in the UK. Nevertheless,
the Group has increased the provision against this investment from
£0.06 million as at 31 December 2022 to £0.48 million at the period end and
the Group is forecasting that no further capital will be deployed to this
investment.
Sub-metering investment in Germany - (£1,111,000)
The Company invested a total of £1.7 million in the sub-metering investment
in Germany investment in April and June 2022 of which £0.4 million had been
redeemed at the year end. The investment was made by way of a subscription for
a note issued by a SPV. The SPV is party to a series of contracts with various
landlords for the provision of sub-metering, hardware, maintenance and billing
services contracts. The SPV appointed an insolvency administrator in October
2023. The provision of £1,111,000 is based on an offer from a potential
buyer.
Measurement uncertainty and sensitivity analysis of ECL
The recognition and measurement of ECL is complex and involves the use of
judgement and estimation. This includes the formulation and incorporation of
multiple forward-looking economic conditions into ECL to meet the measurement
objective of IFRS 9.
The ECL recognised in the financial statements reflects the effect on expected
credit losses of a range of three possible outcomes, calculated on a
probability-weighted basis, based on the economic scenarios described in Note
3 to the financial statements, including management overlays where required.
The probability-weighted amount is typically a higher number than would result
from using only the base (most likely) economic scenario. ECLs typically have
a non-linear relationship to the many factors which influence credit losses,
such that more favourable macroeconomic factors do not reduce defaults as much
as less favourable macroeconomic factors increase defaults. The ECL calculated
for each of the scenarios represents three outcomes that have been evaluated
to estimate ECL. As a result, the ECL calculated for the upside and downside
scenarios should not be taken to represent the upper and lower limits of
possible actual ECL outcomes. There is a high degree of estimation uncertainty
in numbers representing tail risk scenarios when assigned a 100% weight. A
wider range of possible ECL outcomes reflects uncertainty about the
distribution of economic conditions and does not necessarily mean that credit
risk on the associated loans is higher than for loans where the distribution
of possible future economic conditions is narrower.
In addition to the scenario analysis outlined above, two further extreme
downside scenarios were provided as follows: the first scenario is LGD%
assumed increased to 100%, in which event we calculate that this would result
in an ECL of £2,906,575. A further second, harsher scenario would be to
assume that in addition to an LGD% of 100%, the PD% is also increased by 50%.
In this case the ECL would be £3,206,722.
Investment in Subsidiaries (Company level)
The Company has two subsidiaries, AHL and in the SPV. The Company's investment
in its subsidiary, AHL, is composed of equity shares. The Company's
investments in AHL is held at cost less impairment in the Company's Statement
of Financial Position. The Company's investment in its subsidiary, SPV, is
composed of loan notes receivables. The Company's investments in the SPV is
held at fair value through profit or loss.
The composition of the Company's investment in subsidaries is as follows:
2023 2022
Company £'000 £'000
Investment in SPV, at fair value through profit or loss 35,683 31,220
Investment in AHL, held at cost less impairment 9,971 -*
Investment in subsidiaries 45,654 31,220
The movement of the Company's investments in AHL are as follows:
2023 2022
Gross carrying amount £'000 £'000
Balance 1 January - -
Additions during the year 11,791 -*
Balance 31 December 11,791 -*
Accumulated impairment
Balance 1 January - -
Impairment loss recognised (1,820) -
Balance 31 December (1,820) -
Carrying amount at 31 December 9,971 -*
* The investment in AHL for the year ended 31 December 2022 was
£1.
5. INVESTMENT INCOME
Group For the year For the year ended
ended 31 December 2022
31 December £'000
2023
£'000
Investment interest income 5,027 1,646
Bank interest income 921 551
Total investment income 5,948 2,197
Company For the year For the year ended
ended 31 December 2022
31 December £'000
2023
£'000
Investment interest income 3,426 235
Bank interest income 654 462
Total investment income 4,080 697
6. INVESTMENT ADVISORY FEES
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Investment advisory fees 808 - 808 615 - 615
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Investment advisory fees 808 - 808 615 - 615
Under the Investment Advisory Agreement, the following fee is payable to the
Investment Adviser:
(i) 0.95 per cent. per annum of committed capital of the Company up to and
including £500 million; and
(ii) 0.75 per cent. per annum of committed capital of the Company above £500
million.
7. OTHER EXPENSES
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Secretary and administrator fees 281 - 281 319 - 319
Tax compliance 62 - 62 37 - 37
Directors' fees 281 - 281 143 - 143
Broker's fees 182 - 182 61 - 61
Auditors' fees*
- Fees payable to the Company's auditors for
the audit of the Company's annual accounts 590 - 590 211 - 211
- Fees payable to the Company's auditors
and its associates for other services:
Audit of the accounts of subsidiaries 26 - 26 16 - 16
AIFM fees 91 - 91 98 - 98
Registrar's fees 23 - 23 16 - 16
Marketing fees 104 - 104 107 - 107
FCA and listing fees 26 - 26 17 - 17
Investment expenses 332 - 332 222 - 222
Legal fees 235 - 235 365 - 365
Other expenses 259 - 259 174 - 174
Total other expenses 2,492 - 2,492 1,786 - 1,786
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Secretary and administrator fees 199 - 199 233 - 233
Tax compliance 41 - 41 37 - 37
Directors' fees 203 - 203 108 - 108
Broker's fees 182 - 182 61 - 61
Auditors' fees*
- Fees payable to the Company's auditors for
the audit of the Company's annual accounts 590 - 590 211 - 211
- Fees payable to the Company's auditors and its associates for other
services:
audit of the accounts of subsidiaries 26 - 26 16 - 16
AIFM fees 91 - 91 98 - 98
Registrar's fees 23 - 23 16 - 16
Marketing fees 104 - 104 107 - 107
FCA and listing fees 26 - 26 17 - 17
Legal fees 235 - 235 351 - 351
Other expenses 192 - 192 120 - 120
Total other expenses 1,912 - 1,912 1,375 - 1,375
* For the year to 31 December 2023, the statutory audit fees
to the Company's auditors and its associates for the audit of the Company and
consolidated financial statements was £336,000 (2022: £187,000) excluding
VAT. The audit fees payable to the Company's auditors and its associates for
the audit of the Company's subsidiaries is £21,500 (2022: £16,000) excluding
VAT, which was paid for by the Parent entity. Included in the above audit fees
are overruns relating to the previous year's audit amounting to £177,500
(2022: £nil), excluding VAT. This is explained further in the Audit and Risk
Committee Report.
8. TAXATION
(a) Analysis of charge in the year
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Corporation tax - - - - - -
Taxation - - - - - -
(b) Factors affecting total tax charge for the year
The effective UK corporation tax rate applicable to the Group for the year is
23.5% (2022: 19%). The tax charge differs from the charge resulting from
applying the standard rate of UK corporation tax for an investment trust
company.
The differences are explained below:
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) on ordinary activities before taxation 913 (609) 304 (340) 477 137
Corporation tax at 23.5% (2022: 19%) 215 (143) 72 (65) 91 26
Effects of:
Utilisation of carried forward tax losses/
management expenses (320) (35) (355) 65 - 65
Movement on investments not taxable (310) 178 (132) - - -
Loss not recognised 415 - 415 - (91) (91)
Total tax charge for the year - - - - - -
For the year ended 31 December 2023 For the year ended 31 December 2022
Revenue Capital Total Revenue Capital Total
Company £'000 £'000 £'000 £'000 £'000 £'000
(Loss)/Profit on ordinary activities before taxation (681) 924 243 (1,293) 2,045 752
Corporation tax at 23.5% (2022: 19%) (160) 217 57 (246) 389 143
Effects of:
Utilisation of carried forward tax losses/
management expenses (320) - (320) 246 - 246
Non-deductible impairment 480 - 480 - - -
Gain on investments not taxable - (217) (217) - (389) (389)
Total tax charge for the year - - - - - -
Investment companies which have been approved by HM Revenue & Customs
under section 1158 of the Corporation Tax Act 2010 are exempt from tax on
capital gains. Due to the Company's status as an investment trust, and the
intention to continue meeting the conditions required to obtain approval in
the foreseeable future, the Company has not provided for deferred tax on any
capital gains or losses arising on the revaluation of investments.
The Company has not recognised a deferred tax asset of £89,000 (2022:
£429,000) on trading losses of £369,000 (2022: £429,000) in the UK. The
asset has not been recognised as it is considered unlikely that the Company
will generate sufficient future profits against which to utilise the assets.
There is no time limit for expiry of the losses. On 3 March 2021, the UK
Government announced its intention to increase the rate of UK corporation tax
rate from 19% to 25% with effect from 1 April 2023. The increase to 25% was
substantively enacted on 24 May 2021 and, accordingly, the unrecognised
deferred tax asset has been measured using the 25% tax rate.
9. RETURN PER ORDINARY SHARE
Group
Return per share is based on the consolidated profit for the year of £304,000
(2022: £137,000) attributable to the weighted average number of Ordinary
Shares in issue of 100,000,000 in the year to 31 December 2023 (2022: Ordinary
Shares in issue 100,000,000). Consolidated revenue profit and capital loss are
£913,000 (2022: Consolidated revenue loss of £340,000) and £609,000 (2022:
Consolidated capital gains of £477,000) respectively.
Company
Return per share is based on the profit for the year of £243,000 attributable
to the weighted average number of Ordinary Shares in issue of 100,000,000 in
the year to 31 December 2023 (2022: Company gain of £752,000; weighted
average number of Ordinary Shares in issue 100,000,000). Company revenue loss
and capital gain are £681,000 (2022: Company revenue loss of £1,293,000) and
£924,000 (2022: Company capital gain of £2,045,000) respectively.
10. TRADE AND OTHER RECEIVABLES
As at 31 December 2023 As at 31 December 2022
Company Group Company Group
£'000 £'000 £'000 £'000
Intercompany receivable - - 32,966 -
Shareholder loan receivable 27,293 - - -
Unsettled trades - 272 - -
Trade and other receivables 255 380 33 70
Total 27,548 652 32,999 70
As at 31 December 2023, the Company has an intercompany receivable from AHL in
the amount of £nil (2022: £32,966,000).
The amount is non-interest bearing and payable on demand.
As at 31 December 2023, the Company has a shareholder loan receivable from AHL
in the amount of £27,293,000 (2022: £nil), which is net of ECL provision of
£221,000 (2022: £nil). The initial interest rate was 7.90% per annum which
is then being adjusted every fourth quarter of the financial year in order for
the Company not to have a gross margin of less than 50bps from its financing
activities. The loan is repayable in full on 31 December 2046.
11. CREDITORS: AMOUNTS FALLING DUE IN ONE YEAR
As at 31 December 2023 As at 31 December 2022
Company Group Company Group
£'000 £'000 £'000 £'000
Accrued expenses 874 1,016 867 892
Unsettled payment of notes purchased - - 177 -
Unsettled trades - 41 - -
Other creditors - - 6 12
Total 874 1,057 1,050 904
12. SHARE CAPITAL
As at 31 December 2023 As at 31 December 2022
No. of shares £'000 No. of shares £'000
Allotted, issued and fully paid:
Ordinary Shares of 1p each ("Ordinary Shares") 100,000,000 1,000 100,000,000 1,000
Total 100,000,000 1,000 100,000,000 1,000
On incorporation, the issued share capital of the Company was 1 Ordinary Share
of £0.01 issued to the subscriber to the Company's memorandum. The Company's
issued share capital was increased by £50,000 represented by 50,000
Management Shares of nominal value £1.00 each, which were subscribed for by
the Investment Adviser. Following Admission, the Management Shares were
redeemed by the holder.
On incorporation on 2 June 2021, 99,999,999 Ordinary Shares were allotted and
issued to Shareholders as part of the placing and offer for subscription in
accordance with the Company's prospectus dated 10 May 2021.
Shares in issue at Shares in issue
the beginning Shares at the end of
For the year ended 31 December 2023 of the year subscribed the year
Management Shares - - -
Ordinary Shares 100,000,000 - 100,000,000
Shares in issue at Shares in issue
the beginning of Shares at the end of
For the year ended 31 December 2022 the year subscribed the year
Management Shares - - -
Ordinary Shares 100,000,000 - 100,000,000
13. SPECIAL RESERVE
As indicated in the Company's prospectus dated 10 May 2021, following
admission of the Company's Ordinary Shares to trading on the London Stock
Exchange, the Directors applied to the Court and obtained a judgement on 12
August 2021 to cancel the amount standing to the credit of the share premium
account of the Company. The amount of the share premium account cancelled and
credited to a special reserve was £97,000,000. As at 31 December 2023, the
total special reserves were £93,500,000 (2022: £94,750,000).
14. NET ASSETS PER ORDINARY SHARE
The Group's net assets per Ordinary Share as at 31 December 2023 is based on
£94,281,000 (2022: £95,227,000) of net assets of the Group attributable to
the 100,000,000 Ordinary Shares in issue as at 31 December 2023 (2022:
100,000,000).
The Company's net assets per Ordinary Share as at 31 December 2023 is based on
£94,876,000 (2022: £95,883,000) of net assets of the Company attributable to
the 100,000,000 Ordinary Shares in issue as at 31 December 2023 (2022:
100,000,000).
15. DIVIDEND
The Company has paid the following interim dividends in respect of the year
under review:
For the year ended For the year ended
31 December 2023 31 December 2022
Pence per Total Pence per Total
Total dividends paid in the year Ordinary Share £'000 Ordinary Share £'000
30 June 2022 interim - Paid 31 October 2022 N/A N/A 1.00p 1,000
30 September 2022 interim - Paid 9 December 2022 N/A N/A 1.25p 1,250
31 December 2022 interim - Paid 20 March 2023 1.25p 1,250 N/A N/A
Total 1.25p 1,250 2.25p 2,250
The dividend relating to the year ended 31 December 2023, which is the basis
on which the requirements of section 1159 of the Corporation Tax Act 2010 are
considered, is detailed below:
For the year ended For the year ended
31 December 2023 31 December 2022
Pence per Total Pence per Total
Total dividends declared in the year Ordinary Share £'000 Ordinary Share £'000
30 June 2022 interim - Paid 31 October 2022 - - 1.00p 1,000
30 September 2022 interim - Paid 9 December 2022 - - 1.25p 1,250
31 December 2022 interim - Paid 20 March 2023 - - 1.25p 1,250
Total - - 3.50p 3,500
16. FINANCIAL RISK MANAGEMENT
The Investment Adviser, AIFM and the Administrator report to the Board on a
quarterly basis and provide information to the Board which allows it to
monitor and manage financial risks relating to the Group's operations. The
Group's activities expose it to a variety of financial risks: market risk
(including price risk, interest rate risk and foreign currency risk), credit
risk and liquidity risk. These risks are monitored by the AIFM. Each risk and
its management are summarised below.
(i) Currency risk
Foreign currency risk is defined as the risk that the fair values of future
cash flows will fluctuate because of changes in foreign exchange rates. The
Group's and the Company's financial assets and liabilities are denominated in
GBP and EUR and substantially all of their revenues and expenses are in GBP
and EUR. The Group and the Company are therefore exposed to foreign currency
risk.
For any non-base currency assets, the Investment Adviser can use forward
foreign exchange contracts to seek to hedge up to 100% of non-GBP exposure.
The Company does not intend to use hedging or derivatives for investment
purposes but may use derivative instruments such as forwards, options, future
contracts and swaps to hedge currency, inflation, interest rates, commodity
prices and/or electricity prices.
With many of its investment assets held in Euros, the Group uses a series of
regular forward foreign exchange contracts to provide a level of protection
against movement in the Sterling exchange rate. Under these arrangements the
Group is required to provide £2.5 million in cash as collateral for these
forward foreign exchange contracts. Following the failure of the Continuation
Vote, the Group is currently reviewing the strategic options for realising
value for Shareholders. The Board will consider the appropriateness of the
current hedging arrangements and the cash collateral as part of the review of
strategic options and in light of the cash requirements of the Group.
The currency profile of the Group as at 31 December 2023 is as follows:
31 December 2023 31 December 2022
GBP EUR Total GBP EUR Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 23,547 5,535 29,082 37,444 9,181 46,625
Trade and other receivables 159 493 652 33 37 70
Derivative financial instruments 122 - 122 - - -
Investments 3,566 61,916 65,482 4,306 45,986 50,292
Total assets 27,394 67,944 95,338 41,783 55,204 96,987
Liabilities
Creditors (901) (156) (1,057) (900) (4) (904)
Derivative financial instruments - - - (856) - (856)
Total liabilities (901) (156) (1,057) (1,756) (4) (1,760)
If the value of Sterling against the Euro increased or decreased by 10% (2022:
10%), if all other variables remained constant, the NAV of the Group would
increase or decrease by £6,794,000 (2022: £5,520,000).
The currency profile of the Company as at 31 December 2023 is as follows:
31 December 2023 31 December 2022
GBP EUR Total GBP EUR Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 19,884 2,664 22,548 32,169 545 32,714
Intercompany balance with Attika Holdings - - - 16,371 16,595 32,966
Shareholder loan receivable 27,293 - 27,293
Trade and other receivables 255 - 255 33 - 33
Investments 9,971 35,683 45,654 - 31,220 31,220
Total assets 57,403 38,347 95,750 48,573 48,360 96,933
Liabilities
Creditors (874) - (874) (1,050) - (1,050)
Total liabilities (874) - (874) (1,050) - (1,050)
If the value of Sterling against the Euro increased or decreased by 10% (2022:
10%), if all other variables remained constant, the NAV of the Group would
increase or decrease by £3,835,000 (2022: £4,836,000).
(ii) Interest rate risk
The Group's interest rate risk on interest bearing financial assets is limited
to interest earned on cash and investments. The interest rates of investments
held at amortised cost are fixed, therefore the interest rate risk is minimal.
Investments held at fair value through profit or loss have variable returns
based on e.g. power production levels and not on variability in interest
rates.
The Group's interest rate risk on interest bearing financial assets is limited
to interest earned on cash and investments. The interest rates of investments
are fixed, therefore the interest rate risk is minimal.
The Group's interest and non-interest bearing assets and liabilities as at 31
December 2023 are summarised below:
31 December 2023 31 December 2022
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 27,817 1,265 29,082 44,854 1,771 46,625
Trade and other receivables - 652 652 - 70 70
Derivative financial instruments - 122 122 - - -
Investments 54,990 10,492 65,482 38,550 11,742 50,292
Total assets 82,807 12,531 95,338 83,404 13,583 96,987
Liabilities
Creditors - (1,057) (1,057) - (904) (904)
Derivative financial instruments - - - - (856) (856)
Total liabilities - (1,057) (1,057) - (1,760) (1,760)
The Company's interest and non-interest bearing assets and liabilities as at
31 December in each reporting year are summarised below:
31 December 2023 31 December 2022
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
Assets £'000 £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 21,606 942 22,548 31,174 1,540 32,714
Trade and other receivables - 255 255 - 33 33
Intercompany receivable - - - - 32,966 32,966
Shareholder loan receivable 27,293 - 27,293 - - -
Investments 35,683 9,971 45,654 31,220 - 31,220
Total assets 84,582 11,168 95,750 62,394 34,539 96,933
Liabilities
Creditors - (874) (874) - (1,050) (1,050)
Total liabilities - (874) (874) - (1,050) (1,050)
(iii) Price risk
Price risk is defined as the risk that the fair value of a financial
instrument held by the Group will fluctuate. As of 31 December 2023, the
Group held investments at fair value through profit or loss with an aggregate
fair value of £10,492,000 (2022: £11,742,000). All other things being equal,
the effect of a 10% increase or decrease in the prices of the investments held
at the year end would have been an increase or decrease of £1,049,200 (2022:
£1,174,000) in the profit after taxation for the year ended 31 December 2023
and the Group's net assets at 31 December 2023. The sensitivity of the
investment valuation due to price risk is shown further in Note 4.
As of 31 December 2023, the Company held investments at fair value through
profit or loss with an aggregate fair value of £35,683,000 (2022:
£31,220,000). All other things being equal, the effect of a 10% increase or
decrease in the prices of the investments held at the year end would have been
an increase or decrease of £3,568,300 (2022: £3,122,000) in the profit
after taxation for the year ended 31 December 2023 and the Company's net
assets at 31 December 2023.
(iv) Credit risk
Credit risk is the risk of loss due to the failure of a borrower or
counterparty to fulfil its contractual obligations. The Group and the Company
are exposed to credit risk in respect of the investments valued at amortised
cost, interest income receivable and other receivables and cash at bank. The
Group and the Company's credit risk exposure is minimised by dealing with
financial institutions with investment grade credit ratings.
Continued monitoring of the investments and the counterparties/service
providers, including the use of credit rating data providers, allows the
Investment Adviser to identify and address these risks early. Where possible,
the Investment Adviser seeks to mitigate credit risks by the counterparty
having the opportunity to sell electricity to the grid or other customers. The
Investment Adviser also seeks to structure investments whereby contracts can
be adapted/extended to accommodate periods of payment defaults.
Diversification of counterparties and service providers ensures any impact is
limited. In addition, a diversified portfolio provides further mitigation.
The table below shows the cash balances of the Group and the Company as well
as the credit rating for each counterparty:
As at 31 December 2023 As at 31 December 2022
Company Group Company Group
Rating £'000 £'000 £'000 £'000
Goldman Sachs - Liquid reserve fund AAA (Fitch Rating) 6,632 6,632 7,752 7,752
EFG Deposit account A (Fitch Rating) 15,858 19,248 23,904 23,957
Royal Bank of Scotland International A-1/A (S&P Rating) 58 2,998 1,058 6,314
Bank of New York Mellon AA (Fitch Rating) - 204 - 8,602
22,548 29,082 32,714 46,625
The table below shows the amortised cost investment balances of the Group as
well as the credit rating for each counterparty:
As at As at
31 December 31 December
Group 2023 2022
A 5,871 4,138
B 31,890 23,895
C 16,509 10,517
D 720 -
54,990 38,550
The Group and the Company classified each project using a certain credit risk
band. Listed below are the conversion methodologies used:
Corresponding
Credit risk band S&P rating range
A AAA to A-
B BBB+ to BBB-
C BB to CC-
D Default
(v) Liquidity risk
Liquidity risk is the risk that the Company may not be able to meet a demand
for cash or fund an obligation when due. The Investment Adviser, AIFM and the
Board continuously monitor forecast and actual cash flows from operating,
financing and investing activities to consider payment of dividends or further
investing activities.
The financial liabilities by maturity of the Group at the year end are shown
below:
31 December 2023 31 December 2022
Less than Less than
1 year 1-2 years 2-5 years Total 1 year 1-2 years 2-5 years Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Liabilities
Creditors (1,057) - - (1,057) (904) - - (904)
Derivative financial instruments - - - - (856) - - (856)
(1,057) - - (1,057) (1,760) - - (1,760)
The financial liabilities by maturity of the Company at the year end are shown
below:
31 December 2023 31 December 2022
Less than Less than
1 year 1-2 years 2-5 years Total 1 year 1-2 years 2-5 years Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Liabilities
Creditors (874) - - (874) (1,050) - - (1,050)
(874) - - (874) (1,050) - - (1,050)
As at 31 December 2023, the Group has total commitments of £5.26 million (31
December 2022: £35.45 million) to its investments which are unfunded.
Capital management
The Company considers its capital to comprise Ordinary Share capital,
distributable reserves and retained earnings. The Company is not subject to
any externally imposed capital requirements.
The Company's primary capital management objectives are to ensure the
sustainability of its capital to support continuing operations, meet its
financial obligations and allow for growth opportunities. Generally,
acquisitions are anticipated to be funded by a combination of current cash and
equity.
17. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Adviser are shown in the Consolidated Statement
of Profit or Loss and Comprehensive Income. As at 31 December 2023, the fee
outstanding to the Investment Adviser was £361,000 (2022: £463,000).
Total Directors' fees paid during the year are as follows:
Date of Fees for the Fees for the
appointment to year ended year ended
the Board 31 December 31 December
2023(1) 2022(1)
(£) (£)
Miriam Greenwood 19 April 2021 92,852 57,585
Nicholas Bliss 9 April 2021 59,794 42,226
Lisa Arnold(2) 9 April 2021 n/a 3,231
Laura Sandys(2) 9 April 2021 n/a 3,231
David Fletcher 29 April 2022 71,861 30,557
Janine Freeman 2 November 2022 56,512 6,642
Total 281,019 143,472
There are no outstanding Directors' fees at year end.
(1 ) Including fees in respect of directorships in
AHL.
(2 ) Resigned on 28 January 2022.
Directors' holdings
At 31 December 2023 and at the date of this report the Directors had the
following holdings in the Company. There is no requirement for Directors to
hold shares in the Company. All holdings were beneficially owned.
As at 31 December 2023 As at 31 December 2022
Shares Connected Total Shares Connected Total
person
person
Miriam Greenwood 24,000 - 24,000 24,000 - 24,000
David Fletcher 42,425 14,181 56,606 41,785 13,951 55,736
Nicholas Bliss 20,000 - 20,000 20,000 - 20,000
Janine Freeman - - - - - -
The following table shows the subsidiaries of the Company. Please refer to
Note 2; these subsidiaries have been consolidated in the preparation of the
financial statements.
Subsidiary entity name and registered address Effective ownership Investment Country of incorporation
Attika Holdings Limited 100% HoldCo subsidiary entity, owns underlying investments United Kingdom
Leaf B, 20th Floor, Tower 42,
Old Broad Street, London,
England, EC2N 1HQ
SPV Project 2013 S.r.l. 100% of the notes of one compartment Special purpose entity, owns underlying investments Italy
Via Vittorio Betteloni, 2 20131,
Milan, Italy
Company related party transactions
As at 31 December 2023, the Company has an intercompany receivable from AHL in
the amount of £nil (2022: £32,966,000). The amount is non-interest bearing
and payable on demand.
As at 31 December 2023, the Company has a shareholder loan receivable from AHL
in the amount of £27,293,000 (2022: £nil). The initial interest rate was
7.90% per annum which is then being adjusted every fourth quarter of the
financial year in order for the Company not to have a gross margin of less
than 50bps from its financing activities. The loan is repayable in full on 31
December 2046.
As at 31 December 2023, the Company has a total of £35,683,000 (2022:
£31,220,000) notes at fair value through profit or loss in the Italian SPV.
As at 31 December 2023, the Company has a total of £9,971,000 (2022: £1.00)
equity investment held at cost less impairment in AHL.
18. DISTRIBUTABLE RESERVES
The Company's distributable reserves consist of the special reserve and
revenue reserve. Capital reserve represents unrealised investments and as such
is not distributable.
The revenue reserve is distributable. The amount of the revenue reserve that
is distributable is not necessarily the full amount of the reserve as
disclosed within these financial statements. As at 31 December 2023, the
Company has no distributable revenue reserves as the Company is in a loss
position of £2,547,000 (2022: loss of £1,866,000).
The Company's special reserve, which is also distributable, was £93,500,000
as at 31 December 2023 (2022: £94,750,000).
19. SUBSEQUENT EVENTS
On 19 April 2024, the Company published a circular in respect of proposals
that up to 18,561,732 Ordinary Shares may be purchased under the Tender Offer
for a maximum aggregate cash consideration of £17.5 million at a fixed price
of 94.28 pence per Ordinary Share. The Company is convening a General Meeting
for 11.30 a.m. on 13 May 2024 to consider and, if thought fit, pass the Tender
Offer Resolution to authorise and to approve the terms under which the Tender
Offer will be effected.
ALTERNATIVE PERFORMANCE MEASURES OF THE GROUP
OTHER INFORMATION (UNAUDITED)
In reporting financial information, the Company presents alternative
performance measures ("APMs") which are not defined or specified under the
requirements of IFRS. The Company believes that these APMs, which are not
considered to be a substitute for or superior to IFRS measures, provide
stakeholders with additional helpful information on the performance of the
Company. There have been no changes in these APMs from the prior year. The
APMs presented in this report are shown below:
(Discount)/premium
The amount, expressed as a percentage, by which the share price is more than
the Net Asset Value per Ordinary Share.
As at As at
31 December 31 December
2023 2022
NAV per Ordinary Share (pence) a 94.28 95.23
Share price (pence) b 57.25 71.00
Discount (b÷a)-1 (39.3%) (25.4%)
Ongoing charges
A measure, expressed as a percentage of average net assets, of the regular,
recurring annual costs of running an investment company. The average net
assets has been computed as the average of the published NAV for 31 December
2022, 30 June 2023 and 31 December 2023.
As at As at
31 December 31 December
2023 2022
Average NAV a 94,349 96,835
Annualised expenses b 3,300 2,537(1)
Ongoing charges (b÷a) 3.5% 2.6%
(1 ) Figure includes investment advisory fees and
other expenses as disclosed in the Consolidated Statement of Profit or Loss
and Comprehensive Income.
Total return
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company into the Ordinary Shares of the Company on the ex- dividend date.
31 December 2023 Share price NAV
Opening at 1 January 2023 (pence) a 71.00 95.23
Dividend adjustment b 1.25 1.25
Closing at 31 December 2023 (pence) c 57.25 94.28
Total return ((c+b)÷a)-1 (17.6%) 0.3%
31 December 2022 Share price NAV
Opening at 1 January 2022 (pence) a 95.75 97.38
Dividend adjustment b 2.25 2.25
Closing at 31 December 2022 (pence) c 71.00 95.23
Total return ((c+b)÷a)-1 (25.8%) (2.2%)
n/a = not applicable
FINANCIAL INFORMATION
Year ended 31 December 2023
The figures and financial information for the year ended 31 December 2023 are
extracted from the Company's Annual Financial Statements for that year and do
not constitute statutory financial statements for that year. The Company's
Annual Financial Statements for the year ended 31 December 2023 have been
audited but have not yet been delivered to the Registrar of Companies. The
Independent Auditor's Report on the 2023 Financial Statements was unqualified,
did not include a reference to any matter to which the Auditors drew attention
without qualifying the report, and did not contain any statements under
sections 498(2) and 498(3) of the Companies Act 2006.
Year ended 31 December 2022
The figures and financial information for the year ended 31 December 2022 are
extracted from the Company's Financial Statements for that year and do not
constitute statutory financial statements for that year. The Company's Annual
Financial Statements for the year ended 31 December 2022 have been audited and
delivered to the Registrar of Companies. The Independent Auditor's Report on
the 2022 Financial Statements was unqualified, did not include a reference to
any matter to which the Auditors drew attention without qualifying the report,
and did not contain any statements under sections 498(2) and 498(3) of the
Companies Act 2006.
ANNUAL REPORT
The Annual Report for the year ended 31 December 2023 was approved on 30 April
2024. The Company's AGM will be held on 12 June 2024 at 2.00pm at the offices
of CMS Cameron McKenna Nabarro Olswang LLP located at Cannon Place, 78 Cannon
Street, London EC4N 6AF. The Company will publish an announcement to confirm
when the full Annual Report and the AGM notice are available to access via the
Company's website at: https://www.aquila-energy-efficiency-trust.com/
(https://www.aquila-energy-efficiency-trust.com/) and via the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
This announcement contains regulated information under the Disclosure Guidance
and Transparency Rules of the FCA.
30 April 2024
For further information contact:
Company Secretary and registered office:
Apex Listed Companies Services (UK) Limited
6th Floor, 125 London Wall, London, EC2Y 5AS
END
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